Foreign Corrupt Practices Act Of 1977

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President Jimmy Carter signed the Foreign Corrupt Practices Act of 1977 into law on December 19, 1977. The law was a reaction to bribery and corruption occurring in United States businesses. This paper will address many questions such as how does the Foreign Corrupt Practices Act of 1977 impact society and business? Is the policy ethical? Has the policy been successful and efficient since its implementation? These questions will be answered throughout the essay in four different sections. First, I will discuss the history of the law, and if it was a market or government failure. Second, I will discuss the implementation of the law. Third, I will address the impact the law has had on the business world specifically and society. Finally, I will…show more content…
It is considered a response to market failure because the FCPA stopped corporations from becoming monopolies by halting negative externalities and information asymmetry from occurring through the illegal bribes being made to foreign officials. Market failure is essentially when a company pursues their interest alone and use society’s resources inefficiently (Jasso, 2015). With the bribes being made to foreign officials in return for business overseas, and accounting books being “cooked”, certain companies were getting an unfair advantage in the market (“A Resource Guide to the FCPA…”, 2012, p.3) This unfair advantage was about to cause negative externalities internationally, and information asymmetry. A perfect example of how the FCPA prevents monopolies or market failure is through the case of Pfizer in 2012. The company Pfizer was found guilty of making illegal payments through subsidiaries “to foreign officials in Bulgaria, China, Croatia, Czech Republic, Italy, Kazakhstan, Russia, and Serbia to obtain regulatory approvals, sales, and increased prescriptions for its products” (“SEC Charges Pfizer…”, 2012, p.1). Not only were they making these payments secretly, but they were obtaining business without letting competitors know, which is a monopoly being formed through information asymmetry. There is also the case of Alliance One and Universal Corporation, where they were found guilty of making secret payments as well to Thailand to illegally get tobacco sales (“Sec Charges Two Global Tabaco Companies…”, 2010, p.1). This is a case where negative externalities are causing a monopoly. The introduction of monopolies through information asymmetry or negative externalities cause market failure for the Unites States, because it is hurting society and competitors are unaware of other firm’s doings when making their decisions. The FCPA wanted to correct all the wrongdoing and restore
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