**Abstract**
In China's automotive aftermarket, the zero ratio—defined as the price of original parts compared to non-original parts—can reach an unusually high 12:1, while in foreign markets, it is typically around 3:1. The British *Financial Times* has noted that China has become a hub for multinational car companies, yet many consumers find cars unaffordable, raising questions about the root causes of this imbalance.
In cases such as Liu Dahua and Xu Liang, plaintiffs faced rejection from courts in Changsha and Qingdao, respectively. Both cases revolved around 4S shops tying repair services with the sale of original parts. Why do consumers consistently lose when invoking the Anti-Monopoly Law?
The root cause lies in the exclusive supply of original parts and the closed access to maintenance technical information. These practices fuel the abnormal zero ratio and enable 4S shops to tie repair services, making it imperative to implement anti-monopoly regulations in the automotive after-sales market.
China’s auto market has evolved significantly, with vehicle profits declining and the industrial chain shifting toward the after-sales sector. As car ownership grows, the repair industry has become essential for consumers. However, high prices at 4S shops, poor quality at roadside garages, and limited options have created widespread dissatisfaction.
Anti-monopoly regulation must be urgently introduced to address these issues. This includes defining the automotive aftermarket, analyzing how restricted competition affects consumer welfare, and tracing the root causes of the high zero ratio and tying practices.
**Price, Territory, and Customer Restrictions in the Automotive Aftermarket**
According to surveys, resale price and customer restrictions are common in China’s 4S channel for parts distribution. For vehicles under nationwide warranty, geographic restrictions on part distribution are often broken. In some regions, vertical and horizontal working hour limitations between 4S shops create complex barriers.
Vertical price, territorial, and customer restrictions are essentially similar, whether in dealerships or after-sales. Resale price limits are particularly problematic as they distort market pricing. Horizontal working hour restrictions among 4S shops may constitute price cartels, which are prohibited under the Anti-Monopoly Law.
**How to Define the Automotive Aftermarket**
The automotive market involves multiple sectors, including distribution, financing, insurance, leasing, and the aftermarket. Currently, vertical monopoly behavior is more pronounced in the distribution and after-sales segments.
In the dealership market, defining by brand is not necessary due to strong demand substitution between same-model cars. However, the after-sales market may be defined by brand, especially for parts and maintenance. Based on U.S. and EU precedents, durable goods like cars should be defined by brand in certain contexts, particularly for after-sales parts and service.
Maintenance and repair for specific brands require compatible parts, both original and non-original. Non-original parts of comparable quality can compete effectively with original ones. When their availability is limited, consumers become locked into using original parts, contributing to the distorted zero ratio and justifying the need to define the aftermarket by brand.
High-end car owners, in particular, rely heavily on original parts due to the limited quality of non-original alternatives, making suppliers dominant in their branded aftermarket.
**Access to Accessories and Repair Technical Information**
Car maintenance requires qualified technicians, high-quality parts, and access to technical information. There are two types of repairers: authorized (such as 4S shops) and independent (like fast repair centers and roadside garages). Independent repairers often offer lower costs but face disadvantages due to limited access to parts and information.
In Europe, the U.S., Korea, and Japan, competition laws ensure access to parts and technical data. In contrast, Chinese consumers lack such protections, leading to higher prices and reduced choice.
**Questioning the High Pricing of Original Parts**
In April 2014, the China Insurance Association and China Automotive Industry Association reported a 12:1 zero ratio for 18 common models, far exceeding the 3:1 ratio seen abroad. If an automaker holds a dominant position in its branded aftermarket and is suspected of overpricing original parts, it may violate Article 17 of the Anti-Monopoly Law unless it proves fairness.
**Challenging the Tie-in of Repair Services with Original Parts**
Cases like Liu Dahua v. Dongfeng Nissan and Xu Liang v. Guangzhou Honda Tongbao highlight the difficulty of proving abuse of dominance. Plaintiffs often fail to demonstrate that defendants hold a dominant market position, making it hard to challenge tying practices.
Tying repair services with original parts is a vertical restriction, potentially violating Article 14 of the Anti-Monopoly Law. By breaking the closure of parts supply and technical information, the root causes of the issue can be addressed, helping to reduce the zero ratio and promote fair competition.
**Breaking the Exclusive Supply of Original Parts**
Exclusive supply of original parts is a key factor behind the high zero ratio. OEMs control distribution through 4S channels, limiting access to independent repairers. This creates monopolistic conditions, allowing high prices and restricting consumer choice.
Such practices also hinder the development of fast repair and insurance services, while promoting counterfeit parts in roadside shops, posing safety and environmental risks.
To address this, anti-monopoly agencies should consider the cumulative effects of exclusive supply agreements and promote multi-channel circulation of parts. Encouraging third-party certified, comparable-quality parts can help restore competitive pricing.
**Guaranteeing Access to Maintenance Technical Information**
Ensuring access to technical information is crucial for independent repairers to compete fairly. Without it, their ability to perform safe and efficient repairs is compromised, leading to higher prices and reduced consumer choice.
Automakers should provide technical information to all repairers without discrimination. The European Commission has set precedents in this area, ensuring that independent repairers can perform normal repairs even if certain information is withheld.
**Where Consumers Can Get Their Cars Repaired**
Access to parts and technical information is essential for a competitive aftermarket. Consumers should have the right to choose where to get their cars repaired, whether at 4S shops or independent garages.
While some argue that exclusive supply of original parts protects intellectual property, this justification is weak given the harm caused to consumers. The Anti-Monopoly Law should focus on preventing abuse of dominance rather than protecting monopolistic practices.
By learning from international experiences and enforcing anti-monopoly rules, China can foster a more open and competitive automotive after-sales market, benefiting both consumers and the environment.
**Call for an Effective Anti-Monopoly Enforcement System**
The automotive market involves many stakeholders, including manufacturers, dealers, and consumers. Balancing competition, intellectual property, and product safety is complex.
Existing regulations, such as the *Automobile Brand Sales Management Implementation Measures*, have sometimes shielded monopolistic behaviors. To ensure fair competition, anti-monopoly enforcement must play a stronger role in regulating the market and protecting consumer interests.
(Submitted by an associate researcher at the American Academy of Social Sciences)
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