Healthcare giant Johnson & Johnson (J&J) has become the latest global company accused of misconduct in China after a court ordered it to pay damages to a local distributor in a lawsuit brought under an anti-monopoly law.
The ruling by a Shanghai court expands use of the five-year-old law and comes amid a flurry of Chinese investigations of possible bribery, price-fixing and other misconduct by global companies.
The court, in a ruling issued on Thursday, said J&J was guilty of “vertical monopoly” for setting minimum prices for surgical sutures. It said that caused the Chinese distributor to lose potential sales and awarded 530,000 yuan (US$85,000) for lost profits.
Telephone calls to Johnson & Johnson’s offices in Beijing and Shanghai were not answered.
Chinese news reports said the case was the first time a court ruled against a Fortune 500 company in an anti-monopoly case.
The judge, Ding Wenlian (丁文聯), said the ruling reflected the law’s intention of protecting consumers and “public interests,” according to the state-run Xinhua news agency.
Johnson & Johnson was accused of improperly setting minimum sale prices to maintain its image as a premium brand, according to a court announcement.
It said the company has since stopped imposing that condition on distributors.
Setting minimum prices for distributors or retailers or prohibiting price-cutting is a standard strategy for makers of luxury goods and other products or services that want to be seen as a premium product.
The lawsuit by Rainbow Medical Equipment & Supply Co said it lost its contract with J&J in 2009 after it submitted a bid to supply sutures to a Beijing hospital at a price below the US company’s standard. Rainbow Medical said it had worked for J&J for 15 years.
A Shanghai court rejected a lawsuit by Rainbow Medical seeking 14 million yuan.
However, a higher court ordered J&J to reimburse it for lost profits due to violations of the anti-monopoly law.