Daimler AG share price down, China fines Mercedes-Benz $56 million for price manipulations

A local branch of Chinas competition regulator said on Thursday it has fined Daimler AGs Mercedes-Benz 350 million yuan ($56 million) for allegedly fixing prices of some models and spare parts.

In the latest crackdown on a multinational company striving to tap Chinas growing markets, the eastern Jiangsu provinces price regulator said Mercedes carried out monopoly agreements with dealers to cap the lowest sales prices of the its E-Class and S-Class models, as well as certain spare parts. The National Development and Reform Commission said the premium car maker had pressured dealers to comply, and had given warnings to those who resisted.

The penalty amounts to 7% of Mercedes revenue in the province last year, 3% below the cap for a fine Chinese authorities can impose on a company based on its sales for the previous year. Some Mercedes dealers were also fined, by a total 7.7 million yuan.

“The practices excluded and limited market competition and hurt consumer interests,” the regulator said in a statement. The German luxury car maker had braced for a fine ever since Mercedes Shanghai office was raided by government investigators last year.

“Mercedes-Benz China accepts the decision and takes its responsibilities under competition law very seriously,” Daimler said. “We have taken all appropriate steps to ensure to fully comply with the law.”

Mercedes is the latest in a series of foreign automobile companies that were investigated and fined by China antitrust authorities last year, mainly for their pricing policies for spare parts and after-market services. As a result of the investigations, coupled with media accusations of excessive profits from Chinese buyers, many foreign premium car makers cut prices of cars, spare parts and after-market services. Premium sedans are typically sold at higher prices in China compared to Europe and the US.

Volkswagens premium division Audi received a penalty of 250 million yuan last September, while Fiats Chrysler had to pay 32 million yuan, both for allegedly overcharging Chinese customers for cars and after-market services.

Separately, the NDRC imposed a combined 1.24-billion-yuan fine on 10 Japanese auto-parts and bearings makers last August for antitrust activities. In February, US chipmaker Qualcomm was fined $1 billion, while in 2013 regulators levied six milk powder companies a total $110 million for price fixing and anti-competitive practices.

As with Audis case, Mercedes fine could have been much higher, if similar price manipulations were discovered in other provinces. Still, the penalty is only a minor setback for the German luxury car maker, which saw its sales in China surge almost 30% to 280 000 units last year. Daimler doesnt separate its revenue from Mercedes-Benz vehicles in China. The brand generated revenue of €22.39 billion in Asia last year, with China being its single largest market in the region. The country accounted for about 10% of Daimlers sales in 2014 at little over €13 billion.

Daimler AG lost 1.49% to close at €86.19 per share in Frankfurt yesterday, but, however, marked a one-year increase of 27.03%. The company is valued at €93.60 billion. According to the Financial Times, the 27 analysts offering 12-month price targets for Daimler AG have a median target of €92.00, with a high estimate of €110.00 and a low estimate of €61.00. The median estimate represents a 6.74% increase from the closing price of €86.19.