The law has taken a lot of criticism over the years on the grounds that it makes U.S. companies less competitive in foreign markets. Rival companies based in countries that don't have similar anti-bribery laws supposedly have a leg up on U.S. companies because they can offer bribes to local officials to win business.
So why do we have such a law anyway?
In some ways, the very existence of the law is a mystery. It doesn't seem to comport with most theories of how laws get passed. In particular, it is hard to figure out what special interests were served by passing the law. Who lobbied for it? Why did it garner enough support from congressmen, senators and the president to become a law?
The law was passed in the wake of the Watergate scandal. Investigations at the time revealed a stunning amount of bribery of foreign officials by U.S. corporations. In order to break into emerging markets, many American companies were regularly paying bribes to local governments to be granted permission to do business or win lucrative government contracts.
As it turns out, most of this was a zero-sum game for the U.S. Our companies weren't paying bribes to win contracts away from foreign competitors, they were paying them to beat out other U.S. competitors. At the time, most European businesses were still themselves "emerging" and didn't pose much of a competitive threat to American businesses.
The bribes were just a dead-weight cost. Most companies would have preferred not to pay the bribes at all, but they couldn't afford not to pay because all their competitors were probably paying.
In short, U.S. companies were in a bribery arms race with each other.
The Foreign Corrupt Practices Act, then, should be understood as an arms treaty for U.S. companies. They basically agreed to form a cartel against bribery in order to drive down the cost of doing business in emerging markets.
In short, the FCPA was actually passed in response to U.S. business interests.
The question is whether this logic still applies. Does it make sense for the U.S. to maintain an anti-bribery cartel? Or should we abandon the practice to make ourselves more competitive with foreign countries?
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