Shuangcheng, the largest cattle raising city in Heilongjiang province, produces 1,200 tons of fresh milk a day. But some media reports say that Nestle is using the local government's help to buy all the fresh milk available in the market, hurting the interests of local dairy farmers, says an article in Beijing News. Excerpts:

All companies should comply with the market principle of fair dealing and follow its laws irrespective of their size, wealth and stature. But by getting the Shuangcheng government's help to buy all the fresh milk available in the market, Nestle is violating the market order and hurting local farmers' interests.

The media reports say the local government signed an agreement with Nestle in 2002 to "restrict competition" in the milk industry by not letting in other dairy companies into the city and ensuring that the entire volume of fresh milk is sold to Nestle. Moreover, the local government owns 2.9 percent of the shares in the local Nestle company and the former leader of the city is its president.

Although Nestle is the backbone of the city's financial revenue, the local government has no right to help it establish a monopoly. And the local government-Nestle agreement is not only against fair market competition, but also deprives the dairy farmers of the right to free trade.

According to China's laws, local people can demand full information on the agreement and seek compensation from the local government if they find that it has hurt their interests. No local government should be a shareholder in a private company, let alone a multinational, because a government's role is that of a vindicator of market regulation. To put it simply, it cannot be a player and referee both.

The local government and Nestle should correct the situation, and apart from being punished for their wrongdoings and paying compensation to those affected, they should also apologize for their deeds.

(China Daily 10/27/2011 page9)