In the news: Bristol-Myers pays $14 million FCPA fine, Xiaomi gets investigated for advertising violations, Unisplendor acquires Western Digital stake

Bristol-Myers pays SEC $14 million for bribery in China

US drugmaker Bristol-Myers Squibb is paying $14 million to the US SEC to settle charges that its Chinese joint venture violated the FCPA by allegedly making improper payments to hospital officials to boost drug sales. The company was said to have used fake expense reports to disguise bribes and other gifts as normal business expenses and that executives did not respond effectively to such red flags. Sales representatives reportedly provided benefits ranging from food and personal care items to shopping cards, jewellery, tours and cash payments. The SEC said Bristol-Myers agreed to the fine without admitting or denying any wrongdoing. The fine includes $11.4 million in profits and a civil penalty of $2.75 million. Though this pales in comparison to the $488 million fine the Chinese authorities levied on GSK last year, it shows exactly how corruption practices in China can have multi-jurisdictional effects, such as under the FCPA and UK Bribery Act. “Gift-giving” is rampant in China's hospital industry. Stiff local competition and regulatory price caps make foreign pharma companies particularly susceptible, though efforts have been made to liberalize drug prices and reform the healthcare system. But the corruption crackdown – which won't end anytime soon – shows that companies clearly need to stop with the bribes, or face being blacklisted from the market entirely.

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Xiaomi investigated for violating Advertising Law

China's largest smartphone maker is facing accusations of violating the new PRC Advertising Law, which took effect on September 1 and bans the use of superlative adjectives for promoting products. The Haidian branch of the Beijing Administration for Industry and Commerce says the company's usage of phrases like “the best” could violate the new law. Businesses received a sharp reminder that they need to focus on advertising regulations and enforcement when P&G's Crest toothpaste was hit with a record fine of Rmb6 million ($958,000) in March this year for altering images to make teeth look whiter. The new law gives authorities more teeth to crack down on fraudulent ads and imposes much stricter requirements on advertising behavior in China.

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Chinese tech company buys into Western Digital

Chinese state-owned Unisplendor, a unit of Tsinghua Unigroup, has agreed to pay $3.8 billion for a 15% stake in US data storage company Western Digital, soon after Presidents Obama and Xi attempted to resolve their differences over alleged hacking and tech-related disputes amid growing cybersecurity tensions. The agreement valued Western Digital at more than $25 billion. The deal is subject to CFIUS review, which is arguably the biggest obstacle to TMT acquisitions by Chinese investors in the US. It's similar to the national security reviews for FDI in China. But as it comes at the heels of President Xi's meeting with Obama and tech conference in Seattle, the deal will probably pass. It adds to Tsinghua Unigroup's international exposure, which includes Intel owning 20% of its subsidiaries.

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China Outbound Investment Guide 2015