Paul French
Paul French

A larger number of foreign companies have been accused of price-fixing. For all the wrong reasons, and based on little proof, argues author Paul French in Ethical Corporation. They include “Unilever, Qualcomm, Mercedes-Benz, Audi, Chrysler, Microsoft, BMW, Nike, a whole bunch of Japanese car parts manufacturers and quite a few other corporations”.

Paul French:

Right now it seems allegations of price-fixing are being used to punish anyone raising prices and the courts feel little need to prove the essential collusion between manufacturers, distributors and retailers that is the legal essence of price-fixing. Car, pharmaceutical and tech companies seem to be most in the spotlight, all areas where Beijing would like to see more customer support for local firms.

Ultimately this could all rebound on Beijing. Does anybody really believe that all these foreign companies are colluding to fix prices in China in a host of secret meetings and cabals? Certainly proof is decidedly thin on the ground. And if foreign car brands drop their prices then surely this will only increase the price pressure on rival, local brands? Additionally, many foreign manufacturers, usually citing wage rises, have been moving production to other locations. Feeling especially put upon by the Chinese authorities may speed up this process. Certainly foreign direct investment in China is down (in July it was at its lowest for several years) but how much this is due to relocation of manufacturing, diversification of sourcing or the crackdown is unclear.

China may want to remain cheap, Beijing may want local companies (which, of course, are also faced with rising costs) to dominate, but staving off the inevitable by punishing companies with massive fines may just accelerate the process of relocation and job loss. It seems a rather bodged response to a long-term problem.

More in Ethical Corporation.

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