News / Asia

China Fines Baby Formula Companies for Price-Fixing

A sales assistant (back) helps a customer to select Dumex milk powder at a supermarket in Hefei, Anhui province, August 5, 2013.A sales assistant (back) helps a customer to select Dumex milk powder at a supermarket in Hefei, Anhui province, August 5, 2013.
x
A sales assistant (back) helps a customer to select Dumex milk powder at a supermarket in Hefei, Anhui province, August 5, 2013.
A sales assistant (back) helps a customer to select Dumex milk powder at a supermarket in Hefei, Anhui province, August 5, 2013.
William Ide
China has fined six largely foreign infant formula firms a total of $108 million in one of its biggest anti-trust penalties. The companies were penalized for price-fixing and anti-competitive practices following a massive investigation into the rapidly growing industry.
 
China has fined infant formula companies from the United States, France, New Zealand and one Chinese firm, following a five-month investigation into their business practices by the country’s top economic planning body, the National Development and Reform Commission.
 
Those penalized include U.S. firm Mead Johnson, which was fined $33 million, Dumex, a subsidiary of France’s Danone was fined nearly $28 million and New Zealand’s Fonterra, $645,000.
 
In comments to China’s state broadcaster CCTV, investigators say the fines were based on the companies’ sales last year and their cooperation with the investigation. The fine was waved for three of the nine firms that were investigated, says Xu Kunlin, director of the investigating commission’s anti-trust division.

“The reason why three of the companies were not fined is because according to China’s anti-trust law, if you voluntarily provide important evidence, cooperate with the investigation and take steps to reverse any negative impact and stop all illegal activities, then fines can be waived,” he said.
 
Although most of the companies that were targeted were foreign firms, the fines are part of a larger effort by the government to protect consumers and tighten enforcement of regulations, says Ben Cavender, a senior analyst at the China Market Research Group in Shanghai.
 
“I do think we are seeing a very strong message from the government and this is true for infant formula, this is true for pharmaceuticals, its true for gold, a variety of different industries," Cavender said. "They are really making sure that laws aren’t being broken and so if you are a company doing business here it is better to factor a lot more into your planning than the past.”
 
China’s powdered milk market is already a multi-billion dollar industry that is expected to expand to as much as $50 billion by 2016.
 
Imports are a big part of that market, partly because consumer confidence in local brands was damaged in the 2008 tainted milk scandal that led to the deaths of six infants. Since then, analysts say companies with products that are thought to be safer have had a lot of elasticity in their pricing here.
 
Just days before the government announced the results of its investigation into the price-fixing scheme, New Zealand dairy company Fonterra - the world’s largest distributor - began recalling its infant formula and other products after discovering they were possibly tainted.
 
The recall spooked parents from China to the Middle East as the company said its products that use whey protein contained bacteria that could cause botulism - a potentially fatal food poisoning.
 
The company has recalled all potentially contaminated products, but in Beijing, the recall left few at ease.
 
Xia, a college student who is caring for her five-year old nephew during the summer break and was out buying formula on Wednesday says the Fonterra recall only adds to consumers’ worries.
 
“There’s no doubt that this will have an impact on consumer confidence in the quality of powdered milk. Whether it is the case a few years ago, when domestic producers put that stuff in infant formula, or this recent one, its hard to feel at ease when buying any product be it domestic or foreign made.”
 
However, when asked if she had to make a choice herself for her nephew, she said she would still choose foreign over domestic brands.

Business analyst Cavender says that although New Zealand milk brands may struggle for a while over the contamination scare, most consumers are likely to stick to foreign made formula because they do not trust domestic manufacturers.
 
“The big thing here is fear," Cavender said. "Consumers are very worried that the products they buy will be safe…I don’t think this is a case where they will be saying, oh, products coming out of New Zealand are bad so we’re going to buy domestic. It is more likely that what we’ll see happening is that products that might be sourced from northern Ireland or northern Europe or somewhere like that, might then become some of the more popular items.”

Consumers say the price of formula has already dropped in recent weeks, by as much as 20 percent in some cases, but some were skeptical how long the dip in prices would last.  On average, imported infant formula can cost as much as two times more in China when compared to prices in the United States and other countries.

