The National Development and Reform Commission (NDRC) last month imposed a fine on Unilever, an Anglo-Dutch consumer products group, for publicly warning that it might increase its prices.
Unilever was an early entrant into China’s consumer products market, and sells a wide range of products including Lipton tea, Pond’s cosmetic products, Lux soap and Zhonghua toothpaste.
The company had cited high raw material prices as a reason for its warning. However, the NDRC said Unilever had “intensified inflationary expectations among consumers” and “seriously disrupted market order”, and fined it RMB2 million (US$300,000) under the PRC Price Law and the related Administrative Penalties for Illegal Pricing Provisions.
Article 14 of the Price Law lists a number of ways in which business operators must not act in order to affect prices. The Unilever fine appears to have been levied under subsection 3 of that article, which states that business operators must not “fabricate and spread price rise information for pushing up the prices to an excessively high level”.
Article 6 of the related Provisions lists a number of penalties that may be incurred for violations of article 14 of the Price Law. These include confiscation of any illegal gain and, in “serious circumstances”, a maximum fine of RMB3 million. In “very serious circumstances”, the offending company may have its business licence revoked.
Fearing the social effects of high inflation, particularly in food, the government appears to have resorted to persuasion and exhortation to dissuade manufacturers from raising prices. The price department of the NDRC met more than a dozen industry associations in April, asking them to press their members to postpone or abandon planned price rises.
After the Unilever fine, the NDRC also warned food manufacturer Tingyi, which makes more than half of the instant noodles sold in China, against “excessive” price increases.
Dr Zhan Hao, executive partner of Grandall Legal Group, told China Business Law Journal that with the rapid rise in the consumer price index in China, “prices, especially for daily necessities, are a very sensitive issue for consumers and the authorities”. Zhan advised business operators to be “prudent” when considering and implementing price rises, and to take care to comply with provisions relating to price in both the Price Law and in anti-price monopoly legislation.