Unilever gets mouth washed out for remark

By Wang Ying (China Daily)
Updated: 2011-05-07 10:12
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SHANGHAI - China has levied a fine on consumer products giant Unilever of 2 million yuan ($310,000) for talking to Chinese media about planned price hikes that sparked panic buying of shampoo and detergents in late March.

The National Development and Reform Commission (NDRC) imposed the fine after finding the Anglo-Dutch company "illegally disseminated news of price hikes and disturbed market order", the top economic planning agency said in a statement on its website on Friday.

In late March, several cities in China suffered panic buying for household items. The NDRC said these were due to Unilever China spokesman and Vice-President Zeng Xiwen, who suggested in media reports that a price hike was in store for consumer products due to the soaring cost of raw materials.

Unilever's shampoo, skincare and laundry detergent products account for 12 percent, 12.6 percent and 15.2 percent of domestic market share, so discussing a price rise in advance will likely lead to a price hike in the whole industry, the NDRC said.

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The Shanghai Price Bureau decided to impose a fine of 2 million yuan on Unilever under related market regulations, added the announcement.

"We accept the decision of the NDRC and Shanghai Price Bureau. As a responsible company, we abide by laws and regulations in China and our global Code of Business Principles. Consumers are our top priority and we will continue to provide high quality products to the public," Unilever said in a statement on Friday.

"Being an influential company in China, Unilever should understand that any decision it makes will greatly impact the whole industry," said Qi Xiaozhai, director of Shanghai Commercial Economic Research Center.

"Many multinational companies are taking advantage of China's consumer markets because similar violations overseas will get more severe punishment," said Qi.

He said 2 million yuan is not a big sum of money for a multinational giant like Unilever, but it shows the central government's effort in restoring market order and consumer confidence as taming inflation becomes one of the major concerns of the government.

"Unilever chose the wrong time to raise prices," said Zhang Jun, a professor specializing in China economic studies at Fudan University.

"Just ahead of Unilever's speeches, many consumers rushed to buy salt in many cities because they feared radiation leaking from the Japanese nuclear power plants would pollute salt," Zhang said.

Zhang regarded the punishment for Unilever as a mild warning that the prices of basic consumer goods must not rise too quickly.

"Foreign companies get too many benefits compared to local companies, it's time to make a change," Pan Ping, a white-collar worker at a private company in Shanghai told China Daily.

Through the Unilever case, the Chinese government is trying to provide fair and transparent market conditions for both domestic and foreign companies, Pan added.

Also, as costs of raw material and labor are rising, measures to subsidize consumers such as tax cuts and salary increases should be done quickly and sufficiently, analysts suggest.

Beijing - mindful of growing public anxiety over rising prices - has taken a range of measures to curb inflation, which remained stubbornly high at 5.4 percent in March, the highest annual rate since July 2008.

The central bank has hiked interest rates four times since October and increased the amount of money banks must keep in reserve, effectively cutting their lending power.

The NDRC also pledged on Friday to boost efforts to keep prices stable by clamping down on companies colluding to raise prices.