Watchdog bites with no favor

TALK OF UNFAIR TREATMENT

WRONG, SAID EXPERTS

Watchdog bites with no favor

Foreign companies are not being singled out for scrutiny in pricing investigations, and recent steps do not pose heightened business risks for enterprises in China, experts say.

However, several organizations such as the European Chamber of Commerce in China feel the dice are often loaded against foreign companies and business risks are steadily increasing in China.

"In pricing investigations, some of the chamber's member companies believe there is disproportion in how foreign companies are covered on this issue when compared with Chinese rivals," says Davide Cucino, president of the chamber.

Jeremie Waterman, executive director for China policy at the US Chamber of Commerce, the largest US business lobby group, says that though the Chinese anti-monopoly authorities have started several cases against Chinese companies, nearly all large state-owned enterprises have been exempt from enforcement actions to date.

But officials with the National Development and Reform Commission, China's top economic planner, dismiss such charges, saying that "there is no such thing as specially targeting foreign companies. Our investigations focus on monopolistic conduct, and not on the entities behind it".

[Full story]

Watchdog bites with no favor
Dan Steinbock, research director for international business at the India China America Institute

In view of the past examples of investigations in the US and Europe, it is unlikely that tighter antitrust enforcement alone will alienate foreign companies from China.

US authorities have in the past investigated Chinese, Japanese and even western European companies. Naturally, such investigations have contributed to the concerns of those companies in the US. But few have ceased their efforts to expand in the US, says Steinbock, who was earlier a consultant for several multinationals and SMEs as well as international organizations, such as the OECD.

Watchdog bites with no favor
Wang Huainan, CEO of Babytree.com, one of China's largest mother-and-baby online communities

Whether or not the foreign baby formula companies violate the law or not, the retail price of foreign infant formula sold in China can often be twice that of the same product in other countries.

"Some of the foreign-branded milk is produced locally in China with ingredients imported from home countries, while some others export their final products directly to China. But the tariff China charges on imported dairy products is only about 4 percent of the price, so high tax is obviously not the reason for huge price differences," Wang says.

Watchdog bites with no favor
Peter Wang, antitrust law partner with Jones Day, a Washington-based law firm


Foreign companies have been hit harder by the recent investigations because China wants to enforce anti-monopoly laws and does not want prices to be unreasonably high, Wang says.

Foreign firms are usually high-end companies with more pricy labels, compared with domestic firms. "So when your concern is high prices, then naturally you end up focusing more on multinational companies," says Wang, who has been practicing anti-monopoly law for more than 21 years.

Watchdog bites with no favor
Bala Ramasamy, professor of economics at the Shanghai-based China Europe International Business School

Measuring foreign and domestic firms with the same yardstick may be out of the question. "The NDRC is a state agency, so investigations against state-owned enterprises may not be done in the public domain, considering that China's social and economic context is different from that of the West.

"The public is not too aware of such investigations as they are often done within the government framework," says Ramasamy, whose teaching focus at CEIBS is international business strategy. He says there is sound logic on why most of the companies being investigated are multinationals.

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Xiaowei Rose Luo, associate professor of entrepreneurship and family enterprise at Insead.


"If you look at the ratio of international firms and domestic firms being investigated, you may get the impression that multinationals have a larger share," Luo says.

"Since the inquiries are a recent phenomenon and the enforcement is getting stronger, it is too early to use the ratio to make such conclusions. I would rather prefer to look at it more qualitatively. Some high-profile domestic jewelry and liquor firms have also been investigated and fined," says Luo, whose research has focused on how unique conditions in emerging economies can affect corporate strategies and performance.

Watchdog bites with no favor

RIGHT STEPS

Antitrust and anti-competition actions
taken against companies in China this year

Jan 4
Collective fines of 353 million yuan ($57.68 million; 43.49 million euros) imposed on six liquid crystal display makers for being part of a cartel that fixed LCD prices on the mainland between 2001 and 2006.

Feb 23
Combined fines of 449 million yuan ($73.37 million) imposed on domestic white spirits makers Kweichow Moutai Co Ltd and Wuliangye Yibin Co Ltd for price fixing. The fines were equivalent to 1 percent of total sales achieved by these companies last year.

Watchdog bites with no favor

In June, domestic premium liquor makers Kweichow Moutai Co Ltd and Wuliangye Yibin Co Ltd were fined a total of 449 million yuan ($71.3 million) by the National Development and Reform Commission for resale price maintenance.[Provided to China Daily]

Watchdog bites with no favor

A woman checks prices beside a shelf of Dumex baby formula at a store in Yichang, in central China's Hubei province. Many shops in Beijing and Shanghai take the product off the shelves. AFP


Aug 7

Six infant formula producers, including one from China, ordered to pay fines of 668.73 million yuan for price fixing and resale price maintenance. The fines are the largest ever for an antitrust infringement in China.

