Infant formula deals 'may' have broken Chinese anti-monopoly laws, Biostime admits
In a statement filed with the Stock Exchange of Hong Kong yesterday, Guangzhou, China-based Biostime admitted that the “fixed prices and price floors” detailed in its agreements with Chinese distributors may be in breach of the country’s Anti-Monopoly Law.
“During its cooperation with the Investigation, Biostime Guangzhou realised that those terms which provide fixed prices and price floors for the Group’s products in its agreements entered into with distributors, may be allegedly in breach of sub-articles 1 and 2 of Article 14 of Anti-Monopoly Law of the People’s Republic of China,” said the firm’s statement.
Biostime’s declaration follows the launch of a probe by the Chinese National Development and Reform Commission (NDRC) into the high pricing of infant formula and suspected anti-trust violations by several manufacturers, including Biostime.
“Fixed prices and price floors”
In an attempt to rectify the suspected violation, Biostime has begun the process of amending all of its Chinese distribution deals.
“In light of the above said, Biostime Guangzhou has started amending relevant terms in relations to fixed prices and price floors in the previous distribution agreements so as to comply with the Anti-Monopoly Law of the People’s Republic of China has been recently arranging the re-signing of distribution agreements,” said the statement.
In addition, the company has announced plans to reward consumers with an additional 50% of “accumulation points.”
Using these accumulation points, consumers “will enjoy a discount of around 11% off the suggested retail prices. These activities will apply to all series of the infant formula products of the Group.”
Through this consumer rewards scheme, Biostime hopes to enhance the confidence of its business partners.
Infant formula prices slashed
Alongside Biostime, Nestlé-owned Wyeth Nutrition, Danone Dumex, Mean Johnson Nutrition, FrieslandCampina, and Abbott Laboratories are under investigation by the NDRC.
New Zealand-based dairy exporter, Fonterra, revealed last week that it has also been “contacted” by the NDRC in regards to the investigation.
In response to the launch of the NDRC probe, Wyeth Nutrition, Danone Dumex and FrieslandCampina have also implemented price reductions across their infant formula products ranges.
Dutch dairy processor FrieslandCampina has slashed its prices by 5%, while Wyeth Nutrition and Danone Dumex have implemented price cuts of between 11% and 20%.
