NEW DELHI: Flipkart has hired KPMG to conduct due diligence of vendors as part of parent company Walmart’s global anti-bribery compliance programme that has been now extended to India’s largest ecommerce company.
The initiative is similar to Walmart’s screening of vendors at its wholesale venture in India — through KPMG since 2012 — as part of the American retail giant’s efforts to comply with a law prohibiting US-listed corporations from indulging in corrupt practices in any foreign country.
Flipkart has started giving new detailed forms to some vendors, according to two people familiar with the development. The ecommerce company is also seeking consent for Flipkart-appointed independent auditors to review the accounts of the suppliers to wholesale and large sellers on its marketplace.
“Independent reviews and assessments shall be performed at least annually to ensure that the organisation addresses non-conformities of established policies, standards, procedures and compliance obligations,” Flipkart mentioned in the form, which was reviewed by ET.
“Customers right to audit shall be established prior to getting into an agreement. Audit plans shall be developed and maintained to address business process disruptions.”
A corruption scandal in its Mexico unit prompted Walmart to tighten its compliance with the Foreign Corrupt Practices Act (FCPA) globally, including in India.
Walmart froze the expansion of its wholesale stores for about seven years starting in 2011to focus on FCPA compliance here. Walmart acquired Flipkart last year for $16 billion from investors including some top global private equity giants.
“We always closely work with all our partners to ensure that we are sourcing the products responsibly and serve our customers together better. This also helps our seller partners grow their business in a more structured fashion,” Flipkart said in an email response to ET’s queries.
A spokesperson for KPMG said it doesn’t comment on companies and client-specific matters. The compliance procedure almost mirrors Walmart’s anti-bribery obligations to its India vendors. KPMG had categorised vendors as red, green and amber, based on their risk factors.
Walmart snapped ties with suppliers that were placed in the red category. Similar categories have been created for Flipkart vendors. “They are doing it for compliance,” said a person familiar with the development, who added that the process applies to every seller on the Flipkart platform and the suppliers of Flipkart India, the wholesale entity.
“They have just started sending the forms to some large vendors. It will take time as it has to be done on a mass scale.” Flipkart’s rival Amazon also invests in FCPA compliance programmes in India including conducting seminars and training programmes for vendors, business partners and suppliers to educate and sensitise them about the law, among other compliance issues.