Anti-trust investigation expands to foreign auto giants

Probes not only targeting overseas companies: expert

German automobile giant Daimler AG's subsidiary luxury brand Mercedes-Benz confirmed Tuesday it is cooperating with China's anti-monopoly watchdog over an investigation, after its Shanghai office was reportedly "raided" Monday.

"We are actively assisting the authorities in their investigation," the company told the Global Times Tuesday, but declined to provide further details or the nature of the investigation.

The automaker's Shanghai office had been raided by anti-trust officials from the National Development and Reform Commission (NDRC) Monday, according to Jiemian, a media outlet affiliated to Shanghai United Media Group.

The report also said investigators interviewed many senior executives and confiscated computers during their surprise visit.

According to a Tuesday report by China National Radio, NDRC's Shanghai branch and the Hubei provincial price bureau found car giants Chrysler and Audi to be engaging in monopolistic practices, and both will be punished accordingly.

Both Chrysler and Audi could not be reached for comment by press time Tuesday.

Daimler announced over the weekend that starting from September, it will "take the initiative" to lower the prices of more than 10,000 auto parts, in response to the NDRC's investigation, by an average of 15 percent.

The cut followed a sweeping reduction of prices for repair and maintenance services that Mercedes-Benz announced last month, Reuters reported.

Some automakers, including Audi and Jaguar Land Rover, also announced price cuts in July after the NDRC started an anti-trust investigation, reported the Beijing Times.

Hao Qingfeng, an automobile industry expert and deputy secretary general of China Consumer Protection Law Society, believes overpricing is the main reason behind the Mercedes-Benz investigation, as foreign automobile companies tend to overcharge Chinese customers due to a lack of fair competition among market players.

"The investigation is served as an act in displaying China's governance over the industry and protection over the automobile market," noted Hao.

Hao said regulation has not been enough since China opened its automobile market to foreign companies, but has improved in recent years after the establishment of the Anti-monopoly Bureau under the Ministry of Commerce, the introduction of anti-monopoly law, and its latest series of investigations into the industry.

Jia Xinguang, another auto analyst, believes the main objective of recent investigations is not only to drive down product prices, but also to eliminate problematic practices among the big players, such as setting a fixed price for distributors.

The three automakers are among the latest foreign companies to come under investigation by Chinese regulators, who have stepped up anti-monopoly efforts in industries ranging from pharmaceuticals to electronics.

In 2013, a total of 353 million yuan ($56.7 million) in fines have been imposed on overseas firms including Samsung, LG and Chimei Innolux, while domestic brands like liquor makers Kweichow Moutai and Wuliangye have been fined 450 million yuan for price fixing.

The investigation comes after another anti-monopoly investigation into Microsoft Corp. last month, when officials raided four of the technology giant's offices across the country.

Unlike Microsoft, the monopoly of the giant automakers in China is not caused by their leading technology, said Chen Ji, Director of China Center for the research of Industrial Economics at Capital University of Economics and Business

"The quality of domestically produced cars is no worse than these foreign automobiles, but Chinese customers still tend to be attracted to well-known foreign brands," Chen told the Global Times.

Chen believes anti-monopoly investigations do not only target foreign companies, but major State-owned enterprises are also part of the far-reaching investigations.