The Chinese government has taken control of Sanlu, and according to Xinhua, one of the company's leaders has been arrested on criminal charges related to the milk contamination. Sanlu's Web site is down.
During a news briefing reported by the AP, the chief executive of the company's New Zealand partner, Fonterra, said that there's "no indication" the company lied about when it first heard of the problems but that "the [Sanlu] brand cannot be reconstructed."
Speaking to an audience in New York, Chinese premier Wen Jiabao sought to offer reassurances that "China will fundamentally improve its product quality and food safety."
But such reassurances have been offered before.
It was only a year ago that the same substance, melamine, killed dozens of dogs and cats in the United States. It had been found in pet food imported from China.
Government officials have placed blame for the tainted baby formula on milk dealers who collect raw milk from small dairy farms and sell it to companies. It is believed that these dealers, desperate to make a buck with substandard milk, watered down the milk and added melamine to make it appear higher in protein.
Twelve countries in Asia and Africa have placed some form of a ban on Chinese dairy products, including candies, chocolates, coffee drinks and other products that contain some form of milk.
Morler says that food-quality problems are also common in the United States, but that in China, which lacks a free press and transparency in government, the problems are exacerbated.
"Regulation is still required," said Marler. "But I think the transparency, when you have the ability for the media to get at issues quicker so companies are forced to make decisions sooner, when consumers know they have rights by taking a company to court and getting compensation, that can change the economic dynamic."
The central government has fired a slew of officials and company heads have been forced to step down. But many say that the baby formula scandal is an example of how China's regulatory bodies have not kept step with its runaway capitalism. As a result, tens of thousands of babies are paying the price.