Mercedes guilty in anti-trust probe

Mercedes-Benz has been found guilty of manipulating the price of after-sales services by the Jiangsu Province Price Bureau amid China's sweeping anti-trust campaign.

The bureau, which launched its investigation late last month, found evidence of anti-competitive practices after raiding Mercedes-Benz dealerships in Suzhou, Wuxi, Yangzhou, Huai'an and Danyang, all in Jiangsu Province, as well as investigating its office in Shanghai and Dalian Zhongsheng Star Automobile Sales & Service Co.

"It is a typical case of vertical monopoly in which the carmaker uses its leading position to control the prices of its spare parts, repair and maintenance services at the downstream markets," Zhou Gao, chief of the anti-trust investigation at the Jiangsu bureau, told the Xinhua news agency website (www.xinhuanet.com.cn) yesterday.

The huge discrepancy in the price of foreign cars, and especially spare parts, in China and abroad, is believed to be what caught the eye of the anti-trust authorities.

The average sum of replacing all the parts relative to the price of a new vehicle is an acknowledged indicator of the cost of after-sales services. According to a report by the Insurance Association of China and China Auto Maintenance & Repair Association in April, replacing all the spare parts in a Mercedes-Benz C-Class can be 12 times more expensive than buying a new one. In comparison, the average level in the United States and Europe is around three times.

Before the news broke earlier this month that Mercedes-Benz was being investigated by the National Development and Reform Commission, the company announced 15 percent price cuts for its after-sales services on average from September in addition to a 20 percent decrease just a few months earlier.

Audi and BMW were also found to be involved in monopolistic behavior after announcing price cuts for spare parts.

While Audi is still awaiting punishment, four BMW dealerships were fined between 150,000 yuan (US$24,400) and 937,900 yuan last week for fraudulently charging pre-delivery inspection fees.

One of the central issues of the current anti-monopoly campaign is tackling the replacement parts market where carmakers have had control of original spare parts distribution since 2005.

The National Development and Reform Commission also found 12 Japanese makers of auto parts in China guilty of monopolistic practices, and is preparing to impose penalties on them.

Ye Sheng, auto research director at market research firm Ipsos, said the opening up of the spare parts market will be a good start to ending monopolies, but consumers still face the challenge of fake products.