China targets foreign auto sector with Mercedes probe

SHANGHAI - China's probes into foreign firms spread to the auto sector Tuesday as German car giant Daimler said it was assisting authorities after reports anti-monopoly investigators raided an office of its Mercedes-Benz unit.

"We confirm that we are assisting the authorities in their investigation," Daimler Greater China said in an email to AFP.

Analysts said the move marked an escalation of previous scrutiny of foreign automakers in China, the world's largest car market, following investigations of overseas firms in several other sectors over the past year.

A team of nine anti-monopoly investigators from China's National Development and Reform Commission (NDRC) paid a surprise visit to a Mercedes-Benz premises in Shanghai on Monday, grilled employees and "forcibly" checked computers, reported Jiemian, a new media platform of state-run Shanghai United Media Group.

Daimler, maker of Mercedes-Benz and Smart cars, did not directly refer to the incident in its statement but said the matter was ongoing.

The report quoted an unnamed source saying that the investigation focused on "Benz's prices of finished automobiles and its policy of maintaining minimum prices with distributors".

"It is an escalation from what they (authorities) were doing," said Namrita Chow, principal analyst for IHS Automotive in London. "The NDRC has had probes into different pricing strategies... however, nothing was done about it." She added the latest investigation did not appear to be into an organised pricing cartel, but rather what China considered to be unfairly high prices for spare parts and automobiles compared with other markets.

Beijing imposes heavy duties on imported cars and parts, which manufacturers say ramp up prices for Chinese consumers.

The NDRC is one of several Chinese government bodies that investigates violations of the country's "anti-monopoly" law. It is responsible for doing so from a pricing perspective.

On Sunday, Daimler announced it would slash prices of more than 10,000 spare parts for its Mercedes-Benz cars in China from September 1, according to a separate statement that linked the move to a pricing and "anti-monopoly" investigation of the entire Chinese auto industry.

Pharmaceuticals to milk powder

The Mercedes-Benz office, in a western suburb of Shanghai, includes a dealership with a showroom and a service centre.

Several showroom employees told AFP they were unaware of any investigation.

But a security guard said the premises were visited by an investigation team two days in a row.

"They were here all day yesterday and three or four hours this morning," he said.

A sign outside says it is an authorised dealer of Mercedes-Benz China and the Beijing Benz Automotive Co. - a joint venture between Daimler and Chinese partner BAIC Motor, which has been producing Mercedes-Benz passenger cars since 2006.

Since last year, China has launched sweeping probes into alleged wrongdoings by foreign companies in several sectors, including the pharmaceutical and baby milk powder industries.

Last week, a Chinese government agency said it was investigating US software giant Microsoft for allegedly operating a monopoly in its market after raiding four of its offices around the country.

The State Administration for Industry and Commerce (SAIC), which also enforces the anti-monopoly law, said that probe centres on Microsoft's Windows operating system - which is used on the vast majority of computers in China - and the Office suite of programs.

The SAIC on Monday warned Microsoft not to "obstruct" the investigation in a meeting with the company's deputy general counsel Mary Snapp, according to a statement on its website.

In another chill for US tech firms, state media have said China is planning to announce US chip maker Qualcomm has monopoly status in the mobile phone chip market.

Over the weekend, a newspaper said that the government had left two foreign firms specialising in Internet security, Symantec of the United States and Russia-headquartered Kaspersky, off a list for procurement in favour of domestic firms.

And last year, China fined six baby formula producers - all but one of them foreign - a total of $108 million for price-fixing.