China's top economic planner on Thursday determined that the China branch of the International Ramen Manufacturers Association (IRMA) has illegally fixed prices for instant noodles.

The IRMA branch had held three meetings of instant noodle manufacturers and related businesses early this year to discuss specific plans to raise prices, said the National Development and Reform Commission (NDRC).

This constituted collusion and manipulation of the market in violation of the Price Law.

The branch had published a meeting memo and caused panic buying in some cities, which seriously disrupted market order, said the NDRC.

The NDRC has ordered the branch to make a public explanation and invalidate the illegal pricing agreement.

The NDRC is continuing its investigation into the branch.

Ramen prices of major manufacturers, who hold 95 percent of the market, jumped 20 percent on average and some rose up to 40 percent in July.

The lowest priced instant noodles cost only one yuan per packet before the price change.

The price hike has triggered widespread debate among producers, consumers, experts and netizens.

Enter "instant noodles" and "price hike" in Baidu, the largest Chinese search engine, and more than 1.5 million web pages show up.

Luo Jiang, an graduate student with the prestigious Tsinghua University, said, "It is not really about money. I am angry because consumers do not have a say on the price. Why can't we have a public hearing?"

Calling the move "self-redeeming", Meng Hesu, a senior official with the branch, said earlier that the price hikes were reasonable as raw material prices had risen 20 percent since last year.

For example, the price of palm oil, which accounted for 18 percent the total cost, more than doubled from 4,000 yuan per ton in 2006 to 8,200 per ton this year, Meng said.

"If we don't lift the prices, there will be no profit," Meng said, adding the profit margin of ramen manufacturers was only two to four percent.

"Instant noodles are daily necessities so price-lifting has to be cautious and should not be determined," said Hu Shoujun, a sociology professor at Fudan University.

In July, China's foodstuffs were priced 15.4 percent higher than the same period last year, and the growth rate was 7.8 percentage points higher than the first half.

July saw edible oil prices up 30.1 percent, and prices of meat, poultry and related products up 45.2 percent and egg prices rose 30.6 percent.

July was the fifth consecutive month the CPI rose by more than three percent, the government-set alarm level for the current year. The index for the first seven months rose by 3.5 percent.

"Every country will punish price alliance, which is the most primitive market-manipulating methods," said Yang Yong, an anti-monoloy expert and lawer with Jin Cheng & Tong Da Law Firm.

"It is ok for a company to raise prices of its products in facing with raw material price surge," he said, "but no types of price alliance, including verbal agreement and privity, are allowed in market-oriented economies, including the United States."

The decisions made by the NDRC serves more like an warning alarm for other industries as the NDRC has ordered the branch to make a public explanation.

Meanwhile, the decision looks more like a signal since it is hard for the the branch and ramen firms follow the NDRC order of "eliminating bad influences" as it is hard for consumers to get a refund since, I guess, few of them keep receipts, Yang said.

As for the "further investigation", enterprises might be fined and related individuals may face administrative punishment since the Price Law does not belong to criminal law, he said.

Chinese local pricing authorities have been told to crack down on food producers and sellers that attempt to raise food prices to an unreasonable level, order the NDRC on August 6.

Describing the nationwide campaign as a major political task, the top economic planning agency urged pricing departments at all levels to work hard to stabilize the food market.

The campaign, mainly targeting food manufacturers, wholesale and retail firms, will overhaul the prices for daily foods like grain, cooking oil, meat, poultry, eggs and milk.

NDRC vowed to severely punish those who jack up food prices by revoking their business licenses and bringing them to justice in collaboration with the police and commercial and quality authorities. (one U.S. dollar is equal to 7.80 yuan)

(Xinhua News Agency August 17, 2007)