On August 7, 2013, the National Development and Reform Commission (“NDRC”) fined six powdered milk companies five foreign and one Hong Kong-based RMB 668 million (approximately US$109 million) for engaging in anti-competitive practices and illegal pricefixing, the largest fine ever for an Anti-Monopoly Law (“AML”) violation in China.
The fine for an AML violation, assessed at the discretion of the NDRC, may range from 1 to 10 percent of a company’s total annual sales revenue U.S. based Mead Johnson was hit hardest, fined RMB 204 million (US$33 million), representing 4 percent of its total revenue in 2012. Biostime of Hong Kong was fined RMB 163 million (US$26.6 million), representing 6 percent of its revenue last year. Dumex of France, U.S.-based Abbott Labs, FrieslandCampina of the Netherlands, and Fonterra of New Zealand each received a fine equal to 3 percent of their 2012 revenue. The fines represented RMB 172 million (US$28 million), RMB 77 Million (US$12.6 million), RMB 48 million (US$7.8 million) and RMB 4 million (US$650,000), respectively. According to a statement from the NDRC, the six companies that were found guilty and fined, must also comply with the following corrective measures: stop the illegal practice, modify the distribution agreements, sales terms, and business policies to comply with Chinese Law, provide AML compliance training to all company staff, and make significant reparative price adjustments for the benefit of consumers. The six companies stated they would not contest the penalties and carry out the corrective measures.