Food and flirting; how firms learn to live with China antitrust raids

Mon Aug 11, 2014 12:32am EDT
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By Michelle Price and Norihiko Shirouzu

HONG KONG/BEIJING (Reuters) - In the early afternoon of Monday, Aug. 4, ten men in suits and casual business wear barged into a busy office at Mercedes-Benz's east China sales office, near Shanghai's Hongqiao international airport.

"People were starting a new week and were just back from lunch, when the men arrived," said a person familiar with the scene. "They didn't have the slightest idea they were coming to rip the office apart and question people for data and information for the next 10 hours," he said, adding the men were antitrust investigators from China's National Development and Reform Commission (NDRC).

Such U.S. and European-style "dawn raids" have become a powerful weapon for China's increasingly aggressive antitrust enforcement agencies, the NDRC and the State Administration for Industry and Commerce (SAIC), allowing them to seize evidence that may aid broader probes into antitrust violations or corruption.

Several major foreign companies have been raided in recent months - from car and drugs manufacturers to technology firms such as U.S. software giant Microsoft Corp - as China steps up enforcement of a 2008 anti-monopoly law.

The raids have spawned a cottage industry in preparing multinational companies on some basic do's and don'ts in the event of a surprise visit.

Companies are giving staff practical coaching, including holding mock raids, and bringing in legal experts to train them on how to handle intense, on-the-spot questioning, negotiate cultural hurdles, and make contingency arrangements to source emergency legal advice.

"We're seeing an increase in the sophistication of the enforcement agencies, and personnel," said Marc Waha, a partner in the antitrust practice at law firm Norton Rose Fulbright in Hong Kong. "They've spent a lot of time with other agencies in Germany and Europe learning about conducting investigations and the value of onsite inspections. That's why we're seeing more active enforcement."


A Mercedez-Benz sign is seen at a dealership in downtown Shanghai in this August 5, 2014 file photo. To match CHINA-ANTITRUST/RAIDS  REUTERS/Carlos Barria/Files