No tolerance to monopoly
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China Daily, November 16, 2011
In a sign of a harsher-than-ever crackdown on monopolistic practices, the National Development and Reform Commission (NDRC) recently imposed a large fine on two drug companies in Shandong province.
Shandong Weifang Shuntong Pharmaceutical Co Ltd was fined 6.5 million yuan ($1.02 million) and Shandong Weifang Huaxin Medicine Trade Co Ltd was fined 100,000 yuan for their "monopoly" over the pricing of raw materials for a medicine used to combat high blood pressure.
An investigation by the NDRC's anti-monopoly department confirmed that the two companies signed an exclusive agent agreement with the country's only two providers of promethazine hydrochloride, a raw material used to make Reserpine. The agreement stipulated the two suppliers could not sell the material to a third party without their permission.
After establishing their monopoly over the supply of promethazine hydrochloride, the two drug companies then raised its price. Several Reserpine manufacturers were forced to halt production of the medicine as the cost of the raw material soared from 200 yuan per kilogram to as much as 1,350 yuan per kilogram.
Reserpine is included in the list of China's essential drugs and the NDRC's crackdown will help forestall unreasonable price rises for the medicine in the future, which will be a blessing to the more than 10 million high blood pressure patients, mostly low and middle-income sufferers, who rely on this medicine.
It is the first heavy anti-monopoly penalty the authorities have inflicted on domestic enterprises since the Anti-Monopoly Law came into force on Aug 1, 2008.
Article 46 of the law stipulates that the authority shall "confiscate the illegal gains and impose a fine of 1 to 10 percent of their sales revenue in the previous year" once businesses operate a monopoly agreement.
The 6.5 million yuan fine on Shuntong, which is more than 17 times its 377,000 yuan of illegal gains, shows the government's strengthened resolve to standardize the country's price-setting system and maintain market order.
The move was declared only days after the NDRC announced its probe into China Telecom and China Unicom for their alleged monopoly over domestic broadband access. Although the final results of the investigation will take some time, the probe into the two telecom giants marks a good beginning for the country's overdue action against any possible monopolistic practices by big State-owned enterprises.
During this critical period of economic and social transitions in the country, it is important the government maintain a zero-tolerance attitude to any rigged monopolistic practices in a bid to maintain the order of its still-fledgling market economy and ensure fair competition among all market participants.
