By Susan Ning, Shan Lining and Angie Ng

The 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 revoked.]

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.

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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, Tacheng, Xinjiang.

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.