Second Danone unit investigates bribery claims

Internal probe follows report Nutricia baby food firm gave gifts to doctors at 14 Beijing hospitals

PUBLISHED : Friday, 27 September, 2013, 12:00am
UPDATED : Friday, 27 September, 2013, 4:50am

Danone will investigate allegations of bribery at a second baby-food unit on the mainland, where the French diary giant cut prices after being fined for violating anti-monopoly laws.

Company spokeswoman Ada Zhao said that Danone's Nutricia China unit "has immediately launched an internal investigation" after 21st Century Business Herald reported it gave "improper advantages", including gifts and travel subsidies, to more than 100 doctors in 14 Beijing hospitals.

The allegations followed two separate reports this month from a state broadcaster, claiming that Danone's Dumex brand made payments to hospital doctors and nurses on the mainland to drum up sales.

The central government has sought to crack down on corruption in the country's US$350 billion health care market, probing multiple drug companies amid claims of doctors' involvement in malfeasance.

Nutricia gave benefits that were worth about 300,000 yuan (HK$378,000) to doctors at two Beijing hospitals between July 2010 and last month, the 21st Century Business Herald reported. The newspaper cited documents from an anonymous source.

China Central Television similarly cited documents provided by an unidentified person this week when it reported that Dumex paid about 500,000 yuan to hospital staff in Beijing, Tianjin and five provinces.

That followed a separate CCTV report last week that Dumex paid hundreds of thousands of yuan annually in various forms of "sponsorship fees" to doctors and nurses at hospitals in Tianjin to sell its products amid fierce competition among baby-formula makers.

Dumex would report on the results of an internal investigation before Tuesday, said Athena Wang, a spokeswoman for Dumex's China unit.

Dumex said last week it was "extremely shocked" by the initial September 16 CCTV report.

Last month, Danone was fined 172 million yuan by Beijing's top economic planning agency for fixing prices of milk powder. That prompted it to cut prices for its products by as much as 20 per cent.

The French maker of Activia Yogurt and Evian water also issued a precautionary recall of its milk formula products last month after New Zealand's Fonterra Co-operative said the items might have been affected by a contaminated whey protein.

Danone's baby-nutrition sales would fall in the third quarter as the recalls had a "significant" effect on sales in Asia, the company said last month. Danone is the third-largest baby formula company on the mainland, with a 9.2 per cent market share.