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J&J must pay for price fixing

A COURT yesterday ordered Johnson & Johnson to pay 530,000 yuan (US$86,434) in compensation to a Beijing company over price manipulation.

The Shanghai Higher People’s Court revoked a previous verdict and ruled that Johnson & Johnson Medical China Ltd and Johnson & Johnson Medical Shanghai Ltd compensate Rainbow Medical Equipment & Supply Company, a former dealer in the US pharmaceutical giant’s products.

The court described Johnson & Johnson as a “vertical monopoly” after it deprived the Beijing firm of its dealership in 2008, halting supplies after the Beijing dealer was found taking orders for products below a minimum price set by the company.

A vertical monopoly is where

 a company controls its production and distribution channels to reinforce its leading position in the market.

The court said not all agreements involving the setting of minimum prices are illegal, but Johnson & Johnson was aiming to control prices in an uncompetitive market.

“Sometimes companies set minimum prices with dealers to encourage introduction of new products or lift the quality of products and services,” said Ding Wenjie, chief judge in the case. “But J&J was simply taking advantage of its dominant market position.”

The court rejected Beijing Rainbow’s claim for 14 million yuan in compensation to cover losses including advertising spending, employees’ severance fees, and for damage to its reputation.

J&J declined to comment yesterday.

Liu Chunquan, a senior partner at Shanghai Panocean Law Firm, said China was generally lenient in monopoly cases compared with developed countries, and said more investigations are set to appear.

“More multinational companies and domestic ones alike will be the target of anti-trust investigations as China builds up experience in the field,” Liu said.

Since the beginning of this year, Chinese authorities have carried out an array of anti-monopoly actions in the wine, milk powder and gold sectors.

Packaging giant Tetra Pak was put under investigation by the State Administration for Industry and Commerce early last month for possible abuse of market dominance.

Also in July, a price-fixing investigation by the anti-monopoly arm of the National Development and Reform Commission led to price cut decisions by at least nine infant formula makers including Abbott Laboratories, Nestle and Danone.

In February, two of the country’s leading liquor makers were fined for price-fixing.

Kweichow Moutai and Wuliangye Yibin Co were fined 247 million and 202 million yuan respectively, equivalent to about 1 percent of their sales  in the past year. The fines were the largest in a monopoly probe in China.

 




 

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