By Amine Mansour*
In a paper published in 2013, M. Connor asks if the Auto Parts market is evolving into a supercartel.
Since then, the industry has witnessed several developments (at the global stage). The most important ones occurred in the BRICS. In this regard, the South African Competition Commission has launched investigations in the automotive industry. The investigations are based on the suspicion that automotive component manufactures colluded when bidding for tenders to supply components to original equipments manufacturers (OEMs). Similar investigations are carried out by the Brazilian CADE since last February. These add to a larger group of investigations conducted by the CADE in the automotive component sector (See here and here ). In China, the NDRC already imposed a $200 million combined fine on 10 Japanese auto-part makers for manipulating prices of spare parts. In August 2014, the Indian Competition Commission imposed €350 million on 14 car companies. However the decision seems to sanction car companies’ abusive conduct that forecloses the after-market for supply of spare parts, not collusive behavior of OEMs. Several other antitrust authorities, mainly the Mexican and the South Korean ones, opened investigations targeting the auto parts industry.
Given all these developments, the question raised by M. Connor becomes, two years later, more and more relevant. The auto parts cartel is undoubtedly going to be remembered as one of the largest international cartels. M. Connor reports that the Auto-part cartel “has already surpassed the former champion, Air Cargo, in terms of number of companies accused and convicted”. However, unlike past cases, the BRICS find themselves not only in the heart of international investigations but also have taken the lead of this process.
In fact, the rapid spread of investigations to BRICS countries is more than a sort of a country to country effect. It is true that the South African Competition Commissioner, Tembinkosi Bonakele, states that “The Commission’s investigation into this pervasive collusive conduct joins similar investigations launched in other jurisdictions internationally”.
However, what is being met here underlines that almost every international antitrust case has an impact on the BRICS, either directly or indirectly. This translates into companies’ actions as they enter into a race in order to take advantage of the whistle blower and leniency programs established in these new/major jurisdictions. Given what is at stake, companies’ actions go beyond simple cooperation to incorporate self reporting of practices detected in adjacent markets. At least, this is what reveals the rapid expansion of investigations, which began in Europe, from one component, wire harness, (EU Commission) to over 121 automotive components in the South African case. A large part of cases were not opened as a consequence of the dissemination, through international cooperation, of information needed to open investigations but more as incentives grow to voluntary self disclosure of collusive conducts with the involvement of economically important markets. As competition agencies in these major markets become more and more proficient, there is a strong possibility that they will play a significant role in detection of international cartels mainly through the incentivizing effect of leniency programs.
Such a self-reporting and self-investigation dynamics are probably what explain the non-coordinated interventions of competition authorities in the BRICS. In South Africa, the case seems to me as a transversal case that affects the whole sector (82 automotive component manufacturers have colluded in respect of 121 automotive components) while in Brazil, CADE’s intervention is rather a disparate one (At least 4 different formal investigations). In the latter case, it appears that the CADE received different information at different intervals of time which translates again to this self investigation and self reporting trend by the involved companies.
The case is not only important in showing the growing importance of BRICS’ competition regimes and subsequently the parallel evolution of antitrust-risk management by companies operating in those markets.
It will also reveal how BRICS’ competition authorities are going to deal and prioritize investigations in markets of primary importance. In this case, the importance of that market results mainly from the growing urbanization and the increased need of mobility in emerging countries which most likely makes telecommunication and transport as expenditure items that experience the biggest growth in households’ portfolios. In this regard, it is legitimate to ask whether this may drive BRICS’ competition authorities to adopt a particular strategy in order to reassure consumers that they focus on markets where they direct or wish to direct their spending.
The South African Competition commission has it own answer. According to Tembinkosi Bonakele, the Competition Commissioner, the Commission “will prioritise the investigation of cases that involve automotive components that are in vehicles assembled in and supplied to the South African market”. Besides focusing mainly on the domestic impact of the considered practices or even adopting a tough line, another option in this case would be to open parallel investigations shedding some light on the secondary market (After-sale Market) or at least explain to the wider public that concerns are unjustified. From the perspective of consumers, these concerns are more than legitimate. It is easy to think that nothing prevents component manufacturers from supplying the same part to the same OEM for the sale on the after-market for a price that is no less than the one charged when colluding for tenders.
Waiting for further developments in these cases, one thing is clear: the BRICS countries have become main players in shaping global markets through their competition policies.
*Co-editor, Developing World Antitrust