China threatens heavier fines after baby formula probe

Foreign suppliers of infant milk formula who knowingly breach the anti-monopoly law can expect tough penalties, China's pricing regulator said a day after six producers were given record fines for manipulating prices.

Xu Kunlin, head of the Price Supervision and Anti-Monopoly Bureau of the National Development and Reform Commission, said the companies faced more serious fines if they gave the impression of complying with the law's provisions while in fact opposing them, People's Daily reported.

On Wednesday, the NDRC announced fines totalling 668 million yuan (HK$840 million) had been issued to the six dairy companies - Hong Kong-listed Biostime, Mead Johnson and Abbott of the US, FrieslandCampina of the Netherlands, France's Dumex and New Zealand's Fonterra. They were the biggest fines levied for violations of the anti-monopoly law.

Xu said the companies knowingly broke the law and deliberately covered up evidence during the antitrust probe.

"If we find other companies that knowingly violate the [anti-monopoly] law, we will impose heavier fines," the paper cited Xu as saying.

In addition to setting minimum prices at which distributors could resell products, the producers controlled prices by threatening to cut supply to wholesalers. As a result, distribution costs for baby formula in China were three to five times higher than in other countries.