As someone living and doing business in China -- it is great to see this happening. Far too many Western companies have come to China purely for the purpose of saving money on parts and labor. Inevitably, a significant number of these go for whatever company offers them the lowest price; they rarely or never check out the factories that are actually making these products (or if they check them out initially, fail to monitor them regularly).
Factories that use child labor. Factories that use sub-standard products and materials. It is all too common here.
The ironic aspect of this is that almost all reputable Chinese companies stopped using these factories a long time ago; it is the foreign companies, focusing on saving a buck, that are keeping them in business.
And it is sooooo easy to trick these foreign companies. They come trotting into China, having read the book-of-the-moment about "How to do Business in China", and certain that they are savvy, experienced businessmen who know their way around a business negotiation. They spend a few months meeting different people, get treated to huge, spectacular dinners, and get offered contracts that give them everything they want, and more.
They leave China shaking their heads at the "poor suckers" who don't know how to "get things done" in China.
Meanwhile, before the ink on the contract is even dried, the Chinese supplier is already sending excuses as to why certain provisions in the contract 'are no longer relevant due to unforeseen developments'. The 'model factory' that the foreign businessman was taken to is turned off, and all the work is actually done in a sweatshop in some rural village. The materials that were supposed to be used are substituted and swapped freely, under the assumption that "by the time they find out, it'll already be in the U.S."
And the saddest thing about all of this? It is entirely avoidable. I myself have been a consultant on such issues for many years; there are other individuals and companies here that provide services that will effectively eliminate almost all of these problems, and guarantee high quality products at a reasonable price.
So why don't these companies take advantage of this? Is it possible they just don't know about it? Nope...I've talked to plenty of them personally, explaining all of these problems. It is a combination of arrogance -- "It may happen to others, but it won't happen to me" (despite the fact he's only been in China a few months) -- and greed.
It is, in fact, remarkably similar to the U.S. military's "don't ask, don't tell" policy in regards to homosexuals. These companies are in China for one reason -- to make money. And in all too many cases, there is a complicit understanding between the foreign company and the Chinese supplier/manufacturer that they don't really care how the product is made, as long as they can save a lot of money...so if there's anything we shouldn't know about it, please don't tell us.
Now, to be fair, in the case of Fisher-Price, I think it was a case more of ignorance or hubris that led to this situation; I don't think they were intentionally ignoring such problems just to save money. But there are plenty of other companies here that do just that.