Mercedez-Benz latest in firing line for price-fixing

German car manufacturer Mercedes-Benz is the most recent global automotive brand found to be manipulating the price of spare parts in China, the official Xinhua news agency reported.

The National Development and Reform Commission concluded that the luxury unit of Germany’s Daimler violated provisions of China’s anti-monopoly law. The severity of the sanctions have yet to be announced.

Mercedez-Benz join Audi, Chrysler, BMW and a number of Japanese manufacturers in a catalogue of similar investigations.

In addition, several pharmaceutical, technology and food manufacturers have encountered enquiries of this nature.

During investigations, representatives from the anti-monopoly bureau of the eastern province of Jiangsu reported that the price of purchasing parts for one Mercedez C-class vehicle equated to the cost of buying 12 cars, according to the Xinhua report.

In discussions last week, members of the European Chamber of Commerce questioned whether foreign companies were being targeted excessively.

The latest developments could have a disconcerting effect on global supply chains.

Ben Bird, director at procurement and supply chain specialist, Vendigital, told TM: “Mercedes Benz is the latest in a line of global brands that have come a cropper in China due to a breach of bribery and corruption policies and this is having an unsettling effect on global supply chains.

“From an outsider’s perspective, it could seem that this action against prominent Western companies is arbitrary in nature but it is quite definitely politically motivated and it is likely that Mercedes Benz, like others before them, has been singled out for a reason.

“Businesses that go to China simply seeking to profit from their exposure to the market will be unlikely to find that things run smoothly.

“The National Development and Reform Commission (NDRC), the agency responsible for administrative control of the Chinese economy, will be more inclined to spot corrupt or anti-competitive working practices in businesses that are just interested in profiting from China rather than those that are bringing something valuable to the country that will enable its economy to grow in the future.

“Simply put, if China doesn’t feel it is learning from a business, or a business is just exploiting an advantage it has, it will gently or abruptly stop it with import tariffs or corruption investigations, or more subtly with changes to joint venture ownerships, ease of doing business, or taxation, for example.

“It is possible that some Western businesses will be considering moving out of China because the risks are becoming too great. However, this would be an over-reaction. Instead, they may need to find new strategies to minimise the associated risks.

“They should start by making sure their corruption and anti-bribery policies are robust and, where necessary, to make sure that local expertise is employed to guide them on the correct protocols.

“It is also important to recognise the importance of providing a service in terms of educating the local market in addition to selling its product or technology.

“The local partner will usually receive significant capital or taxation incentives, on top of the benefit gained by working with and learning from an incoming company.”