Price collusion and price discrimination dominated by multinational enterprises have been investigated and punished by China's antitrust authorities since 2013. Based on Japanese auto parts companies' price bidding collusion case, this paper models the behavior of inputs price collusion and transfer pricing inside these enterprise groups under vertical equity-related structure. Comparative static analysis shows that price bidding collusion between affiliated enterprises does not align with the goal of "profit maximization". Actually, the collusion just acts as a tool for multinational enterprises as real controllers to transfer profits from downstream vehicle joint ventures to their upstream parts companies in the background of asymmetric equity ratio and profitability between downstream and upstream firms. This paper confirms the desirability of profit transfer hypothesis from the perspectives of equity ratio and enterprise operation modes, and also deep analyzes the real contradictions faced by structure-conspiracy rules by the combination of the relationship between market structure and profits in main market segments. It provides the main policy recommendations that antitrust legislation in Chinese automobile industry should involve from "behavior punishment" to "regulation intervention", more evidence supported by industrial organization analysis should increase appropriately to improve the scientific level of law enforcement, and the principle of reasonable presumption should be more used to avoid inadequate intervention on enterprise behavior.
Vertical Structure and Paradox Analysis of Input Goods Bidding Collusion:Some Reflections on “Monopoly Agreement” Case of Japanese Auto Parts Enterprises
Journal of Finance and Economics Vol. 42, Issue 05, pp. 111 - 122 (2016) DOI:10.16538/j.cnki.jfe.2016.05.010
Cite this article
Bai Rangrang. Vertical Structure and Paradox Analysis of Input Goods Bidding Collusion:Some Reflections on “Monopoly Agreement” Case of Japanese Auto Parts Enterprises[J]. Journal of Finance and Economics, 2016, 42(5): 111–122.
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