Antitrust investigations have spread to other industries, sources disclose

More than 1,000 Chinese and overseas companies in the auto industry, including manufacturers, suppliers and dealers, are involved in anti-monopoly investigations, according to an official at China's top economic planning body.

Antitrust investigations already announced in the auto and telecommunications sectors have spread to other industries, say sources close to the probes.

For example, a large number of cement and medical companies are also involved in the investigations, according to sources.

Besides recent high-profile cases, antitrust investigations into domestic companies are also underway and a monopoly case involving a State-owned company will be disclosed soon, an official at the National Development and Reform Commission, who declined to be identified, told China Daily.

The latest auto company involved is US manufacturer General Motors, which said on Tuesday its passenger vehicle joint venture in China was contacted by the commission after at least seven foreign carmakers cut prices amid the antitrust investigations.

BMW, Volkswagen's Audi, Daimler's Mercedes-Benz, Tata Motors' Jaguar Land Rover, Fiat's Chrysler, and Toyota and Honda have all announced price cuts for vehicles or spare parts in July and early August.

FAW-Volkswagen's Audi division may face a fine of 1.8 billion yuan ($292 million) for operating a monopoly, The Economic Observer reported on its website on Tuesday, quoting an unnamed Audi dealer.

The report said the punishment is equivalent to 1 percent of the company's sales in 2013, which is the minimum level as the Anti-Monopoly Law states that violators can be fined between 1 and 10 percent of their sales revenue for the previous year. China Daily could not independently confirm the report.

Recent high-profile antitrust cases have sparked rising concerns over China's monopoly efforts, with some foreign businesses complaining that they are being targeted unfairly.

The commission official said the investigations, some of which began in 2011, are not aimed at any specific type of industry or a specific country.

"Investigations in many industries started with domestic companies and then spread to foreign companies," he said.

He said investigations into State-owned or domestically owned private enterprises are also underway and a monopoly case involving a Stated-owned company will be disclosed soon. He would not disclose the sector the State-owned company is in, saying only that it is not the auto industry.

The official said many domestic automakers are under scrutiny, but the problem here is not as obvious as that involving their international peers, partly due to their small market share.

Domestic-brand automakers accounted for less than 20 percent of China's auto sales in the first half of this year, the China Association of Automobile Manufacturers says.

The official said,"Our goal (with antitrust probes) is to ensure that Chinese consumers can enjoy high-quality auto and component services with prices as fair as in other markets."

He said the Chinese government aims to establish an environment in which enterprises can compete on an equal footing.

Jessica Su, antitrust scholar and Institute of American Studies associate professor at the Chinese Academy of Social Sciences, said the commission has strong evidence and a legal base to continue its investigations.

In the new-car and after-sales markets, the conduct of international automakers may have infringed the antitrust law, including price-fixing, territorial restrictions and customer restrictions , Su said.

In the after-sales car market, suspected conduct includes exclusive supply, exclusive purchase and excessive pricing of replacement parts, as well as restrictions on the supply of technical information needed for repair and maintenance, she said.

"Such behavior mainly comes from car manufacturers suspected of substantially impeding competition and harming consumer welfare," Su said.

"If similar conduct occurred in the United States, European Union, Japan, South Korea and other mature market economies, it would doubtless trigger antitrust investigations," she said.

The Anti Monopoly Law allows enterprises to claim efficiencies and other reasons to justify otherwise unlawful conduct, added Su.

Robin Bew, managing director of the Economist Intelligence Unit, said antitrust in China is a big issue that requires fairness and transparency.

"Big Western businesses are looking at what is happening in China and questioning whether the law is being applied evenly. That is always a worry for companies," Bew said.

"The areas where China needs foreign investment to bring in new know-how are sectors like education, healthcare and services," he added.

But Bew thinks that China will remain attractive for foreign investors.

"The China market is so big and it will be very difficult for any company to say that it won't be here in China. Most companies are now profitable in China and it is an important part of their revenue story worldwide, so they won't leave."

Contact the writer at lanlan@chinadaily.com.cn

Mu Chen contributed to this story.

(China Daily USA 08/13/2014 page1)