Last updated: August 20, 2014 5:49 pm

China fines 10 Japan car parts makers over price collusion

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A worker walks past vehicles being assembled on the production line at a plant operated by Dongfeng Peugeot-Citroen Automobile Ltd., the joint venture between Dongfeng Motor Corp. and PSA Peugeot Citroen, in Wuhan, China, on Wednesday, Oct. 16, 2013. PSA Peugeot Citroen is considering stake sales to Dongfeng Motor Corp. and the French government to shore up funding as car sales in Europe plunge to a 20-year low, people familiar with the matter said on Oct. 14. Photographer: Tomohiro Ohsumi/Bloomberg©Bloomberg

Chinese regulators have accused 12 Japanese car parts manufacturers of colluding to overcharge Toyota, Ford and other multinational car companies, in an unprecedented application of the country’s anti-monopoly law.

On Wednesday, the National Development and Reform Commission said it had fined 10 of the Japanese suppliers a total of Rmb1.24bn ($202m) – the biggest antitrust fine imposed by a Chinese authority, and almost double the Rmb670m fine paid by six baby formula makers last year.

Sumitomo Electric was ordered to pay Rmb290.4m – equivalent to 6 per cent of its annual China revenues. Hitachi Ltd and Nachi-Fujikoshi Corp were also investigated and found guilty of violations by the NDRC, but exempted from punishment after they co-operated in the probe. The regulator credited both companies for coming forward to report the cartel activity and providing other “important evidence”.

In a statement, the NDRC said eight companies including Sumitomo Electric had “frequently conducted bilateral or multilateral talks in Japan, negotiating prices and agreeing on quotes for orders”. It added that the collusion – which lasted from January 2000 to June 2011 – affected more than a dozen components used by manufacturers including Toyota, Ford, Honda, Nissan and Suzuki.

According to the regulator, four other ball bearing manufacturers also conducted annual meetings in Japan and Shanghai to determine annual price increases. “This damaged the legitimate interest of downstream manufacturers and consumers,” the NDRC said. “Their illegal activities were conducted for a period of more than 10 years. It is a serious offence.”

Multinational car executives have been bracing themselves for the results of the NDRC’s long-running investigation all week. On Monday, the official Xinhua news agency reported that investigators had deemed Mercedes-Benz in breach of the country’s anti-monopoly laws. Audi, Chrysler, and other multinational carmakers expect findings on their pricing practices to be handed down in coming days.

But the rationale for the decision to penalise Japanese suppliers – for overcharging Japanese and other international car companies – was unexpected. Toyota, Ford, Honda and Nissan all operate highly profitable joint ventures in co-operation with large state-owned Chinese car companies.

“This is ironic and it’s to the credit of the NDRC,” said one Beijing-based competition lawyer. “But, eventually, Chinese consumers and joint venture partners are also harmed by these cartels.”

Under Chinese law, the NDRC can fine companies as much as 10 per cent of their annual revenues for antitrust violations. Last year a Chinese liquor maker and Mead Johnson of the US were fined Rmb247m and Rmb204m, respectively, for allegedly monopolistic pricing practices.

One of the ball bearing companies involved, NSK Ltd, informed the Tokyo Stock Exchange on Tuesday that it had been ordered to pay a penalty of Rmb174.9m for unspecified violations of China’s anti-monopoly law. “We express our sincere regret for the concern this matter has caused our shareholders [and] customers,” NSK said.

Li Pumin, NDRC’s secretary-general, rejected criticism by some foreign executives that the regulator unfairly targeted overseas companies in its investigations. “Everyone is equal before the law. No matter whether they are domestic or foreign-funded firms, they will be punished if they violate the law.”

Additional reporting by Wan Li and Jonathan Soble

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