As more and more Chinese mothers scrambled to find milk formula that was produced outside their country for fears of melamine contamination, many foreign firms saw an opportunity: flood the Chinese market and hike the price.
In a world where one of the principal formulas of markets is the demand=price equation, the flurry of requests for foreign made milk formula generated not only an opportunity to open a new market, but to exercise a level of greed that should not be seen when dealing with providing mothers with milk substitutes.
But that is exactly what has happened in China. Most of the firms providing powered milk formula produced abroad colluded in a price fixing scheme.
The Chinese government has ordered at least four foreign firms to slash their prices. The investigation is still unannounced, at least officially, but the probe is public and details a scrutiny of foreign companies colluding over high prices for the much sought after formula.
Abbot Laboratories, a U.S. enterprise, was one of the firms said to be 'collaborating' with the Chinese authorities. Abbott has agreed so far to a 12% reduction in the price of its formula.
Another company, Friesland Campina, a Dutch company was also dropping its prices by 5%.
French interest Danone was the first one to drop prices by as much as 20% earlier this month.
The Chinese government in the meantime has implemented a rigid program of monitoring of its milk formula supply in order to regain the trust of the Chinese population. It seems, however, that most are not willing to return to the fold, which has given foreign firms a veritable bonanza.
Source : France 24/ 7.9.13
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