UPDATE 2-Mead Johnson settles with China over baby formula probe

Tue Aug 6, 2013 6:14pm EDT

Aug 6 (Reuters) - Mead Johnson Nutrition Co said on Tuesday it would pay a penalty of about $33 million related to a probe by China into possible price fixing and anti-competitive practices by foreign baby formula makers.

The maker of Enfamil formula said that as a result of its antitrust review, China's National Development and Reform Commission (NDRC) had assessed administrative penalties against Mead Johnson and a number of other milk formula companies doing business in China.

Foreign infant formula is highly coveted in China, where public trust was damaged by a 2008 scandal in which six infants died and thousands of others were sickened after drinking milk tainted with the toxic industrial compound melamine. Foreign brands now account for about half of total sales.

Mead Johnson said the payment, which resolves the NDRC review, would reduce its full-year earnings by about 12 cents per share, but it reiterated its 2013 earnings forecast for profit, excluding one-time items, of $3.22 to $3.30 per share.

The company said in recent weeks that it was being investigated, along with Danone, Nestle, Abbott Laboratories and Hong Kong-listed Biostime International Holdings, by China's National Development and Reform Commission, an economic planning agency, for possible antitrust violations including price-fixing.

As a result, Mead Johnson and others cut prices on their baby formulas.

Representatives from Danone, Nestle and Abbott Laboratories were not immediately available for comment.

Infant milk producer Biostime International Holdings Ltd, which imports most of its products, said on Tuesday its shares had been suspended pending an announcement related to an investigation by Beijing's top economic planning agency.

The company had said previously that a unit based in China's southern city of Guangzhou was being investigated by the NDRC over suspected price-fixing.

In a statement to the Hong Kong stock exchange in late July, Biostime said it planned to lower prices of infant formula products by 5 percent to 10 percent and that the investigation into its unit was ongoing.

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