Fine signals zero-tolerance towards foreign cartels

For the first time, China has fined overseas companies for price-fixing on the mainland, which is a strong signal that the country will not tolerate foreign cartels any more and is committed to maintaining market discipline by law.

The country's top price regulators said Friday it ordered Samsung, LG and four Taiwanese makers of LCD display screens to pay 144 million yuan (22.9 million U.S. dollars) in fines and return 172 million yuan of extra payment to Chinese mainland buyers, besides confiscating 36.75 million yuan of their illegal gains.

The six companies were fined for price-rigging between 2001 and 2006, according to the National Development and Reform Commission (NDRC).

The settlement is the highest paid by overseas companies in China, though smaller compared to those imposed by the United States and Europe.

Media reports said the U.S. Department of Justice has been awarded 1.4 billion dollars in fines by courts while EU officials have imposed a total of 1.3 billion euros in penalties.

The NDRC explained the difference came because China acted under its pricing law that bases penalties on the improper income from individual sales, while Western anti-monopoly laws base fines on a company's total revenue. China's first anti-monopoly law was not enacted until 2008 and cannot be applied retroactively.

Considering the smaller amount, the move is symbolic rather than punitive. It shows the country's firm stance against monopoly and commitment to the market economy under the rule of law.

It is virtually inarguable that the robust competition is the most effective means to enhance consumer welfare as it stimulates efficiencies and results in lower prices, better products and services, and choice for consumers. Moreover, competition breeds innovation, creativity and entrepreneurship at unmatched rates.

The world's major economies have outlawed the creation of monopolies. As early as in 1890, the United States Congress enacted Sherman Antitrust Act, the first legislation to curb concentrations of power that interfere with trade and reduce economic competition.

Protecting competition has become the norm in mature market economies.

A recent example is Microsoft's decade-long battle with the European Commission. The world's largest software company has already been penalized to the tune of 1.6 billion euros in the last decade for infringing EU antitrust rules.

After China opened up more than three decades ago, many foreign companies entered this huge market with a sense of superiority developed when local government officials extended their welcoming arms for big taxpayers.

Some large multinational companies even took advantage of the country's slack supervision and lagging legislation. For instance, Unilever (China) Co., Ltd. was fined merely 2 million yuan in 2011 over statements it made regarding planned price hikes in China. But in Europe, it was fined, together with another consumer goods giants Procter & Gamble, a total of 315.2 million euros for fixing washing powder prices during the same period.

The new leadership of China's ruling Communist Party has reiterated its adherence to the opening up and reform policy. The first fine over foreign cartels is just the beginning of stricter law enforcement. Overseas companies in China should focus more on the future, instead of immediate earnings.