FAQs on Competition & Antitrust
Q1: When did the National Development and Reform Commission (“NDRC“) issue the first fine order to companies outside of mainland China as anti-trust enforcement action for cartel?
A: On Jan 4th, the NDRC announced that they had ordered fines in a total amount of RMB 353 million (approximately USD 56 million) on 6 LCD board manufacturers, including Samsung and LG in Korea and ChiMei, AU Optronics, Chunghwa Picture Tubes and HannStar from Taiwan region. This is China’s first antitrust enforcement action against international cartels. It also imposes the highest penalties in China’s antitrust enforcement history since 2008.
In addition to the monetary penalty, the 6 LCD manufacturers also promised to take corrective measures, including firstly, to strictly obey Chinese laws and regulations, secondly, to provide Chinese TV makers with high-end products on a non-discriminatory basis, and thirdly, to extend the warranty period of the panels to 36 months.
Q2: What are the legal grounds for the fine.
A:Since 2001, almost every month, the six companies hosted conferences to reach agreement on price of LCD to be sold to mainland China, which constituted price monopoly.
Base for calculating fine
It is based on Price Law, the calculating base is the illegitimate income.
If calculating based on revenue pursuant to Anti-Monopoly Law (as US and EU), the fine will be much higher.
The reason for taking a lower calculating base is the good altitude of the companies involved.
Q3: What are the implications and possible actions to be taken by NDRC in the future?
A: Anti-Monopoly Law came into force on August 1, 2008, the first fine to companies outside of mainland China is a strong signal of strengthen enforcement of Anti-Monopoly Law.
Enhance enforcement of Price Law and Anti-Monopoly Law of PRC – penalizing monopoly agreement, abusing power of controlling market etc. Various monopoly activities and publicize high-profile cases.
Formulating more detailed regulation on anti-price monopoly and industry sector guidelines.
The LCD case is a milestone development that is worth close attention from multinational enterprises.