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China fines 3 milk suppliers in price-fixing probe

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JOE McDONALD | August 6, 2013 11:24 PM EST | AP

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BEIJING — Three foreign suppliers of infant formula, including Mead Johnson and New Zealand's Fonterra, said Wednesday that China has fined them in a price-fixing investigation.

The investigation shook China's fast-growing dairy industry, which also is reeling from a separate recall due to contamination found in supplies from Fonterra.

The fines reflect intensifying scrutiny by Chinese regulators of a wide range of industries under China's 5-year-old anti-monopoly law. Most of their targets so far have been foreign-owned.

Mead Johnson Nutrition Co., based in Glenview, Illinois, said its China unit was fined 203.8 million yuan ($33 million). Hong Kong-based Biostime International Holdings Ltd. said its local arm was fined 162.9 million yuan ($26.3 million). Fonterra Co-operative Group said it was fined 4.47 million yuan ($720,000).

A Chinese dairy, Beingmate Group Ltd., said it was spared a fine but ordered to stop activity that violated the anti-monopoly law.

Milk is especially sensitive in China after six babies died and thousands were sickened in 2008 due to formula tainted with the chemical melamine. That prompted many parents to switch to buying more expensive imported milk.

There was no announcement by the agency that conducted the investigation, the Cabinet's National Development and Planning Commission.

Authorities said earlier they were investigating possible vertical price-fixing, or minimum prices set by suppliers for their distributors. That is a common practice in some markets but lawyers say Chinese regulators appear to see it as illegal under the anti-monopoly law.

Regulators did not allege direct collusion by the companies, or horizontal price-fixing, which can be difficult to prove.

Suppliers including Nestle SA and FrieslandCampina NV announced price cuts after the investigation was launched.

In a separate case, a Shanghai court ordered U.S.-based health care giant Johnson & Johnson last week to pay damages to a distributor in a lawsuit filed under the anti-monopoly law. The court said J&J improperly set minimum prices, depriving the local distributor of possible sales.

Meanwhile, China has ordered a recall of Fonterra infant formula after the dairy company announced Saturday that hundreds of tons of infant formula, sports drinks and other products might be tainted with bacteria that could cause botulism.