China fines baby formula companies $108 million in price-fixing case

The Chinese government Wednesday issued what it said were record-high fines totaling $108 million in connection with the scandal-ridden baby formula industry.

Five foreign companies were fined -- Mead Johnson, Dumex, Abbott Laboratories, Royal FrieslandCampina and Fonterra -- as well as Guangzhou-based Biostime International Holdings.

The government charged that the manufacturers had artificially inflated the price of formula, taking advantage of the panic among Chinese parents over tainted milk products.

The milk powder industry in China has lurched from scandal to scandal. Most recently, the world’s largest dairy exporter, New Zealand-based Fonterra, revealed on Saturday that it had found traces of the bacteria causing botulism in some of its product.

China is one of the world’s largest markets for baby formula. Since 2008, when six babies died because of the illegal addition of melamine to milk powder, parents have turned to imported brands, often stocking up on supplies during trips abroad. Hong Kong last year had to impose restrictions on formula sales because so many mainland Chinese were stripping the products from store shelves.

In a statement Wednesday, an official of the National Development and Reform Commission, China’s top economic agency, said that formula producers set minimum resale prices and punished distributors who sold at lower prices.

“These practices caused milk powder prices to remain at a high level, restricted competition in the market and harmed the interests of consumers,” Xu Kunlin was quoted as saying by the New China News Agency.

Chinese state media reported that prices for imported baby formula had risen 30% since the 2008 melamine scandal.

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barbara.demick@latimes.com