Wednesday, December 12, 2007

More on Public and Private Bribery

Yesterday, I talked a bit about a new consultation paper on the law of bribery issued by the Law Commission of England and Wales.  One of the report’s most striking recommendations is that bribery in the private sector be treated the same as bribery in the public sector.  From an American perspective, the recommendation is surprising.  The law of bribery, particularly at the federal level, is focused primarily on bribes involving public officials engaged in official acts.  Legislation concerning bribes in the commercial sphere occurs only in the case of certain specific industries in which side payments have proved to be a problem, such as in the case of investment advising, banking, labor unions, radio disc jockeys, and television quiz shows.  Only a few states have more general laws broader laws that apply broadly in all commercial contexts.

The consultation paper’s principal rationale for treating public and private sector bribery the same is that both involve a "betrayal of a relation of trust or a breach of a duty to act impartially or in the best interests of another."  At the most abstract level, perhaps, this is true.  But the problem is that the nature of the relation of trust in the private sphere tends to be much more varied and complex than in the public sphere.

Consider the following hypotheticals: (1) a waiter at a restaurant accepts a payment from a customer in return for reserving a particular table; (2) a supermarket manager accepts a payment from a breakfast cereal sales representative in return for ensuring prominent shelf space for a product; (3) a teacher accepts a gift from a favorite student at Christmas time shortly after the teacher has written the student a recommendation letter.  In each case, it’s unclear that any relation of trust or duty to act impartially has been betrayed. Waiters regularly receive money from customers for their services. Indeed, they depend on such payments for their livelihood.  There is no clear line between payments given to recognize service given and payments to receive some special treatment. The same is true in the case of the supermarket. Sales representatives regularly pay money for prominent product placement.  Unless there is a clear rule that prohibits sales managers from taking side payments, we cannot know whether the manager has done anything wrong.  Similarly in the case of the teacher, without more context, we have no indication that there has been a breach of any duty of impartiality.

In the public sector, the lines are much clearer. It’s hard to imagine any circumstances in which it would be appropriate for a public official to accept a gift from anyone in connection with his official duties.  (One possible exception might be a case in which an official receives a gift from a foreign head of state or diplomat, but even here it’s doubtful that it would be appropriate for the public official to keep the gift for his own use.)  We have no problem in categorically prohibiting public officials from accepting payments beyond the regular salaries they receive from the state. But private industry functions very differently.  There are various industries in which it is expected and appropriate for such side payments to be made. To regard all such payments as bribes would entail significant chilling effects on business practices. For this reason, the ad hoc, industry-by-industry approach to legislation seems more likely to provide an optimal level of criminalization.

Stuart Green

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