NDRC Probes Shanghai Gold Association and Gold Retailers for Price Fixing
1. What kind of organization is Shanghai Gold & Jewelry Trade Association (SGJTA)?
SGJTA was established in December 1996 and currently has 226 members with the industry coverage of 85%. It occupies a market share of 90% and its members include Shanghai Lao Feng Xiang and Yuyuan Tourist Mart Company, among others.
2. What does the investigation, which is initiated by the Price Supervision and Anti-Monopoly Bureau of the National Development and Reform Commission, center on?
The investigation centers on the Stipulation of Self-Regulatory Pricing of Gold and Platinum Jewelry in Shanghai adopted by SGJTA. According to Article 5, 7 and 8 of the Stipulation, the price of gold and platinum jewelry sold by the member companies shall be within the 2% to 3% range of the middle price set by the association.
3. Why SGJTA’s actions are considered to be monopoly agreements? What will be the results?
According to Article 13 and 16 of China’s Antimonopoly Law, competing business operators are prohibited from reaching any monopoly agreements with each other fixing the price of commodities; no trade association may organize the business operators in its own industry to implement price-fixing agreements. Therefore, the Stipulation may be found by the NDRC as monopoly agreements fixing the price of jewelry.
If the said stipulation is found illegal by the NDRC on the basis of Article 46 of Anti-Monopoly Law, the companies under investigation could be confiscated the illegal gains and be penalized in the amount of 1 to 10 percent of the sales in the previous year.
Following the appointments to the Competition Commission, the Hong Kong Government just announced the appointments of the President and Vice President of the Competition Tribunal.
1. After the establishment of the Competition Commission, what is the next step the Hong Kong Judiciary took?
The Hong Kong Judiciary has taken the next step with the appointment of the President and Vice President of the Competition Tribunal : Mr Justice Godfrey Lam and Madam Justice Queeny Au-Yeung. These appointments are each for a term of three years, with effect from 1 August 2013. Both Mr Justice Lam and Madam Justice Au-Yeung were experienced barristers before they were appointed to the Judiciary.
2. What will the Competition Commission will do in the following years?
According to current indications, the Competition Commission will spend the next 12 to 18 months drafting various guidelines, carrying out public and industry consultations and educating Hong Kong’s business community about the new regime. Therefore, it appears that the law – only the parts establishing the Competition Commission and the Competition Tribunal are currently in force - will be made effective only in early 2015. A global search for a CEO and a few key positions is underway and it is likely that these senior managers will be on board soon.
3. How do businesses react to such changes? What is recommended?
Some businesses are taking a “wait and see” approach; in particular they are waiting for the guidelines to be issued for consultation before they review their operations for compliance with the new regime. Whilst this may seem to be a sensible option, nevertheless, we recommend that an early start will be useful: you can more easily re-negotiate your contracts, you have more time to review your operations and train your staff and you can better implement an effective internal compliance program.