Authored by Michael Gu (

Just at the beginning of 2013, the National Development and Reform Commission of the People’s Republic of China (“NDRC”), the Chinese Price-Monopoly Regulator, has announced a breakthrough penalty against six leading international liquid crystal display (“LCD”) panel manufacturers, including two leading South Korean-based multinationals (i.e. Samsung and LG) and four Taiwanese companies (i.e. Chi Mei, AU Optronics, Chunghwa Picture Tubes, and HannStar). The total value of the penalty amounts to RMB 353 millions. This is the largest price-related monopoly case that the Chinese competition authority has ever investigated and penalized in terms of the total fines.

The breakdown of penalties is illustrated in the diagram below. (Unit: RMB Million)



Fact and Investigation Process

NDRC started investigating as early as December 2006 based on a number of complaints. During the course of the investigation, some firms voluntarily reported their collusion with others in manipulating the market price of LCDs. According to the NDRC decision, during 2001-2006, the six companies called 53 meetings to exchange market information and coordinate the pricing strategy, hosting meetings on a monthly basis rotated through South Korea and Chinese Taiwan. They sold products according to the price negotiated and agreed upon in the meetings.

Due to the tremendous amount of time that has been put into evidence collection, data comparison, and economics analysis, etc., the investigation has lasted for more than 6 years. This is in line with the international practice, e.g. the European Commission spending 4 years to conclude a similar LCD antitrust investigation, South Korea investigating LCD antitrust for 5 years, and the US conducting a six-year investigation against AU Optronics (“AU”).

Applicable Law and Decision

Although it was publicized as the most severe price-cartel case, the decision was rendered on the basis of Article 40 and 41 of PRC Price Law rather than the PRC Anti-Monopoly Law (“AML”). A NDRC official clarified to the press that “the monopolistic behavior happened before AML came into effect. Adhering to the principles, ‘law of non-retroactivity’ and ‘application of the old law with the exception of a lesser punishment in the new law,’ the Price Law shall be applied.” The NDRC-imposed penalty total of RMB 353 millions is actually relatively small in comparison with the enormous penalty amounts that would be stipulated in the AML based on sales revenue.

In addition to the economic penalty, the six major LCD producers were also ordered to take rectification measures, e.g. treating all customers equally and ensuring fair procurement opportunities of high-end and new technology products for all Chinese television producers. In particular, the six LCD producers promise to extend the free warranty period from 18 months to 36 months.

Observations and Comments:

      i.        As demonstrated in this case, Chinese competition authorities are determined to further strengthen antitrust enforcement. Multinational companies need to be aware and alert to the risk, particularly those that have already undergone antitrust investigations or those that even have had antitrust punishments imposed upon in other jurisdictions. Both the State Administration for Industry and Commerce (“SAIC”) and the NDRC indicate that they are closely tracking the outcomes of investigations against multinationals. Chinese competition authorities are most likely to follow the example set by their western counterparts, i.e. conduct investigations against suspected business practices that have either been directly carried out in or have had an anti-competitive effect on the market in Mainland China. As the first enforcement action against a cartel engaged by foreign companies, this case sends a strong signal to multinational companies doing business in China that PRC antitrust enforcement actions against cartels will not be restricted to Chinese entities. In addition, given the enhanced communication and cooperation among international antitrust enforcement authorities, PRC antitrust enforcement authorities are becoming more proactive and confident in penalizing AML violators, particularly when the violator in question has had previous penalties imposed on their business practice in other jurisdictions. Overseas decisions would definitely encourage Chinese antitrust enforcement authorities in their enforcement and decision making against monopolistic behaviors in China.

     ii.        The Chinese Price Law and Anti-Monopoly Law will inevitably function in parallel for a certain period of time. As previously mentioned, the price-cartel and its monopolistic behaviors occurred before the AML came into effect and thus, the companies shall be punished under the Price Law. However, the legislative intentions of the two laws are different, i.e. the Price Law is intended to ensure stable and normal orders of price while the AML is aimed at protecting fair market competition. Therefore, it is the NDRC who has discretionary power over choosing which law to apply against companies who exhibit monopolistic behaviors. The NDRC has previously acted as the price supervisor body, but now that they can exercise enforcement power under the AML, they seem reluctant to apply AML when it comes to imposing specific sanctions in certain cases. As indicated in the table below, there are some distinctive differences between the AML and the Price Law:


Price Law

Article 13(1) prohibits price fixing as an illegal “monopoly agreement”

Article 14(1) prohibits collusion in manipulating price as “improper price behaviors”

A fine of 1%-10% of the violator’s annual turnover plus confiscation of all illegal gains

A fine of up to five times the amount of any illegal gains plus confiscation of all illegal gains;
If there are no illegal gains, a fine of at least RMB 100,000 up to RMB 5 million can be imposed 


    iii.        Notably, in this LDC decision, AU was exempt from fines, and the other five LCD producers were granted reductions from the alleged penalties. However, this should not be misunderstood as an application of the leniency program in this case. It has been reported that AU was the “whistle blower” of the price conspiracy and that the other five companies confessed their monopoly behaviors when under investigation. Given that the AML is not applicable to this case, accordingly, the leniency program under the AML shall also not be adopted. Instead, Article 27 of the PRC Administrative Penalty Law provides that: “a party shall be given a lighter or mitigated administrative penalty in accordance with law if the investigated has taken the initiative to eliminate or lessen the harmful consequences or has performed meritorious deeds when working in coordination with antitrust enforcement agencies.” The LCD manufacturers’ commitment to extend the warranty of their products from 18 months to 36 months is a confirmation of Article 27 being used as a legal basis for the reduced penalties.

The individual penalties are illustrated in the chart below. (Unit: RMB Million)