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Liquor firms hit with monopoly fines

By Chen Dujuan Source:Global Times Published: 2013-2-19 23:08:03

Fines of 449 million yuan ($71.9 million) for price monopoly levied against Kweichow Moutai Co and Wuliangye Group, China's top two liquor firms, prompted mixed responses but no apologies, according to Tuesday reports.

Moutai Group's office director Zou Xin told china.com.cn Tuesday that enterprises that have made mistakes should be allowed opportunities for correction.

A Wuliangye staff member was cited Tuesday by sina.com as saying that the company had rectified its price-limiting conduct, but had yet to receive the penalty notice from the NDRC.

Neither of the two firms responded to calls by the Global Times.

Moutai will be fined 247 million yuan and Wuliangye will be fined 202 million yuan by the National Development and Reform Commission (NDRC).

A fax sent to the NDRC by the Global Times was unanswered by press time.

Both firms had set price floors for their distributors, and penalized some at the end of 2012 for selling products below the suggested retail prices, which aroused anti-monopoly investigations by the NDRC in January.

"Floor price policies are common practices used by luxury companies to maintain their brand images, but they are unreasonable both for distributors and for consumers, so the NDRC's move could help create free market competition," You Yunting, an economic lawyer at DeBund Law Offices, told the Global Times Tuesday.

According to Moutai's financial data, its revenue amounted to 35.2 billion yuan in 2012, with an expected net profit of 13.1 billion yuan. Wuliangye's data put its total revenue at 27 billion yuan in 2012, with net profit up to 9.8 billion yuan.

Following the news on Tuesday, Moutai's stock price closed down 0.97 percent to 177.94 yuan and the share price of Wuliangye closed down 1.55 percent to 24.81 yuan.

Moutai said on January 16 that it would halt such marketing policies and had revoked penalties for distributors, and Wuliangye said on January 17 it would also cancel such measures.

The fines are a new blow to high-end liquor firms, which have seen declines in both prices and sales following reports of excessive plasticizer (DEHP) in liquor, as well as the reduction of official banquets due to a nationwide campaign against extravagance in December, Yang Qingshan, an independent liquor analyst, told the Global Times Tuesday.

The current retail price of Moutai is about 1,300 yuan per bottle, compared with 2,300 yuan one year ago, he said, noting that prices of high-end liquor products will further decline because their sales rely heavily on official consumption. 

As prices drop, high-end liquor firms, especially Moutai, will gradually change their major customer bases to business banquets and ordinary consumers, Yang said.

The anti-monopoly fines by the NDRC aim for orderly competition, and such fines will be a warning for all sectors, urging them to meet national laws and regulations, he noted.

Following the fines, luxury firms will relax their control on distributors and adjust their marketing strategies, You said.

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