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China says only 'heavy punches' will dent rising monopoly behavior

By Xiaoyi Shao and Michael Martina

BEIJING (Reuters) - A heavy-handed approach is needed to halt a rise in monopolistic behavior by companies in China, a senior official said on Tuesday, in a sign that an antitrust campaign which has already ensnared top global firms could get tougher.

"Only heavy punches will work," Xu Kunlin, head of the anti-monopoly bureau at the National Development and Reform Commission (NDRC), told a business forum in Beijing.

"It's easy to find evidence on many firms' monopolistic behavior in China," Xu said in his speech. "Some of it could be found on the Internet," he added, noting the ease of discovery was the reason why investigations had been so successful.

The NDRC is China's top economic planning body but it also regulates prices. It has launched a spate of antitrust investigations across sectors ranging from pharmaceuticals to milk powder and jewellery in recent months. In particular, authorities are paying attention to whether manufacturers are forcing retailers to set minimum prices for products, which would contravene a 2008 anti-monopoly law.

China's leaders are trying to restructure the economy to one where growth is driven by consumers, and while Xu did not mention any specific companies or industries, he said investigations would focus more on sectors affecting the lives of ordinary people. He added that competition policy should be a key economic policy area for China.

Speaking later to Reuters, Xu said authorities had some targets for future investigations, but he declined to give specific details.

Antitrust experts cautioned, however, that while Xu's rhetoric sounded serious, it was still too early to say whether it would translate into benefits for consumers.

"Obviously, he's a senior enforcer in the government and what he says, if it's followed through, would have a significant effect, and hopefully a beneficial one," said Mark Williams, a law professor at Hong Kong Polytechnic University.

"Lots of consumers in China suffer as a result of cartel practices. It would be nice to think the government is on the side of consumers rather than producers," he added, noting though that the government also owns many of the producers, leading to possible conflicts of interest.

BANK CHARGES

The NDRC said in a separate statement that it will begin an investigation into service charges and fees levied on smaller companies by banks. The probe, set to be completed by June, will cover the construction, transport and environmental protection industries, among others, and will target "irregular charges" in an effort to reduce the burden on companies, the statement said.

"The focus of this inspection is arbitrary bank charges," Xu told the forum, adding that the regulator has received over 20 complaints about bank charges. "Many commercial banks only collect charges, but provide no service," he said.

Xu reiterated during his speech that the recent spate of anti-monopoly investigations in China were not aimed at specific companies or foreign firms. "It would not be objective to say the investigations target foreign firms because they involve foreign firms," he said, adding that antitrust investigations would become routine and people would get used to them.

The NDRC has launched nearly 20 pricing-related probes into domestic and foreign firms in the last three years, according to official media reports and research published by law firms.

It fined a group of mostly foreign milk powder producers, including Mead Johnson Nutrition Co and Danone , a total of $110 million for price fixing last month.

The agency is also investigating the pricing practices of 60 local and foreign pharmaceutical firms. Autos, telecoms and banks might come next, regulators have suggested.

Some antitrust experts argue foreign companies have been more vulnerable to regulators since they lack domestic political backing.

(Writing by Jonathan Standing; Editing by Dean Yates and Ian Geoghegan)

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