Children's formula at a supermarket in Ho Chi Minh City. Photo courtesy of Tuoi Tre
The government is investigating pricing policies at five major dairy firms and will soon take steps to stop their constant price hikes, including likely price caps
Nguyen Anh Tuan, head of the Ministry of Finance’s Price Management Department, said his agency would investigate foreign firms Mead Johnson, Nestle, and Friesland Campina, Vietnam’s largest dairy firm Vinamilk, and 3A Nutrition JSC which distributes Abbott, Tuoi Tre newspaper reported.
The ministry has also asked the Ministry of Industry and Trade to collect data to see if there has been antitrust violations by the companies, including collusion to raise prices.
Tuan said his department might roll out measures to stabilize prices after the investigation, like a price cap for products for children below six.
Since late 2013 major dairy importers have sought permission from the ministry to hike retail prices by 3-8 percent citing rising costs.
Abbott has asked to raise the prices of more than 20 products by 5-7 percent from March 15 and the ministry is waiting for the company to justify the demand.
The ministry said it has allowed one foreign firm to hike prices of 10 of its 35 products by 6-8 percent after it produced documents showing import prices were up by 12 percent.
The ministry did not reveal the name of the firm, but a Thanh Nien investigation suggests that it could be Mead Johnson, which hiked prices by 5-7 percent in December.
A week-long inspection by the finance ministry last month found no transfer pricing abuse.
While 70 percent of dairy production depends on imported raw materials, global prices of major ingredients like milk powder and butter have increased by 30-57 percent this year.
Vinamilk said it has been paying dairy farmers 22 percent more for fresh milk since late last year.
Tuan said his ministry would seize all the money that firms might have earned from illegal price hikes besides also fining them. The biggest fine for a firm for unreasonable price hikes is VND60 million (US$2,850).
He said the ministry is determined to tighten control over prices.
Businesses now have to register their wholesale prices with the ministry, also listing their expected retail prices, with up to a 30-40 percent markup.
Tuan said the big markup makes it hard to control retail prices, but the ministry is working to fix that.
He told Tuoi Tre one solution could be publicizing the registered wholesale prices.
Nguyen Phuong Nam, deputy head of the Ministry of Industry and Trade's Competition Management Department, said at a press briefing Monday that his agency would do a month-long inspection, and if there are signs of antitrust practices, the investigation would continue for six months.
Tuoi Tre reported last year that imported infant formulas were sold at three or four times their import prices since companies were paying doctors and nurses to recommend their products to pregnant women and new mothers and at medical conferences.
Insiders say the differences between import and retail prices are bigger for famous brands like Abbott and Mead Johnson.
Dairy costs act as a dampener on the physical growth of Vietnamese children, with middle-income parents saying formula for their children costs half of their salaries.
The government last October announced it would delay a $10-billion program to increase the average height of the population by providing free milk at nurseries and primary schools in the country’s 62 poorest districts between 2014 and 2020.
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