What is a business relationship?
By Tom Fox2018-07-25T08:30:00+01:00
The wider anti-corruption world is filled with examples of business relationship gone awry, causing legal liability. These have included agents, sales representatives, joint ventures, and almost any other type of business relationship one can dream up.
The Man From FCPA was, therefore, intrigued by recent reports that electric-car company Tesla, in a no-doubt desperate bid for more cash, is putting the squeeze on its suppliers—not to reduce the prices but to actually refund monies Tesla had paid to them, as far back as 2016. While it is not uncommon for large companies to squeeze their suppliers during economic downturns to reduce prices, it is almost unheard of to demand monies back.
Tesla has claimed these attempts are "an investment in the car company to continue the long-term growth between both players." Note, Tesla does not characterize this as a loan, but rather an investment "between players." This almost sounds like a partnership between very unequal partners.
Putting aside the economic wisdom of forcing rebates for monies paid out years ago, or even the ethical efficacy of such an approach; what considerations does this raise under the Foreign Corrupt Practices Act? If a supplier becomes unwittingly,or through economic strongarm tactics, a partner with a very large customer, has that supplier now accepted a new level of compliance risk? What if this happened outside the United States, with either a foreign government or state-owned enterprise in a country that was going through economic difficulties such as those Tesla is facing? What type of relationship would put a company at compliance risk under such a scenario?
While these actions by Tesla speak to its current financial situation, burning through cash and not seemingly able to deliver on its promise to deliver cars, there may well be wider risks for those suppliers who enter into such a business relationship. You may well become a de facto partner.
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