Avon Caught Bribing Chinese Government Officials
Avon Products China provided cash and things of value, including gifts, travel, and entertainment, to various Chinese government officials, including government officials responsible for awarding a test license, and subsequently a direct sales business license, that would allow the company to utilize direct door-to-door selling in China. In March 2006, the Chinese government did grant Avon Products China the first national direct selling business license. Avon Products China also provided cash and things of value to Chinese government officials to avoid fines and other penalties in order to maintain a pristine corporate image. At times, payments were made to suppress negative news in state-owned media and to obtain competitor information.
Altogether, Avon Products China provided approximately $8 million dollars in cash and things of value to Chinese government officials during the period from 2004 through the third quarter 2008. Avon has violated the Foreign Corrupt Practices Act (“FCPA”), the U.S . legislation that, among other things, prohibits payments to foreign government officials to obtain or retain business. Avon has agreed to pay more than $67 million to settle the SEC’s charges.
Avon Products China began operations in the People’s Republic of China in 1989 as part of a joint venture that manufactured its products and used a direct selling model. However, in 1998 the Chinese government banned all direct selling. For a number of years, Avon then marketed its products in independently owned retail operations called “Beauty Boutiques.” When China subsequently expressed an interest in joining the World Trade Organization (“WTO”), the WTO requested that the Chinese government consider allowing direct selling in the country as part of its admission into the organization. In 2001, the Chinese government agreed to allow direct selling within three years. Avon wanted to influence the legislation and regulations governing the re-implementation of direct selling in China. Avon also wanted to be the first company to implement direct selling if, and when, the new regulations became effective. – Source SEC.gov