China's antitrust regulator said on Wednesday it would punish Audi and Chrysler for monopoly practices, potentially paving the way for the automakers to be fined up to 10 percent of their domestic annual sales revenue in the world's biggest car market.
Chrysler is owned by Fiat SpA while Volkswagen owns Audi, and both are premium brands in China. The regulator, the National Development and Reform Commission (NDRC), said an ongoing investigation into the two companies showed they had "conducted anti-competitive behaviors".
"They will be punished accordingly in the near future," NDRC spokesman Li Pumin told a press conference in Beijing.
Audi and other global automakers have recently rushed to change their pricing strategies in China in response to the government investigation into the auto industry, and amid domestic media complaints that foreign carmakers were overcharging Chinese customers on vehicles and spare parts.
The NDRC also said it was launching a probe into Mercedes-Benz, owned by Daimler AG, and that it had finished investigating a dozen Japanese spare-part manufacturers on similar anti-trust charges. The regulator did not name the companies or give further details.
"The purpose is to maintain a sound competitive order in the auto market and protect consumer interest," said NDRC spokesman Li.
The China-based spokesperson for Chrysler declined to comment. Both Audi China and Mercedes-Benz said they were cooperating with the NDRC.
Audi says China, including Hong Kong, accounts for a third of its global sales by volume. Chrysler's market share was not immediately available.
The NDRC did not specify the punishment for Chrysler or Audi. Under the six-year-old anti-monopoly law, the NDRC can impose fines of between 1 and 10 percent of a company's revenues for the previous year.
"NDRC would normally set a percentage of annual sales in relevant markets as fines based on how cooperative the companies are," said Colin Liu, a lawyer in the automotive industry.
Industry experts say automakers have too much leverage over car dealers and auto part suppliers, enabling them to control prices, considered as a violation of China's anti-trust laws.
"Monopolistic practices are quite rampant in the auto industry. NDRC is first targeting imported luxury brands because the problem is most severe in this area," said Yale Zhang, managing director of consultancy Automotive Foresight (Shanghai) Co. Ltd.
"It's also a warning signal to the industry. If top brands like Audi gets punishment, others would know what to do."
Zhang said imported luxury cars in China cost, on average, 2-1/2 to three times their price in the United States. The price difference is due to higher import duties and other taxes, foreign carmakers have argued.
China's government has in the past few years intensified its enforcement of the anti-monopoly law, slapping several multinational companies, including Mead Johnson Nutrition Co and Danone SA, with fines.
The government is also currently conducting an anti-monopoly probe into U.S. tech giant Microsoft Corp. The regulators also recently said U.S. chipmaker Qualcomm had a monopoly.
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