Foreign Profits at Risk in China

Chinese regulators' probes into foreign companies' pricing and competitiveness may squeeze the high margins those companies have grown used to in China.

China’s antitrust crackdown signals a new era of regulatory scrutiny in the country and threatens to end the days when products from Audi sedans to Starbucks lattes generate fatter profits in Beijing than in London or New York.

In the past month, Chinese antitrust authorities pressured at least seven carmakers to cut prices and raided the offices of software maker Microsoft Corp. The companies join Qualcomm Inc., Caterpillar Inc., Mead Johnson Nutrition Co., and Danone among foreign-owned businesses that have fallen under anti-monopoly scrutiny in China since last year.

Oversight Triumvirate

While antitrust cases are pursued by the Justice Department and the Federal Trade Commission in the U.S., and the European Commission in that region, oversight in China has been split into three since its anti-monopoly law went into effect in 2008. Cases fall under NDRC jurisdiction when involving prices, the Ministry of Commerce assesses the legality of mergers and acquisitions, and other anti-competition cases fall under the SAIC.

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