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China Targets Auto Industry for Anti–Monopoly Investigations

Q: Did the National Development and Reform Commission (“NDRC”) launch the anti-monopoly investigation on auto industry?

A: Yes. It is not officially reported that NDRC has launched the anti-monopoly investigation on auto industry; however, some market watchers said that the NDRC has, in concert with the China Automobile Dealers Association (CADA), collected data regarding the pricing policy of foreign auto manufacturers. These data can help the NDRC to determine whether those auto manufacturers trigger the PRC Anti-Monopoly Law by requiring their distributors and retailers to resell products at a minimum price.


Q: What will the NDRC do before it take steps to investigate those manufactures involving anti-monopoly issue?

A: Before the NDRC take steps to investigate those manufactures, it will normally work with local trade associations to collect the data. It is reported that the CADA has sent the questionnaires to the auto-manufactures requesting the disclosure of some sensitive information such as ale prices, profit margins, profit rates, costs and customs duties that are required to be paid in different jurisdictions. If the NDRC is satisfied with the data, then the NDRC will launch the investigation.


Q: What will happen if the NDRC is doing investigation?

A:  the NDRC will inspect the companies involved on site, including inspecting the location of the companies’ businesses, verifying transaction parties, review the relevant agreements, checking accounting books, correspondence and even information related to its bank account.  After investigation, the NDRC will exercise its discretion to determine whether the involved company triggers the PRC Anti-Monopoly Law and what the penalty should be.


Q: What should those auto-manufacturers do now?

A: the auto-manufacturers should be well-prepared with the help from experienced lawyers. If they did something wrong, they should admit to the NDRC because in practice, the NDRC might mitigate or exempt the involved company from any punitive action if it voluntarily admits to wrongdoing and provides material evidence of anticompetitive agreements.

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