Chinese liquor giant admits to price monopoly

Leading Chinese liquor maker, Kweichow Moutai, says it will overhaul its current monopolistic pricing practices. The announcement comes after Moutai penalised retailers carrying its products under the designated prices, which caught the attention of China's price regulator. Moutai closed down 2.3 percent Wednesday on the Shanghai Stock Exchange.

The Shanghai-listed baijiu company has admitted regulators have stepped in on its violation of the country's anti-monopoly laws. The liquor giant is also vowing to cease its unlawful marketing practices. These practices include asking Moutai stockists to set a floor price for its products. Moutai says it will announce a detailed overhaul of its sales policy.

In mid December last year, the liquor producer's chairman demanded distributors to follow its pricing strategy, and that penalties would be handed out to anyone who failed to adhere to the designated prices. According to sources, three distributors have been recently fined by Moutai for violating the liquor producer's price policy. The move prompted price regulators to intervene.

Experts say Moutai's sales policies are against the law.

Huang Yong, deputy director of State Council Anti-monopoly Consultancy, said,"As long as you stipulate maintaining fixed prices or resale prices in the agreement with dealers, it is illegal. "

Moutai's pricing strategies have been a target of criticism and controversy for years. As the premium manufacturer of the popular Chinese spirit baijiu, price hikes initiated by Moutai are always followed by other industry players. Experts say only reasonable pricing could be beneficial to the beleaguered industry, which enters 2013 on uncertain footing. |Alcohol makers are suffering a decline, due to oversupply in the market, the increasing popularity of wine, the government's curb on public spending on official banquets, and a recent safety scandal over plasticisers in baijiu.