There are fundamental flaws within China’s food safety regulatory regime that permeate both its supervision system and governing laws. This is especially prevalent within the market structure in the dairy industry. The government continues to fail in regulating the chaotic market forcing competitors to internalize costs, which has resulted in melamine tainted milk.

This tainted milk scandal has resulted in the death of thousands of infants in a number of Asian countries. The scandal was concealed by the Sanlu Group and local government for fear of bad publicity and loss of profits.

The Chinese government should search for a new style of supervision to address the failed policies and laws in this area.The present system does little to prevent the dairy industry from pursuing profits at the expense of consumer welfare. The government should regulate the market towards inducing milk processors to internalise the cost of doing business. Furthermore, private litigation brought by consumers would lead to greater progress towards this endeavor.