China hands down fines in milk powder price fixing probe

by Eric Schroeder
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BEIJING — The National Development and Reform Commission in China has fined six milk powder companies a total of $110 million for price fixing and anti-competitive practices in the infant formula business. The probe began in March and was made public in early July.

The companies involved in the probe included Mead Johnson Nutrition Co., Glenview, Ill.; Biostime International Holdings Ltd., Hong Kong; Dumex, a unit of Paris-based Danone S.A.; Abbott Laboratories, Abbott Park, Ill.; Fonterra Co-operative Group, Auckland, New Zealand; and FrieslandCampina N.V., Amersfoort, The Netherlands.

The companies admitted they violated the anti-monopoly law by setting minimum prices that distributors were required to charge, which raised costs for consumers, according to the N.D.R.C. Regulators did not allege direct collusion among them.

U.S.-based Mead Johnson was assessed a penalty of approximately $33 million, a fine the company said it does not intend to contest.

“China remains one of the company’s most important markets, and Mead Johnson reiterates its commitment to making positive contributions to the communities within which it operates,” said Peter Kasper Jakobsen, chief executive officer, Mead Johnson. “The company will maintain its ongoing efforts to provide safe and high-quality products at good value for babies and young children across China and around the world.”

Fonterra, which was fined approximately $650,000, said it has been cooperating fully and openly with the N.D.R.C. throughout the process.

“We accept the N.D.R.C.’s findings, and we believe 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,” said Kelvin Wickham, president of Fonterra Greater China and India. “We understand that a number of companies in the dairy industry were fined, with Fonterra’s fine being in the lowest range.”

As a consequence of the investigation Fonterra said it will provide additional training to its sales teams and will review distributor contracts to ensure clarity around how pricing policies are implemented through the distribution chain.
“We are committed to providing high quality, premium imported products to Chinese consumers, and we are also committed to being an integral part of and long-term partner to the Chinese dairy industry,” Mr. Wickham said. “Therefore we are taking these steps to ensure we fully comply with the N.D.R.C.’s expectations of us.”
The fines included Danone S.A. at about $28.1 million, Biostime at approximately $26.6 million, Abbott at about $12.6 million and FrieslandCampina at about $7.8 million.
Three companies were found to have violated the law but were spared fines because they cooperated with the investigation and provided evidence. Those companies were Beingmate Group Ltd., Zhejiang, China ; Wyeth Nutrition, a unit of Vevey, Switzerland-based Nestle S.A.; and Meiji Dairies Corp., Tokyo.

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