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China Fines Milk Powder Suppliers Over Pricing Suppliers of Milk Powder to China Are Issued Fines
(about 11 hours later)
BEIJING — The Chinese government has fined six companies that sell infant milk powder a total of $109 million for anticompetitive behavior and price fixing, the country’s top economic planning agency said on Wednesday.BEIJING — The Chinese government has fined six companies that sell infant milk powder a total of $109 million for anticompetitive behavior and price fixing, the country’s top economic planning agency said on Wednesday.
It is the largest fine China has ever issued for violations of its antimonopoly law, according to Xinhua, the official state news agency.It is the largest fine China has ever issued for violations of its antimonopoly law, according to Xinhua, the official state news agency.
Five of the companies are foreign ones, and one is based in Hong Kong. They are Mead Johnson Nutrition of the United States; Dumex Baby Food, a subsidiary of Danone in France; Biostime International of Hong Kong; Royal FrieslandCampina of the Netherlands; the Fonterra Co-operative Group of New Zealand; and Abbott Laboratories of the United States, according to a statement from the National Development and Reform Commission, the Chinese economic planning agency. Five of the companies are foreign, and one is based in Hong Kong. They are Mead Johnson Nutrition of the United States; Dumex Baby Food, a subsidiary of Danone in France; Biostime International of Hong Kong; Royal FrieslandCampina of the Netherlands; the Fonterra Co-operative Group of New Zealand; and Abbott Laboratories of the United States, according to a statement from the National Development and Reform Commission, the Chinese economic planning agency.
The statement said three other companies were exempted from the punishment because they “cooperated with the government investigation, provided important evidence and actively took self-rectification measures.” The statement said three other companies were exempt from the punishment because they “cooperated with the government investigation, provided important evidence and actively took self-rectification measures.”
Those not subject to the action were Wyeth Nutrition, a subsidiary of Nestlé of Switzerland; Zhejiang Beingmate Technology Industry and Trade Company, a Chinese company; and Meiji Holdings of Japan.Those not subject to the action were Wyeth Nutrition, a subsidiary of Nestlé of Switzerland; Zhejiang Beingmate Technology Industry and Trade Company, a Chinese company; and Meiji Holdings of Japan.
The decision concluded an investigation that began in March into the infant formula industry for what the commission said was price fixing of baby formula in the Chinese market.The decision concluded an investigation that began in March into the infant formula industry for what the commission said was price fixing of baby formula in the Chinese market.
The statement said evidence gathered during the course of the investigation showed that the companies used various methods to ensure that distributors raised prices, including signing contractual agreements, imposing fines, cutting rebates and restricting the supply of goods.The statement said evidence gathered during the course of the investigation showed that the companies used various methods to ensure that distributors raised prices, including signing contractual agreements, imposing fines, cutting rebates and restricting the supply of goods.
People’s Daily, the Communist Party’s official newspaper, and at least one analyst of China’s market for baby products have said that prices of foreign-branded infant milk powder had risen by at least 30 percent since 2008, when Chinese began buying foreign brands in droves because of a wide scandal involving tainted Chinese-made milk powder that caused widespread illness and some deaths. People’s Daily, the Communist Party’s official newspaper, and at least one analyst of China’s market for baby products have said that prices of foreign-branded infant milk powder had risen by at least 30 percent since 2008, when the Chinese began buying foreign brands in droves because of a wide scandal involving tainted Chinese-made milk powder that caused widespread illness and some deaths.
After the investigation began, at least three foreign companies — Mead Johnson, Dumex and Nestlé — cut prices of their products about 20 percent in the Chinese market. After the investigation began, at least three foreign companies — Mead Johnson, Dumex and Nestlé — cut their product prices about 20 percent in the Chinese market.
Mead Johnson was fined the equivalent of 4 percent of its 2012 revenue in China, or about $33 million. In its announcement, the agency said Mead Johnson did not actively cooperate with the investigation but was quick to take corrective measures.Mead Johnson was fined the equivalent of 4 percent of its 2012 revenue in China, or about $33 million. In its announcement, the agency said Mead Johnson did not actively cooperate with the investigation but was quick to take corrective measures.
Mead Johnson said it did not intend to contest the agency’s decision. A company spokeswoman said in an e-mail on Wednesday, “We believe our business practices were consistent with prevailing interpretations of regulatory requirements applicable to our industry.”Mead Johnson said it did not intend to contest the agency’s decision. A company spokeswoman said in an e-mail on Wednesday, “We believe our business practices were consistent with prevailing interpretations of regulatory requirements applicable to our industry.”
