China's top pricing regulator has announced it will penalize US medical devices manufacturer, Medtronic, for price fixing and violating monopoly laws. It's the first time a medical equipment maker has been penalized by the central authority.
Medtronic is the world's largest medical technology development company. However, its entry into the Chinese market has raised concerns over its monopoly status, due to its non-competitive market position.
Customers in China were full of chatter about the move, with some claiming that prices of certain medical devices had immediately skyrocketed.
"Medtronic has a leading position in the field of medical devices and dealers have a strong reliance on it. So the company uses these relative advantages to control dealer prices," Wu Dongwei with NDRC anti-monopoly bureau said.
An investigation launched by the National Development and Reform Commission, discovered that since 2014 the company had fixed resale prices through monopoly agreements with its distributors, which is illegal in China.
Evidence showed the company had displayed typical vertical monopoly behaviors in the supply of advanced cardiovascular, restorative, and diabetes-related medical devices.
"We will strengthen law enforcement against actions that violate fair competition and damage consumer interests. Fair competition in the market needs to be protected," Lu Yanchun with NDRC anti-monopoly bureau said.
The company has been fined more than 17 million US dollars, around 4 percent of its annual sales in 2015.
Medtronic violated China's anti-monopoly laws and eliminated market competition by fixing the resale prices, gross profits and minimum bid prices of dealers, as well as qualifying the lowest price for resale to hospitals.
The crackdown on Medtronic is part of the central authority's ongoing efforts to tackle monopolies in marketing and distribution in the medical industry, following fines handed down to domestic drugs firms for price fixing earlier this year.
Authorities say investigations in this field are continuing to further improve the quality of medical services, develop the mode of medical payment, and foster a stable environment for market competition.
Fact box:
The world's largest medical device maker, Medtronic, entered the Chinese market in 1996. Due to its high-end technology, it soon become the leading provider of medical devices in China, with sales revenue exploding here and making faster gains than in the United States and Europe.
As growing numbers of similar providers overseas tend to sell their products directly to medical organisations, Medtronic in China still chooses to sell through authorized dealers.
However, this hasn't ensure fair competition among distributors, as Medtronic set minimum resale prices through monopoly agreements, which violated Article 14 of China's Anti-monopoly Law.
China launched a nationwide antitrust probe this year, investigating companies both at home and abroad. Previous cases included a 4 million yuan fine for five domestic medical companies, for monopoly actions in selling urate-lowering medicine this January.
