Nestle unit cuts baby formula prices amid China probe

A unit of Swiss food giant Nestle is cutting prices for baby formula in China by as much as 20 percent, it said after the government launched a investigation into alleged price-fixing by foreign firms.

Wyeth Nutrition confirmed the investigation by China's top economic planner, which has been reported by state media, and pledged to "immediately" cut prices on some formula products by six to 20 percent, according to a statement late Wednesday.

"Wyeth Nutrition has always respected and been willing to abide by China's laws and regulations and is actively cooperating with the anti-monopoly investigation into the company," it said.

The firm promised not to raise prices on new formula products for a year and said it had improved marketing policies to ensure they were in line with regulations.

The response came after media reports on Tuesday that the National Development Reform Commission had launched a probe of foreign baby formula makers for high prices, which it claimed resulted from a monopoly-like situation.

But a 2008 scandal involving tainted formula that killed six children and sickened more than 300,000 has prompted domestic consumers to shun local brands and created huge demand for foreign products, both those sold through normal channels and informally imported.

Other foreign companies being investigated include France's Danone, Mead Johnson Nutrition, Abbott Laboratories and Dutch firm Royal FrieslandCampina which produces the Friso brand, state media said.

Mead Johnson said earlier this week it was cooperating with the investigation and added it was providing products at "good value" to customers.

"The company is fully cooperating with the recently reported Chinese government anti-trust review of resale prices in the infant formula market and will provide information in response to enquiries received from government officials," it said.

Shares of some of the companies involved in the investigation, which has not been directly confirmed by the government, plunged in US trading on Wednesday.

Mead Johnson sank 8.1 percent while Abbott Laboratories fell 1.8 percent.

But shares of Chinese dairy producers have benefited since the investigation has targeted foreign companies.

China Mengniu Dairy gained 1.98 percent in Hong Kong morning trade Thursday while Inner Mongolia Yili Industrial Group rose 0.73 percent in Shanghai.

China is by far the world's largest market for baby formula, according to consumer research group Euromonitor.

The government has vowed to crack down on safety violators and called for strict monitoring of milk powder production, in an attempt to restore public trust.