SEC investigating Chinese infant formula promotion ‘expenditures’: Mead Johnson

By Mark ASTLEY contact

- Last updated on GMT

Related tags: Mead johnson, Mead johnson nutrition

SEC probing Chinese infant formula promotion spending: Mead Johnson
Mead Johnson Nutrition has revealed that the US Securities and Exchange Commission (SEC) is probing “certain expenditures” relating to the promotion of infant formula products by its business in China.

Within its financial statement for Q3 2013, which was published last week, Illinois-based Mead Johnson Nutrition said that it was “voluntarily complying”​ with a request by SEC for specific documents.

“The company has initiated an internal investigation of, and is voluntarily complying with a Securities and Exchange Commission request for documents relating to, certain business activities of the company’s local subsidiary in China,”​ the notice said.

All SEC investigations are conducted privately. In line with this, the Washington-based regulator refused to confirm that it is even looking into Mead Johnson’s Chinese business practices.

“We decline to comment,”​ a SEC spokesperson told DairyReporter.com.

Violated US and local law?

Mead Johnson Nutrition's Chinese business markets a range of infant formula and growing-up milk products, including its popular Enfamil infant nutrition brand.

In its statement, Mead Johnson said that its own internal investigation would focus on promotional methods employed by its Chinese business that may have violated company policy or US law.

“The company’s investigation is focused on certain expenditures that were made by the subsidiary in connection with promotion of the company’s products or may have otherwise been made and that may not have complied with company policies and applicable US and/or local laws,” ​said the statement.

The firm added that it has drafted in “outside legal counsel to conduct the investigation.”

The announcements comes just two weeks after Danone’s Asian infant nutrition business, Dumex, vowed to take “disciplinary action”​ against employees that bribed Chinese doctors and nurses to promote its products to the parents of newborn children.

An investigation by local health officials and police discovered that since 2011 bribes had been paid to 116 doctors and nurses across 85 medical institutions in the Tianjin Municipality to “distribute promotional materials, and promote the use of Dumex milk powder.”

Chinese price fixing

Last week’s announcement represents the latest setback for Mead Johnson's Chinese business.

Earlier this year, the Chinese National Development and Reform Commission (NDRC) launched an investigation into anti-monopoly law violations by a number of infant formula manufacturers including Mead Johnson Nutrition, Danone Dumex, Abbott Laboratories, and FrieslandCampina.

Fines were issued following the investigation, which uncovered a culture of illegal price fixing in the market.

Mead Johnson Nutrition was worst by the probe, with the NDRC handing it a RMB 203.7m ($33m, €25m) penalty.

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