Thursday 30 July 2015

Is Beijing punishing foreign companies to boost Chinese firms?

Matthew Miller

Published 08/08/2014 | 02:30

Beijing's business district: foreign companies targeted.
Beijing's business district: foreign companies targeted.

China's recent probes into Microsoft and car companies including Audi and Chrysler have rekindled concerns that Beijing may be using an anti-monopoly law to support domestic firms at the expense of foreign companies.

On Wednesday, the State Administration for Industry and Commerce (SAIC) conducted its second round of raids against Microsoft, including for the first time its financial services provider Accenture.

Another anti-trust regulator, the National Development and Reform Commission (NDRC), also said on Wednesday it would punish Volkswagen's Audi unit and Chrysler, owned by Fiat, after an ongoing investigation showed they had engaged in monopoly practices.

In the past few years Chinese regulators have intensified their enforcement of the six-year-old anti-monopoly law, which stipulates fines of between 1pc and 10pc of a company's revenues for the previous year for anti-competitive practices.

In addition to the SAIC and the NDRC, the Ministry of Commerce (MOFCOM) is also tasked with enforcing the law, which is still relatively new. In some cases, officials are required to consider industrial policy.

Legal experts point out that the authorities appear to have wielded the law against more foreign multinationals than local companies. The firms targeted include Mead Johnson Nutrition and Danone, which the regulator slapped with hefty fines, as well as US chipmaker Qualcomm which faces the prospect of a €75bn fine.

"A significant proportion of the high-profile cases appear to involve big foreign firms," said Mark Williams, an anti-trust expert and professor at University of Melbourne Law School.

"Critical observers have suggested that this gives the appearance that the AML is being used to discipline new entrants to the China market." The AML is the anti-monopoly law.

In April, the US Chamber of Commerce sent a private letter to secretary of state John Kerry and treasury secretary Jacob Lew urging Washington to get tough with Beijing since enforcement of the anti-monopoly law was being used to pursue "China's industrial policy goals".

"It has become increasingly clear that the Chinese government has seized on using the AML to promote Chinese producer welfare and to advance industrial policies that nurture domestic enterprises, rather than the internationally- accepted norm of using competition law to protect consumer welfare and competition," the letter said.

The authorities say the law is applied to both domestic and foreign firms, with the aim of protecting consumers. The NDRC said it has targeted local telecoms companies, including China Unicom and China Telecom, and local financial institutions for anti-trust practices.

"The NDRC gives equal treatment to all market participants," Xu Kunlin, director general of NDRC's price supervision and anti-monopoly bureau, said recently.

"Those who have been penalised include state-owned enterprises, private companies, and foreign-owned enterprises, and industry associations," he said, adding that the law was "to protect market order and fair competition".

The NDRC's investigation into the auto industry followed domestic media complaints that foreign carmakers were overcharging Chinese customers for vehicles and spare parts.

The probes spurred Audi and Mercedes-Benz to lower their spare part prices in China.

(Reuters)

Irish Independent

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