Fines aimed to clean market

Whenever foreign companies are punished for their monopolistic activities in China, a new wave of complaints and finger-pointing begins.

With the FAW-Volkswagen Sales Co and Chrysler Group China Sales Ltd fined a total of 280.26 million yuan ($45.5 million) on Thursday in China’s latest antitrust move, some commentators, as usual, accused China of selective law enforcement.

First of all, the punished companies indeed violated China’s antitrust law.

Investigations by China’s regulators found that the FAW-Volkswagen company had been organizing 10 Audi dealers in Hubei province to fix prices for cars and reparation services since 2012.

Obviously, the company has inflated auto and auto parts prices and disrupted normal market order. The punishments are therefore indisputably justifiable.

Then, there’s the question: Are the fines only targeted at foreign companies?

Statistics show that the commission has reviewed 335 anti-monopoly cases against companies and industrial associations since the promulgation of the country’s antitrust law in 2008, among which 33 involved foreign companies.

Another antitrust regulator, the State Administration of Industry and Commerce, has reviewed a total of 39 anti-monopoly cases, with only two of them, or one-fifth, involving foreign companies.

The data shows that if China is selective in enforcing its antitrust laws and regulations, the victims are domestic enterprises and associations, not foreign companies.

China welcomes foreign investment, which has played a crucial role in helping China’s economic take-off in the early 1980s. Foreign companies have also created a large number of jobs and contributed large amounts of taxes.

However, there is a big difference between welcoming foreign investment and tolerating law-breaching activities by foreign companies.

For foreign companies, investing in China has brought them handsome profits. Apart from the big market, they have also benefited from China’s various preferential policies towards foreign investors, which has put them in an advantage when they compete with domestic companies.

Some of the foreign players, however, have gone too far and taken advantage of their leading market position to make exorbitant profits.

Such monopolistic behavior has largely escaped the attention of Chinese regulators thanks to China’s porous legal framework and loose law enforcement. Since 2008, however, China has promulgated its antitrust law and strengthened anti-monopoly regulation.

Facing China’s maturing regulatory framework, foreign companies must rethink their China strategy and show more respect to Chinese laws and regulations.

Complaining and finger-pointing are useless in finding the proper solutions. What they should do is to get familiar with Chinese laws and redress their irregularities in the Chinese market.