NDRC imposes a second record anti-monopoly fine
February 22, 2013 | BY
clpstaff &clp articles &China's National Development and Reform Commission has levied a second record fine this year for price fixing, which highlights its increasingly aggressive stance
Two of China's premium liquor producers, Kweichow and Wuliangye, have been hit with fines of Rmb449 million ($72 million) by China's top regulator, the National Development and Reform Commission (NDRC) for engaging in monopolistic pricing, according to reports from the Global Times this week.
“This is an issue that breaches the Law. Companies have now had four years since the Law was issued, that is four years notice that resale price maintenance is illegal – this is the attitude the NDRC seems to be taking,” said Frank Schoneveld of MWE China Law Offices in Shanghai.
The fines follow statements released in January from both companies that they would correct any policies in violation of the PRC Anti-monopoly Law (中华人民共和国反垄断法). Both producers engaged in resale price maintenance (RPM) of their premium liquor by punishing distributors who sold below a set price.
Article 14 of the Law is clear that business operators are prohibited from reaching: “agreements that limit the minimum price at which goods are sold on to third parties”. However, the fines imposed have gone a step further than the Commission's usual stern warning to correct any irregularities.
The Anti-monopoly Law was promulgated in 2008 and since then the Commission has gradually been exerting its power over monopolistic acts. This was seen at the beginning of January when the NDRC imposed fines of Rmb353 million on Samsung, LG and four Taiwanese companies for price fixing of LCD panels.
“The fact that the NDRC is taking on two high-profile cases in a short period of time signals the Commission's willingness to get involved in these kinds of disputes,” said Fang Qi, a lawyer with Fangda Partners in Beijing.
According to the same report from the Global Times, Kweichow's revenue amounted to Rmb35.2 billion in 2012, with an expected net profit of Rmb13.1 billion. Wuliangye's data put its total revenue at Rmb27 billion in 2012, with net profit up to Rmb9.8 billion.
Under Article 46 of the Anti-monopoly Law, offenders are liable to fines of between 1% and 10% of the company's sales of the preceding year. But as Zhaofeng Zhou of Chance & Bridge Partners points out: “In some previous cases, we could not see that the fines were linked to revenue.”
These two high-profile cases will ensure companies pay attention to the Law. They should also make consumers and distributors more aware of their antitrust rights and encourage them to exert their rights.
“Companies certainly need to watch out – they need to closely follow developments of the Anti-monopoly Law and enforcement in China. They should also cooperate with government agencies during investigations,” said Qi.
By David Tring
Further reading:
Anti-monopoly Law under scrutiny as key case goes to Higher Court
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