China: China’s Takes First Enforcement Action Against International Price Fixing Cartel

On January 4, 2013, China's National Development and Reform Commission (NDRC) imposed fines of RMB 353 million (approximately USD 56 million) on six international manufacturers of liquid crystal display (LCD) panels for price-fixing in connection with the so-called LCD cartel. NDRC is the agency in charge of price-related non-merger antimonopoly enforcement in China. This is the first time that Chinese antitrust regulators have imposed a fine on participants in an international price-fixing cartel. It may signal the start of more vigorous enforcement in China against price-fixing, which so far has been limited in both scope and reach (for details see our recent Commentary at http://www.jonesday.com/lessons_from_four_years/).

According to NDRC, six international LCD panel makers, including Samsung and LG of Korea, and Chimei, AU Optronics, Chunghwa Picture Tubes and Hannstar of Taiwan, met almost monthly in Taiwan or Korea between 2001 and 2006. During 53 so-called "Crystal Meetings," the companies exchanged market information and discussed prices for LCD panels. Over 5 million LCD panels were sold in China during this time period by the cartel. It is unclear from NDRC's press release whether it uncovered any fact that goes beyond what other antitrust regulators or courts around the world have already discovered.

NDRC ordered the six companies to pay a total fine of RMB 144 million (approximately USD 23 million). In addition, it ordered them to pay RMB 172 million (approximately USD 27 million) in restitution to Chinese TV makers, corresponding to the amount such customers overpaid due to higher prices imposed by the cartel. Finally, NDRC ordered the confiscation of the cartel's illegal gains of RMB 36.75 million (approximately USD 5.7 million). The total monetary penalties imposed on the cartel participants amounted to RMB 353 million (approximately USD 56 million). The highest fine, RMB 118 million (approximately USD 19 million), was imposed on LG. The cartel participants also offered rectifying measures, including to strictly comply with Chinese laws going forward, to use their best efforts to supply Chinese TV makers in a non-discriminatory manner, and to extend the warranty periods of LCD panels sold in China.

This enforcement action raises a number of significant issues:

Price Law vs Anti-Monopoly Law. NDRC's decision is based on the 1998 Price Law, rather than the newer, 2008 Anti-Monopoly Law ("AML"), because the AML was not yet in force at the time of the cartel's activities. The Price Law contains several antitrust-related provisions, including a prohibition on "colluding with others to manipulate market prices." This statute likely will continue to be applied to conduct pre-dating the AML and when its application is easier or more convenient for enforcers. For example, in May 2011, NDRC ordered a fine of RMB 2 million (approximately USD 300,000) to Unilever for "disrupting the market order" through public announcement of a potential price increase of around 10 percent on certain household products, which led to panic buying by consumers in several Chinese cities, as well as alleged price signaling through its public statements.

The use of the Price Law also likely explains the lower monetary sanctions imposed on the LCD cartel participants in China when compared to other jurisdictions. For example, earlier this month, the European Commission issued fines for an amount of EUR 648 million (approximately RMB 5.3 billion) against the participants in the global LCD cartel. This is because, while the Chinese Anti-Monopoly Law imposes sanctions of between 1 and 10 percent of a company's turnover for cartel or other non-merger conduct violations, the Price Law limits available fines to 5 times any illegal gains or RMB 5 million (approximately USD 0.8 million).

Will China start investigating international cartels? Until now Chinese regulators do not appear to have pursued international cartels, even those already under investigation in multiple other jurisdictions around the world and where Chinese customers are potential victims. This may be due in part to the lack of investigative resources available to regulators. Another important reason likely is the imperfect leniency regime in place in China, in which regulators apparently maintain substantial discretion about whether or not to grant leniency even if applicants submit all required evidence about their participation in cartels, thus discouraging international cartel participants from filing for leniency in China (see www.jonesday.com/china_new_leniency_procedure/). However, now that NDRC has shown its interest in investigating international cartels, cartel participants may be less hesitant to file for leniency in China, given the alternative of independent NDRC prosecution. This could open the floodgates for cartel enforcement in China.

Consideration of the interests of local industry. NDRC's press release states that its enforcement decision will play an important role in enhancing the competitiveness of domestic TV manufacturers. NDRC also indicates that the commitment to extend the free warranty period from 18 months to 36 months will save RMB 395 million (approximately USD 63 million) for domestic TV manufacturers. These statements suggest that the interests of local TV manufacturers were an important motivation for the enforcement action. Putting aside whether such national concerns should be an appropriate consideration in antitrust enforcement, it appears that, as a practical matter, companies should be aware that the risks of Chinese antitrust investigations will be higher if cartel activities are likely to have affected the interests of Chinese industry.

Extraterritorial jurisdiction of the Price Law. The NDRC press release also noted that, between 2001 and 2006, the cartel participants conducted 53 meetings in Taiwan and South Korea. Unlike the AML, the Price Law does not explicitly provide for jurisdiction over extraterritorial conduct that violates its provisions (although neither does it expressly exclude the possibility of extraterritorial jurisdiction). Thus, while it is unclear on precisely what basis NDRC applied the Price Law to such anticompetitive conduct outside of China, it appears likely that NDRC took the position that the Price Law permits its extraterritorial application.

Statute of limitations. According to the PRC Administrative Penalty Law, the statute of limitations in China for violations of the Price Law is 2 years from the occurrence of the illegal conduct or, in the case of continuing violations, from the termination of that conduct. The NDRC press release indicates that it received complaints about the cartel in 2006. It is not clear from the NDRC decision and press release when NDRC started its investigation into the cartel or when NDRC viewed the 2-year limitation period as starting or ending, e.g., when NDRC first received those complaints or formally initiated an investigation ("li'an" in Chinese).

A copy of NDRC's press release (in Chinese) can be found at http://www.sdpc.gov.cn/xwfb/t20130104_521958.htm. NDRC's Q&A (in Chinese) can be found at http://www.sdpc.gov.cn/xwfb/t20130104_521993.htm.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions