Baby formula price probe to shake or reshape industry?

BEIJING - A probe into possible price fixing by foreign and domestic baby formula firms will lead to the consolidation of the dairy sector, experts have said.

The National Development and Reform Commission (NDRC) is investigating foreign baby formula companies, including Nestle, Mead Johnson and Wyeth, as well as domestic company Biostime, over alleged anti-trust violations.

The companies are believed to have a monopoly in the Chinese market and have been accused of violating anti-monopoly laws via high prices and limited market competition, according to the NDRC.

The NDRC said it will continue the probe, warning that companies that are found to have violated the law will be punished and could face fines ranging from 1 to 10 percent of their annual sales.

Nestle, Wyeth and Mead Johnson have confirmed that their companies have been actively cooperating with the investigation.

Wyeth announced Wednesday that it will cut prices for some of its baby formula products by an average of 11 percent, as well as freeze prices on all new products for the next year. The price cuts will take effect on July 8, the company said.

Biostime said in a Tuesday statement that it is cooperating with the investigation and has decided to adjust its sales and marketing practices following the inquiry.

Wang Dingmian, a researcher who has tracked the dairy industry for years, said the probe provides an opportunity for domestic dairy companies to speed up restructuring and improve competitiveness by producing trustworthy products with affordable prices.

Demand for baby formula is booming in China, but confidence in domestic brands has plummeted since 2008, when melamine-tainted milk killed six infants and sickened 300,000 others.