Why was the Swedish telecom giant fined 8.7 billion yuan by the United States for bribing in China?

If the US "long-arm jurisdiction" is an all-encompassing "basket", then the settlement agreement is more like a carefully dug "pit".

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On March 3, U.S. prosecutors announced that Swedish telecommunications giant Ericsson admitted to violating the anti-bribery provisions of the Foreign Corrupt Practices Act and agreed to pay a $206 million fine.

Together with the previous payment of US$1.06 billion, Ericsson was fined a total of US$1.26 billion (about 8.7 billion yuan).

Why was Ericsson fined 8.7 billion yuan by the United States for bribing overseas?

Ericsson company, Chinese people should be no stranger.

Founded in 1876 in Stockholm, Sweden, Ericsson is one of the world's largest manufacturers of mobile communication equipment.

According to Dell'Oro's latest report, in the first half of 2022, Ericsson accounted for 14% of the global telecom equipment market, ranking third.

Share of revenue in the global telecommunications equipment market

In 2013, Ericsson was targeted by U.S. investigators on charges of bribery.

Subsequent developments showed that Ericsson did "make a mistake".

Ericsson itself admitted to paying $2.1 million in bribes to government officials in Djibouti between 2010 and 2014 to secure contracts with the country's state-owned telecommunications company.

According to the U.S. Department of Justice investigation, Ericsson paid $45 million in bribes to secure telecom orders from Indonesia.

It is worth mentioning that Ericsson's subsidiary in China spent tens of millions of dollars bribing government officials through gifts, travel and entertainment.

Overall, Ericsson bribed Djibouti, Vietnam, Kuwait, Indonesia, China and other countries.

Given the fact that the facts were available, Ericsson reached a settlement agreement with the United States in 2019, signed a deferred prosecution agreement (DPA) with the U.S. Attorney's Office for the Southern District of New York, and agreed to a three-year review.

Reconciliation comes at a cost.

On the one hand, there must be people behind the pot, and Ericsson fired 49 employees suspected of misconduct.

On the other hand, Ericsson paid a fine of $520.6 million, while also paying a fine of approximately $540 million to the SEC, totaling $1.06 billion.

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You know, at that time, Ericsson's annual net profit was only $200 million.

Unexpectedly, during this three-year review period, Ericsson was found to be problematic again.

According to the U.S. Department of Justice, Ericsson failed to truthfully disclose "all factual information and evidence" related to the company's bribery programs in Djibouti and China, nor did it disclose potential evidence of similar schemes in Iraq.

Simply put, Ericsson didn't confess it all.

This means that Ericsson has violated the deferred prosecution agreement.

As a result, Ericsson had to pay another $206 million in fines.

Many readers will wonder why Ericsson was fined $8.2 billion by the United States because it was a Swedish company and did not pay bribes in the United States.

This brings us to the "long-arm jurisdiction" once introduced by the Zhengjie Bureau.

Simply put, the United States has the right to govern a company, regardless of its ownership, as long as its actions meet the "Minimum Contacts" between its actions and the United States.

The scope of the "minimum link" is very broad.

Listed in the United States, traded with U.S. technology or products, traded in dollars, are all included.

Given the dollar's influence, few businesses can escape U.S. jurisdiction.

There are also many reasons for the "long-arm jurisdiction" of the United States.

Money laundering, monopolies, bribery are all included.

Five major reasons for the United States to implement long-arm jurisdiction

Ericsson violated the U.S. Foreign Corrupt Practices Act.

If the US "long-arm jurisdiction" is an all-encompassing "basket", then the settlement agreement is more like a carefully dug "pit".

In the case of Ericsson, Ericsson reached a settlement agreement with the United States in order to save time and litigation costs.

Under the agreement, Ericsson pays fines and is subject to U.S. supervision and rectification.

After the agreement expires, the U.S. Department of Justice decides whether to drop the indictment.

It seems like a good compromise, but the initiative is entirely in the United States.

For example, Ericsson was convicted of violations and fined for failing to disclose all information.

But has this information already been known by the US Department of Justice and deliberately concealed it?

If this is the case, the United States is fully capable of "playing dead" any enterprise.

In 2008, Germany's Siemens was fined $1.6 billion.

In 2014, France's Alstom was fined $770 million.

In 2016, Russian mobile operator Vimpelcom was fined $795 million.

In 2018, Japan's Panasonic Electric was fined $280 million.

ZTE and Huawei have also been "brutally killed".

In 2021 alone, the U.S. Department of the Treasury, the Department of Commerce and other departments imposed various sanctions on more than 2,000 entities.

The "long-arm jurisdiction" of the United States is essentially the embodiment of the abuse of hegemony by the United States.

Unfortunately, in the face of this hegemony, companies do not have a particularly good response.

What Chinese companies can do is to operate in compliance and be cautious to avoid falling into the pit.