Nestle and Danone Investigated by China

China is currently investigating foreign companies that produce milk-powder including Nestle SA and Danone for the possible violation of laws regarding anti-monopoly and for having too high prices, according to a report from an unnamed government agency.

The top economic planning agency in China, the National Development Commission, began the investigation into infant formula pricing sold by companies including Mead Johnson, Abbott Laboratories, Royal Freisland Campina, and Biostime International Holdings, reported a local paper.

The Commission said it had evidence that the two companies sold their products at prices that were higher in China and that the pricing has increased since 2008 by over 30%.

Safety worries such as the milk powder melamine-tainted scandal from 2008, which killed six or more infants, have increased the distrust by Chinese consumers of local milk products and increases their purchases of brands from foreign companies both at home and overseas.

The NDRC reviewed many documents related to pricing at Mead Johnson’s unit in China recently and said the company had cooperated fully with them.

Nestle’s Beijing spokesperson and one for Danone said the two companies were aware of the situation and were working with authorities from the Chinese government.

The current investigation follows an attempt by China to consolidate the industry and create domestic brands that are strong.

China has the target of creating up to 10 large businesses in the formula business within the next two years, each that would have revenues of more than $325 million, the national radio in China reported in June.