Following a string of corruption charges involving pharmaceutical companies, China’s increasing interest in holding companies accountable to ethical operation continues this week with a China Central Television (CCTV) investigation of Dumex Baby Food Co. The CCTV report says that Dumex, a subsidiary of French company Danone SA, paid off hospitals to use its products and improve the sale and distribution of its baby formula.
In a statement from Danone Monday the company says it is “shocked by the CCTV report” and will devote significant resources to investigate the situation. “Dumex Baby Food Co strictly adheres to Chinese laws and regulations,” the statement continued.
The Wall Street Journal reports that the CCTV segment, “spoke broadly about formula companies but named Danone’s Dumex, alleging that the company gives cash to doctors and nurses in hospital maternity wards so that it can increase its sales and market share in China.” The CCTV report also claimed that use of formula undermined breastfeeding in China, which has some of the lowest rates of breastfeeding in any developed nation.
In July, several high-profile corruption acquisitions were brought against pharmaceutical companies including GlaxoSmithKline (GSK) and Bayer. As with the case brought against Dumex, the cases were announced with fireworks. In the GSK case, Chinese authorities stopped executives from leaving the country during the investigation and broadcasted a confession from a top executive.
With a flurry of corruptions charges leveled at multinational corporations, some have questioned the motives of the Chinese government. Some suggest that the squeeze is coming in advance of pricing concession as China attempts to make healthcare costs more affordable for its rising middle class. Others point to the flashy unveiling methods as the country’s attempt to show commitment to becoming an anti-corruption force.
Regardless of the motivation, if companies are at fault in these cases, China has every recourse to pursue litigation against them.