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EU UPDATE: Competition Law – Droit de la concurrence

The European automotive industry, in the eye of the storm of the Chinese authorities!

Since last year, Chinese regulators have launched extensive investigations into a number of large foreign groups, including pharmaceutical companies, manufacturers of infant milk or, recently, computer firms.

More recently, the powerful National Commission for Development and Reform Commission (NDRC), one of China's competition authorities, is investigating the business practices of more than 1,000 firms active in the local and foreign automotive industry, according to state media.

Four car dealers of the German manufacturer BMW have already been fined a total of about 1.6 million yuan (195,000 euros), officials said.

Located in Wuhan in Hubei province (center) - a major center of the automotive industry in China - these vendors have been accused of having "forged an agreement on the price," according to reported statement by the provincial authorities.

The four car dealers had agreed to charge their customers a fee for vehicle inspection before delivery, so that it belongs to the "duties and responsibilities" of the manufacturer and sellers, the statement said. 

The authorities deny all allegations of protectionism and claim that many local businesses are also being scrutinized.

The Statute of Monopolies which entered into force six years ago, expressly states in this regard that "no discrimination" between Chinese and foreign firms is made, as stressed by the Ministry of Commerce. So much so that a leading manufacturer of state will soon be officially singled out, says an official of the National Commission for Development and Reform Commission (NDRC), according to the China Daily.

The EU Chamber of Commerce in China fears that foreign groups are being disproportionately targeted and said it had received reports from its members claiming to be victims of intimidation by investigators to force them to accept the fines even before the conclusion of investigations.

Within the last year, several measures and decisions by the European Commission and Courts were adopted which may pose antitrust compliance risks for Chinese companies doing business within the European Union.

The above mentioned measures simply recall the general imperative for companies, especially when operating in a foreign country, to establish a strong compliance program with good business practices. Such programs must involve both management and employees to limit the risk of becoming subject to heavy penalties. 

A compliance program should include at least the following:

  • The appointment of a compliance officer;
  • The development and implementation of policies and procedures to ensure compliance with the Act and its regulations. These policies and procedures must be documented and maintained. If you are a legal entity, they must also be approved by a senior officer;
  • A legal risk assessment and documentation and the implementation of mitigation measures to address these risks;
  • If you have employees, agents or other persons authorized to act on your behalf, the development of a continuing education program for them. This must be documented and maintained;
  • A review of such policies and procedures to verify their effectiveness. Such a review should include your policies and procedures, your legal risk assessment and your training program. In addition, it is advisable that the review is conducted every two years.

Antitrust specialists can provide you with the necessary assistance in developing a strong and effective program.

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