SHANGHAI (Reuters) -- Mercedes-Benz has been found guilty of manipulating prices for aftersales services in China, the official Xinhua news agency reported, citing regulators.
The report made no mention of possible penalties, but China's 2008 anti-monopoly law allows the National Development and Reform Commission (NDRC), the country's antitrust regulator, to impose fines of between 1 percent and 10 percent of a company's China revenues for the previous year.
The foreign auto industry has been under particular scrutiny in recent years as China intensifies its efforts to bring companies into compliance with the 2008 legislation, with a wave of investigations prompting carmakers such as Mercedes, Audi and BMW to slash prices on spare parts in recent weeks.
The Jiangsu Province Price Bureau, which launched an investigation last month, found evidence of anti-competitive practices after raiding Mercedes dealerships in the eastern coastal province and an office in neighboring Shanghai, Xinhua said in its report on Sunday.
"It is a typical case of a vertical monopoly in which the carmaker uses its leading position to control the prices of its spare parts, repair and maintenance services in downstream markets," Zhou Gao, chief of the antitrust investigation at the Jiangsu bureau, was quoted as saying by Xinhua.
A Daimler spokesman repeated a statement, first made by Mercedes on Aug. 5, that it was assisting the authorities with their investigation, adding that it was unable to comment further as it was still an on-going matter.
Analysts at JP Morgan said the willingness of the German manufacturers to lower prices in China reduces the possibility of high fines but in the longer term could hit profitability.
Mercedes recently announced that it would reduce prices on some spare parts by an average of 15 percent and BMW said it would cut prices by an average of 20 percent, JP Morgan said. Audi has also said it will cut prices but did not specify by how much.
In the longer run, forcing European carmakers to lower the price of spare parts and imported vehicles could see margins in China normalize to levels currently seen in Europe, JP Morgan said in a note earlier this month.
"We believe that this might happen gradually over the next five years or more," the brokerage said, adding it sees an impact on earnings per share of around 3 percent for German carmakers.
JP Morgan said that if the price of spare parts and services fell 20 percent in China, Daimler and BMW's pretax profit would take a hit of around 1 percent in 2015, and Audi parent Volkswagen Group's pretax profit would fall by just under 3 percent.
Industry experts say automakers have too much leverage over car dealers and suppliers in China, enabling them to control prices, considered as a violation of the country's antitrust laws.
The Xinhua report said the cost of replacing all the spare parts in a Mercedes C class could be 12 times more than buying a new vehicle, citing a report from the China Automotive Maintenance and Repair Trade Association.
Earlier this month the NDRC said it would punish Audi and Chrysler for monopoly practices. Chinese media reported last week that Audi, the best-selling foreign premium car brand in China, would be fined about 250 million yuan (30.4 million euros).
Foreign car brands, all of which operate in China through joint ventures with a local partner, have been fiercely competing to up their share in the world's largest car market.
Mercedes parent Daimler has said that it wants to boost China sales of the premium brand to more than 300,000 cars a year by 2015, up from 218,045 in the market last year. Rival Audi expects China to make up 40 percent of its sales by 2020.
China's government has in the past few years stepped up its enforcement of its anti-monopoly law, slapping several multinational companies, including Mead Johnson Nutrition Co. and Danone, with fines. The government is conducting an anti-monopoly probe into U.S. tech giant Microsoft, and regulators also recently said U.S. chipmaker Qualcomm had a monopoly.