Crackdown

China is shocked—shocked!—at the suggestion that it is bullying foreign companies

August 11, 2014
August 11, 2014

China’s anti-trust regulator is insisting that contrary to appearances, both foreign and domestic companies are fair game in its recent crackdown.

The statement comes after high-profile investigations of foreign tech firms Qualcomm and Microsoft, six foreign infant formula makers, and automakers Audi, Chrysler, and Mercedes Benz—all for for alleged “monopolistic practices.” Surprise raids by anti-trust regulators have become common, encouraging a cottage industry of consultants advising firms how to deal with the raids.

In the last year and a half, Chinese regulators have been more active than in the previous four years combined, under anti-trust law laws that were established in 2008. Firms can be fined up to 10% of their annual revenue, but they usually opt to settle with authorities rather than face a losing battle in court. Though domestic firms from state-owned China Unicom, China Telecom, to the liquor maker Maotai, have also been fined, it is the probes of foreign firms that have received the most attention, both at home and abroad.

“To really know, one would need to look at whether these companies really do have the power to engage in monopoly pricing…but it does feel like the government is going after foreign companies to use them as examples on pricing,” Dan Harris, a China legal specialist and founder of the Seattle-based international law firm, Harris & Moure, told Quartz. “China has really just begun to use its anti-monopoly laws and so it remains to be seen how far the government will go with this, and most importantly, what sorts of responses from foreign companies can work.”

Officials say they are responding to the fact that Chinese shoppers pay more for foreign goods and service than their counterparts in other countries, which have been the subject of several state media reports over the past year. Others say that the increased activity has more to do with a turf war (paywall) between the three government agencies that implement the law, creating a contest to curry favor with China’s top leaders.

“China’s not moving towards a free market, but it’s moving towards a wider palette of regulatory tools,” Scott Kennedy, director of Indiana University’s Research Center for Chinese Politics & Business told the New York Times. “These aren’t meant to create a level playing field; they obviously want the field to be slanted, but they want to use what I’d guess we call more sophisticated tools.”

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