China fines 6 milk suppliers in price-fixing probe

BEIJING — China announced Wednesday it has fined six milk suppliers, including Mead Johnson and New Zealand's Fonterra, a total of $108 million for price-fixing after an investigation that shook the country's fast-growing dairy market.

The announcement came as China reels from a separate recall of milk supplies from Fonterra this week due to possible contamination.

The investigation reflected intensifying scrutiny of business under China's 5-year-old anti-monopoly law. Most targets so far have been foreign-owned. It was carried out against the backdrop of Chinese probes of possible bribery and other misconduct by global suppliers of pharmaceuticals and other products.

Anti-monopoly enforcement "is getting more and more forceful," said Wang Xiang, a lawyer for the firm Orrick, Herrington & Sutcliffe.

The Cabinet's National Development and Reform Commission said it imposed fines totaling 668.7 million yuan ($108 million) on the local units of Mead Johnson Nutrition Co., based in Glenview, Illinois; Hong Kong-based Biostime International Holdings Ltd.; Dumex, a unit of France's Danone SA; Abbott Laboratories, in Abbott Park, Illinois; Fonterra Co-operative Group and Dutch-based FrieslandCampina NV.

The companies admitted they violated the anti-monopoly law by setting minimum prices distributors were required to charge, which raised costs for consumers, the NDRC said in a statement. Regulators did not allege direct collusion, known as horizontal price-fixing, among them.

Setting minimum prices is a common practice in some markets, where companies want to maintain an image as a premium brand. But lawyers say Chinese regulators appear to see most such requirements for distributors as illegal.

Last week, health care giant Johnson & Johnson was ordered by a Shanghai court to pay compensation to a former distributor in a lawsuit brought under the anti-monopoly law.

Beijing is especially concerned about consumer prices at a time when communist leaders face pressure to contain surging living costs.

Three suppliers were found to have violated the law but were spared fines, the NDRC statement said. They were China's Beingmate Group Ltd.; Wyeth Nutrition, a unit of Switzerland's Nestle SA, and Japan's Meiji Dairies Corp.

Other industries also could face tougher scrutiny, especially those in which foreign enterprises have advanced technology that might dominate a market, said Wang.

"Industries like new drugs and medical equipment, especially top companies that have the potential to be monopolies, should pay more attention to this," he said.

Milk and its quality and price are sensitive in China after six babies died and thousands were sickened in 2008 due to formula tainted with the chemical melamine. That prompted many parents to switch to buying more expensive imported milk.

Thursday's announcement referred to suppliers of milk powder while earlier reports by state media said investigators specifically targeted sellers of powdered infant formula.

Milk suppliers including Nestle and Dutch-based FrieslandCampina announced price cuts of 5 to 12 percent after the investigation was launched.

Mead Johnson was fined 203.8 million yuan ($33 million), Biostime 162.9 million yuan ($26.3 million) and Dumex 172 million yuan ($27.7 million), according to the NDRC statement. FrieslandCampina was fined 48.2 million yuan ($7.8 million), Abbott 77.3 million yuan ($12.5 million) and Fonterra 4.5 million yuan ($720,000).

Some fines were based on companies' annual sales and ranged from 3 to 6 percent of revenue, the agency said.

There have been few court rulings so far on the 2008 anti-monopoly law. That has fed uncertainty about how it will apply to global companies that are eager to expand in the world's second-largest economy.

Chinese regulators have cited the law in ordering changes to acquisitions or business practices. In 2009, they blocked Coca-Cola Co. from buying a Chinese fruit juice producer.

Business groups welcomed the law as a step toward clarifying operating conditions in China. Since then, they have said it is enforced more actively against foreign companies than against their Chinese rivals.

Last week, a Shanghai court ordered U.S.-based health care giant Johnson & Johnson to pay damages to a distributor in a lawsuit filed under the anti-monopoly law. The court said J&J improperly set minimum prices, depriving the local distributor of possible sales.

Meanwhile, China has ordered a recall of Fonterra infant formula after the dairy company announced Saturday that hundreds of tons of infant formula, sports drinks and other products might be tainted with bacteria that could cause botulism.

Also last month, police detained four employees of GlaxoSmithKline on charges they bribed doctors to prescribe the British pharmaceutical giant's drugs.

