China's People's Daily slams GlaxoSmithKline over bribery
China must crack down on commercial bribery by multinational firms, the country’s top state paper said on Wednesday, two days after police accused British drugmaker GlaxoSmithKline of the widespread bribery of Chinese officials and doctors.
In a commentary, the People’s Daily newspaper accused some multinationals of using their market dominance to exploit gaps in regulatory systems in developing countries.
The article suggests Chinese authorities are not about to step back from a spate of investigations launched in recent months into how foreign companies do business in China, from the setting of prices to quality controls.
“A crackdown on commercial bribery by multinationals is deeply significant to safeguarding the order of the market economy and protecting an environment of fair competition,” said the commentary in the mouthpiece of the ruling Communist Party.
Chinese police on Monday accused GlaxoSmithKline of bribing officials and doctors to boost sales and raise the price of its medicines in China. Police said GSK transferred up to 3 billion yuan (HK$3.8 billion) to 700 travel agencies and consultancies over six years to facilitate the bribes.
In response, GSK said it was deeply concerned by the developments, which it called “shameful”.
A second commentary in the People’s Daily said China must “lift a sharp sword to pierce the improper, even illegal, costs behind rising drug prices” for which multinationals, such as GSK, were responsible.
The first article said the GSK case was an illustration of “the commercial anti-corruption struggle” in China. Project bidding and tax systems for multinationals were also problematic, the commentary said, without giving details.
“In recent years, some multinationals have utilised strong market and technological advantages, operated through intermediary agents, and taken advantage of the imperfect regulatory system in developing countries to drill loopholes,” the commentary said.
Some experts have suggested China may be expanding an anti-corruption drive beyond government ranks and domestic companies including state-run entities, focusing now on foreign firms.
China has targeted foreign firms on multiple fronts in the past few months, although the probe into GSK is the only high-profile, publicly known investigation focused on bribery.
European food companies Nestle and Danone said early this month they would cut infant milk formula prices in China after Beijing launched an investigation into the industry.
Chinese media has been giving the GSK story plenty of attention.
On Tuesday night, state broadcaster CCTV night aired an interview with one of four detained Chinese executives from GSK.
Liang Hong, vice president and operations manager of GSK (China) Investment, offered details on how he funnelled money through travel agencies by arranging conferences, some of which were never held.
“To have contact with some government departments you need money that you cannot normally expense to the company,” Liang said during the broadcast.
Liang said he paid bribes to officials from the powerful planning agency, the National Development and Reform Commission (NDRC), and the Ministry of Labour and Social Security, which are among those required to get medicines approved or prices set.
It is rare for state TV to carry such interviews, although state news agency Xinhua had earlier been given access to Liang.