Answer
The groove wall must be as perpendicular to the shaft or bore axis as possible. If the groove wall is angled (tapered), the retaining ring will not have a flat surface to bear against. This creates a radial component of the axial force, which acts like a wedge, trying to push the ring out of the groove. Most standards specify a maximum out-of-squareness of $0.005$ inches per inch of groove depth. If the groove is machined with a standard end mill, the 'radius' at the bottom of the groove must be smaller than the 'radius' or 'chamfer' on the ring itself. In high-performance automotive differentials, the groove is often ground after heat treatment to ensure perfect squareness and depth, maximizing the thrust capacity of the spiral ring.