Pricing regulator puts local governments on notice

The nation’s top pricing regulator will start a nationwide probe in January to restrict local governments from intervening in pricing behavior starting as part of a broad set of measures to ensure fair market competition.

The National Development and Reform Commission announced administrative warnings on Thursday to 15 government departments for administrative monopoly abuse, referring to acts of granting favorable conditions to preferred enterprises at the expense of competitors.

Local governments were found to guide enterprises’ price-fixing behaviors, issuing discriminatory conditions for market entry and asking businesses to use goods and services provided by designated producers in the power, tourism, clothing and building material industries.

In one case, the Shanghai Municipal Transport Commission, the supervising authority of the local cruise industry, was found to guide price-fixing by asking cruise companies to reach a specific price monopoly agreement starting in 2009.

The NDRC did not provide details on whether the Shang- hai Transport Commission benefited from that guidance.

Local departments were ordered to immediately refrain from administrative intervention and were given administrative warnings, according to the NDRC.

The announcement came after the NDRC slapped penalties on two United States’ companies within a month for monopolistic behavior, leading to speculation that the nation’s anti-monopoly law enforcement is targeting selected, mainly foreign companies. Last week, the Chinese unit of General Motors was fined 201 million yuan ($28.9 million) and on Dec 9 the Chinese unit of Medtronic was fined 119 million yuan, both for infringing on consumers’ rights through price-fixing.

Zhang Handong, director of the NDRC’s Price Supervision Bureau, said issuing administrative warnings to domestic governments shows that such speculation is misplaced. “Instead of focusing merely on market players, the commission is promoting fair market competition by putting more emphasis on law enforcement of governments’ self-review processes,” he said, referring to self-review system introduced early in June.

The State Council published the guidelines on establishing a fair competition review system, asking local policymaking authorities to make self-reviews before issuing policies related to the economic activities of market players.

The review system stipulates a negative list of 18 don’ts for local governments that apply not only to the anti-monopoly law.

Enterprises can file lawsuits against local governments and report them to anti-monopoly law enforcement authorities if they violate the rules, according to the guidelines.

Wang Huowang, a senior official of the NDRC’s Price Supervision Bureau who was in charge of administrative monopoly cases, said making the announcement at the year-end alerts departments in other regions to the issue, since many local government officials have little understanding of fair market competition, or simply disregard self-review system.