THIRD-PARTY RISKS IN THE SALES FORCE
Involving third parties in a company’s sales force may be an unavoidable reality if the company lacks coverage in certain geographies or markets. But doing so always entails a degree of compliance risk.
Since distributors and agents are the most common categories of third parties engaged for sales purposes, this article will only focus on them (although many of the statements below may be applicable to other categories of third parties).
Using third parties in the sales force (irrespective of the degree of integration) is a compliance risk that a company should address preemptively to avoid future problems. There is always a risk that the pressure to sell may lead to corrupt practices.
Corrupt practices that occur within an internal sales force – an environment where employees are directly managed, guided, trained and held accountable – is one thing. But an external sales force, where oversight of distributors and agents is considerably more challenging, is another.
Such risks are even higher when dealing with public officials (e.g., during public tenders) in regulated markets (such as the healthcare sector, which has specific and often restrictive regulations), as well as in countries identified as high-risk in terms of compliance. Moreover, much of the relevant legislation that deals with bribery and corruption – including the UK’s Bribery Act and similar legislation such as the US Foreign Corrupt Practices Act (FCPA) – have wide-reaching, extraterritorial effect.
Oct-Dec 2024 Issue
Arthrex Inc