Chinese regulator to punish Chrysler and Audi

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br CHINA AUTOS-ANTITRUST Reuters Audi's exhibition booth at Auto China 2014 in Beijing in April. China said yesterday it would punish Audi and Chrysler and some Japanese car parts makers for violating anti-monopoly laws. Photo: Reuters

Reuters Shanghai and Beijing

CHINA’S antitrust regulator would punish Audi and Chrysler for monopoly practices, it said yesterday, potentially paving the way for the car makers to be fined up to 10 percent of their annual sales revenue in the biggest car market.

Chrysler is owned by Fiat while Volkswagen owns Audi, and both are premium brands in China. The regulator, the National Development and Reform Commission (NDRC), said an ongoing investigation showed the two companies had “conducted anti-competitive behaviours”.

“They will be punished accordingly in the near future,” NDRC spokesman Li Pumin told a press conference in Beijing.

Audi and other global car manufacturers have recently rushed to change their pricing strategies in China in response to the government’s investigation into the industry, and amid domestic media complaints that foreign manufacturers were overcharging for vehicles and spare parts.

The NDRC also said it was launching a probe into Mercedes-Benz, owned by Daimler, and that it had finished investigating a dozen Japanese spare-part manufacturers on similar antitrust charges. The regulator did not give further details.

“The purpose is to maintain a sound competitive order in the auto market and protect consumer interest,” Li said.

Chrysler’s China-based spokesperson declined to comment. Both Audi China and Mercedes-Benz said they were co-operating with the NDRC.

Audi says China, including Hong Kong, accounts for a third of its global sales by volume. Chrysler’s market share was not immediately available.

The NDRC did not specify the punishment for Chrysler or Audi. Under the six-year-old anti-monopoly law, the NDRC can impose fines of between 1 percent and 10 percent of a company’s revenues for the previous year.

“NDRC would normally set a percentage of annual sales in relevant markets as fines based on how co-operative the companies are,” said Colin Liu, a lawyer in the industry.

Industry experts say manufacturers have too much leverage over car dealers and part suppliers, enabling them to control prices, considered as a violation of China’s antitrust laws.

“Monopolistic practices are quite rampant in the auto industry. NDRC is first targeting imported luxury brands because the problem is most severe in this area,” said Yale Zhang, the managing director of consultancy Automotive Foresight (Shanghai).

“It’s also a warning signal to the industry. If top brands like Audi get punishment, others would know what to do.”

Zhang said imported luxury cars in China cost, on average, roughly two-and-a-half to three times their price in the US.

The price difference was due to higher import duties and other taxes, foreign car makers have argued.

The government is also currently conducting an anti-monopoly probe into US tech giant Microsoft. The regulators also recently said US chip maker Qualcomm had a monopoly.


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