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Business
Print Edition> Business
UPDATED: February 7, 2013 NO. 7 FEBRUARY 14, 2013
Upping the Fight
In its anti-monopoly campaign, China needs to strengthen cooperation with the international community
By Lan Xinzhen
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PRICE WATCHERS: Xu Kunlin (left), Director of the Bureau of Price Supervision and Anti-monopoly under the National Development and Reform Commission, investigates prices of vegetables in Suzhou and Zhangjiagang, east China's Jiangsu Province, on December 7, 2012 (CFP)

Following the anti-monopoly punishment imposed on the six LCD makers, including Samsung and LG, on January 4, the Bureau of Price Supervision and Anti-monopoly of the National Development and Reform Commission (NDRC) launched an anti-trust investigation into two famous domestic white spirit makers—Kweichow Moutai Co. Ltd. (Moutai) and Wuliangye Group (Wuliangye). It is the second time that the NDRC has conducted an investigation into large state-owned enterprises.

Moutai of Guizhou Province and Wuliangye of Sichuan Province are among the top eight liquor brands in China, and are listed in the A-share market with annual revenues exceeding 50 billion yuan ($8.03 billion) and 10 billion yuan ($1.61 billion) respectively.

Affected by plasticizer and blended liquor scandals (See A Time to Reflect in issue No.5), Moutai and Wuliangye witnessed a plunge in sales in the fourth quarter of 2012. To stabilize prices, the two liquor makers simultaneously unveiled minimum prices for their products and punished dealers who sold the liquor products below the threshold.

According to China's Anti-monopoly Law, price-fixing is prohibited. NDRC's anti-monopoly bureau launched an investigation on the two liquor makers on January 14.

Moutai soon after announced that it would abolish all practices that went against the Anti-monopoly Law. On January 16, the company released another statement, claiming to withdraw all penalties against retailers who sold the company's products below the price limit.

Wuliangye Group followed suit and said it would obey the country's Anti-monopoly Law.

In 2011, when monopolistic behavior from China Telecom and China Unicom were reported, investigations were launched to find out whether there were monopolistic practices in their broadband access business. It was the first anti-monopoly case involving large state-owned enterprises.

However, there has been no further progress after a year and a half of probing. Some people believe the investigations against Moutai and Wuliangye would also end up being inconclusive.

Huang Yong, an anti-trust law expert at the University of International Business and Economics, notes that Moutai and Wuliangye may get a certain degree of "clemency" for their corrective measures thus far. Still, if found in violation of the law, the two companies face a penalty of 1-10 percent of sales revenue.

A clear signal

Yang Dong, Assistant to the Dean of the School of Law at Renmin University of China, believes that the successive anti-monopoly probes by the NDRC indicate a strong determination to maintain a level playing field.

"The investigation sent a clear signal to enterprises. First, they should comply with laws and regulations concerning market competition. Second, enterprises should support the enforcement of the Anti-monopoly Law to create a favorable environment for fair competition," said Yang. "The Anti-monopoly Law plays an indispensable role in eliminating actions undermining the market economy."

Since the Anti-monopoly Law came into effect in 2008, anti-monopoly cases have been on the rise. A total of 201 cases were reported to anti-monopoly authorities in 2012 alone, with 154 resolved.

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