CHINA: Mead Johnson warns of possible corruption law violations

By Katy Askew | 20 February 2014

Mead Johnson investigates promotional payments in China

Mead Johnson investigates promotional payments in China

Mead Johnson is investigating promotional payments made by its Chinese subsidiary, which the infant formula group said may have broken the US Foreign Corrupt Practices Act and local laws.

In a filing with the US Securities and Exchange Commission this week, Mead Johnson said the investigation is being conducted by "outside legal counsel" and overseen by a committee of independent members of its board. The move follows a SEC request for documents relating to the US business' activities in China.

"The company's investigation is focused on certain expenditures that were made in connection with the promotion of the company's products or may have otherwise been made. Certain of such expenditures were made in violation of company policies and may have been made in violation of applicable US and/or local laws, including the US Foreign Corrupt Practices Act (the "FCPA")," Mead Johnson said.

The company said it was co-operating with the SEC and "other governmental authorities".  

Mead added it was unable to "predict the scope, timing or outcome" or "regulatory or legal actions that may be commenced".

"If a violation of the FCPA or other laws is determined to have occurred, the Company could become subject to monetary penalties as well as civil and criminal sanctions," Mead said.

Last year, the company's profits were dented by a US$33m fine imposed by China's anti-trust regulator, the NDRC, as part of its review of the marketing and pricing practices of international formula manufacturers. The fine was part of a wider investigation into competition in the infant formula category and Mead Johnson was one of a handful of companies found to violate local competition regulations. In total, the NDRC handed out fines totalling $108m, the biggest anti-trust ticket in China's history.

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Sectors: Baby food, Emerging markets

Companies: Mead Johnson

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