In January, the National Development and Reform Commission ("NDRC") imposed penalties on six LCD manufacturers for colluding to fix the price of LCD panels in China. The NDRC investigation was conducted concurrently with investigations undertaken by US and European authorities. The penalties imposed on Samsung, LG, AUO Optronics, Chimei Innolux, HannStar and Chunghwa Picture Tubes were in response to collusive activities undertaken between 2001 and 2006. The collusive activities were arranged by the colluding parties at over 53 monthly meetings to exchange market information on LCD screens and reach agreements on pricing. All of these meetings took place outside of China.
The total penalties imposed by the NDRC for this collusion amounted to RMB ¥353 million, which included disgorgement of profits, administrative fines and restitution to Chinese TV manufacturers. In addition to the financial penalties, the LCD manufacturers agreed to certain corrective actions including the extension of panel warranty periods from 18 months to 36 months and undertaking to comply with Chinese law and operate in a fair manner with respect to the provision of up-to-date technology to PRC TV manufacturers.
It was notable that these penalties were rendered under the PRC's Price Law, which precludes collusion in setting a market price that damages consumer interests, rather than under the PRC's Anti-Monopoly Law, which was not in effect when the collusive activities occurred. This is the first time that the PRC Price Law has been given extra-territorial application.
This action reflects a more aggressive posture on the part the PRC authorities with respect to the extra-territorial application of China's regulations. It is anticipated that future actions of this type will be brought under the PRC's Anti-Monopoly Law, which clearly provides for extra-territorial application. It should also noted that penalties under the Anti-Monopoly Law, which are tied to annual turnover of violating party, would produce a larger penalty than that calculated pursuant to the PRC's Price Law, which is tied to disgorgement of profits.
Foreign multi-nationals should consider Chinese competition law issues in their business activities in China as the application of PRC Anti-Monopoly Law is not being limited to the review of business combinations. Business practices are now under investigation as the PRC authorities review market positions. More aggressive enforcement can be expected in the future.