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National Development and Reform Commission (in Chinese): www.sdpc.gov.cn

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Samsung seeks smart watch trademarks in US, SKorea

SEOUL, South Korea — Samsung Electronics Co. has applied for U.S. and South Korean trademarks for a watch that connects to the Internet in the latest sign that consumer technology companies see wearable devices as the future of their business.

Samsung described "Samsung Galaxy Gear" as a wearable digital electronic device in the form of a wristwatch, wrist band or bangle in its July 29 application with U.S. Patent and Trademark Office. A month earlier, it applied for a "Samsung Gear" trademark in South Korea.

The trademark applications did not show the shape of the products. But drawings from a Samsung design patent approved in May show a watch-like design with a flexible screen that curves around the wrist.

The U.S. trademark application said the device will be "capable of providing access to the Internet, for sending and receiving phone calls, electronic mails and messages" as well as "for keeping track of or managing personal information."

The trademark filings in the U.S. and in South Korea show that Samsung is deep in preparations for what tech industry experts expect will be a new generation of mobile technology that dramatically expands the utility of single-function objects such as watches and glasses. The South Korean consumer electronics giant was caught flatfooted by Apple's invention of the smartphone but through what turned out to be a legally risky strategy of imitation was able to capture a dominant share of the global smartphone market within a few years.

Apple Inc. applied June 3 for a trademark in Japan for "iWatch." Industry watchers have long speculated that Apple is working on a smart watch that uses a version of the operating system that powers the iPhone and iPad. The company has not confirmed those rumors but CEO Tim Cook has hinted it may be developing a wearable computing device.

Google Inc. is testing an early version of Internet-connected spectacles called Glass. It uses a small screen above the right eye that displays information and imagery retrieved from the Internet.

The South Korean patent office said the Gear trademark will not be approved this year as it takes seven to eight months to start reviewing applications due to a waiting list. Samsung applied for the South Korean trademark on June 21.

It was not clear if Samsung would use the "Samsung Gear" trademark for a Smart Watch. The trademark application covers 38 possible products including mobile telephones, bracelets, glasses and software interfaces that monitor human vital signs.

South Korea's patent office said in June that Samsung had patented watch designs in which more than three quarters of the device is covered by a flexible display that curves around the wrist. Illustrations showed 'back' and 'home' buttons at the bottom of the screen. Another illustration shows a rectangular screen with an edge that tapers toward the top.

The product is made of metal, synthetic and glass materials, Samsung's patent document said.

Samsung executive vice president Lee Young Hee said in March interview with Bloomberg that the company's mobile division has been working on a smart watch. Samsung declined to confirm the report then.

Company spokeswoman Chenny Kim declined to comment on the patent applications.

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George W. Bush now home after heart procedure

DALLAS — Former President George W. Bush has been discharged from a Dallas hospital a day after having a heart procedure to ease a blocked artery.

Spokesman Freddy Ford says the 43rd president is "doing great" and went home Wednesday morning. Further details weren't released.

Doctors at Texas Health Presbyterian Hospital on Tuesday inserted a stent to help prop open an artery. The blockage was discovered Monday during Bush's annual physical at a clinic in Dallas, where he lives.

Ford says the 67-year-old former president is expected to resume his normal schedule by Thursday.

Bush has a reputation as a fitness buff and is known to enjoy jogging, riding bicycles and doing other exercise to keep in shape.

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Amazon launches site for purchase of fine art

NEW YORK — Amazon.com is getting into the fine art arena.

Customers can buy original and limited edition works of art from more than 150 prominent galleries and dealers via Amazon Art.

The announcement came Tuesday, a day after Seattle-based Amazon.com Inc. announced that its CEO, Jeff Bezos (BAY'-zohs), had purchased The Washington Post.

Amazon Art features 40,000 works from more than 4,500 artists. The wide range of works includes folk art, impressionism and modern art.

Prices range widely, too.

There's a photograph by Clifford Ross for $200 and a painting by Norman Rockwell for $4.85 million.

The online marketplace offers detailed information about the artist, work, provenance and exhibition history.

Amazon worked with Sotheby's for a short-lived experiment selling art online in 1999.

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Freddie Mac earns $5 billion in second quarter

WASHINGTON — Freddie Mac earned $5 billion from April through June, the seventh straight profitable quarter for the mortgage giant.

The second-quarter gain reported Wednesday compares with net income of $3 billion in the same period of 2012. Freddie says its earnings were due largely to increased profits from investments made to hedge against rising interest rates. That helped offset losses on mortgages during the quarter.

