Businesses which trade in powdered children's formula must register their sales prices to the authorities starting this October, according to a new guideline issued by the Ministry of Finance.
Nguyen Anh Tuan, deputy head of the ministry's Price Management Department, said the move was aimed at stabilizing prices on dehydrated children's milk and to curb unreasonable price hikes in this market.
Tuan said that, under the new law, businesses must register production and material costs with government regulators to ensure fair market values.
The information would be kept secret by the authorities, he said.
Tuan told Thanh Nien Weekly that businesses which fail to register this information could face penalties. Their trading licenses could be revoked if they do not provide the necessary information to government regulators or are found to increase prices by unreasonable levels.
The registration would provide a basic means for government oversight bodies to determine whether or not sales hikes are reasonable, said Tuan.
Bui Thi Huong, director of Vinamilk's Public Relation Department, said the country's biggest dairy firm had no response to the new move and would respect the ministry's ruling.
Increases in milk prices, especially imported ones, have sparked public outrage. Many feel the milk prices are exorbitant, especially considering Vietnam's low import taxes.
Dairy firms blamed the price increases on high production costs brought on by material hikes while experts argue that the firms spent too much on advertising and sales commissions to remain competitive, and then passed the burden to the end users.
Current regulations require only companies who generate 50 percent of their budgets from state capital to register their prices with the authorities. Under current law, regulators are only permitted to intervene in instances where firms raise prices by 20 percent or more.
Authorities charge that these regulations failed to control increases in milk prices; many of these companies simply raise their prices in increments of less than 20 percent.
Nguyen Van Toan, legal director of FrieslandCampina Vietnam, said the Dutch firm supplied enthusiastic feedback to a draft of the regulation. They consider the law to be in full compliance with WTO regulations.
"Businesses are free to justify their prices under the new rule," he said.
However, Rashid Qureshi Aleem, CEO of Nestle Vietnam, said the rule may place significant administrative burdens on every aspect of the production chain for an extensive list of products.
Aleem said the proposed data and information requirements in the rule were highly proprietary and confidential in nature yet would be required from thousands of distribution points throughout Vietnam.
The CEO argued that competition was the best stabilizer for the market and the government should maintain a competitive and fair market for all players. Aleem asserted that competitive solutions function better in the market than these sorts of sweeping administrative gestures.
If a government imposes a mandatory price ceiling that is too low, the suppliers of that product could withhold the goods from the market, or sell them to customers outside of the country, Aleem said. This game could lead to dairy shortages and black-market sales of the goods at a higher price.