Campaign against Monopoly
By ZENG HUISHENG
China's National Development and Reform Commission (NDRC) punished three cement producers in Jilin Province with fines totaling RMB 114 million for monopolistic practices in September 2014. Since early last year, China has issued six anti-monopoly fines totaling nearly RMB 3 billion.
China has recently stepped up the scale and frequency of anti-monopoly investigations. Experts estimate that antitrust actions are becoming the norm in China. Regardless of the nature of business and involved industries, investigations are conducted and penalties are imposed against all monopolistic behavior. This is not, as some critics claim, "selective enforcement;" to the contrary, firm anti-monopoly campaigns are necessary to maintain market order and a fair competition environment. Antitrust crackdowns are expected to be carried out more frequently and broadly in the future.
A Fine of RMB Three Billion
On September 9, 2014, the NDRC said in a statement on its website that Jilin's provincial price regulator had fined three cement makers from Jilin Province RMB 114.39 million for price fixing. The fine was imposed on Yatai Cement Sales Co., North Cement Co. and Jidong Cement Jilin Co., Ltd. which were found to have privately negotiated prices in their business operations. Yatai was fined RMB 60.04 million while North Cement and Jidong were fined RMB 40.97 million and 13.38 million respectively.
Shi Jianzhong, director and professor of the Competition Law Research Center at China University of Political Science and Law says that the penalty should have been stricter since these three companies seriously contravened the law and, moreover, did not learn a lesson from the companies which had been punished before.
However, Bai Ming, a researcher and vice director of the Department of International Market Research under the Chinese Academy of International Trade and Economic Cooperation of the Ministry of Commerce, considers it an appropriate penalty as he believes companies should not be fined too much in the early stage of the anti-monopoly campaign.
NDRC explained the lenient penalty, saying that China sustains an excess capacity in cement production. In addition, the price-fixing agreement between the three companies did not last long and damage was limited to a regional market.
Statistics released by www.chinanews.com show that since the beginning of 2013, China's antitrust probes and sanctions have involved a growing number of industries. On January 4, 2013, NDRC fined six television manufacturers including LG, Samsung and HannStar a total RMB 353 million. Two months later, Chinese traditional distilleries Maotai and Wuliangye were fined RMB 449 million. On August 7, 2013, six milk powder companies including MeadJohnson, Abbott and Fonterra were penalized RMB 669 million. A few days later, China's antitrust watchdog issued fines of more than RMB 10.09 million for five Shanghai gold retailers including Laofengxiang and Laomiao Gold for manipulating the prices of their jewelry. The Shanghai Gold & Jewellery Trade Association was also fined RMB 500,000. On August 20, 2014, a total of 12 Japanese auto parts suppliers including Sumitomo, NTN and JTEKT were fined RMB 1.24 billion. On September 2, 2014, NDRC announced combined fines of RMB 110 million on Zhejiang Provincial Insurance Association and 23 local insurers. Taking the penalty on the three cement companies into account, China has levied a total of RMB 2.94 billion in anti-monopoly fines since the beginning of 2013.
"Selective Law Enforcement?"
As China conducts antitrust investigations, some claim that law enforcement departments are deliberately targeting foreign companies. Lately, the European Union Chamber of Commerce in China and the American Chamber of Commerce in China have claimed that overseas companies have been treated unequally in the nation's anti-monopoly probe. Nevertheless, as law enforcement advances, such arguments become untenable.
It has been six years since China's Anti-monopoly Law came into force on August 1, 2008. Over the years, domestic companies have been punished no less severely than their foreign counterparts in frequency and in penalty amounts. According to Bai Ming, the country's antitrust probes and NDRC's sanctions do not show a selective enforcement or specific targets. All companies in China, whether domestic or foreign-funded, should be subject to investigation and punishment once they have committed monopolistic practices and violated the principle of fair competition.
Shen Danyang, the spokesperson of the Ministry of Commerce pointed out that in the six years since the Anti-Monopoly Law was implemented, probes into monopoly behavior have been conducted among both Chinese and foreign enterprises, which were treated equally before the law. Shen also rejected claims that xenophobia influenced antitrust probes.
On his talks with a group of foreign business leaders ahead of the 2014 Summer Davos Forum in September, Chinese Premier Li Keqiang said that foreign companies accounted for only ten percent of those involved in antitrust probes. China's antitrust crackdown does not target certain firms and does not enforce selectively, he pointed out. He hoped that foreign-funded companies in China respect business ethics and Chinese laws while conducting business operations fairly.
Li's remark is echoed by Xu Kunlin, director general of the Price Supervision and Anti-monopoly Bureau under the NDRC. Xu states that equal treatment for local and overseas companies embodies the spirit of the Anti-monopoly Law and the principle China always adheres to during law enforcement. The nation's enforcement of anti-monopoly laws has nothing to do with the ownership, Xu says, and rather aims at ensuring fair market competition.
"Criticism on 'selective enforcement' is a bias that does not reflect the reality." Shi Jianzhong revealed. In the past six years, antitrust investigations covered state-owned enterprises, private firms, and foreign-funded companies in wide-ranging sectors without discrimination.
Stepping Up
In the past two years, the increasingly frequent investigations and punishments for monopolistic practices in China have drawn much attention.
"Before, we only focused on serious cases involving companies which had flagrantly violated the law," Bai Ming indicated. He acknowledged that China's law enforcement ability and system were incomplete in the past. Having accumulated experience for six years, law enforcement is expected to play a more important role in maintaining market order and unbiased market competition as well as in protecting the rights of consumers.
Bai believes that future antitrust investigations and sanctions will be carried out more often and in a wider range of industries. The probes into the producers of LCDs, milk powder, liquor, automobiles, insurance and cement show that the country is expanding the scale of antitrust actions.
According to Shi Jianzhong, the antitrust campaign in China has indeed entered a new phase, in which any industry or company will be subject to investigations if it commits monopolistic behavior. He also emphasized that law enforcement capability must be enhanced. In addition, a hefty punishment is not necessarily appropriate in all cases. Rather, penalties should be tailored according to the damages caused by guilty companies to their competitors and customers.
ZENG HUISHENG is a journalist with China News Service.
