Dairy farmers in the northeastern province of Heilongjiang have accused Shuangcheng Nestle Co. of paying them less than the standard price for milk and manipulating the weight of their product.
"Nestle doesn't cheat farmers. We take what is being reported very seriously and have already launched an investigation with the local government," Nestle (China) Ltd spokeswoman Nancy He told AFP.
"Nestle does not tolerate such practices and will take immediate actions as soon as we find out the problem together with the government."
Shuangcheng, a city just south of the provincial capital of Harbin, is home to more than 20,000 dairy farmers who produce 1,200 tonnes of milk every day, the official Xinhua news agency said.
Dairy farmers said the Chinese subsidiary -- a major taxpayer in the city -- had been cheating them for more than 10 years and local authorities had banned them from selling their milk to dairy companies elsewhere, Xinhua said.
A farmer surnamed Li said he was short-changed by 1.25 kilogrammes for two buckets of milk that a collection station operated by Shuangcheng Nestle said weighed 91.25 kilogrammes.
"I have gotten used to this as it has lasted for many years and is known to all," Li was quoted by Xinhua saying.
Another farmer, Zhao Yongwu, said a collection station also owned by Shuangcheng Nestle underpaid him by one kilogramme for every bucket of milk he sold to them.
"They are always short-changing us. Some of us are so angry that we would rather kill our cows than send the milk to Nestle," Zhao was quoted by Xinhua saying.
Shuangcheng Nestle has denied reports it has a monopoly on milk collection in Shuangcheng, saying there were another two companies operating in the city and farmers "were not forced to deliver to Nestle", the China Daily said.