Nestle responds to price-fixing probe; will cut infant formula prices in China

Nestle company sign in Vevey, Switzerland, on Sept. 24, 1999. (Keystone / Fabrice Coffrini / AP)

BEIJING -- Nestle SA says it will cut infant formula prices in China by an average of 11 per cent starting Monday in response to an investigation into alleged price-fixing by several foreign companies.

The price cuts by the company's Wyeth Nutrition unit will be maintained through 2014, and the prices of some products will be cut by up to 20 per cent, Nestle spokesman Jonathan Dong said in an email Thursday.

China's National Development and Reform Commission is investigating five foreign companies and one Chinese company for allegedly violating market competition laws by manipulating retailers to sell infant formula at inflated prices.

Chinese demand for foreign milk formula has risen in the wake of scandals that have left many parents wary about domestically produced infant formula. In 2004, fake Chinese milk powder caused malnutrition deaths in at least a dozen babies. That was followed by a melamine-tainted milk scandal in 2008 that killed at least six babies and sickened nearly 300,000 others.

"We are still buying imported baby formula even if it is more expensive, because we don't dare take the local Chinese brands," one father, Wang Guoliang, said Thursday. "It would be terrible if the baby has a problem because of the bad quality of the milk," added the 36-year-old, who works in the construction business.

China has not alleged direct collusion among the companies in setting prices, which is known as horizontal price-fixing and which can be difficult to prove. This investigation has focused only on prices suppliers set for retailers, known as vertical price-fixing.

The other foreign companies -- Danone Dumex, Abbott Laboratories, Mead Johnson Nutrition Co. and FrieslandCampina -- did not immediately respond to questions about whether they also were lowering their prices, or said only they were co-operating with the inquiry and that it would be inappropriate to comment further.

The Chinese company, Guangzhou-based Biostime International Holdings Ltd, said it was awaiting the result of the investigation and had no plans to lower its prices.