Henry Chen: Two Bottles of Liquor Rises to Bribery-Fine Level, But Not Criminal
Recently, the Market Supervision Bureau (MSB) of Shanghai’s Qingpu district fined a medical device distributor 50,000 yuan ($7,230) because the distributor made a unique bribe to a doctor responsible for the procurement of medical devices in a hospital in Nanjing, a city in Jiangsu province that’s about 270 kilometers (170 miles) from Shanghai. The reason why the bribe is unique is that the bribe was not cash, but two bottles of famous luxurious liquor — Moutai. The total value of the two bottles of liquor was about 3,000 yuan.
The distributor is registered in Qingpu district, Shanghai, so the MSB of Qingpu district has jurisdiction over the case. The MSB of Qingpu district is well-known for being tough in cracking down on bribery.
Although the total amount of the bribe was not that much, a gift of Moutai was quite eye-catching to MSB officials.
Moutai was named a national liquor in 1951, two years after the founding of the People's Republic of China. Moutai has been used on official occasions in feasts with foreign heads of state and distinguished guests visiting China. It is the only alcoholic beverage presented as an official gift by Chinese embassies in foreign countries and regions. It received wide exposure in China and abroad when then-Premier Zhou Enlai used the liquor to entertain Richard Nixon at the state banquet during the U.S. presidential visit to China in 1972. Zhou told Nixon that Moutai had been famous since it won recognition at the San Francisco World’s Fair in 1915, and “that during the Long March, Moutai was used by us to cure all kinds of diseases and wounds.” Nixon replied, “Let me make a toast with this panacea.” When Deng Xiaoping visited the United States in 1979, Henry Kissinger told him, “I think if we drink enough Moutai, we can solve anything.”
On the one hand, Moutai became the drink of choice for greeting foreign dignitaries; on the other hand, Moutai is the bribe of choice to officials (as well as non-officials).
Doctors are regarded as government officials under the Foreign Corrupt Practices Act (FCPA) if the doctors work in a state-owned hospital. Because almost all of the hospitals are state-owned, doctors in China are government officials under the FCPA. However, surprisingly, doctors are not deemed as state personnel or government officials under the Criminal Law of China. In 2014, GSKCI (a subsidiary company of GSK in China) received a criminal fine of 3 billion yuan for giving bribes to doctors. And several senior executives of the company received criminal punishments as well. The name of the crime is nothing but bribing nonstate working personnel. Otherwise, the punishment could be harsher.
However, there is an important exception. If the doctor is an administrator in a state-owned hospital, like the doctor in this case responsible for procurement of medical devices, he or she would be deemed as a government official. So bribing a doctor with administrative responsibilities will receive a severer punishment than bribing a common doctor. The reason why the distributor received an administrative ticket and not criminal punishment in this case is that the total amount is not that much. With that said, there are two kinds of bribery laws in China: one is the Criminal Law; the other is the Anti-Unfair Competition Law (which is an administrative law), about which we will write more later.
Henry Chen is a senior partner at Dentons’ Shanghai Office, and was previously the accounts-payable compliance director of The Ford Motor Co. He is the author of the book “Commercial Bribery Risk Management in China.” Chen is accessible via firstname.lastname@example.org.
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