06 Aug Mead Johnson Nutrition slapped with a $12 million penalty to settle on SEC bribery charges
According to a recent statement issued by the US Securities and Exchange Commission (SEC), Mead Johnson Nutrition (MJ), the world’s second largest infant formula manufacturer, has agreed to pay a $12 million settlement on its violation of the US Foreign Corrupt Practices Act (FCPA). Despite the Illinois-based company’s refusal to admit guilt, the sum is to settle bribery charges. Apparently, MJ’s Chinese subsidiary’s has been making more than US$2 million in off-the-books payments to health workers in hospitals in China to recommend Mead Johnson products and to provide the company contact information of expectant mothers. The SEC investigation revealed that instead of directly paying health workers, Mead Johnson channeled the illicit payments through third-party distributors as “distributor allowance’’.
Providing benefits to health workers is a very common promotional practice with the end goal to enhance sales. Article 7.3 of the International Code prohibits financial or material inducements from being offered to and accepted by health workers. Companies often circumvent this Article either through offering benefits to health workers indirectly (as in this case), or by arguing that benefits were not intended as “inducement to promote products’’. Thus, ICDC advises countries to tighten existing Code provisions when implementing the Code at national level by leaving out any need to show intent.