The State Administration of Market Supervision and Administration solicits public comments on the “Automobile Industry Price Conduct Compliance Guide”

Zhitong Finance App learned that on December 12, the State Administration of Market Supervision and Administration solicited public comments on the “Automobile Industry Price Conduct Compliance Guide (Draft for Comments)”. Focus on the new car sales process and focus on regulating outstanding issues such as failure to clearly label prices in accordance with regulations and false promotions. The first is to refine clear pricing rules, require business establishments and online platforms to display true and accurate product and service information, strictly distinguish between automobile product prices and sales service prices, and strictly prohibit price increases in addition to the price. The second is to regulate promotional behavior, requiring that promotion rules, periods and restrictions be clearly publicized, and that giveaway information be accurately indicated. The third is to refine the forms of price fraud and clearly prohibit acts such as misleading pricing, false price comparisons, and failure to fulfill price promises. Fourth, establish a risk alert mechanism to encourage the platform to provide two-way reminders of business risks and consumption risks for significant low price behavior. Fifth, regulate service charges, and strictly prohibit acts such as simply charging no service, repeated charges, and passing on charges.

The original text is as follows:

Price Conduct Compliance Guide for the Automobile Industry (Draft for Comments)

Chapter I General Provisions

Article 1. In order to further regulate price behavior in the automobile industry, maintain price order and fair competition in the automobile market, protect the legitimate rights and interests of consumers and operators, guide automobile manufacturers and sales enterprises to strengthen price compliance, and promote high-quality industry development, this guide is formulated in accordance with the “Price Law of the People's Republic of China”, “Administrative Penalties for Price Violations”, “Provisions on Clear Pricing and Prohibition of Price Fraud”, “Provisions on Combating Low Price Dumping”, and “Interim Provisions on Regulating Promotion Conduct”.

Article 2 This Guide applies to price acts occurring during automobile production and new car sales activities within the People's Republic of China.

Article 3. All business entities in the automobile industry shall follow the basic principles of legal compliance, openness and transparency, equality, voluntariness, honesty and trustworthiness, and their price behavior shall comply with laws, regulations and relevant policy requirements.

Article 4. All business entities in the automobile industry focus on national strategies, play a role in developing the economy, expanding employment, improving people's livelihood, scientific and technological innovation, etc., and actively assume social responsibility to promote the high-quality development of the automobile industry.

Article 5. Under the guidance of government departments, associations relating to the automobile industry shall establish and improve industry standards, strengthen industry self-discipline, and promote the construction of industry price compliance.

Chapter II Price Behavior of Automobile Manufacturers

Article 6 Automobile manufacturers establish pricing strategies based on production costs and guided by market supply and demand, and implement full-chain price behavior management for their vehicle sales, financial services, etc., to ensure price behavior standards.

Article 7. The rebate policy of an automobile manufacturer shall be clear and unequivocal, and agreed with the dealer in advance by means of a contract or other means.

Article 8 Automobile manufacturers shall respect the right of automobile dealers to set their own prices and follow the principles of fair trade and equal consultation in cooperation.

Article 9. There is a major legal risk of implementing the following price collusion between automobile manufacturers and auto parts manufacturers:

(1) Fix or change the price level of automobiles and spare parts;

(2) Fix or change the extent of price changes;

(3) Agreed to adopt uniform price calculation standards;

(4) Other price collusion.

Article 10. In addition to cutting prices and dealing with backlog products in accordance with law, automobile manufacturers carry out the following price acts for the purpose of excluding competitors or monopolizing the market, which poses a major legal risk:

(1) The ex-factory price of the vehicle and parts is lower than its production cost;

(2) Using high specifications, high grades as low specifications, low grades, etc. to reduce prices in disguise, so that the actual factory price is lower than its production cost;

(3) By adopting preferential price measures such as discounts and subsidies, the actual factory price is lower than its production cost;

(4) Exchange non-equivalent materials in series so that the actual factory price is lower than the production cost;

(5) By settling debts with goods, the actual factory price is lower than its production cost;

(6) Adopt the method of shipping more and less invoicing, so that the actual factory price is lower than its production cost;

(7) Reduce the price in disguise by giving more quantity, etc., so that the actual factory price is lower than its production cost;

(8) In tenders and tenders, the actual factory price is lower than its production cost by lowering the list price, etc.;

(9) Use other methods to make the actual factory price lower than its production cost.

The production costs of automobile manufacturers include manufacturing costs and period expenses composed of management expenses, financial expenses, and sales expenses. Ex-factory price refers to the invoiced price sold by an automobile manufacturer to a dealer, trader, etc.

Article 11 When there is a serious imbalance between supply and demand in the automobile supply chain, there is no significant change in the cost of auto parts manufacturers, and prices are raised drastically without justifiable reasons, disrupting the normal order of the market, and there is a great legal risk.

Article 12 Automobile manufacturers providing the same automobile products or services shall not discriminate in price against dealers and traders with the same trading conditions.

