July 22, 2007
What part of "colluding to fix prices" don't you understand?
My friend Lester Ross sent me the following tidbit (appended at the end of this post) about the Chinese dairy companies getting together to agree not to engage in certain kinds of competitive activities. According to the report, the five big dairy companies have agreed to exercise "self-discipline" in the Beijing retail market. Fierce competition is driving down profits, and the price of milk is apparently the same as it was in 2005. Moreover, once the dairy companies succeed in driving up retail sale prices, they plan to turn their attention to procurement end of things, and to "standardize" their purchasing activities.
Although China does not yet have an antimonopoly law, this would seem to be a pretty clear violation of the Price Law, which states in Art. 14: 经营者不得有下列不正当价格行为： （一）相互串通，操纵市场价格，损害其他经营者或者消费者的合法权益 ("Operators may not engage in the following acts of improper pricing: (1) colluding with each other to manipulate market prices, harming the lawful rights and interests of other operators or consumers"). Yet the above report was not the result of a muckraking expose; it was the result of an official, public announcement made by the Dairy Industry Association.
This shows in an interesting way, I think, the absence of what might be called a certain culture of the market. I doubt if the Dairy Industry Association had any intention of breaking the law, or even of doing anything legal but improper. It just seemed to them that when profits are going down because of disorderly markets, collective action to maintain profit levels is entirely appropriate. And journalists and the public have not yet learned to be cynical about assertions of the virtues of "orderly" markets.
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Great post. It will be very interesting to see what happens.
Posted by: China Law Blog | Jul 22, 2007 3:34:40 PM