(Reuters) — Germany’s Siemens said it’s investigating a media report that it boosted sales figures of its healthcare equipment in China by creating fake contracts.
Chinese business daily Yicai cited Chinese distributors as saying that Siemens’ healthcare division had been creating contracts with them that were not backed up by real sales.
The distributors would pay a 10% down payment, allowing Siemens to book the contracts. Siemens would then return the payments to them by other means, Yicai said.
"This was a common practice for everyone and was considered to be helping each other out," the newspaper quoted a distributor named Wu as saying.
"Regarding the points raised by some business partners as described in the news report, Siemens has attached high attention to them and has initiated internal investigations," the German industrial conglomerate said today. "Siemens pays high attention to taking pre-emptive measures against unfair competition and any other inappropriate business conduct."
Siemens started to crack down on the practice in the 2nd half of 2014 and told distributors that the 10% down payments would be forfeit, according to the Chinese paper.
Siemens appointed a new head of its Chinese operations, Lothar Herrmann, who took over in April 2014.
The paper said 37 distributors grouped together to get the money returned. Distributor Wu told the newspaper the total sum involved was more than ¥30 million ($5 million).
Siemens made sales of €6.44 billion ($7.23 billion) in China last year, about 8% of its total sales, and employed 32,250 people.
Imported medical devices, mainly from the United States, Japan and Europe, account for just under three-quarters of the Chinese healthcare equipment market, which was worth more than ¥200 billion in 2013.
China has been pushing for greater use of domestic medical devices, a potential threat to the global firms who dominate the sector.
Siemens reported weak order intake and price pressure at its healthcare division in the last 3 months of 2014 and said the decline was led by China, along with Japan.
China’s fragmented healthcare sector is riddled with underhand dealings and backhanders, fueled by low salaries among medical professionals and fierce competition for sales.
($1 = ¥6.2720; $1 = €0.8902)