“Pausing” Enforcement of the FCPA: A Sad Admission of Weakness
March 27, 2025
Privacy Plus+
Privacy, Technology and Perspective
This week, let’s consider the implications of a recently announced “pause” in the enforcement of the Foreign Corrupt Practices Act.
Background:
Barely noticed in the chaos, the U.S. Government has declared that it will “pause” enforcement of the Foreign Corrupt Practices Act, 15 U.S.C. § 78dd-1, et seq. (“FCPA” or the “Act”).
Passed in 1977, the FCPA was one of several post-Watergate “reform” statutes intended to reset what seemed to many like an errant moral compass in D.C. Briefly, the Act prohibits U.S. businesses from bribing foreign officials to take actions in the U.S. businesses’ favor. Of course, the FCPA is more complicated than that, but its message has been to stop such conduct – at least by U.S. businesses – in its tracks, no matter how customary or even expected such practices are in foreign countries.
Of course, this was controversial fifty years ago. “But that’s how things are done in [XYZ country],” read the protests, “and if we don’t play the game by their local rules, we’ll lose out to our foreign competitors.”
Maybe so, at least for a short while, came the first of two typical responses. But very quickly the word will go out that U.S. businesses simply can’t pay “gratuities,” “the ‘bite’,” kickbacks, or any other contractually irregular, under-the-table payments, or their own Justice Department would put the payers in prison with severe sentences. We would not pay bribes, no matter what they were called or how they were described, because it’s wrong. Period.
The second response was that deal losses to the less scrupulous were likely to be low and temporary, because of the competitive quality of American-made products and services. The “Made in USA” label would give U.S.-flag businesses a competitive advantage over foreign competitors despite the “competitive handicap” of having to behave morally. And that –more or less, with plenty of aberrations – is about how things have turned out. Businesses in international markets have had half a century to accept as reality that whatever else Americans might do, we don’t grease palms.
Until now? We now read that an executive order has “paused” enforcement of the FCPA. For more on this, click the following link:
For more, including a view that this might not be so bad, see this article from Forbes:
Our Thoughts:
1. Moral Retreat with U.S. Government Sanction: We are saddened by any retreat from American moral standards and practices, especially ones initiated and sanctioned by our own government. If America has often fallen short of its goal to be a “city on a hill,” we have rarely abandoned that goal on purpose.
2. Undermining a Cornerstone of Stability and Trust: The decision to “pause” FCPA enforcement represents more than just a policy shift—it undermines a cornerstone of American business ethics that has provided stability, certainty, and competitive advantage in global markets for half a century. We believe that the Rule of Law, consistently applied, remains essential for functioning markets and civil society. Any retreat from this principle is not just morally concerning but economically short-sighted. When we step back from our principles, we don't just compromise our values; we introduce the kind of uncertainty and distrust that destabilizes the very markets and society we aim to strengthen. The FCPA has been a beacon demonstrating that ethical business and competitive success are not mutually exclusive but mutually reinforcing. That's a lesson we abandon at our peril.
3. A Thin, Sad Admission of Competitive Weakness: This recent step, taken amidst cacophonous brays for “fairness!’ and a “level playing field!, ” is also a thin, sad admission of weakness – an admission that the label “Made in USA” no longer what once it did, that America actually isn’t all that different anymore, and that the legal and moral standard that has set America apart for fifty years is now naïve and burdensome.
We think the United States of America is better than this. And if that makes us a little naïve, then we hope you’re a little naïve, too.
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Hosch & Morris, PLLC is a boutique law firm dedicated to data privacy and protection, cybersecurity, the Internet and technology. Open the Future℠.