Avon to shell out $135m fine in China bribery case

Published: 18-Dec-2014

The direct seller is in hot water for paying out bribes to Chinese officials

Beauty giant Avon has been fined $135m (£87m), after a lengthy bribery charge case that has been ongoing for six years.

Avon China pleaded guilty to concealing and disguising $8m (£5.1m) in gifts and bribes to Chinese officials. Gifts included plane tickets as well as Louis Vuitton, Tiffany and Gucci merchandise.

In addition, Avon paid millions of dollars to government officials to obtain a direct-selling licence in China in order to gain an edge over its competitors. In China, direct selling was outlawed in 1998, but the ban was lifted in 2001. Avon began operating in China five years later and was one of the first companies to obtain a license in the country.

It is illegal to pay money or give gifts to foreign officials to retain or obtain business under the US Foreign Corrupt Practices Act. As a result, Avon is now due to make two aggregate payments to two US government agencies: $68m in fines to the United States Department of Justice (DOJ) and $67m in disgorgement and prejudgment interest to the US Securities and Exchange Commission.

In the settlement papers, the DOJ noted Avon's cooperation and “extensive remediation” and noted that Avon's efforts resulted in “important compliance and internal controls improvements”.

It is estimated that Avon has coughed up more than $300m in legal costs as a result of the inquiry.

Avon generates approximately $10bn in annual revenue and is the world's largest direct sellers of beauty products. It is sold through more than six million independent sales representatives.

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