You May Like

Republican Majority in Congress Off to Rough Start

Standoff over Homeland Security funding exposes philosophical, tactical problems within party More

Pakistan Blocks Baloch Activist from US Trip

Human Rights Commission of Pakistan slams Islamabad officials for stopping people from leaving country to attend human rights conference More

Video Muslims Long Thrived in North Carolina Before Students Killed

Idyll shattered February 10, when three Muslim university students living in Chapel Hill were gunned down by a neighbor More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Sierra Leone Ebola Orphans Face Another Crisisi
X
March 06, 2015 12:28 AM
There's growing concern about the future of an orphanage run by a British charity in Sierra Leone, after a staff member and his wife died this week from Ebola. The Saint George Foundation Orphanage in Freetown is now in quarantine, with more than 20 children and seven staff in lock-down. The BBC has agreed to share Ebola-related material with Voice of America because of the difficulties faced by media organizations reporting the crisis. Clive Myrie reports from Sierra Leone.
Video

Video Sierra Leone Ebola Orphans Face Another Crisis

There's growing concern about the future of an orphanage run by a British charity in Sierra Leone, after a staff member and his wife died this week from Ebola. The Saint George Foundation Orphanage in Freetown is now in quarantine, with more than 20 children and seven staff in lock-down. The BBC has agreed to share Ebola-related material with Voice of America because of the difficulties faced by media organizations reporting the crisis. Clive Myrie reports from Sierra Leone.
Video

Video Growing Concerns Over Whether Myanmar’s Next Elections Will Be Fair

Myanmar has scheduled national elections for November that are also expected to include a landmark referendum on the country's constitution. But there are growing concerns over whether the government is taking the necessary steps to prepare for a free and fair vote. VOA Correspondent Steve Herman was recently in Myanmar and files this report from our Southeast Asia bureau in Bangkok.
Video

Video Nigeria’s Ogonis Divided Over Resuming Oil Production

More than two decades ago, Nigeria’s Ogoni people forced Shell oil company to cease drilling on their land, saying it was polluting the environment. Now, some Ogonis say it’s time for the oil to flow once again. Chris Stein reports from Kegbara Dere, Nigeria.
Video

Video Winter Weather Strikes Eastern US...Again!

A new wintry blast has hit more than 20 states in the U.S. Midwest and Mid-Atlantic region, adding more snow to the piles from previous storms. Tired of shoveling snow, breaking the ice and dealing with accidents, flight delays and property damage, most Americans hope this is the last bout of cold for the season. Zlatica Hoke reports.
Video

Video Muslims Long Thrived in N Carolina Before Slaying of 3 Students

The killings of three Muslim students in North Carolina early last month came as Muslims across the United States have felt under siege, partly as a result of terrorist attacks being committed internationally in the name of their faith. But Muslims have long thrived in university cities in this part of the American South. VOA's Jerome Socolovsky reports.
Video

Video Fuel Shortages in Nigeria Threaten Election Campaigns

Nigeria is suffering a gas shortage as the falling oil price has affected the country’s ability to import and distribute refined fuels. Coming just weeks before scheduled March 28 elections, the shortage could have a big impact on the campaign, as Henry Ridgwell reports for VOA.
Video

Video Report: Human Rights in Annexed Crimea Deteriorating

A new report by Freedom House and the Atlantic Council of the United States says the human rights situation in Crimea has deteriorated since the peninsula was annexed by Russia in March of last year. The report says the new authorities in Crimea are discriminating against minorities, suppressing freedom of expression, and forcing residents to assume Russian citizenship or leave. Zlatica Hoke has more.
Video

Video 50 Years Later African-Americans See New Voting Rights Battles Ahead

Thousands of people will gather to mark the 50th anniversary of a historic civil rights march on March 7th in Selma, Alabama. In 1965, dozens of people were seriously injured during the event known as “Bloody Sunday,” after police attacked African-American demonstrators demanding voting rights. VOA’s Chris Simkins introduces us to some civil rights pioneers who are still fighting for voting rights in Alabama more than 50 years later.
Video

Video Craft Brewers Taking Hold in US Beer Market

Since the 1950’s, the U.S. beer industry has been dominated by a handful of huge breweries. But in recent years, the rapid rise of small craft breweries has changed the American market and, arguably, the way people drink beer. VOA’s Jeff Custer reports.
Video

Video Video Claims to Show Shia Forces in Iraq Executing Sunni Boy

A graphic mobile phone video is spreading on the Internet, claiming to show Iraqi forces or Shia militia executing a handcuffed Sunni boy. Experts have yet to verify the video, but already Islamic State followers are publicizing it across social media, playing on deep-rooted sectarian fears. VOA’s Jeff Seldin reports.
Video

Video Ukrainian Authorities Struggle to Secure a Divided Mariupol

Since last month's cease-fire went into effect, shelling around the port city of Mariupol has decreased, but it is thought pro-Russian separatists remain poised to attack. For the city’s authorities, a major challenge is gaining the trust of residents, while at the same time rooting out informants who are passing sensitive information to the rebels. Patrick Wells reports for VOA.
Video

Video Myanmar's Traditional Fashion Choices Endure

The sartorial choices of Myanmar’s men and women quickly catch the eye of any visitor to the tropical Southeast Asian country. But at a time when Myanmar’s political and economic opening is bringing affordable western fashions to the masses, will the country’s unique fashion trends endure? VOA Correspondent Steve Herman in Yangon explores that question.

All About America

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More