China fines three milk suppliers in price-fixing probe

Beijing: Three foreign suppliers of infant formula, including Mead Johnson and New Zealand's Fonterra, said Wednesday that China has fined them in a price-fixing investigation.

The investigation shook China's fast-growing dairy industry, which also is reeling from a separate recall due to possible contamination of supplies from Fonterra. It reflects intensifying government scrutiny of business practices under China's 5-year-old anti-monopoly law. Most targets so far have been foreign-owned.

Mead Johnson Nutrition Co., based in Glenview, Illinois, said its China unit was fined 203.8 million yuan ($33 million). Hong Kong-based Biostime International Holdings Ltd. said its local arm was fined 162.9 million yuan ($26.3 million). Fonterra Co-operative Group said it was fined 4.47 million yuan ($720,000).

A Chinese dairy, Beingmate Group Ltd., said it was spared a fine but ordered to stop activity that violated the anti-monopoly law. The Communist Party newspaper People's Daily said Wyeth Nutrition, a unit of Nestle SA, and Japan's Meiji Dairies Corp. also were spared fines. It said total fines imposed were 668.7 million yuan ($108 million).

A woman who answered the phone at the agency that carried out the probe, the Cabinet's National Development and Reform Commission, said she was not authorized to give out more information.

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Milk is especially sensitive in China after six babies died and thousands were sickened in 2008 due to formula tainted with the chemical melamine. That prompted many parents to switch to buying more expensive imported milk.

Authorities said earlier they were investigating possible vertical price-fixing, or the setting of minimum retail prices by milk suppliers for distributors. That is a common practice in some markets but lawyers say Chinese regulators appear to see it as illegal under the anti-monopoly law.

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Regulators did not allege direct collusion by the companies, or horizontal price-fixing, which can be difficult to prove.

Suppliers including Nestle and Dutch-based FrieslandCampina NV announced price cuts after the investigation was launched.

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In a separate case, a Shanghai court ordered U.S.-based health care giant Johnson & Johnson last week to pay damages to a distributor in a lawsuit filed under the anti-monopoly law. The court said J&J improperly set minimum prices, depriving the local distributor of possible sales.

Meanwhile, China has ordered a recall of Fonterra infant formula after the dairy announced Saturday that hundreds of tons of infant formula, sports drinks and other products might be tainted with bacteria that could cause botulism.