BEIJING — The Chinese government is investigating possible price fixing by foreign companies that produce infant milk powder for Chinese consumers, according to reports this week by the state news media.
Targets of the investigation include some of the largest foreign producers, including Nestlé of Switzerland, Danone of France and Mead Johnson Nutrition of the United States. A Danone representative said in an e-mail on Tuesday that Danone was cooperating with the investigation, and representatives of other companies have acknowledged the investigation to various news organizations.
Xinhua, the Chinese state news agency, reported on Tuesday that foreign companies were being investigated by the National Development and Reform Commission, an agency that helps set and execute economic policy. Xinhua said the foreign companies “are believed to have manipulated and raised the price of baby formula in the China market.”
The report said the companies were suspected of retaliating against sellers in China who refused to raise their prices. The actions included imposing fines, halting the supply of the products and reducing available rebates, the Xinhua report said.
In mainland China, foreign-made infant milk powder can be more than twice as expensive as the same brands in Western countries, and costs much more than Chinese-made formula. Chinese who travel to Hong Kong or overseas often buy milk powder there. This has led some foreign governments to impose limits on the amount of milk powder that can be taken out by visitors. Some stores limit sales.
Foreign milk powder surged in popularity in China after a 2008 scandal in which at least six infants died and 300,000 children fell ill after drinking domestic milk powder formula tainted with a toxic chemical, melamine. Virtually all major Chinese makers of milk powder were found to have tainted products.
The People’s Daily, the official publication of the Communist Party, said in a commentary on Wednesday that since 2008, foreign milk powder companies had increased their prices in China by around 30 percent. Foreign milk powder has 60 percent of the market share in China, compared with 30 percent before 2008, the commentary said.
The Beijing Times reported Wednesday that about a dozen companies were under investigation, including some domestic ones. The newspaper cited an employee of the National Development and Reform Commission, saying, “One of the goals is to lower the price.”
Since the enactment of an antimonopoly law in August 2008, Chinese government agencies have aggressively pursued some antitrust cases against foreign companies. A notable example was the rejection in 2009 of Coca-Cola’s bid to buy the China Huiyuan Juice Group. At the time, the Commerce Ministry released a statement saying that the acquisition would have given Coca-Cola “a dominating position in the domestic market.”
In January, Chinese regulators fined two South Korean companies, LG and Samsung, and four Taiwanese companies for fixing the prices of flat-panel screens sold to Chinese manufacturers. The companies were ordered to repay the equivalent of $27 million to Chinese customers and were fined a total of $22.8 million.
Some foreign business owners have questioned whether Chinese agencies are using the antimonopoly law to protect Chinese companies from foreign competition.
The People’s Daily commentary said Chinese milk powder companies should take advantage of the investigation to focus on producing “high-quality, low-cost products.”
“In fact, it is very possible for China-made milk powder to replace imported ones or even defeat their foreign counterparts and sell their products to the overseas market by improving the quality and regaining consumer confidence,” it said.
David Barboza contributed reporting from Shanghai, and Shi Da contributed research from Beijing.
Article source: http://www.nytimes.com/2013/07/04/business/global/china-says-its-investigating-price-fixing-in-baby-formula.html?partner=rss&emc=rss
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