Chinese regulators fined Volkswagen AG and Chrysler Group LLC for violating antitrust laws, announcing on Thursday the first monetary penalties against large multinational carmakers swept up in a broad investigation.
The fines, which totaled US$46 million, were the latest in a series of tough measures by China against what it considers monopolistic practices. In recent months, foreign companies in a range of industries including automobiles, technology, pharmaceuticals and food packaging have faced increased scrutiny, including raids and allegations of unfair practices.
The scrutiny of automakers comes as Chinese players are being pummeled by international competition. The government has been searching for ways to help its homegrown industry, which only several years ago held the promise of becoming a big exporter.
However, Chinese officials have taken pains in recent weeks to deny that they are targeting multinationals. Chinese Prime Minister Li Keqiang (李克強) on Tuesday said that antitrust cases against foreign companies represented only a tenth of all such investigations.
He said enforcement of the antitrust rules would, in fact, make “even more foreign investors, and more foreign products, willing and daring to enter China, because there is a fair competitive environment.”
On Thursday, price regulators in Hubei Province imposed a fine of US$40.5 million on the Audi unit of Volkswagen, saying the automaker had reached monopolistic agreements with 10 dealerships to maintain high prices for cars and replacement parts.
The investigators said the agreements were “hurting the interests of consumers.”
Audi, which confirmed the penalties and violations, said that its joint venture with China FAW Group Co (一汽集團), the 50-50 partner in its Chinese operations, was “optimizing the management processes in the sales and dealership structure” and would “attach great importance that all applicable antitrust and competition laws are adhered to.”
Shanghai price regulators leveled similar accusations against Chrysler, levying a US$5.2 million fine, Xinhua news agency said. The regulators accused Chrysler of conspiring with dealers to keep prices high for its vehicles — mostly Jeeps — and punishing dealers that did not cooperate by allocating few of the best-selling models to them.
Chrysler said in a brief statement that it “respects and accepts this final ruling by the Shanghai Price Bureau” and that it was committed to remaining highly competitive in the Chinese market.
Fines against Volkswagen and Chrysler could help the government address persistent complaints that international brands of cars typically cost twice as much in China as overseas, and sometimes almost three times as much. The main reason for such steep prices is that China imposes a series of huge taxes on the cars, largely hidden from buyers: an engine tax of up to 40 percent of the sales price, a 25 percent import tax and a 17 percent value-added tax.
The fines could foster an impression that auto prices are high in China not because of taxes, but because of price gouging by multinationals. That could erode the ability of multinationals to charge extra for coveted brands that have strong reputations for style, safety or other attributes, making them more affordable for Chinese consumers.
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