Authored by Dr. Zhan Hao (email@example.com), Dr. Song Ying (firstname.lastname@example.org)
China’s National Development and Reform Commission (“NDRC”) has imposed a heavy penalty of total RMB 353 million yuan against six companies for the monopolistic behavior of price-fixing on liquid crystal display (“LCD”) panel in mainland China as announced on January 4, 2013. The six companies include Samsung, LG, as well as four firms from Taiwan——Chi Mei Optoelectronics, AU Optronics, Chunghwa Picture Tubes and HannStar Display. What worth noting is that it is the first time for NDRC to issue a penalty against foreign firms for monopolistic behavior which is also the heaviest penalty ever on price-related violations by Chinese antitrust enforcement authority until now.
NDRC has received multiple complains on the price-related monopolistic behavior of above companies from domestic enterprises since December 2006. As found by NDRC through the investigation, Samsung, LG and other four Taiwanese companies "conspired" in a price fixing scheme through monthly meetings (“crystal meetings”) from 2001 to 2006. During the period, the six companies held 53 crystal meetings in Taiwan and South Korea to exchange information related to price and make agreements on LCD panel pricing which caused huge damage on other undertakings and customers.
As disclosed by NDRC, the total amount of involved LCD panels sold by six companies reaches up to 5.1462 million units. Samsung sold 0.8265 million units, LG sold 1.927 million units, Taiwan’s Chi Mei Optoelectronics sold 1.5689 million units, AU Optronics sold 0.5494 million units, Chunghwa Picture Tubes sold 0.2706 million units and HannStar Display sold 3,800 units. The total illegal gains arising from concerning illegal activities is amounted to be RMB 208 million yuan. NDRC imposed the penalty against above monopolistic behaviors based on the Price Law of China in the end. The thing is, the involved behaviors by the companies belong to pricing monopolistic behaviors so that the case falls under the governing scope of Anti-Monopoly Law of China (“AML”). As provided in Article 13 of AML, “competing undertakings are prohibited from concluding the following monopoly agreements: (1) fixing or changing commodity prices;……” But the Price Law rather than AML was applicable in this case, because the AML went into effect in 2008 while the illegal behaviors had happened from 2001 to 2006. According to the principle of “Law of non-retroactivity” and “application of the old law with the exception of a less punishment in the new law”, the AML shall not be applied in this case.
The total amount of penalty is RMB 353 million yuan. Samsung has to pay RMB 101 million yuan, LG has to pay RMB 118 million yuan, Chi Mei Optoelectronics has to pay RMB 94,410,000 yuan, AU Optronics has to pay RMB 21,890,000 yuan, Chunghwa Picture Tubes has to pay RMB 16,200,000 yuan and HannStar Display has to pay RMB 240,000 yuan. The penalty is composed of three parts, the companies have to pay back RMB 172 million yuan to Chinese customers overpaid, NDRC confiscated RMB 36,750,000 yuan of illegal gains and also fined RMB 144 million yuan as an additional penalty. The RMB 172 million yuan illegally obtained from Chinese television manufacturers has now been reimbursed to the customers.
Besides the penalty, the six involved companies also made three commitments to NDRC as follows:
(1) Commit to abide by the law of China strictly, maintain the competing orderliness of market consciously and protect the lawful rights and interests of other undertakings and customers;
(2) Commit to supply the products to domestic television manufacturers fairly, to provide the same opportunity of purchasing high-end and new technologies products to all customers;
(3) Commit to extend the free warranty period of their LCD panels for television manufacturers in Chinese mainland from 18 months to 36 months.
Another hot issue in this case is that the penalty in China is far more less than that imposed by the United States (U.S.) and European Union (“EU”). The press reported that the United States imposed $ 1,215 million dollars (amount to RMB 7,570 million yuan) while EU imposed $ 648 million dollars (amount to RMB 4,037 million yuan) on the illegal companies. As emphasized by principle from NDRC of this case answering to reporter’s request, there are two main reasons for this distinguish.
For one thing, both U.S. and EU fined the involved companies in accordance with their anti-monopoly law in which the standards of penalty are based on the percentage of the amount of sales. So the amount of penalty is quite huge. While the penalty in China is based on the illegal gains by the companies according to the Price Law, the amount of penalty is relatively small. In another word, if the penalty in China is based on the amount of sales, it will be much more heavily. Article 46 of AML provides that where an undertaking, in violation of the provisions of this Law, concludes and implements a monopoly agreement, the authority for enforcement of the Anti-monopoly Law shall instruct it to discontinue the violation, confiscate its unlawful gains, and, in addition, impose on it a fine of not less than one percent but not more than 10 percent of its sales achieved in the previous year. If such monopoly agreement has not been implemented, it may be fined not more than RMB 500,000 yuan.
For another thing, some undertakings confessed in the investigation, so NDRC gave a lesser punishment to this kind of companies which caused the lesser fine. As reported by the press, AU Optronics was exempted from the penalty as it was the first undertaking to confess in investigation.