The six producers are Mead Johnson, Dumex, Abbott, Friesland, Fonterra and Biostime of Guangzhou, which was fined 163 million yuan, or 6 percent of its sales revenue last year. The other five companies were fined 3 to 4 percent of their revenue last year.

Aug 12
Penalties and fines amounting to 10.08 million yuan imposed on five Shanghai-based gold retailers. They included Shanghai-listed Shanghai Lao Feng Xiang Co Ltd and the fines amounted to 1 percent of last year's sales.

The Shanghai Gold & Jewelry Trade Association was also fined half a million yuan for "organization of unified price adjustments" by gold retailers over the past six years, a step seen as a violation of the antitrust law. The manipulation involved gold and platinum products.

Watchdog bites with no favor

Penalties levied on LCD makers

Antitrust 'not target' foreign companies

Dairy firms hit with fines

Mead Johnson, Biostime fined over formula probe

Fewer loopholes for intl firms in China

Biostime gives discount amid possible price-fixing


Watchdog bites with no favor

Watchdog bites with no favor

Industry experts say luxury cars should be exempt from rules relating to monopolies. He Youbao/for China Daily

Talk of exorbitant prices puts automakers in hot seat

Watchdog bites with no favor

ANTI-MONOPOLY CAMPAIGN MAY NOT HELP BRING DOWN
VEHICLE PRICES IN CHINA

Foreign automakers may be subjected to closer scrutiny over their pricing as demand for luxury vehicles remains robust in China, experts say.

Prices of imported cars have been a hot topic recently following a series of investigations launched by the government over pricing by foreign companies in various sectors. The China Automobile Dealers Association had last month indicated that it had been asked by the National Development and Reform Commission to collect information on whether foreign car makers were setting a minimum retail price for dealers in China.

Chinese customers are expecting a fall in prices following the announcement of the inquiry. However, industry experts maintain that premium prices will continue to remain unchanged, as demand continues to increase.

Luo Lei, deputy secretary-general of the association, says it plans to collect data on the prices of foreign cars and the profit margin made to ascertain whether price manipulation has taken place and whether prices in China are higher than in the home markets of the car companies.

Debate about foreign cars gathered further steam after China Central Television aired a program that came down heavily on what it said are exorbitant prices and huge profit margins enjoyed by foreign auto brands in China.

[Full story]

Watchdog bites with no favor

Penalties levied on LCD makers

Antitrust 'not target' foreign companies

Dairy firms hit with fines

Mead Johnson, Biostime fined over formula probe

Fewer loopholes for intl firms in China

Biostime gives discount amid possible price-fixing

Watchdog bites with no favor

Making sense of the moves

By Cindy Chung and Ben Chow

[The authors are analysts with Shanghai-based Universal Consultancy.]

INVESTIGATIONS REFLECT GOVERNMENT WILL TO CREATE LEVEL-PLAYING FIELD FOR ALL BUSINESSES IN CHINA


If you want to understand the motive behind China's recent high-profile crackdown on monopolistic practices and commercial corruption, look no further than Premier Li Keqiang's article (China Will Stay The Course On Sustainable Growth) in the Financial Times

"Government will leave to the market and society what they can do well while concentrating on those matters within its purview," reads the article published on Sept 9 ahead of the Summer Davos Forum.

The comment is a clear indication that top Chinese policymakers are keen to change the government role from an all-round participant in economic activities to that of a regulator that ensures a level playing field for all sorts of business entities regardless of their ownership or size.

But changing the government role and regulating market order are colossal tasks that require long-term and enduring efforts and may face opposition from vested interest groups over time.

[Full story]

Putting things in perspective

By Ren Wei

[The author is a professor at Beijing Information Science and Technology University]

REGULATORY ACTIONS WILL HELP CREATE A STABLE, LONG-TERM ECONOMIC CLIMATE

Foreign companies in China are getting increasingly jittery over the spate of antitrust investigations being launched by Chinese regulators. Such apprehensions are natural, considering that the probes have extended to high-growth sectors like electronic accessories, wine, imported cars, milk powder and pharmaceuticals.

What must be particularly worrying for the foreign companies is the apprehension that they are pawns in a bigger geopolitical and economic game involving China and Western governments, especially at a time when the Chinese economy is slowing and investigations against Chinese companies in Europe and the US are growing.

However, the reality is something else. The Ministry of Commerce has so far probed 170 merger cases under China's antitrust laws. Though multinational companies are involved in several complaints, the anti-monopoly bureau has rejected very few cases. One such example is Coca-Cola's failed bid to take over China Huiyuan Juice in 2009.

[Full story]

Watchdog bites with no favor

Gloating no help to domestic dairy

Curing the drug market of its ills

Record fines herald a healthier market economy

Foreign companies should adapt to Chinese market