Biostime, which was fined 6 percent of its revenue from last year, or $26.6 million, received the harshest punishment of the six companies for its “serious violations” of the antimonopoly law. A statement by the company, released on Wednesday, said it intended to pay the fine and would continue to work to ensure that its “various business decisions comply with the applicable P.R.C. laws and regulations,” referring to the People’s Republic of China.Biostime, which was fined 6 percent of its revenue from last year, or $26.6 million, received the harshest punishment of the six companies for its “serious violations” of the antimonopoly law. A statement by the company, released on Wednesday, said it intended to pay the fine and would continue to work to ensure that its “various business decisions comply with the applicable P.R.C. laws and regulations,” referring to the People’s Republic of China.
Dumex, Abbott, Friesland and Fonterra were each fined 3 percent of their 2012 revenue in China. The Chinese agency said they had cooperated with the investigation and had been quick to change their practices. Dumex was fined $28 million, Abbott was fined $12.63 million and Friesland was penalized $7.89 million — all representing about 3 percent of their 2012 revenue in China. The Chinese agency said they had cooperated with the investigation and had been quick to change their practices.
Fonterra was fined ony about $730,000, but it has been mired in a separate food safety scandal in China related to potentially tainted ingredients used in baby formula products made by other companies. This week, a top Fonterra executive flew to China to issue an apology at a news conference. Fonterra was fined only about $730,000, but it has been mired in a separate food safety scandal in China related to potentially tainted ingredients used in baby formula products made by other companies. This week, a top Fonterra executive flew to China to issue an apology at a news conference.
Chinese officials have banned imports of New Zealand milk products, and several foreign companies have said they would take precautionary measures and recall products containing the Fonterra ingredients. The Chinese state-run news media has run front-page articles and harsh editorials over the case. Chinese officials have banned imports of New Zealand milk products and several foreign companies have said they would take precautions and recall products containing the Fonterra ingredients. The Chinese state-run news media has run front-page articles and harsh editorials over the case.
Foreign brands have become popular since the Chinese milk industry experienced severe losses after the 2008 scandal, when six babies died and more than 300,000 children fell ill as a result of drinking milk products tainted with melamine, a toxic chemical.Foreign brands have become popular since the Chinese milk industry experienced severe losses after the 2008 scandal, when six babies died and more than 300,000 children fell ill as a result of drinking milk products tainted with melamine, a toxic chemical.
When Chinese officials announced the price-fixing investigation a month ago, they also said they would ensure stricter standards within the domestic industry. Chinese state-run newspapers ran editorials saying they hoped that the new standards would bolster the competitive ability of the domestic companies versus foreign rivals.When Chinese officials announced the price-fixing investigation a month ago, they also said they would ensure stricter standards within the domestic industry. Chinese state-run newspapers ran editorials saying they hoped that the new standards would bolster the competitive ability of the domestic companies versus foreign rivals.
For various reasons, including aggressive marketing by the formula makers, many Chinese mothers prefer to give their babies formula rather than breast milk, though breast-feeding has grown in popularity since the 2008 scandal.For various reasons, including aggressive marketing by the formula makers, many Chinese mothers prefer to give their babies formula rather than breast milk, though breast-feeding has grown in popularity since the 2008 scandal.
The market for infant formula in China is enormous and growing fast. It was estimated to be worth about $12.7 billion in 2012, and is projected to grow to $15.4 billion this year and $18.4 billion in 2014, according to data from Euromonitor, a research organization.The market for infant formula in China is enormous and growing fast. It was estimated to be worth about $12.7 billion in 2012, and is projected to grow to $15.4 billion this year and $18.4 billion in 2014, according to data from Euromonitor, a research organization.
Chinese parents have gone to great lengths to buy foreign-made infant milk powder, and that has led to shortages in at least a half-dozen countries around the world.Chinese parents have gone to great lengths to buy foreign-made infant milk powder, and that has led to shortages in at least a half-dozen countries around the world.
Some large retail chains have imposed a limit of two to four cans of milk powder per customer, and Hong Kong has made it a criminal offense to take more than two cans of milk powder out of the territory. The law was imposed in March to crack down on smuggling of milk powder to the mainland.Some large retail chains have imposed a limit of two to four cans of milk powder per customer, and Hong Kong has made it a criminal offense to take more than two cans of milk powder out of the territory. The law was imposed in March to crack down on smuggling of milk powder to the mainland.