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China punishes Unilever for price hike remarks
Date: 2011/5/9 Click: 1069
China's top price regulator announced on Friday that Unilever (China) Co., Ltd. would face a fine of 2 million yuan (US$303,000) over statements of planned price hikes that enhanced the public's inflationary expectation and triggered panic buying.

The fine, handed down by the Shanghai municipal pricing authority, came amid China's efforts to nail down runaway inflation that has spiked prices across the country.

A spokesman for Unilever China made repeated remarks on planned price hikes that led to the rush buying of consumer goods in some Chinese cities in March this year, fueling concerns about across-the-board price increases, according to a statement posted on the website of the National Development and Reform Commission (NDRC), China's top economic planner and price regulator.

Shanghai municipal pricing authorities found that Unilever purposely spread misinformation which caused consumers to expect massive price increases. This caused sales of Unilever products to soar, with some supermarkets reporting sales of Unilever products ten times what they would normally be, according to the NDRC statement.

"Such moves have severely disrupted the market order," NDRC said in the statement, adding that the fine was handed down according to China's pricing laws and regulations.

Shanghai-based Unilever China issued a brief statement shortly after the punishment was announced, saying Unilever "respects" the decision by the NDRC and the Shanghai municipal pricing authority.

"As a multinational company that wishes to keep its long-term commitment to China, we fully understand China's actual conditions," Unilever China said in the brief release on its website.

Unilever, the world's second-largest consumer goods producer behind Procter & Gamble, has postponed price increases previously scheduled to begin on April 1 this year after the NDRC asked Unilever China's managers to explain the company's remarks.

Unilever's brands in China include Dove and Lux personal hygiene products, Lipton tea and Omo washing detergent.

According to figures reported to the NDRC by Unilever, Unilever brands had a market share of 12 percent for shampoo, 12.6 percent for body wash products and 15.2 percent of detergent in 2010.

Tingyi (Cayman Islands) Holding Corp., China's leading instant noodle producer, was also warned by the NDRC to suspend its plan to raise wholesale prices for its noodles on April 1.

"All companies, those with majority market shares and great influence within the industry in particular, must learn a lesson (from the Unilever case)," the NDRC noted in the statement.

All business operators should standardize their pricing activities and create a normal market pricing system to stabilize prices and reassure the public, the NDRC said.

The NDRC has stepped up its efforts to monitor and supervise price fluctuations in recent weeks, as inflation spiked to a 32-month high of 5.4 percent in March.

The Chinese government has made curbing inflation its priority this year, setting the annual inflation control target at 4 percent for 2011.

The Consumer Price Index (CPI), a major gauge of inflation, rose 5 percent in the first quarter of this year, prompting China's central bank to raise interest rates and reserve requirement ratios to cool down lending.

The National Bureau of Statistics will release CPI figures and other economic data for April on Wednesday. Many economists expect the CPI to remain above 5 percent for the month.
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