Chinese Automobile Association Takes back its Floor Price Setting Words

Credit: CAAM 

BEIJING, July 10 (TiPost) ——The China Association of Automobile Manufacturers (CAAM) issued a statement last Saturday, saying that the expression of pledging“not to disrupt fair market competition through abnormal pricing practices”in the Letter of Commitment to Maintain a Fair Market Order in the Auto Industry signed by 16 automobile enterprises was deleted.

This is because the expression is considered contrary to the spirit of the Anti-Monopoly Law.

The CAAM also indicated in its statement that it would urge the 16 automobile enterprises and other automobile manufacturing enterprises to strictly comply with the Anti-Monopoly Law and relevant administrative rules, guidelines, and regulations to set prices independently and compete fairly.

Guo Song, a lawyer from Tahota (Shenzhen) Law Firm, said that Article 16 of the Anti-Monopoly Law defines agreements, decisions, or other concerted acts that exclude or restrict competition as monopoly agreements and prohibits operators in a competitive relationship to reach agreements to fix or change the price of goods. The wording not to disrupt fair market competition through abnormal pricing practices in the pledge jointly made by the 16 automobile enterprises is fixing or changing the prices of commodities, which is suspected of constituting a monopoly agreement prohibited by the Anti-Monopoly Law.

In addition, Liu Xu, a researcher at the National Strategy Institute of Tsinghua University, pointed out that the statement of commitment is general and symbolic, and how it is recognized depends on how things are handled.

Liu also mentioned that the auto industry’s anti-monopoly law enforcement has been suspected of selective law enforcement. The state-owned auto enterprises and their brands suspected of violating the Anti-Monopoly Law have not been investigated and penalized, but foreign automakers’ joint venture brands have been investigated and dealt with many times, especially because of setting the minimum resale prices. So even if the car companies have reached monopoly agreements, it is difficult to say whether they will be investigated and dealt with in a timely and public manner.

The CAAM, together with BYD, Tesla, FAW Group, SAIC Group, and other 16 automobile enterprises, signed the Letter of Commitment to Maintain a Fair Market Order in the Auto Industry last Thursday “ in a concerted effort to maintain a level playing field and foster a favorable consumer environment”, as they alleged. The commitment was made during the ongoing China Automotive Forum. It said that those companies will “regulate marketing activities, maintain fair competition and order, and not disrupt the order of fair competition in the market with abnormal prices.” This expression has recently received widespread attention.

At present, the statement is not only controversial in law but also uncertain in how it could be implemented. Many industry sources believe that car companies will still choose to reduce prices to increase sales. Last Friday, the next day after the signing of the Letter of Commitment, SAIC Volkswagen’s official website showed that the ID3 model’s price was reduced by 37,000 yuan, a price reduction rate of more than 20%.

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