China: NDRC Imposed Stiff Fines on Multinational LCD Manufacturers in China’s First Antitrust Enforcement Action against International Cartels

Last Updated: 17 January 2013
Article by Susan Ning and Kate Peng

On Jan 4th, the National Development and Reform Commission ("NDRC") published that they had imposed fines in a total amount of RMB 353 million (approximately USD 56 million) on 6 LCD panel manufacturers, including Samsung and LG of Korea and ChiMei, AU Optronics, Chunghwa Picture Tubes and HannStar from Taiwan region. This is China's first antitrust enforcement action against international cartels. It also imposes the highest penalties in China's antitrust enforcement history.

According to the press releases of NDRC on its official website1, during the period from 2001 to 2006, the 6 LCD manufacturers, which accounted for about 80% of the global LCD panel market, convened 53 meetings in Taiwan and Korea to exchange market information and negotiate the price of LCD panels. NDRC received complaints on the cartel from major Chinese TV makers in December 2006. The TV makers also reported non-price related misconducts of the panel manufacturers, including providing an 18-month warranty only and failing to provide high-end products in a timely manner.

During the investigation, NDRC adopted the tactics of exerting continuous pressure on the companies with investigative efforts on one hand, and using leniency to encourage the companies to voluntarily report the cartel on the other hand. Such strategy was later proved to be effective. AU Optronics first confessed the illegal behaviors to NDRC, and it was followed by the other manufacturers.

In result, financial penalties in the amount of RMB 353 million were imposed. The penalties were composed of three parts: restitution of the past overcharge of RMB 172 million (approximately USD 27 million) to domestic TV enterprises, confiscation of unlawful gains of RMB 36.75 million (approximately USD 5.8 million) and fines of RMB 144 million (approximately USD 23 million). AU Optronics was exempted from the fines being the first successful applicant for leniency, but it was nonetheless required to pay the rest of the penalties.

Besides the monetary sanctions, the 6 LCD manufacturers also promised to take corrective measures, including first, to strictly obey Chinese laws and regulations, second, to provide Chinese TV makers with high-end products on a non-discriminatory basis, and third, to extend the warranty period of the panels to 36 months.


There are many issues that merit discussion for this case:

  • China's Expansion of Enforcement Efforts to International Cartels

The LCD case is a milestone development that is worth close attention from multinational enterprises. It signaled the rediness of the Chinese authorities to pursue international cartels having potential impact in China. The international cartels being probed by foreign authorities, such as the price-fixing cartel among the leading car carriers and the bid-rigging cartel among marine hose companies, may possibly become future targets of investigation should Chinese business operators be victims thereof. On the other hand, Chinese companies are getting sophisticated to avail themselves of the Anti-Monopoly Law (the "AML") to protect their own interest. It was reported recently that the domestic TV makers have filed for a new investigation into the post-2006 price behaviors of the LCD manufacturers, and NDRC has accepted the case.2 Foreign companies may need to reassess the risks of exposing to antitrust enforcement and adjust their compliance program in China.

  • The Price Law Being an Alternative to the AML

Despite concerning a price-fixing cartel, the LCD case was penalized on the basis of the Price Law instead of the AML, as the activities in question occurred before the effectiveness of the AML as of August 1, 2008. This is not the first time NDRC applied the Price law in antitrust-related context. For example, in May 2011, NDRC ordered a RMB 2 million fine on Unilever under the Price Law on the ground that the company disturbed market order by spreading news of price increase of household products3. The Price Law contains antitrust related provisions, such as Article 14 which prevents business operators from colluding to manipulate prices, and yet it sets a lower bar for enforcement compared to the AML. Therefore, when it is more convenient, NDRC may apply the Price Law as an alternative to the AML. This sometimes creates uncertainties in risk evaluation by business operators: a company may not be completely safe even if its behavior does not constitute a violation under the AML.

