China Law Blog

The other day I did a piece, entitled, "Hey China Milk Man, What Part of Price Fixing Do You Not Understand," on what appeared to me to be price fixing/collusion in the dairy industry and wondered why the dairy producers were so public about it. Seems China's noodle industry tried the same thing but it seems a Chinese lawyer has taken umbrage to it. Today's China Daily has a story, entitled, "Lawyer appeals to gov't over instant noodle price hike," on how a Beijing lawyer has requested China's National Development and Reform Commission (NDRC) investigate the recent 20 percent averge price jump in instant noodles.

The complaint centers on the industry's collective decision to raise prices:

Qiu Baochang, a legal consultant of the China Consumers' Association, said it is acceptable for industries to raise prices if the costs rise, but they should not meet in private and decide on price hikes together.

Qiu said the collective decision might have breached China's Price Law and infringed upon the right of consumers.

Industries are banned by the Price Law from colluding with each other to manipulate prices, according to Qiu. It is also prohibited by the anti-price monopoly regulations drawn up by the NDRC.

The interesting thing about this is that the noodle industry, just like the dairy industry, is quite open about their joint decision to raise prices:

Meng Suhe, an official with the Chinese branch of the World Instant Noodle Association, told media last week that major instant noodle makers, who hold a combined 95 percent share of the domestic market, had met and made a collective decision to raise prices.

Meng said the retail price rise was a result of the increased cost of raw materials, namely palm oil which has jumped from 4,200 yuan per ton to 8,000 yuan per ton.

The low-end instant noodles cost only one yuan (13 US cents) per packet before the price change. The highest price rise will be 40 percent, said Meng.

Since "China makes 51 percent of all instant noodles in the world with more than 46 billion packets produced last year, a decision on these price increases will reach beyond China. Qiu Baochang has not yet received a response from the NDRC and I am not expecting much will ever come of his complaint.

In addition to my questioning the legality of these joint decisions to raise prices, I question the PR value in announcing these increases publicly.

We will try to monitor this and report back if we learn more.