Avon Products Inc. agreed to pay $135 million to settle charges that it bribed Chinese officials to gain business advantages, U.S. authorities announced in 2021. The cosmetics giant pleaded guilty to conspiring to violate the Foreign Corrupt Practices Act (FCPA) and the Securities Exchange Act.
Two federal agencies pursued separate cases against Avon. The Securities and Exchange Commission (SEC) filed a civil complaint, while the U.S. Attorney’s Office for the Southern District of New York, the Department of Justice, and the FBI conducted a joint criminal investigation. The FCPA prohibits U.S. entities from bribing foreign officials to obtain or retain business.
The SEC alleged Avon's Chinese subsidiary made approximately $8 million in payments to Chinese officials between 2004 and 2008. These payments, disguised as gifts, travel expenses, and entertainment, were intended to secure favorable treatment. Officials received cash, luxury goods like Louis Vuitton bags and Tiffany pens, and tickets to high-profile events such as the China Open tennis tournament. Millions were also spent on meals and entertainment.
These bribes aimed to gain access to officials involved in drafting and implementing direct selling regulations in China. Avon sought to be among the first companies to test these new rules and to receive a direct selling license. The payments also served to maintain a positive corporate image, which was a requirement for retaining the license.
Avon's management became aware of potential FCPA violations in late 2005, the same year the company received approval to test direct selling in China. Although management consulted an outside law firm and directed reforms, these measures were never implemented. Instead, the company allegedly concealed the issue. A whistleblower contacted Avon in 2008, prompting an internal investigation.
The company also used bribes to avoid fines and suppress negative news that could harm its public image and affect its license. To conceal these illicit transactions, Avon falsely recorded them as employee business expenses or as reimbursements to third-party vendors. In other cases, payment records were so vague they offered no clear explanation of the transactions.
The settlement included a $67 million criminal penalty paid to the Department of Justice and disgorgement of $67 million in ill-gotten gains to the SEC. This case highlights the risks multinational corporations face when operating in markets with varying regulatory environments and underscores the importance of robust compliance programs.