GM’s key China ven­ture fined $29m in anti-mo­nop­oly case

Chi­nese ac­tion fol­lows Trump re­mark on trade prac­tices

Kuwait Times - - BUSINESS -

Gen­eral Mo­tors Co’s main joint ven­ture in China was fined $29 mil­lion on Fri­day on charges it sup­pressed com­pe­ti­tion by en­forc­ing min­i­mum sales prices for deal­ers, the lat­est in a string of penal­ties against for­eign auto brands un­der the coun­try’s anti-mo­nop­oly law.

Chi­nese reg­u­la­tors have pun­ished com­pa­nies in in­dus­tries from milk to med­i­cal de­vices un­der a 2008 anti-mo­nop­oly law in what ap­pears to be an ef­fort to force down con­sumer prices. Fri­day’s an­nounce­ment fol­lowed public crit­i­cism by US Pres­i­dent-elect Don­ald Trump of Chi­nese trade prac­tices but there was no in­di­ca­tion the case was linked to that. GM had an­nounced in Au­gust 2014 its joint ven­ture, Shang­hai GM, was un­der in­ves­ti­ga­tion by anti-mo­nop­oly reg­u­la­tors.

The Shang­hai Price Bureau said Shang­hai GM, a joint ven­ture with state-owned Shang­hai Au­to­mo­tive In­dus­tries Corp., im­prop­erly sup­pressed com­pe­ti­tion by en­forc­ing min­i­mum prices deal­ers were al­lowed to charge for Cadil­lac, Chevro­let and Buick mod­els. That “dis­rupted the nor­mal order of mar­ket com­pe­ti­tion,” the state­ment said.

Set­ting min­i­mum re­tail prices is a com­mon prac­tice in many mar­kets but lawyers say Chi­nese reg­u­la­tors ap­pear to re­gard it as an im­proper re­straint on com­pe­ti­tion.

A state­ment by the price bureau said the penalty was set at 4 per­cent of Shang­hai GM’s an­nual sales, or 201 mil­lion yuan ($29 mil­lion). In a state­ment, GM said: “GM fully re­spects lo­cal laws and reg­u­la­tions wher­ever we op­er­ate. We will pro­vide full sup­port to our joint ven­ture in China to en­sure that all re­spon­sive and ap­pro­pri­ate ac­tions are taken with re­spect to this mat­ter.”

GM vies with Ger­many’s Volk­swa­gen AG for the sta­tus of the top-sell­ing ve­hi­cle brand in China.

Sales of GM ve­hi­cles in China rose 7 per­cent in Novem­ber over a year ear­lier to 371,740 units. Year-to-date sales rose 8.5 per­cent to 3.4 mil­lion. Audi, VW’s lux­ury unit, was fined $40.5 mil­lion and Fiat Chrysler Au­to­mo­biles’ Chrysler brand re­ceived a smaller penalty in 2014 on sim­i­lar charges of en­forc­ing min­i­mum sales prices.

State me­dia cited an of­fi­cial say­ing Daim­ler Benz AG’s Mercedes unit was guilty of vi­o­la­tions but no penalty was an­nounced. Toy­ota Mo­tor Corp. said its Lexus unit was un­der scru­tiny but no re­sults have been an­nounced. A dozen Ja­panese auto parts sup­pli­ers were fined ear­lier on price-fix­ing charges. The in­dus­try-wide in­ves­ti­ga­tion be­gan in 2014 fol­low­ing com­plaints for­eign auto brands were abus­ing their con­trol over sup­plies of spare parts to over­charge con­sumers. In the case of Mercedes, reg­u­la­tors said pur­chas­ing the spare parts needed to assem­ble one car would cost as much as 12 new ve­hi­cles.

For­eign busi­ness groups wel­comed pas­sage of the 2008 law, which they said would help to clar­ify op­er­at­ing con­di­tions in China’s state­dom­i­nated economy.

Since then, they have com­plained about the se­cre­tive way in­ves­ti­ga­tions are con­ducted. They say com­pa­nies are pres­sured into agree­ing to penal­ties and to avoid dis­put­ing any find­ing of wrong­do­ing.

In the big­gest penalty so far, Qual­comm Inc. was fined $975 mil­lion in 2015 on charges it abused con­trol over patents that are part of global in­dus­try stan­dards for mo­bile phones to charge Chi­nese hand­set mak­ers ex­ces­sive li­cens­ing fees. This month, med­i­cal de­vice maker Medtronic Inc. was fined $17 mil­lion on charges it sup­pressed com­pe­ti­tion by en­forc­ing min­i­mum prices for its retailers. —AP

MIAMI: In this June 28, 2016, photo, shows the front of a 2016 Nis­san Al­tima at a Nis­san dealer, in Miami. Black Fri­day deals were ex­pected to pull US auto sales out of their re­cent slump in Novem­ber 2016. —AP

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