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Japanese auto suppliers fined to protect consumers

2014-08-21 08:18 China Daily Web Editor: Qin Dexing

China imposed the largest anti-trust fine in its regulatory history on a dozen Japanese auto parts manufactures and suppliers on Wednesday, reflecting its resolve to prevent market leaders from jeopardizing consumer interests through price manipulation.

Ten of the 12 Japanese companies, were fined a total of 1.24 billion yuan ($202 million) for price fixing. Hitachi and Nachi-Fujikoshi were exempted because they pleaded guilty and provided evidence against the other companies. The largest single fine, of 290 million yuan, was imposed on Sumitomo Corp, which is also the largest fine on one company operating in Chinese anti-trust history.

Last year, China fined its two major domestic liquor makers Kweichow Moutai and the Wuliangye Yibin Group 249 million yuan and 202 million yuan respectively.

Moreover, Japanese auto parts makers are not the only ones operating in the auto sector to be penalized for practicing monopoly. German automaker BMW, too, has been penalized, and Chinese regulators are set to fine Mercedes-Benz and Audi for monopoly and price manipulation. Fiat Chrysler Automobile NV's Chrysler will also face punishment for violating China's anti-monopoly law.

Japanese companies have a history of being investigated and penalized for monopolizing prices in global markets. For example, NSK has been penalized in Canada, the European Union, Singapore and Australia this year for monopolizing ball-bearing prices. And Japanese tire maker Bridgestone has been fined heavily in the US for monopoly activities.

The 10 fined Japanese companies operating in China have not been penalized without reason. According to the National Development and Reform Commission, which is in charge of the anti-trust probe into auto parts manufacturers, Hitachi and Nachi-Fujikoshi-the tainted witnesses-provided solid evidence such as e-mails and documents to the Chinese authorities against the guilty companies. Based on the evidence and investigation results, the regulators found that the Japanese companies secretly carried out price-fixing activities.

Research by industrial associations, too, point to the possibility of price manipulation by the Japanese companies. According to Insurance Association of China and China Automotive Maintenance and Repair Trade Association, the total cost of the auto parts of a Japanese car could be many times more than the price of the car if somebody wants to replace them. As it is, Japanese cars cost much more than domestic and some foreign brands. For example, the ratio of Yaris, a Toyota model, is more than seven times, the highest after a Mercedes-Benz model. This means consumers would have to pay an unfairly high price if they need to replace any of the auto parts.

Although the regulatory move is not likely to shake Japanese carmakers' positions in the market, it will have a bearing on their brand image. Japanese cars have been very popular in China because many consumers believe they are more fuel efficient and "inexpensive" compared with other foreign brands, such as Volkswagen.

Because of the souring of relations between Beijing and Tokyo over a territorial dispute, Japanese carmakers once feared that their sales would drop sharply in the Chinese market. But the impact has been quite small. Take Toyota for example. In 2013, it sold 917,500 vehicles in China, up by 9.2 percent year-on-year. Its unexpectedly exceptional performance is in stark contrast to the poor monthly sales starting from late 2012, when the Beijing-Tokyo intensified.

Toyota's popularity among Chinese consumers may continue despite the regulatory move, but the result of the anti-trust investigation will make Chinese consumers realize that they would end up paying high after-sale costs if they buy Japanese cars.

What is worth monitoring, therefore, is whether the Japanese companies follow their German rivals to give up their monopolistic activities and reduce the prices of their auto parts to the benefit of Chinese consumers.

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