Home -> Law Blog Directory -> International Law Blogs -> The FCPA Blog

International Law

: The FCPA Blog

Ding Dong, FCPA Investigation Calling

Beauty-products giant Avon said Monday that it has launched an internal investigation into possible Foreign Corrupt Practices Act violations in China that may be linked to improper promotional expenses. Avon -- with five and a half million independent sales representatives in more than 100 countries -- is the world's largest direct seller. The company's FY2007 revenues were $9.9 billion.

China imposed restrictions on direct selling in the late 1990s that forced Avon to market its products through shops and boutiques. Two years ago, the company convinced China's regulators to allow its traditional door-to-door sales model. Avon's announcement refers to "certain travel, entertainment and other expenses" but doesn't say if the investigation involves promotional expenses for Chinese regulators involved in that decision.

Here's the portion of the company's October 20, 2008 release that deals with the FCPA investigation:

Avon Products, Inc. (NYSE: AVP) announced today, October 20, 2008, that it is voluntarily conducting an internal investigation of its China operations, focusing on compliance with the Foreign Corrupt Practices Act ("FCPA"). The Company, under the oversight of the Audit Committee, commenced in June 2008 an internal investigation after it received an allegation that certain travel, entertainment and other expenses may have been improperly incurred in connection with the Company's China operations. The company has voluntarily contacted the Securities and Exchange Commission and the United States Department of Justice to advise both agencies that an internal investigation is underway. The internal investigation is in its early stage and no conclusion can be drawn at this time as to its outcome.

Last week we discussed the FCPA's affirmative defense for payments for expenses of foreign officials related directly to ?the promotion, demonstration, or explanation of products or services" that are "reasonable and bona fide.? 15 U.S.C. §§ 78dd-1(c)(2)(A) and 78dd-2(c)(2)(A). That defense, as we said, is loaded with uncertainty and very difficult for companies to safely use.

View Avon's "Statement on Voluntary Disclosure" (October 20, 2008) here.

.

Full post as published by The FCPA Blog on October 20, 2008 (boomark / email).