he radiation leaks in Japan's Fukushima Daiichi nuclear
plant (caused by the earthquake-tsunami in Japan on 11 March) has
made consumers in China paranoid about the salt they will consume
in the near future. Once news of the leak in the nuclear plant
broke, there was a mad "scramble" to purchase table salt
– as Chinese consumers were concerned that in the near
future, the sea water around China would be contaminated as a
result of the radiation leakage. According to press reports, around
the same time, some table salt retailers proceeded to raise the
retail prices of iodized table salt.
The Chinese Government controls prices in relation to table
salt. Specifically, the ex-works and wholesale prices of table salt
are set by the National Development and Reform Commission (NDRC,
the central price authority); in addition provincial price
authorities also control to some extent, the retail prices of salt.
In some provinces, provincial price authorities set maximum retail
prices – this means that table salt retailers are not to
charge above a price set by these authorities.
On 17 March 2011, the NDRC1; issued a notice which
instructed local price authorities to conduct investigations into
the increase in the retail price of table salt2; On 18
March 2011, the NDRC announced that 10 retailers of table salt were
in breach of Article 14(3) of the Price Law 1997. Article 14(3) of
the Price Law1997 prohibits the concoction and spreading of
price-hike information, "jacking up" prices in relation
to commodities to excessively high level, as this conduct amounts
to an "unfair price act". It would appear that these 10
retailers are of the small to medium enterprise (SME) variety. Each
of the 10 retailers received fines in relation to their conduct of
raising retail salt prices - amongst them, the heaviest fine was
imposed on Xiaofang Aquatic Product and Non-staple Food Store
(Xiaofang). The Xi'an Municipal Price Bureau confiscated
RMB25,000 (in illegal gains) from Xiaofang and fined Xiaofang
RMB50,000. The other retailers generally received fines between
RMB1000 to RMB3000. [Note: Pursuant to Article 6
of the 2010 Provisions on the Administrative Punishment of Illegal
Price Conduct, business operators in breach of the Price Law 1997
will be subject to a confiscation of illegal gains and a fine not
exceeding 5 times this illegal gain. In relation to
"severe" breaches of the Price Law 1997, these 2010
Provisions state that business operators will be subject to orders
to suspend their business or will have their business licenses
The NDRC possesses a lot of discretion in relation to what
constitutes excessive pricing pursuant to Article 14(3) of the
Price Law 1997. In this regard, it makes sense to "catch"
such price hikes pursuant to the Price Law 1997; rather than using
provisions pursuant to the Anti-Monopoly Law (AML)3.
Pursuant to the latter, excessive pricing is considered illegal
provided the entity possesses dominance or market power (see
Article 17, AML). In relation to this matter, we note that the
entities in question appear to be mainly SMEs.
1. The NDRC is the authority in charge of administering
the Price Law 1997.
2. These are: (a) Xiaofang Aquatic Product and Non-staple
Food Store located at No. 13 Qinling Haoshaobei Vegetable Market of
Xi'an; (b) Songjiang Township Maoxing Food Wholesale Store
located in Huide City, Jilin Province; (c) Gongxiao Convenience
Store of Jiande City, Zhejiang Province; (d) Xincheng Trans-Era
Food Store located in Shahe City, Xintai, Hebei Province; (e)
Gaoleitangjiu Convenience Store located at Jiancaoping District of
Taiyuan City, Shanxi Province; (f) Xiaoqing Shanghai Hualian
Franchise Store in Yuhuatai District of Nanjing City, Jiangsu
Province; (g) Meilanaheng Breakfast Store located in Haikou City,
Hainan Province; (h) Laochai Store in Wusu City, Tacheng, Xinjiang;
(i) Huafeng Store located at Hatubu Town, Wusu City, Tacheng,
Xinjiang and (j) Guangjin Store located at Hatubu Town, Wusu City,
3. There are overlaps between the Price Law 1997 and the
AML. Both laws aim to regulate anti-competitive conduct and protect
the interests of consumers. The focus of the Price Law 1997,
however, is aimed at regulating the prices of certain commodities
and services in order to promote and maintain the well-being of
China's socialist market economy.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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