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.
TEXT SIZE - +
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

Video Pope Francis Hopes Dual Canonizations Will Reconcile Church

John the XXIII and John Paul II will be made saints in a ceremony at St. Peter’s Square on April 27 More

Thailand Reacts to Plots Targeting Israelis

Authorities hope arrest of two Lebanese suspects will disrupt plot to attack young Israeli tourists More

Video In Capturing Nature's Majesty, Film Makes Case for Its Survival

'Once Upon a Forest' takes viewers deep into heart of tropical rainforest More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Pet Kangaroo Helps Spread Environmental Messagei
X
Penelope Poulou
April 22, 2014 5:53 PM
Children’s author Julia Heckathorn travels the world to learn about different ecosystems and endangered animals. She pours her knowledge into children’s books, hoping the next generation will right the environmental wrongs of our times. As in many children's books, the main character in Heckathorn's stories is an animal. Unlike those other characters, though, this one is real - a kangaroo, that lives in the author’s backyard. VOA’s Penelope Poulou has more.
Video

Video Pet Kangaroo Helps Spread Environmental Message

Children’s author Julia Heckathorn travels the world to learn about different ecosystems and endangered animals. She pours her knowledge into children’s books, hoping the next generation will right the environmental wrongs of our times. As in many children's books, the main character in Heckathorn's stories is an animal. Unlike those other characters, though, this one is real - a kangaroo, that lives in the author’s backyard. VOA’s Penelope Poulou has more.
Video

Video Pro-Russian Separatists Plan 'Federalization Referendum' in Eastern Ukraine

Pro-Russian separatists in eastern Ukraine say they plan to move forward next month with a referendum vote for greater autonomy, despite the Geneva agreement reached with Russia, the U.S. and Ukraine to end the political conflict. VOA's Brian Padden reports from the city of Donetsk in Eastern Ukraine.
Video

Video Pope Francis Hopes Dual Canonizations Will Reconcile Church

On April 27, two popes - John the XXIII and John Paul II - will be made saints in a ceremony at St. Peter’s Square. VOA religion correspondent Jerome Socolovsky says the dual canonization is part of the current pope’s program to reconcile liberals and conservatives in the Roman Catholic Church.
Video

Video In Capturing Nature's Majesty, Film Makes Case for Its Survival

French filmmaker Luc Jacquet won worldwide acclaim for his 2005 Academy Award-winning documentary "March of the Penguins". Now Jacquet is back with a new film that takes movie-goers deep into the heart of a tropical rainforest - not only to celebrate its grandeur, but to make the case for its survival. VOA's Rosanne Skirble reports.
Video

Video Boston Marathon Bittersweet for Many Runners

Monday's running of the Boston Marathon was bittersweet for many of the 36,000 participants as they finished the run that was interrupted by a double bombing last year. Many gathered along the route paid respect to the four people killed as a result of two bombings near the finish line. VOA's Carolyn Presutti returned to Boston this year to follow two runners, forever changed because of the crimes.
Video

Video International Students Learn Film Production in World's Movie Capital

Hollywood - which is part of Los Angeles - is the movie capital of the world, and many aspiring filmmakers go there in hopes of breaking into the movie business. Mike O'Sullivan reports that regional universities are also a magnet for students who hope to become producers or directors.
Video

Video Pacific Rim Trade Deal Proves Elusive

With the U.S.-led war in Iraq ended and American military involvement in Afghanistan winding down, President Barack Obama has sought to pivot the country's foreign policy focus towards Asia. One aspect of that pivot is the negotiation of a free-trade agreement among 12 Pacific Rim nations. But as Obama leaves this week on a trip to four Asian countries he has found it very difficult to complete the trade pact. VOA's Ken Bredemeier has more from Washington.
Video

Video Autistic Adults Face Housing, Job Challenges

Many parents of children with disabilities fear for the future of their adult child. It can be difficult to find services to help adults with disabilities - physical, mental or emotional - find work or live on their own. The mother of an autistic boy set up a foundation to advocate for the estimated 1.2 million American adults with autism, a developmental disorder that causes communication difficulties and often social difficulties. VOA's Faiza Elmasry reports.
AppleAndroid