Mead Johnson Nutrition announced this week in a Form 10-K filing with the Securities and Exchange Commission that it has launched an internal investigation into potential violations of the Foreign Corrupt Practices Act.

In October 2013, the SEC launched an investigation into whether a Chinese subsidiary of the infant formula maker inflated formula prices in China. Following an SEC request for documents relating to that investigation, “the company is continuing an internal investigation of such business activities,” the Form 10-K stated.

As part of its internal investigation, Mead Johnson is reviewing whether certain expenditures made in connection with the promotion of its products may have violated company policies, as well as the FCPA.

The investigation, which is being overseen by an independent committee of the board, is being conducted by outside legal counsel. “The status and results of the investigation are being discussed with the SEC and other governmental authorities,” the company stated.

“At this time, the company is unable to predict the scope, timing or outcome of this ongoing matter or any regulatory or legal actions that may be commenced related to this matter.”

Antitrust Enforcement

The SEC launched its investigation into Mead Johnson after China's central economic planning agency, the National Development and Reform Commission (NDRC), fined six infant formula producers a combined record total of $110 million in August 2013. The fines marked the culmination of a widespread probe launched by the NDRC in July over alleged price-fixing and anti-competitive practices in violation of Article 14 of China's Anti-Monopoly Law (AML).

Article 14 prohibits companies from entering into monopoly agreements with trading partners that fix the price of commodities for resale to a third party or restricts the minimum price of commodities for resale to a third party. Companies that are found in violation of Article 14 may face fines ranging from 1 to 10 percent of global revenue for the preceding year.

As a result of that price-fixing probe, Mead Johnson paid $33 million in penalties. Other infant formula companies to face fines included U.S.-based Abbott Laboratories; Hong Kong-based Biostime; France-based Dumex; Netherlands-based FrieslandCampina; and New Zealand-based dairy company Fonterra. Wyeth Nutrition, which has since been acquired by Nestle, was able to avoid penalties by providing “important evidence and [carrying] out active self-rectification,” according to the NDRC.

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