Fair mar­ket is anti-trust goal Probes into both do­mes­tic and for­eign-funded en­ter­prises are push for a more reg­u­lated mar­ket or­der and ma­turer mech­a­nisms

China Daily (Canada) - - COMMENT -

Twelve Ja­panese auto parts and ball­bear­ing mak­ers were fined nearly 1.24 bil­lion yuan ($201 mil­lion) on Wed­nes­day for price fix­ing and mo­nop­o­lis­tic ac­tiv­i­ties. It is the largest fine im­posed on com­pa­nies since the Na­tional Devel­op­ment and Re­form Com­mis­sion and State Ad­min­is­tra­tion for In­dus­try and Com­merce launched the anti-trust probes, which have also cov­ered en­ter­prises such as Mi­crosoft, Mercedes-Benz, BMW and Audi apart from do­mes­tic brands.

Since most of the com­pa­nies pe­nal­ized are glob­ally renowned, some for­eign me­dia out­lets have ac­cused China of tar­get­ing for­eign en­ter­prises. But the fact is the an­titrust move in­cludes do­mes­tic and for­eign com­pa­nies and is aimed at build­ing a healthy mar­ket.

Al­though China in­tro­duced the Anti-Mo­nop­oly Lawsix years ago, its en­force­ment has up to now been weak. It was only in 2013 that the NDRC in­ten­si­fied its anti-trust probes to cre­ate a level play­ing field for do­mes­tic and over­seas en­ter­prises, and pro­mote fair com­pe­ti­tion. Fair com­pe­ti­tion is the pre­con­di­tion for effective al­lo­ca­tion of re­sources in the mar­ket. From the per­spec­tive of eco­nom­ics, mo­nop­oly of a mar­ket can nei­ther elim­i­nate com­pe­ti­tion nor de­velop it­self for long. Only with effective reg­u­la­tion on mo­nop­oly and mon­i­tor­ing of mar­ket ac­tiv­i­ties can or­der be main­tained in a fair and healthy mar­ket— and this is true for mar­kets in­Western coun­tries as well as in China.

China’s mar­ket su­per­vi­sion mech­a­nism is not fool­proof, and mo­nop­oly can evolve through un­fair mea­sures in mar­ket com­pe­ti­tion. Some com­pa­nies have used their ad­van­tages in re­sources and mar­ket ac­cess to push up the prices of their prod­ucts and/or in­crease their sales, which have not only thwarted fair com­pe­ti­tion but also af­fected the al­lo­ca­tion of re­sources in the mar­ket.

For ex­am­ple, Audi, one of the com­pa­nies fac­ing an anti-trust probe, used to call meet­ings and force the 10 4S show­rooms in­Hubei prov­ince to com­ply with its pric­ing strat­egy and the show­rooms had to agree to the prod­uct and ser­vices costs. Such mo­nop­o­lis­tic ac­tiv­ity made fair com­pe­ti­tion among auto man­u­fac­tur­ers and deal­ers im­pos­si­ble, vi­o­lated con­sumers’ rights and harmed China’s auto in­dus­try. But af­ter the anti-trust probes in­ten­si­fied, many high-end auto brands have been forced to re­duce prices, this has helped re­store some or­der in the mar­ket and fa­cil­i­tated fairer com­pe­ti­tion.

But the anti-trust probes are not just tar­geted at over­seas com­pa­nies. This is proved by the fact a huge fine — 451 mil­lion yuan — was im­posed on China’s two top liquor mak­ers, Kwe­i­chowMoutai andWu­liangye Yibin Group, last year. The rea­son some peo­ple may sus­pect that the probes tar­get for­eign com­pa­nies is that most en­ter­prises un­der in­ves­ti­ga­tion com­mand a con­sid­er­able mar­ket share in de­vel­oped coun­tries.

The irony is that the same com­pa­nies that abide by strict laws in de­vel­oped coun­tries and face heavy penal­ties for vi­o­lat­ing them try to ride roughshod over rules in China to grab a larger share of the Chi­nese mar­ket, where com­mod­ity pric­ing, in­come and economic devel­op­ment and the Anti-Mo­nop­oly Laware very dif­fer­ent.

Af­ter the launch­ing of re­form and open­ing-up more than three decades ago, China of­fered pref­er­en­tial poli­cies for a long pe­riod to at­tract for­eign in­vest­ment. And the for­eign in­vest­ment that flowed into China helped boost the coun­try’s economic growth. But the pref­er­en­tial poli­cies also made for­eign com­pa­nies as­sume that they could con­tinue en­joy­ing them and in­crease their stakes in the Chi­nese mar­ket for­ever. Even though the pref­er­en­tial tax pol­icy for for­eign com­pa­nies was an­nulled in 2008, many lo­cal gov­ern­ments in China con­tin­ued to of­fer fa­vor­able tax poli­cies to var­i­ous de­grees to at­tract for­eign in­vest­ment.

Some for­eign auto com­pa­nies have taken ad­van­tage of such fa­vor­able poli­cies to con­trol sup­ply chan­nels and ma­nip­u­late the prices of ve­hi­cles and auto parts, form­ing a ver­ti­cal mo­nop­oly and dras­ti­cally in­creas­ing prices, which have hurt the in­ter­ests of con­sumers. Such prac­tices have to be erad­i­cated to de­velop a healthy mar­ket at­mos­phere in China, and the fore­most thing to do is to cre­ate a level play­ing field for do­mes­tic and for­eign en­ter­prises.

The anti-trust probes have yielded re­mark­able re­sults so far, with the pe­nal­ized auto com­pa­nies ex­press­ing their will­ing­ness to co­op­er­ate with reg­u­la­tors and abide by the rules, and the oth­ers of­fer­ing ag­gres­sive re­duc­tion in the prices of ei­ther their ve­hi­cles or auto parts.

But since the in­ten­sive anti-trust campaign has also given rise to anx­i­ety among many for­eign com­pa­nies op­er­at­ing in China and such a devel­op­ment is not con­ducive to build­ing an open and fair mar­ket econ­omy, reg­u­la­tors have to en­sure that the in­ves­ti­ga­tions are more trans­par­ent and car­ried out strictly ac­cord­ing to es­tab­lished pro­ce­dures. They also need to give do­mes­tic and for­eign com­pa­nies a sta­ble in­sti­tu­tional guar­an­tee of fair play.

China’s mar­ket econ­omy is still rather im­ma­ture com­pared with those of de­vel­oped economies and its anti-trust mech­a­nism and mea­sures need fur­ther im­prove­ment and stan­dard­iza­tion. In the long run, rel­e­vant de­part­ments such as the NDRC, SAIC and theMin­istry of Com­merce should work to­gether to es­tab­lish a fool­proof su­per­vi­sion mech­a­nism to in­ves­ti­gate and eval­u­ate law-en­force­ment pro­ce­dures and help strengthen a fair and open mar­ket.

In the mean­time, both do­mes­tic and for­eign com­pa­nies should rec­og­nize the long-term power of the anti-trust probes and de­sist from in­dulging in mo­nop­o­lis­tic ac­tiv­i­ties and price fix­ing. Zhang Jianping is direc­tor of the In­ter­na­tional Economic Co­op­er­a­tion In­sti­tute for In­ter­na­tional Economic Re­search, NDRC, andMa Xinyue is a re­searcher at Pek­ing Univer­sity.

Newspapers in English

Newspapers from China

© PressReader. All rights reserved.