6/20/2012

Korea Fair Trade Commission To Investigate European Car Makers

The Korea Times has reported that the Korea Fair Trade Commission is considering investigating BMW, Mercedes Benz, Audi, and Volkswagen for price fixing.  The Korea FTC has aggressively investigated both foreign and domestic companies for allegations of price fixing and other unfair trade practices.

The Korea Times article, in part, notes that:  
After monitoring the prices of BMW, Mercedes Benz, Audi and Volkswagen vehicles, the country’s most popular imported auto brands in that order, officials at the Fair Trade Commission (FTC) said Wednesday there are reasons to allege that these companies have been involved in profiteering and collusion.

FTC didn’t say whether or not it will conduct a probe but on the basis of findings, it reserves the right to do so at its own discretion.

The automakers have lowered the prices of their cars by an identical 1.4 percent after the Korea-EU free trade agreement (FTA) went into effect in July last year and reduced the Korean tariffs on their products by the same 2.4 percent. Tariffs will be cut by another 2.4 percent starting next month.

While drivers here had obviously hoped the price cuts to be more profound, the FTC appeared to be more interested in investigating the suspicions of price fixing.

``We collected information regarding the four carmakers to draw a broad picture of their sales and product circulation in the domestic market as well as evaluate the effect of the FTA,’’ said an FTC official.

``But we didn’t conduct on-site inspections or other investigative actions to confirm whether they breached the country’s fair trade law,’’ brushing away speculation that the watchdog is preparing a direct attack on the automakers’ pricing policies.

BMW’s popular 520d passenger car is currently being sold for 63.5 million won (about $55,200), although the shaving in tariffs suggests that the price tag could be 620,000 won lower than that, the FTC said.

The Mercedes Benz E200CGI is now available at 57.7 million won, although authorities prefer it to be 600,000 won cheaper.

Representatives of the European carmakers accused the Korean officials of oversimplifying the pricing logic, saying it’s unreasonable to request the carmakers to cut prices at the same rate of the reduction in tariffs.

``We have saved 2.4 percent of import prices under the FTA, but we have suffered increased domestic taxes and other extra costs for transportation and other sales activities. Considering this, our policy of selling a car at a price 1.4 percent lowered than before the FTA should be justifiable,’’ said one official.

In contrast to its European rivals, the U.S. automaker Ford has launched an aggressive promotion campaign in the domestic market and has lowered the prices at a sharper rate than the reduced tariffs under the Korea-U.S. FTA.

Some models are available at even 5.25 million won lower than prices set before the KORUS FTA, which carries the same effect of 9.8 percent of reduced tariffs.
The Korea Times article may be found at: European Carmakers May Face Probe for Price Fixing.
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Sean Hayes, IPG's Co-Chair of the Korea Practice Team, may be contacted at: SeanHayes@ipglegal.com