Post on 27-Jul-2015
© Copyright 2014 by K&L Gates LLP. All rights reserved.
Amy L. Sommers, K&L Gates Shanghai
Compliance and China’s Anticorruption
Campaign: Insider Advice from
Industry Experts
US-China Business Council, Washington DC, March 2015
TOPICS:
Anticorruption enforcement in China since 2013
What about cross-border anticorruption
enforcement?
What learnings can be extracted from these
events?
Looking ahead: what should your company be
doing?
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WHAT’S HAPPENED IN CHINA IN LAST 2
YEARS?
At the most senior levels and with an urgent
sense of priority, in 2013, the Chinese
Communist Party’s new Chairman launched a
‘healthy work styles’ campaign
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MNC’S ARE INTIMIDATED AND
BEWILDERED BY EVENTS IN CHINA
As of 2/15, 78 ‘tigers’ at provincial level or higher have been removed
As of 12/14, 232,000 total tigers & flies punished (27.5% increase over 2013)
2013: NDRC, PSB and AIC lead a range of price-related enforcement actions
Brought on both antimonopoly and
anticorruption grounds
GSK case led to industry sweep
against pharmas
2014: AIC (gov’t) announces plan to implement Party’s healthy workstyle campaign
Will last 3 years and target unfair market practices
Target industries for ’14 named: ecommerce, building
materials/furniture, public utilities
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2014: INDUSTRY SWEEPS WERE COMMON
At the provincial level and also at the municipal level, the
Administration for Industry & Commerce was active in
conducting industry-focused enforcement.
For example, in early 2014, the Hunan AIC
commenced a province-wide action against
medical/pharma sector commercial bribery.
This resulted in the commencement of 68 cases in
Hunan, 49 of which have already been resolved.
A total of RMB 1,567,000 (US$248K) in penalties
were imposed >> so, low penalties, but likely high
level of disruption, advisor fees and angst
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AND FOR 2015?
AIC announces that for 2015, the second year of the
healthy work style campaign, it will continue to strike out
against unfair competition problems
The same industries will remain areas of focus
e.g.,
e-commerce,
building materials,
Furniture, and
public utilities
So, will 2015 be more of the same?
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WHAT DO OTHER STAKEHOLDERS SAY?
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Toughen sanctions
such that ‘officials
dare not…be
corrupt’
Heavier
penalties for
offerors of
bribes
SOE’S ON THE HOT SEAT
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26 centrally-owned
SOEs to be on the hot
seat, starting with
China Mobile & China
Telecom…
GAZING INTO THE CRYSTAL BALL:
These developments suggest the following:
The Party is anxious to consolidate internal reform and ensure
loyalty to its senior leadership
The urgency of these concerns are likely to lead to extensive
intra-Party engagement on anticorruption grounds, which will
include SOE management.
Probably less bandwidth to continue industry-focused sweeps
with the degree of intensity seen in ’13 & ’14
But…where regulators receive intel on a case (say from a
whistleblower), they are likely to be very tough as a means of
showing their loyalty/commitment to Party aims
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GSK: CHINA SHARED INFO WITH SFO
"Certainly, so far as I am
aware it is the first time
we have had cooperation
with the Chinese on an
SFO case," David Green, the head of the
Serious Fraud Office (SFO)
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APEC has also launched the APEC Network of Anti-Corruption
Authorities and Law Enforcement Agencies (ACT-NET) to facilitate
greater information sharing and cooperation in enforcement efforts
in the region:
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WHAT ARE IMPLICATIONS OF RECENT
DEVELOPMENTS?
Not just a work-shop
China as market
Private sector bribery
Fast growing
Local regu-lation
Excessive focus on public sector bribery risk?
DOES YOUR COMPLIANCE PROGRAM
FIT THE RISKS YOU FACE IN CHINA?
Business model drives risk
Focus on gov’t touch-points?
What about comm’ltouch-points?
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