The regulatory process and its role in the legal system is a fundamental concept in business law. Federal, state and local governments received the authority to regulate activities from Article 1 Section 8 of the U.S. Constitution. Article 1 Section 8 also referred to as the Commerce Clause or Necessary and Proper Clause dictates the enumerated powers of Congress in professional and private settings.
The regulatory process is performed by administrative agencies. Some commonly recognized administrative agencies are the Central Intelligence Agency (CIA), the Environmental Protection Agency (EPA), and the Food and Drug Administration (FDA). The recent GlaxoSmithKline bribery scandal focused on the Securities and Exchange Commission (SEC) administrative agency. The mission of the SEC is to “protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.” (Securities Exchange Commission)
The SEC recently alleged that GlaxoSmithKline’s Chinese subsidiary had engaged in bribery activity for four years, 2010 to 2013. The SEC accused GlaxoSmithKline subsidiary of violating the Foreign Corrupt Practices Act. According to the SEC, GlaxoSmithKline’s subsidiary had been providing foreign officials and health-care professionals with gifts incongruous to the law. These gifts included shopping trips, cash, travel, entertainment, etc. for the purpose of boosting sales. Further, the SEC suspected that GlaxoSmithKline’s subsidiary deceptively recorded these payments as expenses. The bribery scandal investigation eventually captured the attention of a second agency, the U.S. Department of Justice.
GlaxoSmithKline has not admitted nor denied these bribery charges, but has agreed to pay $20 million to settle the matter. Nonetheless, this is not GlaxoSmithKline’s first bribery settlement. In 2014, the company paid $491.5 million and several managers were convicted with charges and suspended imprisonment for a similar matter. Since the 2014 bribery controversy, GlaxoSmithKline stated it “installed several reforms, including shifts to the compensation of sales representatives and the end of payments to health-care practitioners for advocating for Glaxo products to other prescribers.” (Minaya)
My opinion on the matter is that GlaxoSmithKline was rightfully accused by the SEC and DOJ, specifically for violating the Foreign Corrupt Practices Act. The Act has a firm anti-bribery provision that GlaxoSmithKline and its Chinese subsidiary had a legal and ethical responsibility to follow. The fact that GlaxoSmithKline and its subsidiary’s records were not a true representation of its payments is a clear piece of evidence suspecting its violation. In addition, having read the SEC order and learned that GlaxoSmithKline had engaged in this activity before, I believe that the company and the subsidiary did participate in bribery.
Melissa is a marketing major with dual minors in public relations and legal studies at the Stillman School of Business, Seton Hall University, Class of 2019.