In the news: GSK found guilty, regulators delay iPhone 6 launch and China business law checklist produced

GSK pays US$489 million for bribery

A Chinese court found drug maker GlaxoSmithKline's local subsidiary guilty of bribery and fined the company US$489 million (Rmb3 billion), concluding this part of the scandal that has shaken the country's pharmaceutical industry. Five managers, including former China CEO Mark Reilly, were convicted of bribery-related charges and received suspended prison sentences. The company may still be fined in the US and UK as well and faces several investigations around the world.

Sources:
The Wall Street Journal
Reuters/ALB

For foreign companies in China, the case reveals vulnerabilities to inside information and a legal system lacking in transparency. Although this was the largest-ever corporate fine in China, it was smaller than many pharmaceutical analysts had expected (equivalent to around 4% of GSK's 2013 operating profits). Practitioners say this is only the beginning for enforcement against corruption, but some feel that the suspended sentences for the GSK employees fail to send a strong enough message to the pharmaceutical industry and does not set a good example for future cases.

More from CLP:
GSK: A case study
Five tips for managing corruption risks
Interview: Changing the game – Michael Cheng (ACGA)
Avoiding the pharma blacklist
How to deal with the corruption crackdown


Apple faces regulatory hurdle with new iPhone

Apple's iPhone 6 passed a regulatory test in China but has yet to receive permission to be sold in the country, causing a delay in the launch of the latest model. The phone has received regulatory approval for use on domestic frequencies but still requires one more licence for network access. The company received over 4 million pre-orders for the new iPhone in the first 24 hours last week, but some analysts are sceptical whether Apple can beat last year's (iPhone 5S and 5C) first-weekend sales of 9 million without China. Without the required licence, Apple has not said when it will start selling the iPhone 6 in China.

Source:
Financial Times

Apple simultaneously released a new website describing its approach to privacy. The company has faced criticism in China for revealing state secrets to the US, allegations which it has denied. The company is also looking to hire a new head of law enforcement in Beijing, a position that requires handling requests by the Chinese government for data on its users in China. The job posting says the candidate must “educate requesters as to the data that can and cannot be supplied in particular circumstances while maintaining good relations with requesters”. Apple has begun to store its users' personal data on Chinese servers for faster internet service, making them vulnerable to requests from the local authorities. Google and other companies have moved their servers abroad to avoid risks of such political problems.

More from CLP:
Interview: A dynamic spirit – Yan Li (Tencent)
How to design a data privacy strategy in China
Cracking down on e-commerce
Measures for the Administration of Online Trading
SAIC's consumer protection comes at a price
Online gaming company sues Apple


A China business law checklist

Dan Harris of the China Law Blog has written a post listing all the factors foreign companies need to check in order to stay out of legal trouble. These include whether the company: a) is operating legally (through a WFOE, JV or representative office); b) has a good contract (which should be written and in Chinese); c) is protecting its IP (register all trademarks, patents and copyrights); d) is bribing anyone (given China's increasingly fierce enforcement of anti-bribery laws against foreign companies); e) is complying with import-export laws (make sure all approval and licences are obtained and check local and relevant overseas rules); and f) is violating any antitrust, tax, environmental or labour laws (each are complex and realising these laws in China are different from the comparable laws in other jurisdictions is crucial for business).

Source:
Above the Law

The post provides a solid 101 checklist for conducting business in China. Each point has its own intricacies and depth, and understanding the laws and legal community's interpretation of these laws goes a long way. With the market (in terms of both consumers and competitors) growing and enforcement steadily (though in some areas quite sharply) increasing, it is critical to lay down the legal foundation for a business. As the list states, it all begins with an authorised entity/structure, enforceable contracts, strong IP portfolio and full compliance with all regulations.

More from CLP:
Freeing private capital
PRC Company Law (2013 Revision)
Setting up a WFOE just got easier
Interview: Learning from M&A – Philip Gu (Danone)
China question: How do I draft an arbitration clause?
The golden rules of trademark strategy
Implementing Regulations for the PRC Trademark Law (Revised)
Five tips for managing corruption risks
How to deal with the corruption crackdown
New environment law signals warning
PRC Environmental Protection Law (Revised)