National Development and Reform Commission

Unilever fined for warning media about price rises

PUBLISHED : Saturday, 07 May, 2011, 12:00am
UPDATED : Saturday, 07 May, 2011, 12:00am

The central government has fined global consumer products giant Unilever 2 million yuan (HK$2.4 million) for talking to the media about expected price rises, action which has been blamed for triggering panic buying amid inflation fears.

Unilever China had 'disrupted market order' by spreading information which caused consumers to expect massive price increases, the National Development and Reform Commission (NDRC), the mainland's price regulator, announced on its website yesterday. It said it was the first big fine imposed for the disruption of market order.

The NDRC has cracked down on price rises since last summer in an effort to contain surging inflation, which climbed to a 32-month high of 5.4 per cent last month.

Unilever sent notices about price increases to major supermarkets and accepted a number of media interviews on the expected rises in March, causing the prices of its products in some stores to rise tenfold, the NDRC said. In one case, sales of washing powder in a Shanghai supermarket went up 100 times on March 25.

The actions of Unilever, which owns a wide range of well-known cleaning agent and personal care brands in China - including Dove and Lux soaps - had a 'fairly big social impact', the commission said.

China Central Television's main 7pm newscast last night featured a detailed report on the NDRC crackdown. It said the fine could have been as high as 3 million yuan but the authorities had opted for a lower punishment because the company had been co-operative.

The Anglo-Dutch company, the world's second-largest maker of consumer goods, has been under investigation by Shanghai's municipal pricing authority since late March. On the government's orders, the company released a statement on March 31 saying that its plans to increase prices from April would be abandoned.

In a statement on its website yesterday, Unilever said the Shanghai Price Bureau had concluded its investigation but gave no details.

'As a multinational company with a long-term commitment to China, we fully understand the local environment and respect the decision of the NDRC and the Shanghai Price Bureau,' the statement said.

Cao Yuanzheng, chief economist at BOC International, said government intervention on pricing had more to do with reassuring the public than holding down inflation.

'Prices rises now are mainly driven by rising costs, for example the costs of food and oil,' he said, and Unilever faced increased costs because the materials used in many of its goods were by-products of oil.

Dr Ma Hongman, an independent economic commentator, warned the government against overusing price-intervention measures. 'It should respect a company's market conduct ... overuse of such administrative power [from a central government department] could lead to copycat action by local governments,' he said.

Ma said Unilever became a target of the government's inflation crackdown because it had a big say in the industry as a market leader and its products were widely used in daily life. 'To some extent it's killing the chicken to frighten the monkey.'

But, Ma said, as the NDRC strengthens its anti-inflation efforts, it should not just keep its eyes on private or multinational industry leaders, but also big state-owned companies such as Sinopec and PetroChina.

Tingyi, which owns instant noodle brand Master Kong, has also been investigated by price regulators since March and has been warned against raising prices faster than its costs.

The European Union Chamber of Commerce in China refused to comment on Unilever's fine, saying it was an issue for the company.

Surging ahead

The government in Beijing is battling to control inflation, which last month rose to a 32-month high of: 5.4%