Sanlu Case

Topics: Milk, 2008 Chinese milk scandal, China Pages: 5 (1209 words) Published: July 16, 2012

Case Facts:

• Incidence of finding high levels of melamine in milk and milk products for infants produced by a famous dairy processing company of China known as Sanlu.

• Death of 3 babies and 6200 diagnosed with kidney problems and cases of kidney failure due to consumption of tainted milk.

• The news of discovery of tainted milk was hidden from the central government by the local offices and the Company itself.

• Whistle blowers/critiques were silenced with bribes (monetary and other incentives) and efforts were made to bribe media, but media didn’t give in.

• Fonterra pulled out of the Chinese market and withdrew its products which were sourced from china from the market.

• Surprisingly, the use of melamine in dairy products was an open secret in China and was also encouraged.

• The sourcing of milk was done over a geographical scattered area which made it difficult to supervise the operations.

• The sourcing of milk was done over a geographical scattered area which made it difficult to supervise the operations.

• Whenever any policy measure/cost measure was announced, the farmers were the only one who had to face a setback in terms of revenue.

Case Issues:

• The adulteration of infant milk with melanine - a harmful content which affected the children

• The attempt to prevent the news from breaking out in public to avoid public defamation.

• The resort to malpractices in face of competition and a need to reduce prices

• Prior and Post role of Government in handling the case

Stand of the Company:

The company though apologized publically and declared withdrawal of the tainted products from the market but still it continued selling products with 10mg/kg of melamine and replaced the high level products with lower ones which were still harmful for the public. The company blamed raw milk suppliers for the issue though it should have taken the blame on itself. We doubt the fact that the company was not aware of the presence of this noxious substance in their product because the case clearly mentioned that before the discovery of melamine in the Sanlu products in 2008, the same had happened (albeit it was revoked) in 2004. At that time the company had tactfully suppressed the issue and even received praise for its disaster management tactic. On the whole the company is morally and legally liable to the consumers and other stakeholders (including Fonterra group). .At the time of problem reporting by a customer in first instance, the company should have shared the issue with its partner .The company should have started a program to provide free aid to the children who were suffering with the problems It cannot reaffirm its good image in the Chinese and global market due to its greed and deceit.

Reasons for this occurrence:

This seems like a classic case of poor corporate governance on the part of the company as well as a clear display of carelessness (shrewdness) and disregard to the welfare of all the stakeholders involved in the case (i.e. from farmers to customers). It is also a lack of interest of government in the welfare of the public which led to this incident and allowed it to scale to such heights.

• When even the unregistered companies did not accept the milk from local dairies because of poor quality, Sanlu accepted the same.

• The company tried to suppress the reporting of issue by Mr.Wang by bribing him instead of investigating the whole matter at that instance.

• Even when cases were reported in various provinces, the company tried to suppress them by taking the support of local government and by trying to bribe the popular Chinese website which posted negative comments about the company.

• The company did not keep proper checks at all the points where milk was manufactured, collected...
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