Nestlé's alleged malpractices

A host of demons seem to be nestling in Nestlé food company. After Indian food regulators found that Nestlés Maggi Noodles contained high levels of lead which makes it "unsafe and hazardous", Maggi has been going off the shelves in India as well as in East Africa.
Closer to home, the firm is in another kind of trouble: the Competition Commission of Pakistan (CCP) has prima facie evidence that Nestlé has abused its dominant position in the infant formula and follow on milk (IFFO) and infant cereal market by "unreasonably increasing prices and exploiting innocent consumers."
The CCPs enquiry order is very clear. It proves convincingly that Nestlé has a dominant position in the IFFO and infant cereal market. A firm has a dominant position if it has the ability to behave independently of competitors, customers, consumers and suppliers and if its share of the relevant market exceeds 40 percent.
Given that Nestlés Lactogen 1 and Lactogen 2 are the only domestically produced IFFO products, the firm naturally has 100 percent share of domestically produced IFFO market. Even after including imported brands in the market, Lactogen 1 and Lactogen 2 hold a market share of nearly 73 percent. Similarly, according to Nielsen Retail audit of February 2015, Nestlé's Cerelac held 99.5 percent share of the infant cereal market in February 2015.
But has the company abused its dominant position? Again, the CCP enquiry order is very clear. The firm had been increasing prices of Lactogen (1 & 2) at regular intervals. The increase in prices of Lactogen (1&2) between 2012 and 2014 was 38-39 percent on average.
While increasing prices is not a wrong thing to do, increasing it without justification especially when you are market leader is akin to abusing your dominant market position and fleecing customers.
The CCPs enquiry order shows that Nestlé's price increases in these products did not correspond to the increase in costs nor was it based on any other justifiable business reason.
The company gave five reasons for the increase in prices: that the prices skimmed milk powder (MSK) was the on the rise during the said period; rupee depreciation during 2012-14; fresh milk price hike; rising general inflation and labour costs; and because of all this the pressure to maintain profitability.
Without going in too many details, the commission has found out that MSK prices had in fact risen only for a brief period and had started tapering off thereafter. In other words, the rise in MSK isn't a sufficient reason for the unreasonable increases in prices.
Likewise, the rupee depreciation, the fresh milk price hike, rising general inflation and labour costs were found to be insufficient to justify the increase in IFFO and cereal prices (readers can study the order on CCPs website).
How accurate is CCPs analysis? We can say for sure because some of the critical information needed to make a view - such as the cost structures - has been kept hidden from the public view. Nestlé has reportedly requested the CCP not to release the said information to the public.
But considering that all of Nestlé's business related arguments have already been heard before the CCP made the allegation of market abuse by unreasonable increase in prices, Nestlé may not necessarily have the room to escape from this, sans on the basis of some procedural or legal loopholes.