Beijing's global warning against monopolistic behaviour
Beijing's fine on display makers is a signal to both domestic and multinational firms that anti-competitive practise will not be tolerated
The 353 million yuan (HK$439 million) penalty the National Development and Reform Commission (NDRC) slapped on a price cartel of six Taiwanese and South Korean makers of liquid crystal displays sets a precedent.
It signals Beijing's resolve to act against monopolistic behaviour not just by domestic firms but multinationals as well.
Lawyers said this case and rulings and investigations in the past two years suggest Beijing is serious about enforcing laws against price collusion and other actions that reduce competition.
"This is the first time China has sanctioned against a global cartel with local effect; before this, actions have been taken only against local cartels," said Francois Renard, head of the China antitrust practice at Allen & Overy in Beijing. "It sends a clear message that it is ready to tackle international cartels."
A previous case against a multinational related to product pricing involved Unilever, the Netherlands-based consumer goods manufacturer.
The firm was fined two million yuan under the Price Law for spreading comments in the media about expected price rises by itself and its rivals, resulting in market-disruptive panic buying.
The Anti-Monopoly Law, passed in August 2008, aims to prevent the formation of giants via mergers and acquisitions that reduce competition. It also regulates against monopolistic behaviour such as price collusion and cartel formation.
The Ministry of Commerce has jurisdiction over the former, while the NDRC and State Administration for Industry & Commerce (SAIC) are mainly responsible for the latter.
The Price Law also has provisions against price fixing.
In the latest case, the NDRC said the illegal behaviour by the Taiwanese and Korean firms occurred between 2001 and 2006, before the Anti-Monopoly Law was enacted, so it pursued the firms under the Price Law.
It said the firms were handed bigger penalties by overseas authorities, which acted against them under their own anti-monopoly laws, under which penalties are based on sales. On the mainland, their penalties, under the Price Law, were based on profit.
"It is arguably the clearest example of an attempt by the NDRC to sanction a price cartel based on principles that mirror the Anti-Monopoly Law, although the conduct was ultimately sanctioned under the Price Law," said Ninette Dodoo, head of the China antitrust practice at global law firm Clifford Chance.
The SAIC said in August last year it had investigated 16 anti-monopoly cases in Chongqing and the provinces of Jiangsu, Jiangxi and Zhejiang. Penalties were handed down in four cases, including against concrete sellers in Jiangsu and building materials sellers in Liaoning province.
It said at the time it would focus on investigating utilities firms such as power, water, gas and also cable television providers.
The NDRC said it has investigated monopolistic behaviour by pharmaceutical, paper, insurance, cement, sea sand and raw milk firms in recent years.
Renard said lawyers would monitor whether the foreign LCD makers had the opportunity to defend themselves.