Auto Companies Facing International Antitrust Issues

Raging competition for new middle class drivers in several rapidly emerging economies has led to some governmental push-back in recent weeks.

First China

In mid-August, China, the world's largest auto market, announced it was fining Audi – a unit of Volkswagen AG (ADR) VLKAY – $40.6 million (250 yuan) for breaking the nation's anti-monopoly law.

Chinese reports quote Audi as saying the company "closely cooperated with the investigation and will accept a penalty."

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The Financial Times, meanwhile, says Chinese officials are also investigating another front-runner in the nation's growing luxury car market, Mercedes-Benz, Daimler AG (USA) DDAIF, for similar breaches of the anti-monopoly laws. And Reuters reports Chrysler, part of Fiat S.p.A. (ADR) FIATY, is also under scrutiny in China for “anti-competitive behavior.”

And Then, India

Then, at the end of August, the Competition Commission of India (CCI) – the number six auto market on the globe – said it was fining over a dozen automakers, both domestic and international, for anti-competitive practices.

A CCI statement quoted by Reuters said the companies has been fined a total of $420 million (25.6 bilion rupees), after an investigation determined their anti-competitive conduct had “restricted the expansion of spare parts and independent repairers segment of the economy to its full potential, at the cost of the consumers, service providers and dealers.”

The international companies fined were Volkswagen's Skoda Auto unit, Daimler's Mercedes-Benz and Fiat – as well as Ford Motor Company, Nissan Motor Co Ltd (ADR), General Motors Company, Toyota Motor Corp (ADR) and Honda Motor Co Ltd (ADR).

Domestic Indian automakers Tata Motors , Maruti Suzuki Ltd, Hindustan Motors and Mahindra & Mahindra were also penalized.

Politicial Moves?

So what's going on? Analysts say some of the motivation behind these charges might be political.

Wall Street Journal, is using its relatively new anti-monopoly laws “to put foreign businesses under increasing pressure...as Beijing seeks greater sway over the prices paid by Chinese companies and consumers.”

India is apparently looking to protect its growing middle class. In its statement, the CCI noted that cars are now an “intrinsic part of life and living in today’s world, and the owners have to take care of their maintenance over a long period of time with significant financial implication.”

"As such,” the Commission continued, “anticompetitive conduct impacts a very large number of consumers in the country estimated to be 20 crore (200 million).”