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GM's Main China Venture Fined $29M in Anti-Monopoly Case

Chinese regulators have punished companies in industries from milk to medical devices under a 2008 anti-monopoly law in what appears to be an effort to force down consumer prices

The GM headquarters in Detroit, photo: Wikipedia
12 months ago

BEIJING – General Motors Co.’s main joint venture in China was fined $29 million on Friday on charges it suppressed competition by enforcing minimum sales prices for dealers, the latest in a string of penalties against foreign auto brands under the country’s anti-monopoly law.

Chinese regulators have punished companies in industries from milk to medical devices under a 2008 anti-monopoly law in what appears to be an effort to force down consumer prices.

Friday’s announcement followed public criticism by U.S. President-elect Donald Trump of Chinese trade practices but there was no indication the case was linked to that. GM had announced in August 2014 its joint venture, Shanghai GM, was under investigation by anti-monopoly regulators.

The Shanghai Price Bureau said Shanghai GM, a joint venture with state-owned Shanghai Automotive Industries Corp., improperly suppressed competition by enforcing minimum prices dealers were allowed to charge for Cadillac, Chevrolet and Buick models.

That “disrupted the normal order of market competition,” the statement said.

Setting minimum retail prices is a common practice in many markets but lawyers say Chinese regulators appear to regard it as an improper restraint on competition.

A statement by the price bureau said the penalty was set at 4 percent of Shanghai GM’s annual sales, or 201 million yuan ($29 million).

In a statement, GM said: “GM fully respects local laws and regulations wherever we operate. We will provide full support to our joint venture in China to ensure that all responsive and appropriate actions are taken with respect to this matter.”

GM vies with Germany’s Volkswagen AG for the status of the top-selling vehicle brand in China.

Sales of GM vehicles in China rose 7 percent in November over a year earlier to 371,740 units. Year-to-date sales rose 8.5 percent to 3.4 million.

Audi, VW’s luxury unit, was fined $40.5 million and Fiat Chrysler Automobiles’ Chrysler brand received a smaller penalty in 2014 on similar charges of enforcing minimum sales prices.

State media cited an official saying Daimler Benz AG’s Mercedes unit was guilty of violations but no penalty was announced. Toyota Motor Corp. said its Lexus unit was under scrutiny but no results have been announced.

A dozen Japanese auto parts suppliers were fined earlier on price-fixing charges.

The industry-wide investigation began in 2014 following complaints foreign auto brands were abusing their control over supplies of spare parts to overcharge consumers. In the case of Mercedes, regulators said purchasing the spare parts needed to assemble one car would cost as much as 12 new vehicles.

Foreign business groups welcomed passage of the 2008 law, which they said would help to clarify operating conditions in China’s state-dominated economy.

Since then, they have complained about the secretive way investigations are conducted. They say companies are pressured into agreeing to penalties and to avoid disputing any finding of wrongdoing.

In the biggest penalty so far, Qualcomm Inc. was fined $975 million in 2015 on charges it abused control over patents that are part of global industry standards for mobile phones to charge Chinese handset makers excessive licensing fees.

This month, medical device maker Medtronic Inc. was fined $17 million on charges it suppressed competition by enforcing minimum prices for its retailers.

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