Foreign Automakers Face Anti-Trust Scrutiny
(Beijing) – China's top economic planner has announced the progress of its anti-trust investigation into foreign carmakers and their distributors.
The National Development and Reform Commission (NDRC), which leads antitrust enforcement, said on August 6 it identified monopolistic behavior at Chrysler Group China Sales Ltd., an arm of Fiat Chrysler Automobiles NV, and at the FAW-Volkswagen Audi Sales Division, part of a joint venture between Volkswagen AG, Audi AG and the state-owned FAW Group.
Li Pumin, the NDRC's secretary-general, added the agency also completed inquiries into 12 Japanese parts makers and was beginning an inquiry into Mercedes-Benz.
The move was likely the beginning of a broader anti-trust crackdown on foreign automakers, said Ding Liang, a partner at Beijing's DeHeng Law Offices, which advises carmakers on antitrust matters.
"The investigation will be very complicated given the wide range of companies and products," he said. "Mercedes-Benz may not be the end of it. More investigations could follow."
The commission has not provided details of the alleged violations, but the companies have been accused by state media of overcharging for both imported cars and parts. Several foreign automakers, including the three named by the NDRC, have initiated price cuts over the past few weeks in what the companies say is a response to probes.
The automakers say they have taken steps to build goodwill with Chinese regulators, and dismiss the idea that they are colluding to raise prices.
"Every company has now explicitly forbidden employees responsible for setting prices from socializing with people who manage pricing at other car brands," said a source close to the Mercedes-Benz pricing department.
A CCTV report in September 2013 said foreign car importers were making unfairly high profits, spurring the NDRC to investigate Mercedes-Benz, the source added. The company was required to submit pricing-related documents to several government agencies, including customs. That was also when Mercedes introduced a policy banning social interactions – even just sharing a meal – with other brands' pricing employees.
The company has also reduced service charges and the prices of more than 10,000 parts on its own initiative, the source said. But Mercedes continues to be the subject of regulatory scrutiny.
On August 4, NDRC personnel visited the Shanghai office of Beijing Mercedes-Benz Sales Service Co. Ltd., the joint venture of Daimler AG and BAIC Motor Co. that sells Mercedes-Benz cars in China. The company said it was cooperating with the investigation.
Other companies that have lowered prices as a goodwill measure include Jaguar Land Rover, FAW-Volkswagen's Audi and Chrysler.
That may not be enough, says Chen Jinjun, vice chairman of the China Automobile Dealers Association. "That companies have responded to the NDRC antitrust investigation by lowering prices displays a positive attitude, but lowering prices doesn't necessarily mean that they will escape punishment for illegal activity," Chen said.
The association has helped with the NDRC's investigations for three years, he added. The inquiries have found several car companies engaged in anti-trust violations including collusion between manufacturers, collusion between manufacturers and distributors, and abuse of a dominant market position, Chen said.
But carmakers see it differently. Industry insiders say that the alleged violations are an inevitable result of a sales structure that has been mandatory in the country since 2005. They say there are potential contradictions between a regulation governing auto sales and the Anti-Monopoly Law that went into effect in 2008.
The regulation stipulates that "dealers shall engage in automobile brand sales, after-sale services and supply of parts within the scope authorized by automobile suppliers."
Experts say ambiguity over what is authorized means carmakers and their dealers run the risk of violating the Anti-Monopoly Law.
Ding said the regulation provides a regulatory basis for carmakers to control dealers, but it cannot shield them from an anti-monopoly investigation.
Whether a company has violated the law depends on details, such as whether the sales process restricts the distributors' pricing autonomy, whether it limits the right of other distributors to engage in normal market competition and whether the behavior harms the interests of consumers, he said.
The Anti-Monopoly Law allows regulators to impose a fine of between 1 and 10 percent of the violator's sales for the previous year. That means Chrysler and FAW-Volkswagen Audi could be hit with fines in the billions of dollars, he said.
(Rewritten by James Bradbury)
- Fast Track
- Fund Used to Bailout Stock Markets Lose 12 percent in Value
- Former Head of CDB Leasing Denies Taking Bribes from China Southern Airlines
- Coal Addiction Spells Trouble for Wind Power Producers
- Crash Site
- China Said to See 'Record Number' of Financial Scams Cases in 2015
- Country Facing 'Unprecedented Problem' Storing Extra Grain, Official Says
- Taxing Times for Booming Consumer Market
- Late-night Snack
- CBRC Says Party's Graft Inspection Led to Punishment of Officials
- Sign up to receive our free daily newsletter
- Amateur Videos by Stock Analysts Get Broad Attention, Mixed Reviews
- Market Jitters as Bonds Edge toward Toxic
- Wenzhou Homeowners Told They'll Be Charged to Renew Land-Use Permits
- Reject Parochial Nationalism for Sake of Continued Progress
- Net Celebrity Papi Jiang Sells Ad Slot in Videos for 22 Mln Yuan
- Senior editor
- Vale's High-Quality Iron Ore Meets a Need for China, Its CEO Says
- New Economy Will Require a New Official
- What's in a Name? If It's 'P2P Lender,' Gov't Says Don't Open
- Heilongjiang Says It Will Subsidize Homebuyers to Spur Demand