Powder milk prices sky high because of unhealthy competition

The overly high powder milk prices in Vietnam have been blamed on unhealthy competition behaviours by producers and suppliers, according to the Ministry of Industry and Trade (MOIT).

The Competition Administration Department (CAD) under MOET has released a report assessing the competition in 10 fields of the national economy, pointing out that the powder milk prices in Vietnam are much higher than the prices in other countries and go against the price trends in the world.

Power milk imports are now accounting for 80 percent of the total products available on the domestic market. In principle, when Vietnam imports dairy products in such a big quantity, the domestic prices would heavily depend on the world’s prices. However, in reality, the domestic prices keep rising even when the world’s prices decrease.

The sky high dairy prices in the domestic market have caused headache to the Ministries of Finance (MOF) and Industry and Trade (MOIT). Relevant agencies have been taking a lot of measures to force the prices down. However, it seems that all their work was in vain.

In late 2009, MOIT and MOF, joining forces with relevant agencies, took inspection tours to dairy producers and suppliers to learn to understand about the production costs and the sale prices of dairy products. Inspectors could not collect any documents or evidence showing that enterprises made corrupt use with each other to push the prices up to earn fat profit.

However, CAD still thinks that there is still possibility that enterprises collude with each other to sway the market.

According to CAD, in most of cases, every foreign dairy producer authorizes one Vietnamese enterprise to act as the only importer of its products. This means that there are not many opportunities for many Vietnamese enterprises to distribute foreign products in Vietnam, and that the number of the enterprises, allowed to import and distribute powder milk products, is limited.

It is the association among exporters, importers and distributors that pushes the prices up. Foreign exporters usually sell their products to Vietnamese importers through third intermediary exporters (in general, the third exporters come from the countries which impose low income tax rates). In this case, the prices of dairy products written down in invoices of Vietnamese importers are always very high.

Besides, CAD has warned that foreign exporters and Vietnamese importers may collude with each other and agree that they will declare the import prices lower than the actual prices in order to evade import tax. However, importers still sell products at high prices in order to cover expenses, while they declare that they have to spend a lot of money on advertisement, sale promotion campaigns and other kinds of expenses.

“In both cases, the dairy prices are pushed high up, and customers are the biggest sufferers,” the report said.

CAD has also said that unhealthy competition behaviours have been found in Vietnam’s market. Though many characteristics of dairy products are not examined and recognized by relevant agencies, suppliers still advertise the characteristics that they call “outstanding characteristics” on mass media, thus causing misunderstanding to consumers.

Enterprises even use mass media to speak ill of rivals. Under the current laws, enterprises must not meet physicians and pregnant women to advertise baby formulas. However, in reality, enterprises still do this to attract more buyers.-Thoi bao Kinh te Vietnam

Tags: Vietnam milk, Vietnam milk prices, Vietnam Powder milk prices