June 5, 2019 / 3:07 AM / 6 months ago

China fines Ford's Changan venture $24 million for antitrust violations

SHANGHAI (Reuters) - China’s market regulator fined Ford Motor Co’s main local joint venture 162.8 million yuan (£18.5 million) on Wednesday for violating anti-monopoly laws, the latest automaker with foreign partners to face such penalties.

FILE PHOTO: New Ford Focus is presented during a media preview of the Auto China 2018 motor show in Beijing, China April 25, 2018. REUTERS/Damir Sagolj

The move comes amid an intensifying trade war between the United States and China, and as Washington put Chinese tech giant Huawei on a trade blacklist, raising concerns among U.S. firms that they might be targeted for retaliation.

The State Administration for Market Regulation (SAMR) said on its website that Ford’s joint venture with Chongqing Changan Automobile Co, Changan Ford, had breached the law by setting a minimum resale price for its cars in the Chinese municipality of Chongqing since 2013.

The joint venture, which is owned 50:50 by Ford and Changan Auto, did not provide evidence that this complied with the country’s anti-monopoly law during the investigation, it said.

“Changan Ford’s actions deprived downstream dealers of their pricing autonomy, excluded and restricted competition within the brand, as well as damaged fair competition in the market and consumer’s legal interests,” it said.

The fine is equivalent to 4% of the joint venture’s sales in Chongqing last year, it said.

Changan Ford told Reuters that it respected the regulator’s decision and had taken corrective action in its regional sales management together with its dealers.

“Changan Ford will continue to ensure its business activities contribute to a free and fair competitive environment,” it said.

Other automakers which have been punished by China for violating its anti-monopoly laws in the past include General Motors’ joint venture, which was fined $29 million in 2016, as well as Audi and Fiat Chrysler.

Changan Auto shares fell by more than 5 percent after the news on Wednesday morning, before cutting some of the losses to be down 3.7 percent in the afternoon.

Some analysts said setting of such minimum resale prices was not unusual in China.

“Every automaker makes efforts to protect its brand’s resale value. Sometimes their actions might be seen as crossing a line such as with price basements,” said Michael Dunne, chief executive officer of California-based consultancy ZoZo Go and a former General Motors executive.

WARNING SHOT?

Amid the escalating trade war, Beijing announced last week that it was launching an investigation into FedEx Corp and would draft a hit-list of “unreliable” foreign firms and individuals that harm the interests of Chinese companies without giving any names.

Dunne said the fine could be seen as a “warning shot”. “China could at any time and for any number of reasons launch a wholesale investigation of any global automaker’s operations in China. That is the reality,” he said.

Ford and Lincoln cars faced unusual delays at customs in May 2018, when trade tensions between the two countries began escalating.

SAMR did not mention the trade war in its announcement of the Ford venture’s fine.

Ford has been struggling to revive sales in China - the second biggest market globally for the Dearborn, Michigan-based automaker - where its business began slumping in late 2017.

Its sales slumped 37 percent year on year to 752,000 units in 2018, after a 6 percent decline in 2017. Changan’s president told Reuters in April that it expects sales at its Ford joint venture to rebound at the end of this year.

Reporting by Brenda Goh and Yilei Sun; Editing by Christopher Cushing and Muralikumar Anantharaman

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