August 19 ,2014 | by Thiago Kiwi

Mercedes-Benz accused in China price-fix probe

Chinese authorities have said that Mercedes-Benz is guilty of breaching anti-monopoly legislation.

Investigations in China’s automotive industry have taken another victim after, on 18 August, the nation’s authorities said that Mercedes-Benz had violated Chinese anti-monopoly laws.

Audi and Chrysler have already fallen foul of the National Development and Reform Commission (NDRC) this month amid a huge enquiry into alleged price-fixing of aftersales services such as repairs, maintenance and spare parts. The authority has also suggested that up to 12 Japanese manufacturers could face severe penalties in the near future, the Financial Times reports.

 

Now Mercedes-Benz is next in line, after NDRC chief Zhou Gao told Xinhua that the firm “uses its leading position to control the prices of its spare parts, repair and maintenance in downstream markets”.

The Xinhua story isn’t available in English but was reported by Reuters here.

In fact, the news provider said that the cost of replacing every spare part of the average Mercedes-Benz C-Class could be as many as 12 times higher than the cost of purchasing a new vehicle.

Daimler, which owns Mercedes-Benz, hasn’t commented yet, explaining that there is still an investigation underway. But the chances are that a penalty could hit them hard – Chinese law allows NDRC to fine a company up to ten per cent of its Chinese revenue from the previous financial year.

 

Given that China is the world’s largest car market and demand remains strong there – especially for luxury brands that appeal to the emerging middle class – the impact could be substantial.

Fortune reports that Chinese media have suggested a 250 million yuan (£24.3 million) fine could be levied at Audi, though there has been no announcement about what could lie in store for Chrysler.

Companies are taking note of the risks involved in pricing their aftersales services too high. Mercedes and BMW have both announced huge reductions in price, and it is likely that other companies will follow to avoid the wrath of Chinese authorities.

NDRC has repeatedly said that it isn’t deliberately targeting foreign companies. That said, a lot of foreign companies are likely to face major changes to their business models if they are to benefit from one of the world’s most promising automobile markets.

Thiago Kiwi

Thiago is the LSBF Blog Editor who manages news and features content on the site, and writes about business, finance, technology, education and careers.

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