Signs of bias missing from antitrust investigations

Signs of bias missing from antitrust investigations

The National Development and Reform Commission (NDRC) levied 114 million yuan ($18.5 million) in fines against three domestic cement companies for price fixing, the country's top economic planner announced Tuesday.

The violators were units of Jilin Yatai Group Co Ltd, China National Building Material Co Ltd and Tangshan Jidong Cement Co Ltd, according to the NDRC statement.

The NDRC began its investigation in March 2013 and found the three companies had reached an agreement to fix prices in 2011. Price fixing violates Chinese antitrust law.

Yatai was fined 60.04 million yuan and Jidong was fined 13.38 million yuan. The size of fines amounted to 2 percent of each company's 2012 sales revenue. North Cement was fined 40.97 million yuan, or 1 percent of its 2012 sales revenue. The NDRC said the penalties varied based on how much the companies cooperated with the investigation.

Obviously, the fines will hurt both the reputations and the bottom lines of the three companies. According to a statement from Yatai, its fine was equivalent to 20.42 percent of its total net profit from last year.

Still, the NDRC should be lauded for its antitrust investigations, which are necessary to build a transparent and fair business environment.

Price fixing has been a hidden rule for cement companies facing difficulties, particularly at times when the industry is suffering from overcapacity. The NDRC's fine has served as a warning to other cement companies as well.

Some in the media have claimed that the NDRC's antitrust crackdown has been primarily focused on foreign companies. The commission's 1.2 billion yuan fine against 12 Japanese automakers for price fixing has been one of the most frequently cited examples.

However, the NDRC has simply strengthened its antitrust investigations overall since 2013. These investigations covered many companies in many industries, including both domestic and foreign corporations.

For example, the NDRC fined the domestic liquor companies of Moutai and Wuliangye 449 million yuan in total last year. It also fined six milk powder producers a total of 670 million yuan in fines for price fixing and anti-competitive behavior.

Among the six milk powder companies, domestic brand Biostime was fined 162.9 million yuan. The fine accounted for 6 percent of the company's 2012 sales. Of the fines levied against the milk powder makers, the one against Biostime was the most severe. Two of the companies, the foreign-invested Wyeth and the domestic Beingmate were spared fines because they cooperated with authorities. Biostime did not.

These cases show that regulators are treating both foreign and domestic companies equally.

Foreign companies usually have more experience with antitrust issues because they have learned more from the mature overseas market. But they still need to learn Chinese antitrust law to ensure they comply with the country's rules.

Some said these antitrust investigations might cause foreign companies to cut back on their investments in China. Perhaps, but it's unfair for domestic companies if their foreign competitors are allowed to profit from price fixing. By the same token, domestic companies also need to follow the rules to build a clean and fair market for everyone.

The government has called for the market to play a decisive role in resource allocation. But that goal rests on premise that there is a fair and transparent market environment.

Without fairness, market participants will eventually lose confidence in the market. Price fixing will disturb the normal market order and bring unfairness to customers and downstream enterprises.

For Chinese regulators, they could try to make their enforcement procedures more transparent and disclose more information to the public to dispel people's concern.

According to the antitrust law that was issued in 2006, the NDRC, the Ministry of Commerce and the State Administration for Industry and Commerce play the leading roles in investigating companies for antitrust violations.

These regulators need to continue their antitrust investigations to maintain an equal market for each company developing in China.