Freddie, based in McLean, Va., will pay a dividend of $4.4 billion to the U.S. Treasury next month and is requesting no additional aid.

The government rescued Freddie and larger sibling Fannie Mae during the financial crisis in 2008. Together, they received loans of about $187 billion.

A housing recovery that began last year has made both profitable again. Combined, they have paid back roughly $136 billion of their government loans. Those payments are helping to make this year's federal budget deficit the smallest since President Barack Obama took office.

Once the second-quarter dividend is paid, Freddie will have repaid $41.4 billion of the roughly $71.3 billion it received from taxpayers.

Fannie and Freddie own or guarantee about half of all U.S. mortgages, worth about $5 trillion. Along with other federal agencies, they back roughly 90 percent of new mortgages.

Fannie and Freddie don't directly make loans to borrowers. They buy mortgages from lenders, package them as bonds, guarantee them against default and sell them to investors. That helps make loans available and exert influence over the housing market.

On Tuesday, Obama proposed a broad overhaul of the U.S. mortgage finance system, including winding down Fannie and Freddie. He declared that taxpayers should never again be left "holding the bag" for the mortgage giants' risky moves.

Obama wants to replace them with a system that would put the private sector, not the government, primarily at risk for the loans. The government would still be involved, both in oversight and as a last-resort loan guarantor. Obama also wants a guarantee that private lenders will make sure homeowners have access to 30-year fixed mortgages.

A fix to the housing finance system is unlikely to be easy. Obama's plan is in line with bipartisan Senate legislation. But most House Republicans want the market almost completely privatized, while many Democrats insist on government having a larger role.

Nearly all of Freddie's second-quarter profit is going back to the government. Under a federal policy adopted last year, Fannie and Freddie must turn over their entire net worth exceeding $3 billion in each quarter to the Treasury. Freddie said its net worth in the second quarter was $7.4 billion.

Fannie earned a record $58.7 billion in the first quarter, capitalizing on tax benefits it had saved from its losses on loans during the crisis. It paid a dividend of $59.4 billion to the Treasury. Fannie has paid back roughly $95 billion of the $116 billion it received.

Freddie said Wednesday it has $28.6 billion of such tax benefits it could tap, a move that would boost its profits. Freddie CEO Donald Layton told reporters in a conference call that the company will consider applying all or a portion of those tax benefits in coming quarters.

For Fannie and Freddie, a better housing market means fewer delinquent loans on their books. The companies also are charging mortgage lenders higher fees to guarantee the loans. With more loans and higher fees, Fannie and Freddie are earning more.

Fannie and Freddie are also taking on less risk than during the pre-crisis years. That's because banks are requiring higher credit scores and larger down payments from prospective buyers.

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Honda to invest in engine plant, training centers

DETROIT — Honda says it will spend $215 million to expand an engine plant and build two training centers in Ohio.

The investment will add about 60 jobs in the state, although 50 of them will come from other Honda operations in North America.

About $180 million will go to Honda's Anna, Ohio, engine plant to expand work on aluminum die casting and engine parts production. Money also will go a training center for the plant.

Honda also plans a $35 million training center for auto assembly workers and engineers at its Marysville, Ohio, assembly plant. Honda says the building also will have office space and a heritage center to document Honda's North American history.

Honda says it's invested nearly $2.7 billion in its North American operations during the last three years.

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Oil down slightly on supply data; pump prices dip

NEW YORK — The price of oil bounced around Wednesday after the government reported a smaller than expected decline in oil supplies and a rise in gasoline inventories.

Benchmark crude for September delivery was down 5 cents to $105.25 in morning trading on the New York Mercantile Exchange. It fell to $104.67 immediately after the release of the supply data.

The U.S. government's Energy Information Agency said crude oil supplies fell 1.3 million barrels last week. Analysts were expecting a drop of 2 million barrels, according to Platts, the energy information arm of McGraw-Hill. In addition, gasoline supplies rose by 100,000 barrels, while analysts had forecast a 1 million barrel decline.

At the pump, the average price of a gallon of gasoline fell 1 cent to $3.60. That's down 3 cents over the past week.

Brent crude, traded on the ICE Futures exchange in London, was down 72 cents at $107.46 a barrel.

In other energy futures trading on Nymex:

— Heating oil fell 3 cents to $2.98 a gallon.

— Natural gas fell 7 cents to $3.25 per 1,000 cubic feet.

