China fines formula firms for price fixing

BEIJING. — China has fined six mostly foreign baby formula companies a total of US$108 million for price-fixing, the government said yesterday in reportedly the country’s biggest-ever anti-trust penalty. The firms fined 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 giant Fonterra — at the centre of a health scare this week — and China’s Biostime, the National Development and Reform Commission (NDRC) said in a statement.

The total fines were a “record high” in Chinese anti-monopoly rulings, the official Xinhua news agency said.
Foreign-branded baby formula is in high demand in China, where repeated safety scandals — including one in 2008 when six children died and 300 000 were sickened — mean parents distrust local products.

The NDRC said the firms set minimum prices with distributors and punished dealers who did not comply.
Their actions “unjustifiably maintained high milk powder prices, severely ruled out or restricted price competition of milk powder of the same brand and reduced that among different brands”, the statement said.

“They undermined the fair market competition order and harmed consumers’ interests,” it added.
In a corporate statement, Mead Johnson said it had been handed a penalty of 204 million yuan, adding it remains committed to the country that is “one of the company’s most important markets”.

Biostime, based in the southern city of Guangzhou, said in a filing to the Hong Kong stock exchange that it would pay a fine of 163 million yuan given by the authorities “in a timely manner”.

The value is around 6 percent of the company’s sales revenue in the previous year — the highest rate among all firms punished — because its violations were “grave” and it “failed to rectify its wrongdoings in an active way”, the NDRC said.

Fonterra, which has had to recall products in several countries this week over a botulism scare, was fined 4,5 million yuan, it said.
It co-operated fully with Chinese authorities and accepted their decision, it said.

“The investigation leaves us with a much clearer understanding of expectations around implementing pricing policies which is useful as we progress our future business plans,” Fonterra’s president for Greater China and India, Kelvin Wickham, said in a statement.
He added that Fonterra’s fine was “in the lowest range” of the penalties handed out.

The NDRC, China’s top economic planner, said Dumex was fined 172 million yuan, Abbott 77 million yuan and FrieslandCampina 48 million yuan.
The agency launched the investigation in March into high prices it said resulted from a monopoly-like situation, mostly targeting overseas firms. Several of them announced price cuts last month. — AFP.