China fines foreign milk powder makers after price probe

SHANGHAI/NEW YORK: China fined three companies including Mead Johnson Nutrition Co and New Zealand dairy giant Fonterra in relation to a probe into price fixing and anti-competitive practices by foreign baby formula makers.

The third company penalized was Hong Kong-listed Biostime International Holdings.

All three said they would pay the fines, the first to be publicly announced in the wake of the antitrust review by the National Development and Reform Commission (NDRC), which coincides with separate pricing investigations into the pharmaceutical sector as well as gold trading.

Foreign infant formula is highly coveted in China, where public trust was damaged by a 2008 scandal in which six infants died and thousands of others were sickened after drinking milk tainted with the toxic industrial compound melamine.

Foreign brands account for about half of total sales in China and can sell for more than double the price of local formula.

Mead Johnson, the maker of Enfamil formula, said it would pay a penalty of about $33 million. The company, based in Glenview, Illinois, gave no details on what the NDRC said it had done wrong.

Fonterra, the world’s biggest dairy exporter, said it had been fined NZ$900,000 ($710,700). It also did not say why it had been penalized but added it would give additional training to sales staff and review its distributor contracts.

“We believe the investigation leaves us with a much clearer understanding of expectations around implementing pricing policies,” Kelvin Wickham, president of Fonterra Greater China and India, said in a statement.

Fonterra is embroiled in a separate milk powder contamination scare that has led to product recalls in China, Hong Kong and elsewhere in Asia.

Infant milk producer Biostime, which imports most of its products, said it had been fined 162.9 million yuan ($26.6 million) for price-fixing.

Other companies being investigated include French food group Danone, Nestle and Abbott Laboratories. An Abbott spokeswoman said the firm had cooperated with the NDRC but declined to comment further. Danone and Nestle officials were not immediately available for comment.

In the wake of the NDRC probe, Mead Johnson, Danone, Nestle and others cut prices on their baby formulas by up to 20 percent in China, where the infant milk market is set to grow to $25 billion by 2017.