Thursday, August 01, 2013

Now J&J must pay for price fixing in China

A COURT yesterday ordered Johnson & Johnson to pay 530,000 yuan (US$86,434) in compensation to a Beijing company over price manipulation.

The Shanghai Higher People’s Court revoked a previous verdict and ruled that Johnson & Johnson Medical China Ltd and Johnson & Johnson Medical Shanghai Ltd compensate Rainbow Medical Equipment & Supply Company, a former dealer in the US pharmaceutical giant’s products.

The court described Johnson & Johnson as a “vertical monopoly” after it deprived the Beijing firm of its dealership in 2008, halting supplies after the Beijing dealer was found taking orders for products below a minimum price set by the company.

A vertical monopoly is where

 a company controls its production and distribution channels to reinforce its leading position in the market.

The court said not all agreements involving the setting of minimum prices are illegal, but Johnson & Johnson was aiming to control prices in an uncompetitive market.

“Sometimes companies set minimum prices with dealers to encourage introduction of new products or lift the quality of products and services,” said Ding Wenjie, chief judge in the case. “But J&J was simply taking advantage of its dominant market position.”

The court rejected Beijing Rainbow’s claim for 10 million yuan in compensation to cover losses including advertising spending, employees’ severance fees, and for damage to its reputation.

J&J declined to comment yesterday.

No comments: