Danone unit probes new China bribery allegations

Mon Sep 23, 2013 5:41am EDT
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By Adam Jourdan

SHANGHAI (Reuters) - A unit of French food group Danone SA (DANO.PA: Quote) said on Monday it opened an investigation after Chinese state TV reported that it bribed medical staff to boost sales of its infant formula at hospitals in a number of regions across northern China.

The latest allegations follow a report by China Central Television (CCTV) last week that Dumex, Danone's milk powder business, bribed staff in a single hospital in the northern city of Tianjin to give its milk powder to new-born babies. Dumex said it expected to have a report ready by early next week.

China is a magnet for foreign milk powder makers, with the country's $12.4 billion market expected to double by 2017. But foreign firms are under scrutiny after recent media reports alleging corrupt sales practices in the industry. Authorities last month fined a group of mostly foreign milk powder producers $110 million for price fixing.

CCTV quoted an unnamed whistleblower with computer records showing Dumex spent nearly 500,000 yuan ($81,700) in April alone in bribes to medical staff in seven provinces in northern China.

The records detailed the names of recipients, the amounts given and the cities where each transfer took place. Images from the report showed the amounts of each transfer ranged from 100 yuan to several thousand yuan.

"Without (our bosses') approval, we wouldn't be able to do this sort of thing," the whistleblower told CCTV.

Similar reports were carried in a number of official newspapers on Monday, including the Beijing Times and the China Youth papers.

"Dumex started the investigation as soon as we saw the news, and the report should be ready by October 1," the company said in a statement emailed to Reuters, declining to comment on whether senior staff in China were aware of the payments.   Continued...

A general view with a giant jar of yogurt is seen outside the exhibition to mark the 90th anniversary of the French foods company Danone, in Paris April 2, 2009. REUTERS/Jacky Naegelen