This article originally appeared on Professor Koehler’s FCPA Professor website (www.fcpaprofessor.com) and is reprinted with his permission.
This recent article from The New York Times (“In China Press, Best Coverage Cash Can Buy”) caught my eye. It discusses how Chinese journalists are often “more than willing to let flattering news about Western and Asian businesses appear in print and broadcast media – if the price is right.” The article notes that “while Western companies and many Chinese journalists are loath to discuss the subject, public relations and advertising firms are sometimes surprisingly candid about their roles as brokers in buying flattering coverage, referred to [in China] as ‘soft news’ or ‘paid news.’”
In the article, Ogilvy & Mather (one of the world’s largest advertising agencies that services Fortune Global 500 companies and a unit of NASDAQ listed WPP) essentially admits, in certain instances, to facilitating such payments for its clients. Also in the article a “Chinese account manager for another American public relations firms was strikingly frank about paying for coverage.”
The FCPA implication?
In the eyes of the enforcement agencies, employees of state-owned or state-controlled enterprises (i.e. most Chinese media outlets) are “foreign officials” under the FCPA. Given the agencies’ interpretation coupled with the agencies increasingly boundless interpretation of “obtain or retain business,” it will be interesting to see how they react (if they haven’t already) to the front-page NYT article. Is the type of conduct described in the article the type of conduct that Congress sought to prohibit when it passed the FCPA? Likely no, but then again this same question could be asked in connection with many recent FCPA inquiries and enforcement actions.
While not a direct parallel to the issues discussed in the NYT article, in FCPA Opinion Procedure Release 08-03, TRACE International Inc. proposed to pay for certain expenses for journalists employed by Chinese state-owned media outlets to attend a TRACE press conference in Shanghai. According to TRACE in the request, “[I]t is common practice for foreign and domestic companies operating in the PRC to provide a stipend and travel expenses to journalists in connection with a press conference and such stipends are not conditioned on subsequent coverage of the press conference or the nature of the coverage.”
Given the various representations offered by TRACE, including that the payments were not contrary to Chinese law and that they would be accurately recorded in its books and records, the DOJ opined that it did not intend to take any enforcement action with respect to the payments. The DOJ noted that the expenses would fall within the FCPA’s affirmative defense in that they appeared to be directly related to the promotion, demonstration, and explanation of TRACE’s products or services. However, in its opinion, the DOJ stated it did not “place [any] weight on the fact that it may be common practice for companies in the PRC to provide such benefits to journalists attending a press conference.”
The NYT article notes that the above dynamic may not be limited to China. The article states, “[M]edia outlets in Europe, Japan, the Philippines, Latin America and even the United States may venture into various gray area, encouraging companies to pay for journalists’ travel or underwriting favorable reporting or agreeing to take out advertising packages in exchange for coverage.”
About the Author
Mike Koehler is an assistant professor of business law at Butler University and is an expert FCPA columnist for Corporate Compliance Insights. He is a leading expert on FCPA and other anti-corruption laws and initiatives. Professor Koehler has testified before Congress on FCPA, and he is also frequently speaks about such topics before business and academic audiences.