China Raids Mercedes Office in Shanghai in Antitrust Probe

Aug 05, 2014 9:51 am ET

(Updates with Chrysler’s comment in eighth paragraph.)

Aug. 5 (Bloomberg) -- Government investigators raided Daimler AG’s Mercedes-Benz office in Shanghai as part of an anti-monopoly probe a day after the German automaker announced plans to cut prices on replacement components next month.

“We confirm that we are assisting the authorities in their investigation,” Senol Bayrak, a spokesman for Daimler in China, said in an e-mail, declining to comment further.

The National Development and Reform Commission, China’s economic-planning body, is probing practices by Mercedes, larger German luxury-auto producers Audi and Bayerische Motoren Werke AG, and Japanese carmakers to see whether they’re inflating prices for spare parts, people familiar with the matter said in July. Audi’s Chinese joint venture said late last month that it’s cutting prices as much as 38 percent, and Mercedes outlined yesterday a 15 percent average reduction as of September.

“The timing is a bit confusing” for the Mercedes raid, said Han Weiqi, a Shanghai-based analyst at CSC International Holdings. “It may be because the cut hasn’t met the authorities’ expectations.”

Nine officials from the commission’s anti-monopoly department visited the Mercedes office in Shanghai yesterday without an appointment and questioned staff, Jiemian, a media outlet affiliated to Shanghai United Media Group, reported today.

Microsoft Raid

The investigation marks the latest step in China’s scrutiny of business practices by foreign companies in the world’s second-largest economy. Regulators opened an anti-monopoly investigation into Microsoft Corp. last month, seizing computers and documents from offices in four cities.

China National Radio, without saying where it got the information, reported today that the NDRC’s Shanghai branch and the Hubei province price bureau found Fiat SpA’s Chrysler division and Volkswagen AG’s premium Audi brand to be engaging in monopolistic practices and that they’ll be punished in the near future.

Chrysler said today that, in response to an antitrust probe by the NDRC and its Shanghai counterpart, it’s cutting prices on 145 components by 20 percent as well as what it charges customers for two Jeep sport-utility vehicles. The “voluntary proactive price adjustments showcase the commitment” of the company “to remain highly competitive in the market,” the U.S. carmaker’s Chinese sales unit said in an e-mailed statement.

Shares Drop

Turin, Italy-based Fiat, which is in the process of merging with Chrysler, dropped as much as 7.2 percent and was trading down 4.5 percent at 6.75 euros as of 3:51 p.m. in Milan. Daimler fell as much as 1.9 percent to 60.03 euros in Frankfurt, reversing a gain earlier today.

Mercedes, the world’s third-biggest manufacturer of luxury cars, will “take the initiative” to adjust the prices of more than 10,000 products as of Sept. 1 in response to the NDRC’s investigation, Stuttgart-based Daimler said on Aug. 3. The move will improve the carmaker’s competitiveness in after-sales services, it said.

BMW, the world’s biggest maker of premium vehicles, declined today to expand on comments yesterday that it’s in talks with the Chinese regulator about reducing prices for components and that the Munich-based manufacturer had already cut what it charged customers in China for spare parts in the first half of 2014.

Audi’s Chinese unit said in an e-mailed statement that the Ingolstadt-based carmaker attaches “great importance worldwide” to ensuring it adheres to all applicable antitrust and competition laws.

Tata Motors Ltd.’s Jaguar Land Rover said last month it cut prices on three models by an average of 200,000 yuan ($32,400) this month.

Some automakers have lowered prices after “they were contacted” by Chinese officials, China Daily reported on July 29, citing Xu Kunlin, director of the NDRC’s bureau of price supervision and anti-monopoly. Xu didn’t provide names of the suspected monopolies, the report said.

--With assistance from Alexandra Ho in Shanghai, Elisabeth Behrmann in Munich and Christoph Rauwald in Frankfurt.