— Wholesale gasoline fell 3 cents to $2.89 a gallon.

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Pamela Sampson in Bangkok contributed to this article.

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Correction: Powerball-Lucky Stores story

DES MOINES, Iowa — In a story Aug. 6 about the latest Powerball jackpot, The Associated Press reported erroneously that a single winner could win a lump-sum payment of about $244.7 million after taxes. That amount would be before taxes.

A corrected version of the story is below:

Stores with rich Powerball history seen as lucky

During Powerball frenzy, stores that sold past winning tickets reap the benefits

By BARBARA RODRIGUEZ

Associated Press

DES MOINES, Iowa (AP) — When word got out that a southeast Pennsylvania 7-Eleven sold a $1 million Powerball ticket on Saturday, superstitious dreamers began pouring into the store in the hopes that luck would strike twice.

For jackpots as big as Wednesday's Powerball pot, which stood at an estimated $425 million Tuesday, convenience stores, gas stations and newsstands throughout the 43 states and other places where the game is played are deluged by ticket requests, including many from those who only play for massive jackpots they see as life-changing.

It's not just ticketholders who benefit from a lottery win, but the stores like the one in Langhorne, Pa., which sold Saturday's $1 million ticket. In addition to the bonus money the lottery gives to stores that sell tickets that win big, the retailers receive media coverage that can last for days and best of all, get a boost from becoming known as the place that sold a winning ticket.

"The manager said people were pouring into her store wanting to buy lottery tickets," 7-Eleven spokeswoman Margaret Chabris said, referring to the Langhorne store. "They were of course really excited that one of their customers had won."

At a Casey's General Store in Bondurant, Iowa, everyone knows it's the place where a $202.1 million Powerball jackpot ticket was sold to a local woman in September. Asked what types of questions the store gets when the jackpots get huge, assistant manager Debra Fetters said: "Does lightning strike twice here?"

The estimated $425 million jackpot for Wednesday's drawing would fetch a single winner a lump-sum payment of about $244.7 million. Although it wasn't close to the record $590.5 million Powerball jackpot won in May by a Florida woman, jackpots as big as Wednesday's bring in casual players, meaning it could jump considerably before the drawing.

"If it surpasses Wednesday's drawing, we would be in world record territory," said Chuck Strutt, executive director of the Multi-State Lottery Association. The world's highest lottery jackpot was a $656 million Mega Millions jackpot sold in March 2012.

When a winning ticket for a $241 million Powerball jackpot was sold in June 2012 at a Hy-Vee grocery store in Cedar Rapids, the store also got into the spirit. It held up a banner about the winners — 20 Quaker Oats plant workers — and a fake Styrofoam check was posted for others to see.

"I do have customers that they do come here specifically when the numbers get higher," said store manager Jason Busswitz. "For some individuals, it does create a little more excitement around the Powerball machine."

Sometimes that involvement from the store helps ignite interest to return, said Adriana Binns, director of marketing and communication for the New Mexico Lottery.

"When you get those stores where they've actually seen someone win, they're very enthusiastic about it. They know about the game, they have regular customers. A lot of it really does come down to great retailers that support the lottery, understand that there are winners on both sides."

Linda Hamlin, also of the New Mexico Lottery, noted the story of "Millionaire Mary" Torres of Albuquerque. After she sold a $1 million winning Powerball ticket to an Albuquerque man in May 2011, she became known as a good luck charm. Her customers followed her to another store a few miles away.

"It's hard to explain," Hamlin said of people who think such buying strategy gives them an edge. "It's illogical because this whole nature of good luck and how random it is. You never know when and where good fortunate is going to strike."

Luck may be random, but there are more winning lottery tickets for smaller $1 million and $2 million prizes since a major overhaul of the Powerball game in January 2012. An increase in ticket prices from $1 to $2 was aimed at building jackpots faster and generating more money.

Those smaller prizes still carry a big punch for its winners, and some people are willing to try any strategy to win them.

"Humans tend to be superstitious about things," said Strutt of the Multi-State Lottery Association. "We all have our ways to ensure our best luck. But every ticket has the exact same chance of winning."

The next drawing is scheduled for Wednesday night.

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Follow Barbara Rodriguez at https://twitter.com/bcrodriguez

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Chrysler to spend $52M at Michigan engine plants

DETROIT — Chrysler is investing $52 million at two Michigan plants to build more four-cylinder engines in anticipation of increased demand.

