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Chinese liquor makers fined for fixing prices

By Ding Yining   (Shanghai Daily)

08:23, February 20, 2013

Two of the country's major liquor makers have been fined by China's top economic planner for fixing prices.

Kweichow Moutai and Wuliangye Yibin Company Ltd were fined a total of 449 million yuan (US$71.3 million), the largest fines so far imposed by the National Development and Reform Commission for price manipulation.

Moutai was fined 247 million yuan and Wuliangye 202 million yuan, representing 1 percent of the spirit makers' sales last year, China National Radio reported yesterday.

At the end of last year, the commission and the Ministry of Commerce probed violations of anti-monopoly rules by the two companies after they were found to have set minimum prices for distributors.

The two companies were the only listed liquor makers that saw their share prices drop yesterday, with Wuliangye losing 1.55 percent to 24.81 yuan and Kweichow Moutai 0.99 percent to 177.92 yuan.

"Setting the floor price for distributors has hurt the interests of consumers but the fine is still a rather small one according to the rules set by the Anti-Monopoly Law," said Wang Xiaoye, a Chinese Academy of Social Sciences professor.

Huang Yong, director of the Competition Law Research Center at the University of International Business and Economics, said the anti-monopoly watchdog was focusing on price fixing imposed on downstream companies and other product makers should be aware of that.

Kweichow Moutai said it expects to see an 18 percent year-on-year sales growth this year, lower than previous targets as a result of the central government's crackdown on extravagance.

The Chinese Luxury Consumer Survey released last month by the Hurun Research Institute said that premium liquor had lost its appeal as a gift among China's super rich following the government move.

Liquor dealers have been selling products at lower prices since the second half of last year as they came under pressure to clear stocks after the moves to crack down on spending of public funds on high-price liquor.

Both Wuliangye and Kweichow Moutai said last month they would rectify their sales policies and revoke previous punishments against distributors who have been selling products below price limits or beyond their sales regions.

The two companies had issued warnings to distributors and retail stores but withdrew these penalties and scrapped their minimum prices after government intervention.

In recent years, the anti-monopoly watchdog has been stepping up investigations against various forms of violations.

Last month, the commission levied 353 million yuan of fines on six overseas makers of LCD panels, including Samsung and LG. At the end of 2011, China Telecom and China Unicom said they would raise their broadband speeds and lower costs after they were found to be practicing price discrimination.

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