July 3, 2013

China investigates foreign infant milk companies for anti-trust violations

China's National Development and Reform Commission (NDRC) is investigating five foreign infant milk formula firms - Nestle, Abbott Laboratories, Mead Johnson Nutrition, Danone's Dumex brand and Wyeth Nutrition for possible antitrust violations involving price-fixing behaviour and anti-competitive practices.

The high price of imported infant formula in China has become a sensitive political issue for Beijing, after the 2008 baby milk tainting scandal that sent mainland parents scurrying to the perceived safe harbour of foreign brands. Foreign brands now account for about half of total sales.

According to a newspaper the investigations came to light after a Hong Kong-listed infant nutrition manufacturer Biostime International Holdings said that its Guangzhou unit was under investigation by the NDRC for an alleged violation of China anti-monopoly law.

"The main purpose of the investigation is in relation to an alleged violation of Article 14 of Anti-Monopoly Law of the People's Republic of China by Biostime Guangzhou in managing the market sales prices at which the distributors and retail sales organisations sell our products," the company said in a filing to the Hong Kong stock exchange.

Competition lawyers in China said it appeared to relate to whether there was fixing of minimum prices for distributors, known as "retail price maintenance".

Danone shares were off 1.6% in Paris while Nestle shares were down 0.3% in Zurich.