Walmart is once again embroiled in an international scandal after stores in China were caught selling mislabeled pork. The pork was marketed as “organic,” although it was not organic meat. Authorities have forced Walmart to temporarily shut down ten of its stores and two Trust-Mart stores that it owns in Chongqing.
Reportedly, the company has been selling mislabeled pork for upwards of two years. Some 63,547 kilograms of pork worth 730,000 yuan were affected, which comes out to just under $115,000. There is speculation that the issue may be under fire now for political reasons. China will soon be going through its once-a-decade leadership transition in the Politburo Standing Committee, which is its highest decision-making body. Chongqing-based Regional Communist Party Secretary, Bo Xilai, might be promoted to the Politburo Standing Committee, and he might be paying additional attention to foreign businesses as a way to increase his power before the leadership changes next year.
Food Labeling Troubles for Walmart
For Walmart, this is the latest in a string of troubles. The company has been operating in Chongqing since 2006, and this is not the first time they’ve run into trouble with the local authorities. Walmart has come under scrutiny for mislabeling, food safety, and false advertising. This isn’t even the first time they have run into trouble in China this year. In February, they were fined by China’s National Development and Reform Commission for deceptive pricing practices.
Previously, Walmart has run into similar troubles in the United States when it sold regular milk labeled as “organic” and more recently an insecticide incorrectly labeled as “organic.” Both instances were discovered by the Wisconsin-based Cornucopia Institute, an organic public-interest group. The United States Department of Agriculture (USDA) can levy penalties of up to $11,000 for products improperly labeled as “organic.”
While it is clear that the company can’t hide their dishonest practices behind a garage door forever, their continued attempts to do so might hinder their profits. China in particular is an important market for the company. While shoppers in the United States are generally spending less money, Chinese shoppers are spending an increasing amount of money on food and other household items. Over the past decade, Walmart’s revenue in China has climbed an average of 38 percent.
The charges that Walmart faces for mislabeling the pork would come to a total of only 3.65 million yuan, in addition to the losses incurred by closing a dozen stores for 15 days. However, in 2010, they earned 444.6 billion yuan from their stores in China. While the fines certainly aren’t light, they aren’t going to be hugely damaging to the company and may not even prove a significant deterrent to Walmart’s continuing practice to mislabel products for a higher profit.
Currently, Walmart is working with authorities to resolve this issue, and the company has offered compensation to those who were affected by their actions.
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