Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
A senior executive at WPP-owned media agency GroupM and two former employees have been detained by Chinese authorities over alleged bribery.
Shanghai Public Security Bureau’s Economic Crime Investigation Department had “cracked” a commercial bribery case involving an advertising company, officials said in a statement late on Saturday.
The statement did not name the company but said that a senior executive and two others had been detained. The two others are former employees of GroupM, according to a person familiar with the matter.
The Financial Times reported on Friday that Chinese police had raided GroupM’s Shanghai offices, detaining one senior executive and questioning several more.
The detained trio “took advantage of their positions to accept huge bribes” between 2019 and February this year while working at the company, police said in the statement. The investigation was continuing, it added.
WPP declined to comment on Sunday.
GroupM, WPP’s wholly-owned media buying and planning agency, is one of the biggest in its field with 42,000 employees globally. The unit charged $60bn to clients last year, roughly one-third of WPP’s total £14bn in annual revenues. China is a key market for the group, with advertising revenue expected to increase nearly 8 per cent to $150.6bn this year.
China is the second-largest advertising market after the US with more than $223bn forecast to be spent on ads this year, according to Daxue Consulting, a China-focused market research group.
Industry insiders say China’s advertising sector is rife with corruption. Last month, the US Securities and Exchange Commission reached a settlement with Clear Channel Outdoor for $26mn for violations of the Foreign Corrupt Practices Act after its local subsidiary was found to have bribed Chinese government officials to obtain advertising contracts.
The detentions involving GroupM in Shanghai highlight how China’s anti-corruption investigators are increasingly targeting the private sector.
Over the past 10 years, corruption crackdowns in China have become a feature of the leadership of Xi Jinping, snaring thousands of high-ranking Communist party officials.
However, in recent years sectors from property and finance to healthcare and tobacco have landed in investigators’ crosshairs, often leading to the arrest of not only corrupt officials and party members, but also members of the country’s entrepreneur class.
The probe comes amid rising fears over personal security among foreign-linked business people in China after Beijing cracked down on the operations of foreign consultancies and due diligence groups.
The business community in China has been rocked by a spate of probes in recent months, including into international consultancy Bain & Company, as well as due diligence group Mintz and China-focused consultancy Capvision.
That is despite concurrent efforts by Xi’s administration to encourage foreign investment in China as it contends with one of the country’s bleakest growth outlooks in decades.
