In the news: Tesla's prices please Chinese, Apple sues SIPO over Siri and anti-monopoly gets dangerous

Tesla optimistic about China sales

Tesla announced its Model S would sell for Rmb743,000 (US$121,400), which made Chinese customers jump for joy as expectations were about Rmb2 million (US$326,600). Foreign carmakers make more than double the profit per car in China as the Chinese pay two to three times more for the same vehicle sold in the US or EU. Tesla wrote on its blog that it could get away with charging twice as much for the Model S in China, but chose to set the price as the same level in the US (adding only unavoidable taxes, customs and transportation costs). CEO Elon Musk was insistent on giving Chinese customers a fair price, and believes sales in China will surpass those in the US. Tesla's plan to build a national recharging network boosted share prices of domestic electric car and battery companies.

Sources:
Caixin
Forbes

A few factors allow for Tesla's pricing strategy. Unlike most car manufacturers that sell through dealers, Tesla controls the final retail price. Its production costs are also significantly lower than those of gas-fuelled automakers. China is expected to contribute one-third of Tesla's growth in 2014, but penetrating the country's large and growing luxury car market is not easy. Tesla must compete as a luxury sports car rather than an electric car, as the latter hasn't quite caught on in China yet. Also, every carmaker in the world is competing for the Chinese market. Although it plans to open stores in 10 to 12 Chinese cities by the end of the year and eventually build cars in China, Tesla's distribution network is still far behind competitors like Porsche, and to manufacture in China it cannot own more than 50% of the operation. Its success depends on outselling the top sports cars.

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Apple sues SIPO over Siri

Apple is suing SIPO and Shanghai Zhizhen Network Technology over voice recognition technology. Apple's Siri was developed in 2007 and debuted on the iPhone 4S in 2011, while Zhizhen's software Xiao i Robot was patented in 2004. Apple has asked SIPO to invalidate the patent covering Zhizhen's technology but was rejected, which led them to go to court. The case appeared before the Beijing No 1 Intermediate People's Court on February 26. Zhizhen also sued Apple last year claiming Siri infringes its Xiao i Robot software, but decision in this case has not yet been handed down.

Source:
Wall St. Cheat Sheet
World IP Review

China is one of Apple's important markets, having recently signed a multiyear distribution deal with China Mobile – the world's largest carrier with 771 million subscribers. The court's ruling will undoubtedly affect Apple's market position. But other technology companies have also developed and released their own personal digital assistants, like Google's Google Now feature. Will the court allow Apple to invalidate the patent, and what message will the decision send to existing and prospective foreign patent owners in China?

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Anti-monopoly law strengthens enforcement

The NDRC has cracked down on companies like Qualcomm, InterDigital, GSK and Apple. The first two have been investigated for price discrimination and market dominance abuse, with Qualcomm being raided late last year. The others are facing tougher scrutiny as China targets key industries to protect consumers from inflated prices. The NDRC has also organised a large team to inspect the big five state-owned and other commercial banks, and imposed fines of Rmb416 million. It began investigations into China Telecom and China Unicom in 2011 for abuse of dominant market position and is still monitoring their improvement. Last year the NDRC launched more than 34,400 investigations. Rmb632 million was ordered to be returned to consumers, Rmb907 million in illegal gains were confiscated and Rmb1.58 billion in fines was imposed in total.

Sources:
Reuters
The National Law Review

The authority acknowledged it faced enforcement challenges in the past due to lack of manpower and experience as well as the absence of an anti-competition culture and policies. It revealed plans for expanding recruitment in both the Beijing headquarters and local offices. The three anti-monopoly enforcement agencies in China are the NDRC, MOFCOM and SAIC. They may be integrated into one in the future, which is a global trend. But the current structure has the three regulating different types of conduct and so may be in place for a while. They are coordinated by the Anti-Monopoly Commission, set up by the SAIC. China's AML enforcement and regulation have a way to go in reaching international standards, but it's getting there.

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