Danone, Fonterra, Mead Johnson handed China infant formula price fixing fines

By Mark ASTLEY contact

- Last updated on GMT

Infant formula manufacturers handed China price fixing fines
China has issued fines totalling RMB 669m ($110m, €82m) to six companies, including Mead Johnson Nutrition, Danone Dumex, and Fonterra, following an investigation into price fixing and suspected anti-monopoly law violations by infant formula manufacturers in the country.

US-based Abbott Laboratories, Chinese infant formula manufacturer Biostime, and Dutch dairy giant FrieslandCampina have also been penalized by the Chinese National Development and Reform Commission (NDRC), which headed up the investigation. 

Illinois-based Mead Johnson has been worst hit by the probe, with the NDRC handing it a fine of RMB 203.7m ($33m, €25m).

Danone Dumex was fined RMB 172m ($28m, €21m), Biostime RMB 162.9m ($27m, €20m), Abbott Laboratories RMB 77m ($12.5m, €9.5m), FrieslandCampina RMB 48m ($8m, €6m), and Fonterra RMB 4m ($650,000, €500,000).

All six firms have confirmed that they will not contest the NDRC fines.

Illegal fixed resale price agreements

The NDRC initiated the probe last month.

In a statement issued yesterday, the NDRC announced that during its review it uncovered evidence that a number of the companies under investigation had agreed fixed resale prices with distributors.

“During our investigation, the companies involved admitted their alleged illegal acts of resale price maintenance, and cannot prove that their actions are consistent with Article 14 of the Anti-Monopoly Law,”​ said the translated NDRC statement.

Speaking with DairyReporter.com, FrieslandCampina spokeswoman, Ria van der Peet, confirmed it was issued the fine after officials in China determined that within its contracts with distributors it had employed “a pricing method that was not in line with local legislation.”

“In the contracts we held with distributors we agreed a fixed sales price for our products,”​ said van der Peet. “We thought this was allowed, but the NDRC has since told us it was not.”

“We are now complying with Chinese legislation. We will pay the fine and focus on the future,”​ she added.

Dumex – Danone’s infant nutrition business in Asia – has also vowed to maintain the “adjustments” ​it made during the investigation. 

“Dumex respects the anti-trust penalty decision recently issued by the National Development and Reform Commission. It has fully cooperated with the investigation and will make adjustments at the request of NDRC,​” said a statement sent to DairyReporter.com.

“In the future, we will continue to comply with applicable Chinese law and regulations for production and operation,”​ the company added.

Wyeth Nutrition "exempted from punishment"

Nestlé-owned Wyeth, which implemented a price reduction of between 11% and 20% during the investigation, has managed to avoid punishment despite being initially targeting by the NDRC.

The NDRC announced in yesterday's statement that Wyeth Nutrition and a handful of other firms including Japanese dairy giant Meiji had been “exempted from punishment.”

In a statement sent to DairyReporter.com, the company skirted around the reasons for its exemption, saying just that it has improved on “certain sales and marketing practices.”

“Wyeth Nutrition respects all Chinese law and regulations,”​ it said.

“Wyeth Nutrition has been cooperating closely with the Chinese National Development and Reform Commission (NDRC) in its investigation of infant formula manufacturers’ pricing practices.”

“Following this investigation, Wyeth Nutrition assessed its pricing practices and decided to improve certain sales and marketing practices,”​ it added.

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