Audi, Chrysler fined in Chinese auto industry anti-monopoly probe

BEIJING—China announced it will fine Audi AG US$40.5 million and Chrysler Group LLC US$5.2 million in a sweeping anti-monopoly probe of the auto industry that has prompted complaints that foreign businesses are being treated unfairly.

Regulators have launched probes of global automakers, technology suppliers and other companies in an apparent effort to force down prices.

Business groups say the secretive and abrupt way the investigations are conducted is alienating foreign companies, and the United States Chamber of Commerce (USCC) said this week Beijing might be violating its free-trade commitments.

Regulators deny foreign companies are treated unfairly.

Audi, the luxury unit of Germany’s Volkswagen AG, improperly enforced minimum prices that dealers were required to charge for vehicles and service, according to the agency that oversees anti-monopoly enforcement, the National Development and Reform Commission (NDRC).

It said Audi was fined US$40.5 million and eight distributors were fined a total of US$4.9 million.

Chrysler, part of newly-formed Fiat Chrysler Automobiles NV (FCA), was fined US$5.2 million for fixing minimum prices for vehicles sold by dealers in Shanghai, according to the city’s price bureau.

It said three dealerships were fined a total of US$343,000 for agreeing to fix minimum prices for service, paint jobs and repairs.

Setting minimum retail prices is common in some countries but lawyers say Chinese regulators see it as a violation of free market principles.

In a report this week, regulators defended the investigations, saying foreign companies account for only 33 of 335 cases launched under China’s 2008 anti-monopoly law.

It said enforcement is open and transparent, despite complaints that companies sometimes are blocked from seeing evidence against them or from bringing lawyers to meetings with regulators and are threatened with more severe penalties if they challenge accusations.

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

Industry analysts say the auto investigation might have been prompted by complaints automakers abuse their control over supplies of replacement components to charge excessive prices.

The NDRC announced Aug. 20 it would fine 12 Japanese auto parts suppliers a total of US$202 million for colluding to raise prices.

A government statement said they were found to have colluded, some for as long as 10 years, to set minimum prices.

An official cited earlier by the government’s Xinhua News Agency said Daimler AG’s Mercedes-Benz also violated the law but mentioned no possible penalty.

It said prices charged by Mercedes for replacement components were so high that purchasing the parts used to make one Mercedes C-class car would cost the equivalent of 12 vehicles.

Mercedes and Audi had responded to the investigation by cutting prices for parts such as windshields by as much as 38 per cent.

Chrysler cut prices of imported Chrysler, Jeep and Dodge vehicles.

Adding to complaints about automakers, a group of European auto components suppliers said in a report by the European Union Chamber of Commerce in China this week that their control over distribution of components led to inflated prices.

They said such an arrangement would be illegal in Europe and appealed to Chinese regulators to end it.

In other industries, companies under investigation include Qualcomm Inc., a San Diego, Calif.-based maker of chips used in mobile phones, and software giant Microsoft Corp.

Business groups welcomed the enactment of China’s anti-monopoly law in 2008 as a step toward clarifying operating conditions.

Since then, they have said it is enforced more actively against foreign companies than against local rivals.

The ruling party under President Xi Jinping has promised to make China’s economy more productive by opening more industries to private and foreign competition.

But at the same time Beijing is trying to create “national champions” in fields ranging from autos to telecoms to aerospace.

Business groups say that has led regulators to use the anti-monopoly law and other regulations to shield domestic companies from competition.

In a report, the USCC complained Beijing has abused anti-monopoly law to support Chinese businesses and promote its industrial development plans.

Almost half of U.S. companies that responded to a survey by the USCC in August believed they are targeted for “selective and subjective enforcement” of anti-monopoly, food safety and other rules.

The chamber warned China faces a growing risk it “will permanently lose its lustre as a desirable investment destination.”

In the same survey, 60 per cent of respondents said they felt “less welcome” in China, up from a survey in late 2013 in which 41 per cent expressed the same sentiment.

In a speech at a business conference this week, Premier Li Keqiang tried to reassure foreign investors, promising to “improve and standardize” operating conditions.

General Motors Co. (GM) said last month it has also been contacted by anti-monopoly regulators in China as part of an ongoing investigation.