Walmart Inc.’s operations in Mexico are coming under government scrutiny.
The division, Walmart de Mexico, known as Walmex, said in a short notice to shareholders on Monday that it’s been notified by Mexico’s Federal Economic Competition Commission that the company is under investigation for alleged “monopolistic practices.”
Walmex is one of the only major retailers in Mexico and Walmart’s operation there is its largest overseas division, with about 2,600 stores under seven brand names. It’s second only to Walmart in the U.S., where it has closer to 4,800 stores. Walmex is Mexico’s largest private sector employer.
“Walmex is confident that its actions have always adhered to applicable legislation and that its participation in the Mexican market has always resulted in lower prices for the consumer,” the retailer wrote in a statement, “particularly lower-income Mexican families and in remote areas of the country that have not been served by others.”
The division added that it intends to demonstrate its demand-driven, not monopolistic, position “before the corresponding authorities and in the appropriate forums.”
Walmex’s stock on the Mexico Stock Exchange fell nearly 6 percent since Monday, from about $29 a share to about $27 a share.
A representative of Walmart’s main operations in the U.S. could not be reached for additional comment.
This appears to be the first antitrust investigation into Walmex, but the division is not exactly new to scandal.
In 2012, Walmart’s relatively rapid international expansion was the subject of a lengthy article in The New York Times, which detailed allegations that some of the retailer’s executives had paid about $24 million in bribes in the early to mid-Aughts to Mexican officials. They allegedly did so in order to obtain and expedite permits to expand retail operations in the country.
The revelations subsequently expanded to include operations in Brazil, China and India and a years-long investigation by the Securities and Exchange Commission ensued. Walmart said at the time it went to the SEC “voluntarily,” but that was apparently years after it became aware of the alleged bribery scheme in Mexico. Payments by certain persons or entities with business interests to foreign officials is a violation of the Foreign Corrupt Practices Act of 1977.
Former Wal-Mart president and chief executive officer Eduardo Castro-Wright was implicated in the scheme, along with former executive Sergio Cicero Zapata, who allegedly admitted to a “campaign of bribery” in order to aid the retailer’s market dominance in Mexico, and told the retailer as much.
But Walmart embarked on a costly exorcism of the scandal, saying in 2017 that it had spent a total of $870 million related to the government and its own inquiries related to the alleged scheme, along with purported enhancements to its global compliance efforts. In addition, it reached a settlement with the SEC of $283 million, which was paid last year to end all FCPA investigations.
Walmart’s market capitalization is about $430 billion, making it one of the most valuable companies in the world.
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