China Fines Shanghai-based Gold Shops for Price Manipulation

August 13, 2013 Leave a comment

Chinese gold stores fined for price manipulation

Xinhua 2013-08-13

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A Shanghai Laofengxiang store. (Photo/Xinhua)

Five Shanghai-based gold and jewelry stores and a local trade association have been fined a combined total of 10.59 million yuan (US$1.7 million) for manipulating the prices of their wares, China’s top economic planner said Monday. The five stores are Shanghai Laofengxiang, Shanghai Laomiao, First Asia Jewelry, Chenghuang Jewelry and Tianbao Longfeng, according to the National Development and Reform Commission (NDRC). The NDRC said probes by local pricing authorities found that the five stores had manipulated the retail prices of their gold and platinum jewelry in accordance with a pricing scheme created in cooperation with the Shanghai Gold & Jewelry Trade Association.Their practices harmed the legitimate interests of other business operators and consumers, the commission said. According to China’s anti-monopoly law, the trade association played a leading role in formulating and executing a monopoly agreement in this case and will receive a fine of 500,000 yuan (US$81,600), the maximum fine possible for this type of offense, the NDRC said.

The stores were fined a combined total of 10.09 million yuan (US$1.6 million), or 1% of their 2012 revenues, because they had voluntarily changed their illegal behavior before the probe and cooperated during the investigation, according to the commission.

The verdict marked the second anti-trust case revealed in the last week, as authorities have moved to clamp down on anti-competitive market conduct and clean up the country’s business environment.

On Wednesday, the NDRC announced fines totaling 670 million yuan (US$109 million) for six foreign baby formula companies operating on the mainland following an anti-trust probe, the largest such fines ever imposed for anti-trust infringement in China.

China’s anti-monopoly law stipulates that fines for a company may range from 1% to 10% of its total revenues from the previous year.

Chow Tai Fook Escapes Fine After Shanghai Price-Fixing Probe

Chow Tai Fook Jewelery Group Ltd., the world’s largest listed jewelry chain, wasn’t among five retailers fined by Chinese authorities for jewelery price manipulation after being included in an earlier industry probe.

Shanghai Laofengxiang Co., Shanghai Laomiao Gold Co., First Asia Jewelry, Chenghuang Jewelry, Tianbao Longfeng, and the Shanghai Gold & Jewelry Trade Association were fined a combined 10.59 million yuan ($1.7 million) for monopolistic pricing on gold and platinum products, the official Xinhua News Agency, said yesterday. The report, which cited the National Development and Reform Commission, didn’t name Chow Tai Fook.

The jewelry industry probe is the latest sign of increased scrutiny of business practices by the Chinese government. Global baby food brands were fined $109 million for price fixing. China has also detained some senior GlaxoSmithKline Plc executives on suspicion of economic crimes.

The jewelry investigation targeted a trade association rule limiting the variation in gold and platinum prices to no more than 2 percent or 3 percent of the prices it sets for the products, the official People’s Daily reported on July 19.

Local pricing authorities found that the five Shanghai-based retailers had manipulated the retail prices of their jewelry in accordance with a pricing system created by the association, hurting consumers’ interests, Xinhua said, citing the NDRC. The association will be fined the maximum 500,000 yuan and the retailers 1 percent of their 2012 revenues, or 10.09 million yuan, the news agency said.

Laofengxiang Co. and Shanghai Yuyuan Tourist Mart Co. said they won’t appeal fines of 3.23 million yuan and 5 million yuan respectively against their units, according to statements posted to the Shanghai Stock Exchange.

Chow Tai Fook said last month that the company’s sales in Shanghai were unaffected by the probe. Chow Sang Sang Holdings International Ltd. also wasn’t cited, according to the Xinhua report. Both companies are based in Hong Kong.

To contact the reporter on this story: Joshua Fellman in New York at jfellman@bloomberg.net

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