French dairy giant Danone, which is suing Fonterra for nearly $500 million in compensation following last year's botulism scare, has become embroiled in claims one of its companies illegally paid Indian doctors to promote and prescribe its infant formula products.
France-based online dairy industry publication DairyReporter cites an unnamed whistleblower who claims that Nutricia India's finance department approved "direct and indirect" payments to doctors by sales representatives from Nutricia India's baby nutrition division. Nutricia is a subsidiary of Danone.
The website said it had obtained documents which detailed cash payments of around 15,000 rupees (NZ$290) by sales representatives to doctors.
The Indian Infant Milk Act prohibits anyone involved in the baby nutrition industry from offering financial inducements or gifts to health workers.
Danone claimed earlier this monthly it experienced a "significant drop-off" in public trust for its brand directly following the Fonterra botulism scare in August for which it would would more than € 300 million (NZ$500m) in compensation. Later tests found the botulism warning was a false alert.
A statement in Nutricia's New Zealand financial accounts for the year to December 31, filed with the Companies Office on Thursday, revealed that the company had recalled just $25.7 million worth of infant formula as a result of the scare.
The recall affected "particular batches of products with the Karicare and Karicare gold brands", Nutricia says in its accounts.
Products manufactured for export to other group entities were also affected, the company said.
Danone said the final compensation amount sought from Fonterra would be quantified at the time of the trial.
A spokeswoman for Nutricia New Zealand "referred all questions regarding the Indian allegations to Danone's headquarters in Paris. Danone did not respond to a request for comment yesterday.
Fonterra also refused to comment on whether the allegations would impact on pending legal proceedings brought by Danone.
Hayley Moynihan, director of dairy research at Rabobank said international laws surrounding infant formulas were complex and she questioned if the allegations against Nutricia, if proved, would have an effect on its litigation with Fonterra.
"Food companies tend to come under all sorts of attacks on their reputation from time to time, but how do they put a value on that reputation," Moynihan said.
"Clearly this is something that will play out in the courts."
Last year Danone and Fonterra were among six dairy companies fined by authorities over their pricing and marketing of infant formulas in China.