Clinics traded loans for milk deals

The Fair Trade Commission has fined two major milk makers a combined 228 million won ($245,000) for offering obstetrics and gynecology clinics low-interest loans in exchange for exclusive contracts to provide powdered milk to the clinics.
The antitrust watchdog said yesterday it discovered Namyang Dairy Products Co. and Maeil Dairy Industries Co. provided loans to 143 obstetrics and gynecology clinics at an average annual interest rate of 3.3 percent from September 1997 to August 2006. That was much lower than the average market rate of 6.4 percent at the time.
Namyang provided 33.8 billion won in loans to 85 clinics at discount rates, while Maeil provided 27.8 billion won in loans to 58 clinics. In exchange for those cheap loans, the two milk makers won exclusive contracts to provide powdered milk for newborn babies at the clinics.
“The provision of low-interest loans caused immediate losses but long-term gains to the milk companies, because many parents tend not to change the brand of powdered milk that they feed to their child,” said Kim Sung-man, head of the monopoly watch team in the Fair Trade Commission.
According to Maeil’s survey, 46 percent of parents of newborn babies continue to feed them the powdered milk that the babies were fed in obstetrics and gynecology clinics.
Namyang and Maeil account for nearly 80 percent of the domestic powdered milk market, according to the watchdog.

By Moon So-young Staff Writer [symoon@joongang.co.kr]