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

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 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 NDRC's Q&A (in Chinese) can be found at

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.

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