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6 Jul, 2013

Multinationals in China face increased scrutiny


Beijing, 2013-07-06, (China Daily) – China is expanding its investigations into the food, dairy and pharmaceutical industries, raising questions about whether the days of “supranational treatment” for multinationals have ended. The investigations signal that these companies face increased scrutiny of their operations in the country.

The State Administration for Industry & Commerce is investigating the food processing and packaging company Tetra Pak International SA for possible abuse of market dominance.

The SAIC has organized more than 20 of its regional agencies to investigate the allegations, Zhang Mao, head of the market regulator, said on Friday. It is also investigating 23 cases of possible monopoly violations.

Tetra Pak China said in a statement that it has received requests from the SAIC and will provide relevant information about its operations in China to fully cooperate with the government’s investigation.

Earlier, the National Development and Reform Commission, the top economic planning agency, started an investigation into the pricing of infant formula sold by Switzerland-based Nestle’s Wyeth and other foreign companies, including Mead Johnson Nutrition Co, Abbott Laboratories and Dutch producer Royal FrieslandCampina NV.

Nestle SA and Danone’s infant-nutrition units cut some prices after the government started looking into possible price-fixing by global producers of infant formula.

Domestic company Biostime International Holdings Ltd, whose net profit rose 40 percent year-on-year in 2012, is also being investigated. The NDRC has evidence showing that the companies’ prices have increased about 30 percent since 2008.

The world’s largest dairy exporter, Fonterra Cooperative Group Ltd in New Zealand, was contacted on a “broad-ranging investigation of consumer dairy products in China”, and it is cooperating with the authorities, the Auckland-based company said.

Wyeth said this week it would lower the prices of some baby-formula products by as much as 20 percent. It said the reductions will save consumers an estimated 450 million yuan ($73 million) in the next 12 months.

Danone said its Dumex unit is preparing a price cut, and it will disclose details later.

Some industry insiders said investigations might exert temporary limits on milk powder prices, but Chinese parents’ demand for foreign brands would drive prices back up again.

Wang Dingmian, an executive council member of the Dairy Association of China, said entrenched preferences for foreign brands would not easily change.