  • The Applicable Leniency Program

Since the AML was not applicable to the present case and there is no provision of leniency under the Price Law, we understand that NDRC granted immunity or the reduction of fines based on the Administrative Penalty Law of the People's Republic of China (the "Administrative Penalty Law").4 It can be inferred that even in those cases where the AML is not applicable, leniency could still be a possible option for business operators, especially where NDRC intends to apply the Price Law in a more inductive method to encourage self-confession. In this situation, NDRC may enjoy more discretion in granting the leniency, and the result of the application may be less certain for the parties concerned in comparison to the leniency program under the AML.

  • Calculating the Statute of Limitations

The underlying conducts of the cartel took place between 2001 and 2006, and yet NDRC's decision was not issued until January 2013. Is it possible that the statute of limitations has already lapsed in this situation? According to the Administrative Penalty Law, an illegal act will no longer be subject to administrative penalt should it not be discovered within 2 years of its commission. However, the law does not further prescribe in what situation an illegal act should be deemed "discovered". For example, should a violation be deemed "discovered" when the Chinese authorities take notice of other jurisdiction's probe in the violation? Or should it be deemed "discovered" when the authorities officially initiate a case? The lack of clarity gives the enforcement agencies flexibility in interpreting whether a violation is "discovered" or not, and it is thus not hard for the agencies to satisfy the statute of limitations. As a result, the relevant business operators may be subject to legal review for an indefinite period of time.

  • Corrective Measures Promised by LCD Manufacturers

The corrective measures are also noticeable characteristics of the LCD case. Such type of corrective measures was rarely seen in other antitrust enforcement actions except for the situation where a business operator promises to take rectifying measure in exchange for suspension of the investigation. NDRC did not reveal the legal basis of these corrective measures, whereas its press releases seem to indicate that the LCD manufacturers make the commitments on their own initiative. In any event, multinational companies should be aware of the risk of the imposition of corrective measures from the practical point of view.

  • Civil Remedies Available to TV Makers and Consumers

As indicated by NDRC, the financial sanctions imposed include the past overcharge in restitution to the domestic TV makers according to Article 41 of the Price Law.5 This gives rise to an important question: should the TV makers and consumers still be qualified for bringing civil actions?

There are two ways to view this issue. First, as the restitution was ordered by NDRC, it should be regarded as part of the administrative penalties, and thus should not prevent the relevant entities and individuals from seeking civil remedies. Second, the restitution should be deemed part of the civil compensation from the LCD manufacturers, and therefore any civil claims to be raised by the TV makers and consumers shall take into consideration of said restitution. Obviously, if the fist understanding is correct, the LCD manufacturers may have to pay more than what it obtained through the cartel. Whereas, if the second understanding is adopted, the TV manufacturers may only claim for damages beyond the restitution; and moreover, the status of the consumers could be questionable: should the consumers directly sue the LCD manufacturers, or should they only be allowed to request compensation from the TV makers?

According to the judicial interpretation on the AML issued by the Supreme People's Court, consumers as indirect purchasers can directly bring civil actions against participants in the cartel. However, it is not clear if this is also the case in terms of the Price law. To date, no authorities have offered any clarification in this regard. Close attention need to be paid to the development of any subsequent civil actions.


1For the original news releases on NDRC's website, please refer to; and

2For the original Chinese article, please refer to

3Please see the relevant articles at and

4Article 27 of Administrative Penalty Law stipulates, "[a] party shall be given a lighter or mitigated administrative penalty in accordance with law, if:(1) he has taken the initiative to eliminate or lessen the harmful consequences occasioned by his illegal act; (2) he has been coerced by another to commit the illegal act; (3) he has performed meritorious deeds when working in coordination with administrative organs to investigate violations of law; or (4) he is under other circumstances for which he shall be given a lighter or mitigated administrative penalty in accordance with law.
Where a person commits a minor illegal act, promptly puts it right and causes no harmful consequences, no administrative penalty shall be imposed on him."

5Article 41 of the Price Law stipulates, "[w]hereas business operators have caused over payment by consumers or other business operators in violation of price law, the part in excess of the due payment shall be returned. If damages are done, the business operators shall undertake to compensate for the losses."

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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