The money is going into factories in Trenton and Dundee, Mich., south of Detroit. Almost 300 new jobs will be created at the Trenton North factory.

The investment will help Chrysler build more Tigershark engines, which are currently used in the Dart compact car and likely to power new Chrysler cars in the future.

Chrysler said in a statement Wednesday that it will spend $40.5 million at the Dundee factory to convert an assembly line to make cranks, heads and engine blocks for the 2-Liter, four-cylinder Tigershark engine.

In addition, Chrysler will spend $11.5 million on a new Tigershark assembly line at the Trenton North plant and add 298 new jobs. The added production is expected to be ready at both plants by the end of the third quarter.

Chrysler has sold just over a million vehicles so far this year, up 9 percent. After hitting a 2009 low of 931,000, the company's sales grew to 1.6 million last year.

The company has sold more than 51,000 Darts so far this year. The car made its debut in the summer of 2012. The company is expected to put the Tigershark engine in additional cars as it rolls out new products.

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Nikkei's slide, Fed comments weigh on markets

LONDON — A slide in Japanese shares and suggestions that the Federal Reserve may rein in its monetary stimulus next month weighed on stocks Wednesday, while the pound rose after new policy guidance from the Bank of England.

Japan's Nikkei 225 index closed 4 percent lower to 13,824.94 as the yen strengthened ahead of the Bank of Japan's monthly policy meeting. The dollar has fallen to 96.61 yen, its lowest level since late June. A higher yen potentially makes Japanese exports more expensive and its steady decline this year in the wake of a big monetary stimulus has lain behind the Nikkei's gains. The Bank of Japan is not expected to unveil any new stimulus measures in the near future.

The Nikkei's decline weighed hard on the Asian session and that carried through into European and U.S. trading hours.

In Europe, Germany's DAX fell 0.5 percent to close at 8,260.48, while the CAC-40 in France recovered some ground to end 0.2 percent higher at 4,038.49.

The main mover among the main European exchanges was Britain's FTSE 100 index of leading British shares, which closed 1.4 percent lower at 6,511.21 after the Bank of England's new governor, Mark Carney spelled out the broad outlines of the approach he will pursue with regard to the British economy.

Investors were particularly interested to hear him say that the Bank will not raise interest rates until unemployment falls below 7 percent. The jobless rate currently stands at 7.8 percent.

Following a knee-jerk fall after his statement, the pound recovered to be trading 1 percent higher at $1.5505 as investors grappled with the details of the new approach. Specifically, they noted that the unemployment linked forward guidance would only be valid if inflation expectations remained anchored at the 2.5 percent level.

Joshua Mahony, a research analyst at Alpari, said this "brings a significant caveat to the table."

"Clearly markets have taken this as a hint that in fact, this forward guidance could be negated should prices continue to rise above target," said Mahony.

In the U.S., the Dow Jones industrial average was down 0.5 percent at 15,441.22, while the broader S&P 500 index fell 0.6 percent to 1,687.30.

U.S. stocks have faltered following the suggestion from a Fed official that the central bank may reduce its monthly $85 billion in asset purchases in September.

The Fed's stimulus over the past few years has helped keep interest rates super-low in order to spur growth. But it also had the unintended effect of pushing up stock markets, where investors have fled in search of returns that outpace bonds.

Charles Evans, who votes on the Fed's policy as president of the Federal Reserve Bank of Chicago, said Tuesday the Fed was "quite likely" to start reducing purchases this year and didn't rule out a decision being made at the Fed's next meeting in September. That is a sign that Fed officials believe the U.S. economy is strengthening and that the monetary stimulus can begin to be wound down, so-called tapering.

"More risk-averse trading conditions have also been triggered by Evans," said Lee Hardman, an analyst at Bank of Tokyo-Mitsubishi UFJ. "On that basis he clearly would not rule out making a decision to begin tapering in September."

Earlier in Asia, the Nikkei's retreat hit sentiment across the region. South Korea's Kospi fell 1.5 percent to 1,878.33 while Australia's S&P/ASX 200 shed 1.9 percent to 5,011.30. Hong Kong's Hang Seng was 1.5 percent down at 21,588.84 in the absence of fresh buying incentives.

In other markets, the euro was up 0.1 percent at $1.3322 while, in the oil markets, the price of benchmark New York crude was down 35 cents at $104.94 a barrel.

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