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Dairy companies fined for price rigging

Firms met regularly to fix cheese prices, antitrust watchdog says


The nation’s four major dairy companies were fined a combined 10.6 billion won ($9.8 million) for fixing prices of their cheese products, the antitrust agency said on Sunday.

Seoul Milk, Maeil Dairies Co., Namyang Dairy Products Co. and Dongwon Dairy Foods were subject to the penalties, the Fair Trade Commission said.

Seoul Milk was slapped with the largest fine of 3.59 billion won followed by Maeil Dairies with 3.46 billion won. Namyang Dairy Products and Dongwon Dairy Foods were hit with 2.25 billion won and 1.31 billion won, respectively.

The companies almost completely control the domestic cheese market, with a combined market share of up to 95 percent. 
Cheese products are on display at a dairy corner at Lotte Mart in downtown Seoul. (Ahn Hoon/The Korea Herald)
Cheese products are on display at a dairy corner at Lotte Mart in downtown Seoul. (Ahn Hoon/The Korea Herald)

The Fair Trade Commission said employees of the four firms had met several times between 2007 and 2008 to rig prices.

“The employees had a covert organization established for the purpose of such price-fixing, and in this organization, the top two dairy makers led the decision to rig the prices so that the other two would follow,” the commission said.

Members of this organization also met ahead of new product launches to exchange information on when the rival companies would raise prices, and by how much.

Cheese products, branded as “high-class,” have seen prices skyrocket in recent years.

At E-mart, a local retailer, cheese products manufactured by the four major dairy companies are being sold at an average 6,000 won for 20 slices.

De Vinchi Einstein DHA cheese, manufactured by Namyang, costs over 4,000 for 10 slices. The product is said to include DHA ― a health-enhancing acid ― and also “well-fermented” cheese.

Children’s cheese is priced even higher.

Enfant, a trademark children’s cheese from Seoul Milk, costs almost 4,000 won for 10 slices. An organic cheese product manufactured by Maeil that targets infants with the promise of enhancing their brain activity and immune systems costs more than 5,000 for 10 slices.

“I’ve always thought that cheese prices were getting too high, but because they are all priced in a similar range, I felt I had no choice,” said Park Hee-yun, a 35-year-old housewife from Seoul.

In July 2007, the organization consisting of select employees from the four dairy makers agreed to raise the price of cheese distributed to local restaurants by up to 18 percent.

Starting in September that year up to March 2008, they further raised prices by as much as 19 percent.

Also in September 2007, the employees agreed to jointly raise the price of pizza cheese sold to consumers and processed cheese sold to restaurants.

After another meeting in August of 2008, the four raised the price of such cheese products by 15-20 percent.

The antitrust watchdog has recently been stepping up efforts against price-rigging in order to fight the escalating inflationary pressure that continues to build on commodities despite promises from the government to the contrary.

President Lee Myung-bak in 2008 selected 52 commodities such as rice, pork and LPG to place under exclusive monitoring to curb the prices.

But on average, the prices of the 52 items rose by more than 20 percent over the past three years, according to data from the Citizens Coalition for Economic Justice and Statistics Korea earlier this month.

The increase far surpassed the 11.75 percent rise of the consumer price index.

By Kim Ji-hyun  (jemmie@heraldcorp.com)
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