UNDER SURVEILLANCE

Deciding to Enforce Antitrust Laws, Beijing Serves Auto Industry Notice

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I've got my eyes on you.
  • Why it matters

    Why it matters

    Foreign firms are under coming under special scrutiny by China’s regulators, as the country begins to vigorously enforce its antitrust laws.

  • Facts

    Facts

    • China first enacted antitrust legislation in 2008, but only now is beginning to crack down on cartels and price-fixing.
    • This week, Chinese regulators fined 12 Japanese auto-parts and bearings manufacturers for price-fixing.
    • Both Daimler and General Motors are being investigated by the Chinese authorities.
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    Audio

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The Chinese government is soon expected to impose hefty fines for price-fixing on some of the leading names in the global auto industry. Beijing intends to teach multinational corporations a lesson and force them to obey the country’s laws in the future – at least more than they have in the past.

What might seem as an inexplicable flurry of scrutiny by otherwise lax Chinese regulators in fact marks the beginning of a new era: China is trying to organize its economic landscape according to common international rules. This primarily means competition authorities are actually enforcing the laws already on the books.

On Wednesday, the New York Times reported that Chinese regulators found 12 Japanese auto parts and bearings manufacturers guilty of fixing prices. They fined the companies about $200 million (€151 million) in total. Chinese antitrust authorities are investigating other foreign automakers for possible price collusion, including General Motors and Daimler, the German company that manufactures Mercedes-Benz and Smart cars.

China’s economy has at least doubled in every decade since 1980 and has become increasingly complex. During the 1990s, the government did quite well with a mixture of cheerful anarchy and creative solutions to individual cases of doing business. Back then, the country’s economic framework was seemingly held together at times with tape and bandages.

It took a while after anti-monopoly legislation was enacted in 2008 for Chinese officials to dare challenge big-name firms like Audi and Daimler.

Only a short while ago, a business manager arriving from abroad still had the impression that China had more gray areas than clear guidelines. But behind the scenes, a change in direction was well underway.

Antitrust laws and regulations are no longer vague points of reference that, when in doubt, can simply be ignored. They are to be followed rigorously. They are an explicit part of the program by Chinese premier Li Keqiang, who studied law and economics at university.

With all their good intentions, Chinese authorities must nonetheless first learn to properly manage the world’s second largest economy. It took a while after anti-monopoly legislation was enacted in 2008 for Chinese officials to challenge big-name firms such as Audi and Daimler. Now the auto industry is surprised, after years of imposing its will and prices on suppliers, to suddenly find itself in illegal territory.

It’s clear that foreign firms are now under special observation. For one, they are easier targets than state-run operations, where managers might be fellow party members with regulators. Plus there are expectations based on how Chinese perceive outsiders. It is taken for granted, for instance, that the otherwise so orderly Germans will conform to rules and laws.

The author is Handelsblatt’s correspondent in Beijing and can be reached at mayer@handelsblatt.com

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