The Identification and Countermeasure to Commercial Bribery in China

In the recent years, the commercial bribery (“CB”) events related to foreign invested companies happened frequently; some internationally renowned companies such as Lucent, Siemens and etc. are involved in CB events, which bring the economic loss to those companies and bad effects to their images and reputation. Hence, it is an inevitable topic for foreign invested companies to prevent CB, company should know the criteria to identify a CB event and do it right in the commercial activities.

In China, we do not have a specific anti-commercial bribery law as of now except some provisions to regulate CB, the provisions are not systematic so the criteria to identify a CB event is not specific and clear. In accordance with “Anti-Unfair Competition Law”, “Interim Provisions on Banning Commercial Bribery” and other relevant laws and regulations, the criteria to identify a CB event shall be as follows:
A. The subject of CB shall be a business operator engaged in sales and purchase activities. In addition, “CB committed by an employee of a business operator in sales and purchase activities shall be regarded as the business operator’s behavior”.

B. The aim of CB is to bring device effect to the transaction, squeeze out competitors or obtain the commercial chance.

C. A business operator has bribed another entity or individual with property or by other means.

Firstly, the “property” refers to cash and material objects, including property given by a business operator to another entity or individual in the name of promotion fee, publicity fee, sponsorship fee, scientific research fee, service charge, consulting fee, commissions, reimbursed expenses, etc. in order to sell or purchase commodities. However, the “property” does not include an advertising gift of a small value which is offered as a common commercial practice. There is no standard for the amount of the small value, normally, those too expensive entertainment activities or gift, such as overseas travel or luxury gift, may be deemed as CB .

In the view of identification of bribery as a criminal crime, “Opinions on Issues concerning the Application of Law in the Handling of Criminal Cases of Commercial Briberies” elaborates the “property” of bribery in the “Criminal Law” shall include the property benefits of which the value can be measured by currency. “Threshold for Criminal Prosecution in Bribery Cases” has stipulated that a bribe must amount to at least RMB10,000 for an individual or RMB200,000 for an entitiy to be justified as criminal prosecution, the amounts are cumulative.

So if the business operator has bribed another entity or individual for once or several times, once the amount is up to the standard hereinabove, the business operator might be justified into criminal prosecution.

Secondly, “by other means” refers to the other methods to provide benefit, such as provide overseas or domestic travel, investigation, etc. Moreover, it shall be a bribe if the business operator gives a secret commission to another entity or individual without logging as normal accounting activities, viz. the commission has not been recorded in the accounting system so it has not been recorded in the statement account, transferred to other account title, or it is a faked one.

Given that the Chinese authorities has strengthened the supervision on CB of multinational company in recently couple of years, the foreign invested company shall take proper measures to prevent the bad results brought by CB:

Firstly, the company shall strengthen the compliance management; formulate the content and standard of the compliance control in the commercial activities. To set up the appropriate standard for the small value entertainment, gift, tourist and etc., for the commercial partners, and strengthen the audit of the statement of account.

Secondly, the company shall set up the supervision system on the employees’ behavior by designing the rules and regulations, provide the employees with legal training.

Last but not least, if there are some problems which are difficult to be dealt with in the commercial communication, the company shall consult professional legal advice promptly.