Infant-formula companies being probed in China have broadly admitted that their resale prices may have violated rules, the official Xinhua News Agency reported, citing an official in the National Development Reform Commission.
The official, Xu Kunlin, head of the regulatory body’s pricing supervision department, didn’t name the dairy companies who admitted to price violations, according to the news report.
Mead Johnson Nutrition Co. (MJN:US), Danone, Nestle SA (NESN), Abbott Laboratories (ABT:US), Royal FrieslandCampina NV and domestic manufacturer Biostime International Holdings Ltd (1112) were being probed on pricing, the official People’s Daily reported on July 2. The investigation offered a window into how government scrutiny in China can create obstacles for overseas companies expanding there.
FrieslandCampina spokeswoman Ria van der Peet declined to comment as investigations are still ongoing. Nestle, Mead, Danone, Abbott, and Biostime couldn’t be reached outside of regular business hours.
The overseas manufacturers set a minimum price on their goods in China, leading to high prices, Xinhua reported on July 31, citing Xu Kunlin.
The NDRC, China’s top economic planning agency, said in the People’s Daily report that it had evidence to show their pricing increased about 30 percent since 2008, the same year milk powder contaminated with the chemical melamine killed six infants.
The companies have said they are co-operating with the NDRC and all have cut prices since. Danone and Nestle reduced some prices by as much as 20 percent within days of the investigation announcement. Mead Johnson announced its own cuts on main products in the country by up to 15 percent on July 10.
Mead Johnson is the largest baby formula company in China with a 14 percent market share last year, according to industry researcher Euromonitor International. Hangzhou Beingmate Group Co. ranked second with a 10 percent share, followed by Danone’s 9.2 percent.
The listed company of Beingmate, which hasn’t been named in the probe, also cut prices by up to 20 percent to increase its competitiveness and market share, it said. Fonterra Cooperative Group Ltd., the world’s biggest dairy exporter which has been contacted by the NDRC for a reason it didn’t specify, has also reduced prices in China for Anmum supplements for pregnant women.
To contact Bloomberg News staff for this story: Liza Lin in Shanghai at firstname.lastname@example.org
To contact the editor responsible for this story: Stephanie Wong at email@example.com