Avon bribery scandal bodes poorly for multinational firms
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E-mail Xinhua, February 22, 2012
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Avon Products has just assigned a new head for its China market. [File photo] |
![Avon Products has just assigned a new head for its China market. [File photo]](http://images.china.cn/attachement/jpg/site1007/20120222/001aa0ba5c8510ae876711.jpg "Avon Products has just assigned a new head for its China market. [File photo]")
New updates in a bribery scandal surrounding Avon Products have brought the long-running case back into the global spotlight and drawn fresh attention to fair competition in emerging markets.
The Wall Street Journal previously reported that U.S. prosecutors found suspicious payments to Chinese officials and third-party consultants in a 2005 audit report, when Avon was seeking a license to conduct door-to-door sales in China.
Although there has not been a sure verdict in Avon's long-running case, bribery scandals concerning multinational companies are not a rare story in China.
Responding to the Avon case, China's Ministry of Commerce (MOC) stated Monday that foreign investors and foreign-invested enterprises should strictly obey Chinese laws and regulations when they engage in business activity in the country.
Several senior officials have left Avon since the U.S. cosmetics giant underwent an internal investigation of its Chinese business operations in 2008.
In an exclusive statement to Xinhua, the MOC said that relevant government departments make decisions according to regulations on direct sales when dealing with applications from registered enterprises in China.
Avon China declined to comment on the allegations on Monday.
As China has opened to the outside world, it has become a significant market and source of growth for foreign companies. Unfortunately, some multinational giants, including IBM, Alcatel and Siemens, have chosen the wrong way to tap into local markets.
In 2006, former head of China Construction Bank Zhang Enzhao was given a 15-year sentence for corruption and bribery involving U.S. computer giant IBM, according to earlier media reports.
"Companies sometimes go against their professional ethics to seek large profits," said He Manqing, a researcher from the MOC's Academy of International Trade and Economic Cooperation.
She said commercial corruption should be controlled through systematic improvements, rather than through reliance on the companies' internal self-discipline.
Bribery scandals surrounding multinational businesses have worsened business environments in emerging markets and undermined anti-graft efforts, according to analysts.
He Manqing pointed out that bribery occurs more often in monopolized sectors that lack transparency, especially in developing countries.
More than two-thirds of bribery cases involving U.S. companies have taken place in developing countries, she said, citing figures from the U.S. Department of Justice.
She urged improvements in relevant laws and increased market supervision to prevent bribery from taking place.
"A clean market is good for everyone," she said.
China has been increasing its efforts to crack down on commercial bribery in recent years. In the first 11 months of 2011, China handled 14,800 commercial bribery cases involving more than 4.28 billion yuan (680 million U.S. dollars), according to official data.
Amendments to China's Criminal Law that took effect on May 1 last year redefined bribery for commercial profit involving foreign officials and international organizations as a crime.
However, tackling commercial bribery remains tricky in China, given the complexity of the cases and difficulties in obtaining evidence, according to legal experts.
China doesn't have a specific law to counteract commercial bribery like the U.S. Foreign Corrupt Practices Act, and regulations on commercial bribery are included in China's Anti-Unfair Competition Law and Criminal Law, according to a legal professional who declined to be named.
