RPT- UPDATE 1-"Shocked" Danone unit to probe China bribe allegations

Mon Sep 16, 2013 9:54am EDT

* China state TV accuses French group of bribery

* Danone unit "shocked", to investigate accusations

* Chinese authorities cracking down on graft (Recasts with Danone statement, repeats with no changes for additional subscribers)

SHANGHAI/PARIS, Sept 16 (Reuters) - Danone's Dumex brand is "extremely shocked" by allegations on Chinese state television that it bribed hospital staff to give its milk powder to new-born babies and will investigate immediately, the French food group said.

China Central Television (CCTV) earlier cited an unidentified former Dumex sales manager as saying the company had paid medical staff at a city hospital in Tianjin to promote its products.

Chinese authorities have been cracking down on graft in various industries, notably the pharmaceutical sector. They imposed a record fine in August on a number of local and foreign-owned milk powder firms, including Danone, for price fixing.

CCTV cited the former sales manager said that every year the brand would give several hundred thousand yuan in "gifts" to the hospital.

"Dumex China pays great attention to and is extremely shocked by the CCTV report...We will immediately launch an investigation," Dumex said in a statement passed on by a Danone SA spokeswoman on Monday.

"Dumex Baby Food Co strictly adheres to Chinese laws and regulations."

Danone told Reuters in July it was co-operating with China's top planning agency, the National Development and Reform Commission (NDRC), and it had reduced the sales prices of its main products by between 5 and 20 percent.

Corruption in China's healthcare industry is widespread, fuelled in part by low base salaries for doctors at the country's 13,500 public hospitals.

International guidelines, used in China, say doctors should promote breastfeeding as the first resort unless there are medical reasons not to.

CCTV said the former sales manager had a document detailing payments to particular doctors, with specific bank card details and payment amounts.

The document, which CCTV said it had seen, showed staff at the hospital had received around 300,000 yuan ($49,000) in total each month from the Danone brand, with individual payments ranging from several hundred yuan to around 10,000 yuan.

Milk powder has been a highly sensitive topic in China since a scandal in 2008 after melamine was added to formulas, causing the deaths of at least six infants and leaving thousands ill.

This damaged the reputation of local firms while boosting the market share of international brands. ($1=6.12 yuan) (Reporting by Adam Jourdan in Shanghai and Lionel Laurent in Paris; Additional reporting by Shanghai Newsroom and Christian Plumb in Paris; Editing by Kazunori Takada, Neil Fullick, Alex Richardson, Anthony Barker)

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