This case discusses the tainted milk scandal that was unearthed in China in 2008. The milk scandal became public in August 2008, after it was disclosed that the baby formula produced by the Chinese dairy products company, Sanlu Group was contaminated with melamine, which caused kidney failure of many children, resulting in death in some cases. Later, the investigation by the government revealed that the products of 21 other Chinese dairy firms were also contaminated with melamine. As soon as the crisis became public, the Chinese Health Ministry ordered the dairy firms to recall the contaminated products and to destroy the unsold and recalled products. The Chinese Health Ministry started testing dairy products across the country. Top executives of Sanlu were arrested. Government offficials who were found guilty were also sacked. China's Dairy Industry Association announced that the affected children and their families would get compensation from the responsible dairy firms. To support the affected dairy farmers, the government also announced a subsidy. As a result of this scandal, many countries like Hong Kong, Taiwan, Singapore, South Korea, Australia, and Indonesia banned Chinese dairy products. Several foreign companies which sold China made products, or products which used Chinese ingredients recalled their products. The scandal severely affected the reputation of China as one of the leading food products exporting country's. The case details the actions taken by the Chinese government in response to the milk scandal. It also attempts to analyse the impact of the crisis on the Chinese dairy industry. The case ends with a discussion on the repercussions of the milk scandal on Chinese exports of food products.
The case will help students to: (1) gain insight into food safety issues in China; (2) understand the Chinese milk scandal and its impact on the Chinese dairy industry; (3) critically analyse the damage control measures taken by the Chinese government; and (4) discuss the role of regulation and enforcement to prevent reoccurrence of such incidents. This case is meant for MBA / PGDBM students and is designed to be part of the business ethics curriculum. The teaching note includes: (1) the abstract; (2) the teaching objectives and target audience; (3) teaching methodology; (4) assignment questions; (5) feedback of the case discussion; and (6) suggested readings and references. It does not contain an analysis of the case.