China Anti-Monopoly Regulators Slap Fine On Automakers

Chinese business regulators announced on Thursday, September 11th, that they will fine automakers Audi and Chrysler $40.5 million and $5.2 million, respectively, in a large-scale anti-monopoly campaign against the auto industry that has led a number of foreign businesses to complain of unfair treatment.

Regulatory agencies in China have undertaken a series of coordinated probes into a number of global automakers, technology suppliers and other firms over the last year or so. International business groups have complained about the secretive manner in which the investigations are conducted, saying this behavior is alienating foreign companies. Related to these complaints, the U.S. Chamber of Commerce noted earlier this week that Beijing could be violating its free-trade commitments.

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Chinese regulators continue to say that foreign companies are not treated unfairly, but that they must obey the law.

Details on Audi and Chrysler fines

According to the China anti-monopoly regulators the National Development and Reform Commission, Audi (owned by Germany’s Volkswagen AG (ADR) (OTCMKTS:VLKAY) (ETR:VOW)), illegally enforced minimum prices for vehicles and service. The commission said Audi had been fined 248.6 million yuan ($40.5 million) and eight distributors were also assessed fines adding up to 30 million yuan ($4.9 million).

Furthermore, Chrysler, (owned by Fiat Chrysler Automobiles NV) was also fined 31.7 million yuan ($5.2 million) for illegally enforcing minimum prices for vehicles in Shanghai. These fines were levied by Shanghais price bureau. The bureau noted that three dealerships were fined a total of 2.1 million yuan ($343,000) for agreeing to fix minimum prices for service, paint jobs and repairs.

Although setting minimum retail prices is common practice in most countries, lawyers say Chinese regulators see the practice as against free market principles.

China anti-monopoly regulators reply to criticism

Chinese regulators defended the investigations in a report released Thursday, saying there was no bias as foreign companies represent only 33 of 335 cases initiated to date under China’s 2008 anti-monopoly law. Moreover, the report claimed that enforcement is fully open and transparent, basically competely ignoring complaints that companies are often prevented from seeing evidence against them or from bringing lawyers to meetings with regulators. Worse, in several cases, businesses have been threatened with more severe penalties if they choose to fight the accusations.

“All types of market players are treated equally in anti-monopoly enforcement,” noted the report by the NDRC and the State Administration for Industry and Commerce.