Bribing in China? It’s Not Worth the Cost
When I advise US companies interested in doing business in China, one of their first questions is always whether they will have to engage in corruption to compete. Rightly or wrongly, there is a perception that China is corrupt, and that bribery is simply “part of business.” Some China consultants, foreign or native to China, encourage this idea by telling companies that they will have to pay off government officials to get things done, or give lavish gifts to potential business partners to be successful. Certainly, there are some officials that will accept, and even expect, that companies will bribe them. The risks of engaging in bribery within China, however, are grave.
US companies can face civil and criminal penalties from the US government for the acts of their employees, subsidiaries, and agents under the Foreign Corrupt Practices Act (FCPA). Companies found guilty of corruption can pay large fines and face corporate monitors. Individuals can also face penalties of up to 5 years in prison, and $250,000 fines per violation–this means per instance of bribery. Most often, US companies get into trouble with the FCPA through consultants or agents who pay off officials while acting on the company’s behalf. Even seemingly small gifts or benefits, such as a nice bottle of wine or an expensive dinner, can be considered bribes when given corruptly to obtain an improper advantage. Common FCPA risk areas for businesses operating in China include: import/export through Customs, enforcement of intellectual property rights, security and logistics (e.g., police, military), and contracting with state-owned entities. Many companies do not realize that state-owned entities, and their leaders, are considered government entities.
China is also increasinly enforcing its own anti-corruption laws, prosecuting citizens and non-citizens that engage in bribery. Punishment is harsh, including up to life imprisonment, fines, and confiscation of personal property. Chinese criminal laws prohibit offering money or property to state personnel to obtain illegitimate benefits. Unlike the FCPA, commercial bribery of private employees is also punishable in China. This means that giving incentives to private businesses, if for the purpose of gaining an improper advantage with that business, is illegal.
If your business touches China, it’s best to ensure your company complies with all anticorruption laws from the outset. Compliance policies and programs are relatively easy and inexpensive to set up with a lawyer’s advice. Have questions? Leave a comment, or email me at [email protected].