China Law Blog

A couple weeks ago, I did a post entitled Hey China Milk Man, What Part Of Price Fixing Do You Not Understand? This was on China milk producers getting together to agree on pricing. I then did a post entitled China Noodles: The (Price) Fix Is In? This was on the same thing in the noodle business. I mused on how I thought this sort of thing is illegal in China and it turns out it is.

The Shanghaiist blog just came out with a post, entitled, "Instant noodle manufacturers association slapped down by reform commission for price fixing" on how the National Development and Reform Commission (NDRC) is going after the China arm of the International Ramen Manufacturer's Association (IRMA) for price fixing:

A week after the price hike was announced, a lawyer by the name of Qiu Baochang, representing the China Consumers Association, filed an appeal to the NDRC to investigate the legitimacy of the price hike, alleging that IRMA's collective decision might have breached China's Price Law and infringed upon consumer rights.

Well, the NDRC, bless their heart, found in investigations that the price hike was indeed on the agenda of three meetings on 26 Dec 2006, 21 April 2007 and 5 Jul 2007, and found them guilty of breaching Section 14.1 of China's Price Law. And since then, IRMA China has annulled all the decisions made through the above three meetings.

An AP Wire story talked about how Beijing was blaming the instant noodle makers "as being partly responsible for a surge in inflation, saying they illegally colluded to boost prices by up to 40% in a scheme that prompted a public outcry:"

The report came amid a nationwide probe into whether price-fixing or hoarding by producers is to blame for a 15.4% jump in food prices in July over the year-earlier period. The government accused violators of damaging social stability.

However, the NDRC did not mention any companies by name nor did it indicate the penalties the violators would be facing. "Chinese law allows for companies to be fined up to five times the illegal income from price-fixing and possible confiscation of business licenses in serious cases."

Shanghaiist astutely wondered "how the collective decision to raise prices by the instant noodle association is any different from last week's decision taken by the nation's state-owned airlines to collectively raise prices, all in the name of introducing "express" services?"

The answer appears to be based more on who is affected by the price fixing rather than on the act itself. I see in this yet another example of what I am constantly telling our clients about China's business laws: "they are not enforced until they are enforced." Just because a particular law is not being enforced in China now, does not mean it will not be enforced tomorrow, next week, next month, or next year, and the smart business must be aware of the laws and plan accordingly.