China's antitrust actions are to protect the weak

The National Development and Reform Commission (NDRC) announced on Aug. 6 that an anti-monopoly investigation of China’s automobile market was underway. It is one of a series of such investigations the Chinese government has conducted in recent years, mainly targeting foreign enterprises.

Last year, the NDRC imposed a fine of 670 million yuan on six foreign-funded baby milk powder manufacturers operating in China. During the period, the UK drug maker GlaxoSmithKline (GSK) was accused of using a network of agencies and firms to channel bribes to health officials.

As the world's second largest economy, and most important destination for FDI in recent years, China has caused much fuss over the antitrust measures, which have even been linked to nationalism.

The New York Times quoted Scott Kennedy, director of the Research Center for Chinese Politics and Business at Indiana University on Aug. 10 as saying: "China's not moving towards a free market; rather, it's moving towards a wider palette of regulatory tools. These aren't meant to create a level playing field."

Hong Kong's South China Morning Post also reported that an increasing number of foreign enterprises in Beijing, including many large multinationals, were involved in antitrust investigations. In the investigations, the targeting of foreign companies was linked by some people overseas to growing anti-foreign sentiment.

In fact, such fears are unnecessary and lack supporting evidence. Moreover, they do not reflect China's actual conditions.

The Wall Street Journal reported that the price of foreign brands in China, such as Audi auto parts, are much higher than in Germany and other countries, because auto manufacturers in China insist that only authorized distributors can sell accessories,. Meanwhile, in Germany, consumers can usually buy auto parts from suppliers offering a comparatively low price.

Yale Zhang, managing director of the consulting firm Automotive Foresight, estimated that in China, the price of auto parts sold by authorized distributors is five to 10 times higher than that available from unauthorized sources.

This round of antitrust investigations, therefore, aims to tackle the manufacturers’ alleged unfair intervention with distributors, which has seriously distorted the market and damaged Chinese consumers' rights.

In fact, this is a very old topic. The United States began to gain support from the automobile distributors association in 1917 to break the control of manufacturers over distribution and thus protect consumers’ rights. The European Union and Japan also reformed the system of auto sales to promote market competition.

China's auto industry development has been rapid in recent years, but the country still lags behind on supervision. Many behaviors banned in the European Union, the United States and Japan, are unfortunately working well in China.

In the auto maintenance service market in China, auto manufacturers authorize exclusive agencies for the sale of cars with handling original accessories and providing maintenance information, as well as monopolizing supplies. This has led to a complete deprivation of customers' rights in selection and bargaining.