* Mead Johnson, Biostime say will pay fines
* Other formula makers also fined, Mead Johnson says
* China had investigated possible price-fixing
* Infant milk market in China to be worth $25 billion by
By Martinne Geller and Anne Marie Roantree
NEW YORK/HONG KONG, Aug 7 Mead Johnson Nutrition
Co and Hong Kong-listed Biostime International Holdings
said they would pay fines in relation to a Chinese
probe into possible price fixing and anti-competitive practices
by foreign baby formula makers.
The fines are the first to be publicly announced in the wake
of the antitrust review by the National Development and Reform
Commission (NDRC) and coincide with separate pricing
investigations into the pharmaceutical sector as well as gold
Mead Johnson, the maker of Enfamil formula, said it would
pay a penalty of about $33 million. It gave no details on what
the NDRC said it had done wrong.
Infant milk producer Biostime, which imports most of its
products, said it had been fined 162.9 million yuan ($26.6
million) for price-fixing.
Mead Johnson said the NDRC had assessed administrative
penalties against other milk formula companies doing business in
China, where the infant milk market is set to grow to $25
billion by 2017. It did not identify the firms.
Other companies being investigated include French food group
Danone, Nestle and Abbott Laboratories
. Those companies were not immediately available for
In the wake of the NDRC probe, Mead Johnson and others cut
prices on their baby formulas.
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 its 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.
Biostime said on Tuesday its shares had been suspended
pending an announcement related to the investigation. Trading in
its shares will resume on Wednesday.
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.
Analysts see the probe as possibly part of a broader Chinese
plan to boost consumption of local infant milk products.
They had said the pricing investigation could also result in
tougher rules governing imports.
The milk sector is still relatively young, with consumption
of dairy products growing at an annual compound rate of 20
percent, a contrast to U.S. and European markets where demand
has been shrinking in the past decade.
China's domestic milk companies have been scrambling to
rebuild trust after a series of scandals left local brands'
reputations in tatters and fuelled demand for overseas brands or
imported products, which are perceived to be of higher quality.
That image was dealt a blow in recent days when New
Zealand's Fonterra, the world's biggest dairy exporter,
apologised for a milk powder contamination scare. That has led
to product recalls in China, Hong Kong and elsewhere in Asia.