Article 13 Automobile manufacturing and sales enterprises shall regulate the charging behavior of “paying to unlock” functions.

(1) For the free period function, details such as the free period and subsequent fee standards shall be notified at the time of sale. The free period is calculated from the date the vehicle is delivered to the consumer, and the consumer shall be reminded again before the free period ends;

(2) Differentiated value-added functions that require a fee shall be clearly notified at the time of sale, and differentiated value-added functions that are not clearly announced shall not be charged.

Chapter III Price Behavior of Automobile Dealers

Article 14 Automobile sales enterprises shall clearly label the prices of goods sold or services provided in accordance with regulations.

(1) The operator shall clearly label the price in a prominent manner at the place of business, indicating the vehicle name, sales price, pricing unit, model, manufacturer, main configuration, standard parameters, etc. If there are optional accessories, indicate the name, price, specifications, place of origin, etc. of the optional accessories. If the vehicle cannot be delivered on site, the delivery time must be clearly communicated before the transaction;

(2) The operator may choose to clearly label the price using price tags (including electronic price tags), price tags, price lists (books), display boards, electronic screens, product physical or model displays, picture displays, and other valid forms;

(3) Where there are many products or service items, the price may be clearly marked using electronic search methods at the same time. Where it is impossible to publicize all the details in prominent places at the place of business at once, consumers should be informed of ways or means to easily obtain the details of the clearly marked price;

(4) Where an operator sells automobiles through an online platform, it shall clearly label the price by means of text, images, etc. through a website. Where the delivery of related accessories or products is involved, it shall also indicate the delivery method, transportation cost, payment method, etc.;

(5) If the color, place of origin, process, specifications and brands of accessories have an impact on the price, they must be clearly marked. Where different prices are applied according to different trading conditions, the transaction conditions and the corresponding price shall be indicated;

(6) When the price changes, the operator shall adjust the corresponding price in a timely manner.

The “sales price” in item 1 of the preceding paragraph refers to the price set independently by the automobile sales company, not the manufacturer's guide price.

Article 15 Automobile sales enterprises shall abide by the following regulations when carrying out promotional activities:

(1) Prominently publicize promotion rules, activity period, scope of application, etc.;

(2) Truly indicate the basis for discount and price reduction;

(3) Where discounts are made through points, gift vouchers, vouchers, advance payments, etc., the specific method of calculation shall be clearly indicated;

(4) Where subsidy promotions are carried out, information such as subsidy recipients, subsidy methods, participation conditions, and start and end times should also be displayed prominently.

Article 16 Automobile sales enterprises shall regulate the act of extra-price gifts.

An off-price gift is a free gift of a certain amount of shopping vouchers, gifts, preferential treatment, etc. given to consumers.

Where a free item or service (hereinafter referred to as a gift) is used, the name, quantity, etc. of the giveaway item must be indicated truthfully, or the item, number of free services, etc., or display a physical sample of the giveaway. The price or value of the giveaway shall be exhaustive, and the price or value shown shall be true and grounded. If there is a reasonable reason, the price or value of the giveaway may not be indicated. Gift redemptions with additional price conditions (such as scope of use, place of exchange, etc.) must also be clearly publicized.

Article 17 Automobile sales enterprises operate in good faith and must not use false or misleading price methods to trick consumers. There is a great legal risk if you commit the following acts:

(1) Using deceptive or misleading language, text, numbers, images, or videos to indicate prices and other price information;

(2) Using false “market prices,” “manufacturer's guide prices,” and “market reference prices” to promote compared prices;

(3) Misrepresenting “limited-time price reduction”, “clearance price”, etc., and the compared price marked during the price reduction promotion is higher than the lowest transaction price within seven days before this promotion at the same place of business;

(4) Where a loan is used to purchase a car, purchase insurance, etc. as an additional condition of the transaction, it is not notified or clearly marked before the transaction;

(5) Refusing to fulfill or not fully fulfill price promises without justifiable reasons, and promises about car prices, gift values, after-sales service costs, etc. have not actually been fulfilled;

(6) Promoting at low prices; no related products are actually sold;

(7) When using points, gift vouchers, vouchers, vouchers, etc. to discount the price, the agreed discount is refused.

Article 18 In addition to reducing prices and dealing with backlog products in accordance with law, automobile sales enterprises carry out the following price acts with the aim of excluding competitors or monopolizing the market, which poses a major legal risk:

(1) The price of the sold goods is lower than the purchase cost;

(2) Using methods such as high specifications and high grades to offset low specifications and low grades to reduce prices in disguise, so that the actual sales price is lower than the purchase cost;

(3) By adopting preferential price measures such as discounts and subsidies, the actual sales price is lower than the purchase cost;

(4) Exchange non-equivalent materials in series so that the actual sales price is lower than the purchase cost;

(5) By settling debts with goods, the actual sales price is lower than the purchase cost;

(6) Adopt the method of shipping more and less invoicing, so that the actual sales price is lower than the purchase cost;

(7) Reduce prices in disguise by giving more quantity, batch discounts, etc., so that the actual sales price is lower than the purchase cost;

(8) In tendering and bidding, the actual sales price is lower than the purchase cost by lowering the list price, etc.;

(9) Use other methods to make the actual sales price lower than the purchase cost.

