Recently two leading spirits producers of China - Moutai and Wuliangye – became the media headline due to a fine up to RMB 449 million in total respectively imposed by the Guizhou Development and Reform Commission and Sichuan Development and Reform Commission (The National Development and Reform Commission as well as it local branches are hereinafter collectively referred to as “NDRC”) for their monopolistic pricing behaviors. Moutai was fined RMB 247 million, while Wuliangye RMB 202 million, which respectively accounted for 1% of their annual turnover in 2012. These are just another two sanctions ordered by NDRC lately. Last month, a fine of RMB 353 million was ordered by NDRC to be paid by six foreign enterprises (including Samsung, LG, Qimei and Youda in Taiwan, and other two large-scale international LCD screen manufacturers) for their collusive price fixing agreements.
Pursuant to Article 14 of the Anti-monopoly Law of PRC (“AML”), fixing the minimum resale price for goods/services is prohibited. The practice of penalizing their distributors by Maotai and Wuliangye for underselling behaviors eventually led to NDRC’s investigation.
The most recent enforcement measures taken by NDRC clearly send a signal that apart from horizontal monopoly behaviors, the pricing anti-monopoly enforcement agency of China has also started to watch out for daily vertical monopoly behaviors, such as the customary marketing and distribution models and arrangements, which were often assumed by companies to be not problematic. It is imminent now for concerned companies to increase their awareness of AML and build a necessary compliance program. Specifically, companies must take the initiative in conducting health-check on their existing business agreements or practices, so as to minimize their exposure to potential enforcement investigation and penalties as much as possible.