Foreign Companies Doing Business in China Conflict with U.S. Anti-Bribery Laws

By C. Gabriel Sanchez

In the last few years, many U.S. multinational companies have found success in China’s attractive and promising market. However, local corruption is a concern that foreign companies doing business in China must consider. The Washington Post reported in late August that in order to achieve sales, China-based executives, sales agents, and U.S. distributors often make payments that may be considered bribes or kickbacks by U.S. anti-bribery laws, to purchasing agents at government offices and state owned business.

Companies such as InVision Technologies, a California-based manufacturer of airport security screening systems, and Diagnostic Products Corp., a Los Angeles-based medical equipment firm, have faced serious financial penalties from the Securities and Exchange Commission as a result of payments made to government officials to gain or retain business.

The Foreign Corrupt Practices Act (FCPA) deems it unlawful to pay or offer to pay anything of value to a foreign official to obtain or retain business. The FCPA sets the standard for business practice in America. Notwithstanding the United States’ attempts to eradicate unlawful practices, corruption in the form of bribes and kickbacks continue to plague Chinese business. For more information, contact C. Gabriel Sanchez at csanchez@kmclaw.com.