Chinese bribery: wake up and smell the moisturiser | FT Alphaville

Chinese bribery: wake up and smell the moisturiser

Corrupt business practices in China have ensnared many a foreign firm: most famously and recently, Rio Tinto; but also IBM, Hitachi and NCR. And now — the Avon ladies?

As Reuters reports (link ours):

Avon Products Inc, the world’s largest direct seller of cosmetics, said on Tuesday that it had suspended four employees pending internal investigations, confirming a media report that top employees of its Chinese operation were being investigated for bribery.

The company, famous for its door-to-door sales model, asked three executives in its China unit, and another in New York, to take an administrative leave of absence pending the outcome of a bribery investigation that began with the company’s China operation and now involves a dozen or more countries, according to the Wall Street Journal, citing a source familiar with the probe.

Well, that’s a blemish that will be hard to cover up, if the investigation does find bribery took place. No one’s coming out of this smelling of roses. (OK — I’ll stop now).

More seriously, this case is yet another reality check on perceptions of bribery in China.

There’s still a view that it only becomes an issue for foreign firms when the state wants to play hardball with them over iron ore pricing, or has similarly extra-legal motives.

Well, unless Avon’s Chinese market strategy was radically different from its core business of selling smelly stuff, that doesn’t apply here — not least because this case will be investigated under US law, in the form of the Foreign Corrupt Practices Act.

Of course, indigenous corruption is still a vast problem in China, especially as its capital markets grow — hence this story of alleged misconduct in the selling of Lehman securities.

Hmm. Lehman-style practices, or cheap perfume? We think we know what’s the better US import to China.

Related links:
Google, Rio Tinto, and the state of business in China – China Law Blog
Rio Tinto case highlights risks in China – Analysis / FT