How are anti-monopoly fines worked out?

It has been reported that 12 Japanese auto suppliers were fined a total of 1.24 billion yuan by the National Development and Reform Commission(NDRC) for monopolistic price fixing. Wu Dongmei, an official at the Price Supervision and Anti-Monopoly Bureau of the commission unveiled the investigation process and how the amounts were determined.

Giving themselves up

This round of anti-monopoly investigation began in April 2014, while Japanese agencies had conducted anti-monopoly investigations against these companies in 2010 and 2011. After being investigated in Japan, the companies opened their books to relevant organizations in U.S. and the European Union where anti-trust has become the norm.

According to anti-monopoly laws in some countries, including China, companies can have their penalties reduced if they report their monopoly agreements and provide clear information about their activities to law enforcement agencies.

Investigators from the NDRC contacted Hitachi from Japan and provided them with the relevant regulations of Chinese anti-trust law in March this year. A month later, Hitachi ackknowledged its activities to the commission. Subsequently, Nachi did likewise.

The investigation process

On the basis of existing evidence, the commission required the companies to answer some preliminary questions and provide further materials to the investigation, including original notes, conference proceedings, and emails. Meanwhile, employees directly involved in price negotiations and management personnel were invited to the commission for further enquiries.

Investigators collated all the details provided by the targeted companies to make sure they were consistent with each other. Faced with a substantial body of facts and evidence, the companies confessed to their breaches of the law.

Issuing fines

In some countries, including Japan and U.S., any employees or senior executives who have had a hand in price-fixing may be subject to criminal charges. However, the offences in China are civil. Therefore, acting in its capacity as a law enforcement department, the commission imposed administrative penalties on the 12 companies.

In accordance with anti-monopoly law in China, to set the amount of fines, law enforcement departments should take into consideration the nature, extent and duration of monopoly activities. As the offences had continued in China for at least 10 years, some of the companies involved received heavier punishments. Others were offereed reductions or exemptions.

According to anti-trust law, if companies form and implement monopoly agreements, law enforcement agencies can order them to halt their activities, confiscate any earnings gained from their monopoly, and impose fines. The fines are usually calculated on the basis of 1 to 10 per cent of their sales for the prior year.

In response to the notification of administrative penalty issued by the commission, three companies lodged defenses. The commission accepted some of their defenses as legitimate.

Foreign companies remit their fines to a specific account established by China Ministry of Finance, and the money will be turned over to the national coffers.