Business / Industries

Consumer concerns core of the issue

By Andrew Moody and Wang Chao (China Daily) Updated: 2014-08-18 04:45

The Ministry of Commerce itself is responsible for mergers, making sure that no one or group of companies have too strong a position in a particular market. The National Development and Reform Commission, China's strategic planning body, deals with issues relating to pricing and the SAIC deals with other competition issues that are not price related.

These agencies combined perform the equivalent role of the Department of Justice and the Federal Trade Commission in the United States.

In the EU, each of the 28 member states has its own competition authority alongside one over-arching European Commission body, which sets the framework for many of the laws.

Evrard at Jones Day says it may be simpler if China had one regulatory body, as some have suggested, but it is difficult to argue that the current regime is more complex than in other jurisdictions.

"In Europe you are effectively dealing with 29 competition authorities. In terms of China I think it would be better if they had one since it would be more efficient from a government operational perspective. In terms of companies themselves I don't think it makes any difference that they are dealing with three bodies."

Some see the recent antitrust cases as the regulatory machinery finally cranking into gear after six years in operation.

Over the past 18 months there have been a number of significant cases, besides the baijiu one.

Last August six infant formula makers, including US company Mead Johnson Nutrition and French giant Danone, as well as four other companies, were fined a total of $110 million.

However, some were not unique to China. Six LCD panel manufacturers, including South Korean companies Samsung and LG, were fined 353 million yuan by the National Development and Reform Commission for price fixing. This case followed an investigation not only in South Korea but also in the EU and the US. China's coming into line with other jurisdictions is typical of many actions against foreign companies in the country.

Mark Waha, a partner at law firm Norton Rose Fulbright in Hong Kong, says there is a sense of the regulatory regime coming of age.

"We are now celebrating the sixth anniversary of these rules. They are quite complex and it is important to remember that the authorities are not very well resourced. People talk about these massive Ministry of Commerce, State Administration for Industry and Commerce and National Development and Reform Commission organizations, but the people who are entrusted with enforcement are very few," he says.

Many experts also believe Chinese companies have started to use competition law as a business tactic against their competitors, as has been the case in the West for many years. A number of the recent cases against foreign companies are believed to have arisen as a result of issues raised by Chinese companies.

Evrard at Jones Day says: "It is essentially a tactic and it was something that wasn't used much in China until the last nine months."

Jiang at Gaopeng and Partners believes Chinese companies have greater confidence about using the law to their advantage.

"They are becoming like Western companies in their use of the law and using it as a tactic or a weapon against foreign companies."

The question remains whether consumers will benefit as a result of the recent moves by the authorities.

Yale Zhang, managing director of Automotive Foresight, an automotive industry research consultancy in Shanghai, believes the foreign car companies have had it far too good for too long in China.

"Selling one premium car in China has been equal to selling 10 in the United States for a number of the luxury carmakers. They won't want to lose that profit for sure.

"The companies will resist as long as possible, perhaps by reducing the price of select models, but I think these moves will ultimately be good for consumers."

Consumer concerns core of the issue

Consumer concerns core of the issue

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