CHINA’S top pricing supervision body Thursday ruled that a nationwide price hike for instant noodles last month was an act of illegal collusion between companies and the industry-based association.

The higher prices, decided by the China branch of the World Instant Noodle Association, have “seriously distorted the market order and hampered fair competition in the industry,” the National Development and Reform Commission (NDRC) said in a statement on its Web site Thursday.

The statement was issued after the commission set up a team to investigate the prices of instant noodle last month.

The China branch of the noodle association held a meeting July 5 in Beijing, which decided to raise prices of low-end instant noodles of 10 major brands starting July 26, the statement said. These brands have accounted for 60 percent of sales in the sector.

Prices of low-end products jumped up to 40 percent and sparked a “strong reaction” from society, the committee said.

The association had already raised the average price of high-end instant noodles from 1.5 yuan (20 U.S. cents) to 1.7 yuan starting June 1 after a meeting April 21 in Hangzhou.

Both hikes were based on “mounting pressure due to surging food costs,” according to previous media reports.

The association then published the minutes of those meetings in an industry magazine, which sent a signal to noodle producers and caused panic buying in some areas after media reported the news, the statement said.

The public soon became suspicious that companies were taking advantage of the price increase to net quick profits and that the producers were engaged in collusion.

The association also made “untrue remarks” to the media to deny they had colluded after the investigation began.

The NDRC has pledged to nab anyone who colludes to drive up prices amid surging food costs.

The price collusion has breached three terms of the country’s Price Law, the statement said.

The offending noodle producers have to return all profits gained from the price hike. They will also have to pay fines of up to five times the profit earned, according to the Price Law.

Those that seriously broke the law will also be asked to suspend operations and may have business licenses revoked, the law said.

(SD-Agencies)