With increases in raw material and input costs, many consumer product companies have either announced price hikes or said they're a real possibility.Typically, consumers will groan at the prospect and simply tell companies what they think with their wallets.
For companies, those comments are usually made to prepare consumers, investors, and the media for changes, but not with the intention of causing a run on supplies. As WSJ's Beijing bureau reports, China's National Development and Reform Commission has fined Unilever $308,000 for comments it made in March about raising prices on detergent in order to counter rising raw material costs. Those comments, the Commission said, triggered a run on detergent as Chinese consumers tried to stock up before a price hike:
The NDRC said Unilever's announcement of planned price increases 'had intensified consumer expectations of price hikes' and 'seriously distorted market order.'
The commission also scolded Unilever for answering numerous requests from the Chinese media about its plans, causing 'panic buying' in some cities. Unilever's actions had violated China's pricing laws, the agency said, adding 'this has been clearly determined with solid evidence.'
The NDRC said it will 'severely' punish any attempts by companies to collude on price increases. The NDRC statement didn't cite evidence of collusion in the Unilever case, however.
The penalties could have been worse for Unilever. The pricing agency noted that the maximum fine under pricing regulations is 3 million yuan and that severe violations could lead to a suspension of operations.
A 3 million yuan fine would have translated to roughly $460,000.
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