Michael Martina Beijing
A senior Chinese official put pressure on around 30 foreign firms including General Electric (GE) and Siemens at a recent meeting to confess to any antitrust violations and warned them against using external lawyers to fight accusations from regulators, according to several sources.
The meeting is evidence of what many antitrust lawyers in China see as aggressive tactics to enforce a 2008 anti-monopoly law and highlights a worsening relationship between foreign firms and China’s regulators.
Two people who were at the July 24-25 closed-door meeting said the senior official showed in-house lawyers how to write what they called “self-criticisms” and displayed copies of letters from firms admitting guilt in past antitrust cases. Lawyers employed by some of those firms were in the room.
The two sources, and another person with direct knowledge of the meeting at a Beijing hotel, said the official who delivered the blunt remarks was Xu Xinyu, a division chief at the National Development and Reform Commission (NDRC).
One source at the meeting said Xu noted, without being specific, that half of the companies represented in the room were either being investigated or had been probed by the NDRC. “The message was: if you put up a fight, I could double or triple your fines. This speech went way over the line,” the second source who attended the meeting told Reuters.
The NDRC did not respond to questions. Xu could not be reached for comment.
The agency has been at the forefront of a wave of investigations into how companies do business in China, especially into whether they effectively force retailers to sell their products at a minimum price.
On August 7 it announced fines totalling a record $110 million (about R1.1 billion) against five foreign milk powder firms and one Chinese producer for price fixing and anti-competitive behaviour. Three other firms were probed but not fined because, among other things, they had carried out “self-rectification”, the NDRC said.
In-house lawyers from about 30 firms attended the July meeting, which was conducted in Chinese. It had been billed as a training session for multinationals to mark the fifth anniversary of the anti-monopoly law. Officials from the Ministry of Commerce and the State Administration for Industry and Commerce, a market regulator, were also at the meeting, but their presentations were overshadowed by Xu’s speech.
His comments were perceived as threatening, and Xu’s message was consistent with the approach taken by other officials in private talks with companies in recent months, the two sources at the meeting said.
They declined to be identified. GE declined to comment, while Siemens did not respond to questions.
While Chinese regulators have said little to explain the motivations behind recent pricing investigations, state media have accused the foreign media of exaggerating the issue. In a commentary on Monday, news agency Xinhua said such probes were routine in a market-oriented economy.
The sources said Xu did not explain why he did not want foreign firms to hire external lawyers if they were probed.
Getting an admission of guilt from companies makes it easier for the NDRC because lawyers who have dealt with it said its capacity for legal analysis was weak. – Reuters