Dairies fined US$109.2m as China fights price fixing
Print Edition
China fined six infant formula makers a total of 668.8 million yuan (US$109.2 million) for price-fixing yesterday.
The National Development and Reform Commission announced the fines after a five-month investigation.
The manufacturers punished were Mead Johnson and Abbott from the US; Dumex, a subsidiary of France’s Danone; a China arm of Royal FrieslandCampina of the Netherlands; New Zealand’s scandal-hit Fonterra and China’s Biostime.
The firms set minimum prices with distributors and punished dealers who did not comply, the commission said, and their actions reduced competition and “unjustifiably maintained high milk powder prices.” It added: “They undermined the fair market competition order and harmed consumers’ interests.”
The fines were equivalent to 3-6 percent of their sales last year with Mead Johnson, the biggest seller in China, paying the highest amount of 203.8 million yuan.
Companies which break the Anti-Monopoly Law face fines of up to 10 percent of their annual sales plus all illegal gains.
Three producers — Wyeth, which is owned by Swiss giant Nestle, Japan’s Meiji, and Chinese firm Beingmate — escaped punishment because of their cooperation in the investigation and active self-rectification measures, the commission said.
China is the world’s biggest market for formula, and foreign-branded products are in high demand after repeated safety scandals involving domestic products — including one in 2008 when six children died and 300,000 were sickened.
Prices are high as a result, leading to frustrations among consumers.
China imported 240,000 tons of infant formula in the first quarter of the year, up 23.7 percent from the same period last year, demonstrating significant demand from Chinese parents for foreign brands, Xinhua news agency reported, citing data from the General Administration of Customs.
The price-fixing investigation into a dozen infant formula makers at home and abroad was launched in March after authorities had noted a 30 percent rise in the price of imported formula since 2008.
The commission’s anti-monopoly bureau said the companies were improving sales policies and rectifying their business operations.
Xu Kunlin, the bureau’s director, told Xinhua that it would step up efforts to crack down on monopoly cases and ensure fair and open market competition to protect the interests of both business owners and consumers.
Milk powder sales in China reached 75.2 billion yuan last year and are expected to grow to 152.4 billion yuan by 2016, according to market researcher Euromonitor International.
Mead Johnson had the largest market share of 11.3 percent last year, followed by Hangzhou Beingmate Group Co Ltd’s 10.2 percent and Nestle’s 10.1 percent.
“The law enforcement authorities have shown their strong determination to fight price-fixing violations as milk powder concerns so many ordinary consumers’ everyday life, but the penalty is still small compared with similar cases in developed nations,” said Liu Chunquan, a senior partner at Shanghai Panocean Law Firm.
“This is also partly the reason why none of the dairy companies has appealed the penalty and it’s still too early to see the actual effect of the punishment,” he added.
In January, the commission imposed a 353 million yuan anti-trust fine on six LCD manufacturers including Samsung and LG.
In February, two of the country’s major liquor makers were fined a total of 449 million yuan for price-fixing. The fines imposed on Kweichow Moutai and Wuliangye Yibin Co were equivalent to about 1 percent of their sales revenue in the past year.
Last month, the Shanghai Development and Reform Commission launched an investigation into jewelers in the city over claims they were manipulating the retail price of gold jewelry.
Meanwhile, a Ministry of Commerce spokesman said yesterday the ministry had received 112 business merger applications in the first half of this year.
Shen Danyang said 105 had been granted.
He said mergers were reviewed with reference to the Anti-Monopoly Law to ensure a fair and competitive environment.
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