Article 19 Third-party platform operators of automobile trading networks (hereinafter referred to as “platform operators”) shall perform platform management responsibilities in accordance with law and regulate the price behavior of operators within the platform:

(1) Platform operators shall respect the independent pricing rights of the operators within the platform, shall not use service agreements, trading rules, technical means or other methods to unreasonably restrict or attach unreasonable conditions to the prices of the products or services of the operators within the platform, and prohibit coercion or disguise the participation of operators within the platform in price promotion activities;

(2) Where a platform operator initiates or organizes price promotion activities, and knows or should have known that the operator within the platform has committed price violations in the promotional activities organized by it, it shall immediately take necessary disposal measures such as warning, suspension or termination of services to correct them and keep relevant records;

(3) When market supervision and administration departments carry out price supervision, inspection, investigation and processing of operators within the platform in accordance with law, platform operators shall actively cooperate to provide necessary data information, technical support and assistance.

Article 20 When the price displayed by the operator within the platform is significantly lower than the manufacturer's guide price or market price level, the platform operator is encouraged to promptly remind the operator within the platform to operate reasonably and lawfully in accordance with market supply and demand and its own business conditions, regulate their own price behavior, and at the same time remind consumers that the low price may present a risk of abnormal transactions.

Article 21 After charging service fees related to automobile sales, automobile sales enterprises shall truly provide corresponding services to consumers. There are legal risks in carrying out the following acts:

(1) Only charge no service or reduce service content or service standards;

(2) Mark the same service content for repeated charges in different service projects;

(3) The obligation to be borne by oneself shall be charged in the name of other services.

Chapter IV: Institution-Building

Article 22 Automobile production and sales enterprises may establish internal price compliance management mechanisms as needed, be responsible for coordinating and supervising enterprise price compliance management work, improve and improve price compliance management systems, organize and carry out price risk identification and early warning, and participate in price compliance reviews and risk management, etc.

Article 23 The internal price compliance management system for the automobile industry includes but is not limited to the following systems:

(1) Price decision-making mechanism. Automobile manufacturing and sales enterprises establish and improve price decision-making systems, and clarify the authority, procedures, and responsibilities for price decisions. Major price adjustments, pricing of new products, etc. are carried out through collective decision-making, etc.;

(2) Sales contract management mechanism. The sale of automobiles, parts and related products shall be based on a written contract, which shall specify the project, standard, amount, payment method and time. Before signing the contract, the transaction party should be explained in detail the amount and method of payment to ensure that the other party is aware. After the contract is signed, keep the contract documents properly to ensure that the conduct is well-documented;

(3) Internal control mechanisms. Strengthen supervision and review of price formulation, adjustment, price promotion, etc., and promptly correct acts that violate price laws, regulations and policy documents;

(4) Price emergency response mechanism. Establish price emergency response plans, properly handle price disputes, and improve handling procedures, division of responsibilities, and communication mechanisms. Carry out normalized investigation of hidden risks in online public opinion, carry out timely risk alerts, early detection, early investigation and treatment;

(5) Risk prevention and control mechanisms. According to industry characteristics and market competition conditions, combined with factors such as its own size and business model, highlight key areas and key links, conduct regular risk assessments on price behavior, identify potential compliance risks, and warn in advance about price behavior that may trigger public opinion, collective complaints or strong reactions from the industry, and take corresponding prevention and control measures;

(6) Price compliance training mechanism. Strengthen price compliance training for relevant positions and personnel, and strengthen their awareness of price self-discipline. Managers take the lead in compliance training, while other employees receive targeted training on specific topics.

Article 24 Automobile manufacturing and sales enterprises establish and improve internal management systems, clarify the division of responsible entities and powers in market promotion, pricing decisions, sales execution, etc., standardize price formation and implementation processes, and prevent the implementation of improper price acts.

Article 25 Automobile manufacturing and sales enterprises shall promptly revise and improve the compliance management system in accordance with changes in laws, regulations, supervisory policies, etc., and check the implementation status.

Chapter V Supplementary Provisions

Article 26 Automobile manufacturers in this guide include but are not limited to automobile manufacturers and auto parts manufacturers; automobile sales enterprises include but are not limited to authorized automobile brand dealers, agents, automobile traders, etc.

Article 27. Industry associations may refer to these guidelines to formulate detailed implementation measures for the industry.

Article 28 The State Administration of Market Supervision and Administration shall be responsible for interpreting these guidelines.

This article was selected from: “State Administration of Market Supervision and Administration” official website; Zhitong Finance Editor: Chen Xiaoyi.