Antitrust law to step up penalties on automakers

China rules against price fixing, trade monopolies

China is drafting an antitrust guideline for the auto industry after several companies, including automakers and spare parts producers, were fined for monopolistic practices.

It will be the first rule relating to the auto industry in the country's Anti-Monopoly Act, which came into effect in 2008.

China is working on rules designed to prevent monopolies in the auto industry. Chen Fei / Xinhua

Preparatory work has started and the draft is expected to be finished within a year, according to the bureau of price supervision and antimonopoly at the National Development and Reform Commission.

The rule is designed to make antitrust investigations more transparent and punish monopolistic practices in a more effective way, said Shen Jinjun, deputy secretary-general of the China Automobile Dealers Association in an interview with the Economic Observer.

Trade organizations, automakers and industry experts were represented and their opinions solicited at the conference to kick off the preparatory work.

"The rules will help those in the auto industry learn more specifically what they are not allowed to do and also allow law enforcement officers learn more about the complexities in the sector," Shen said.

From 2014, the commission and regional price bureaus have investigated and fined many carmakers, suppliers and dealerships for price fixing, including Germany's Audi, BMW and Mercedes-Benz, the US car brand Chrysler and Japanese auto parts companies.

Statistics show that fines for monopolistic acts in the auto sector have reached 1.6 billion yuan ($262.3 million).

Those cases have triggered heated debates about law enforcement and whether it is biased against foreign companies.

The emphasis was put on fair market competition, rather than protecting domestic enterprises, said Xu Kunlin, former head of the antitrust bureau of the NDRC.

He said in September that of the 335 enterprises investigated for monopolies by the commission, only 33 were foreign.

Many customers became frustrated when they learned about the monopolistic acts of car dealers, which in turn affect the auto market.

Cheng Xiaodong, a senior auto analyst at the NDRC, said that under such circumstances it is essential to come up with a set of detailed rules about antitrust acts in the auto sector.

Future guidelines

There are several other guidelines in the pipeline including how to lodge appeals.

Such legislation is the most urgent tool to dispel and prevent possible speculation, doubt and misunderstanding of law enforcement, said industry insiders.

The forthcoming guidelines are also expected to solve problems that are hidden rules of the auto sector.

"The auto sector has a long chain from its suppliers, automakers and car dealers, and to some extent many practices have become common practices of the sector. When completed, the guidelines will expose which common practices are illegal," Shen said.

Cheng said the detailed rules would also deter those in the auto sector from looking for and taking advantage of loopholes that are not explicitly mentioned in the Anti-Monopoly Act.

In the meantime, some experts are calling for efforts to strengthen supervision, arguing prevention will be more effective than punishment.

"Price fixing has long existed widely in the industry. It is easy for several dealerships from one region to manipulate market prices, as long as they act together," said Jia Xinguang, a senior analyst at CADA.

"The priority is to supervise on a day-to-day basis, rather than launch investigation campaigns and hand out fines," said Jia.

lifusheng@chinadaily.com.cn

(China Daily 07/06/2015 page18)