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Ford collides with China’s antitrust regulator

Ford Motor Company’s Chinese venture has been fined 162.8 million yuan (CNY) – equivalent to US$23.6 million – by China’s antitrust regulator for allegedly engaging in restrictive sales practices.

Changan Ford Automobile, a joint venture between Michigan-based Ford and Chongqing Changan Automobile, must pay the penalty – equivalent to 4% of company’s annual sales in Chongqing – for a business practice that has restricted retail prices since 2013, according to a statement by the State Administration for Market Regulation.

In a statement issued by the carmarker, Changan Ford said that it respected the regulator’s decision and it had “taken corrective action in its regional sales management together with its dealers”.

“Changan Ford will continue to ensure its business activities contribute to a free and fair competitive environment,” the company added.

The action follows a fine of CNY201 million imposed on General Motors Corporation for antitrust violations in December 2016, shortly before Donald Trump took office as US president. Investigations into GM’s business practices in China had commenced in 2014.

The antitrust fine on Changan Ford came only days after China’s commerce ministry announced that it was compiling a list of “unreliable” foreign companies and individuals deemed to be hurting Chinese interests. Although the ministry did not specify the consequences or provide additional details, the parameters were for entities that blocked or cut back supplies to Chinese companies for non-commercial purposes.

Significant timing

Reuters news agency quoted Tian Maowei, a sales manager at Yiyou Auto Service, who commented: “It is not unusual that authorities uncovered wrongdoings by car companies to intervene into dealers’ selling prices. “But the timing of fining a US carmaker now seems to have a connection with the trade tensions between the two countries.”

At a recent symposium on US-China trade relations, Fu Bingfeng, executive vice-president of the China Association of Automobile Manufacturers, an industry guild, said: “If the US-China trade continues into the long term, it will accelerate the weakening of the US auto industry. I don’t want the US-China trade friction to continue and I hope the problems will be solved.”

However other US firms as they with a presence in China are worried that they could be impacted by the rising bilateral political tension. The US-China Business Council (USCBC), representing about 200 American companies that do business in China, told Reuters that anxiety among its members was on the rise.

“At the moment many of our companies are wondering whether this is an attempt by the Chinese government to increase their potential leverage in the trade negotiations, or if it’s an actual effort to force companies into an unenviable position of choosing between the two markets,” said its vice-president of China operations, Jacob Parker.

China introduced an anti-monopoly law (AML) in August 2008. Antitrust enforcements in the country have increased in the period since its enactment, with heavy financial penalties imposed on a number of Western firms

This item appears in the following sections:
Cash & Liquidity Management
Cash & Liquidity Management in Asia-Pacific
Regulation & Tax
Risk Management
Financial Risk Management

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