China’s Antitrust Regulator Fines Baby Formula Producers RMB 670 Million for Resale Price Maintenance

On Aug. 7, 2013, the National Development and Reform Commission (NDRC) issued fines totaling around $110 million to six producers of baby formula (namely Danone, Mead Johnson, Fonterra, Abbott, FrieslandCampina and Biostime) for price-fixing and anti-competitive behavior.

As a percentage of Chinese revenues, the harshest fine was imposed on Biostime (the only Chinese company involved), for an amount of RMB 162.9 million (approximately 6 percent of Biostime’s revenues in the previous year). Mead Johnson was handed a fine equal to 4 percent of its annual sales revenues in China, while the other three companies’ fines were set at about 3 percent of revenues.

Collectively, these constitute the largest fine ever imposed by the NDRC and reflect the varying levels, among the respective participants, of cooperation with the authorities and corrective action taken in response to the investigation. Three other companies (Nestle, Beingmate and Meiji) were granted full immunity for cooperating with NDRC, providing information to the investigators and proactively implementing measures to rectify any breaches.