Sorrell warns Lévy against buying Chinese agency Oriental & Rende

In an extraordinary new twist to the Oriental & Rende story I posted the other day, WPP chief executive Sir Martin Sorrell has written to his counterpart at Publicis Groupe, Maurice Lévy, warning him of the dangers of acquiring the Chinese specialist car agency.

Last year, I’m told, WPP subsidiary Ogilvy broke off acquisition talks with O&R after it emerged that the agency – whose main client is VW, Mercedes and Hyundai joint-venture partner FAW – was operating both outside Chinese law and accepted ethical practices. The problem seems to involve under-the-table payments, totalling several million dollars a year, which are being paid to the client management in order to retain business.

It is believed that, in his letter, Sorrell appealed to Lévy’s sense of fair play and emphasised the need for a corruption-free level-playing field in the international advertising business.

Corruption, knowingly or unknowingly, committed in foreign markets is now a major corporate headache. Under section 7 of the UK Bribery Act 2010, it is an offence for commercial organisations registered in the UK, or carrying out business there, to fail to prevent bribery taking place. The burden of proof is on the indicted company to demonstrate that it had adequate anti-corruption controls in place at the time of the offence’s commission. Punishment on conviction ranges up to a 10-year prison sentence and unlimited fines. France has similarly tough anti-corruption legislation governing overseas subsidiaries, involving heavy fines and potential imprisonment.

Whether Sorrell’s letter – to which Lévy is believed to have replied – will have any impact on PG’s decision to buy O&R remains to be seen.

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