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Source: China Business Journal Date: Jan. 23, 2016
The original link: http://news.cb.com.cn/html/company_11_29504_1.html
This should have been an "industry self-purification" action, but eventually turned into openly confronting or even a lawsuit between two groups, involved by the industry leading enterprises, a number of listed companies and industry trade associations (federations).
On January 5, 2016, Beijing Baicebang Information Technology Co., Ltd. (hereinafter referred to as "Baicebang") filed a lawsuit to Beijing Dongcheng District People's Court, suing Zhejiang Wanma Co., Ltd. (Cable-based) (hereinafter referred to as "Wanma Group") for reputation infringement, and asking for compensation of RMB 10 million.
The foresaid dispute originates from a Joint Declaration. In November 2015, launched by Electric Cable and Wire Branch of China Electrical Equipment Industry Association (CEEIA-ECWB), 26 nationwide cable enterprises and local cable industry federations jointly signed an announcement, boycotting the online “price monitoring reminder” conducted by Jiangsu Optical & Electric Cable Industry Chamber of Commerce (hereinafter referred to as "Jiangsu Cable Chamber of Commerce") and www.dianlan.cn under Baichebang, and Wanma Group mentioned above are among the signatures of the Joint Declaration.
An unnamed senior management from “Wanma Group” told the reporter of China Business Journal the main reason for the boycott launched by the industry federations is that www.dianlan.cn made thoughtless comments on the wire and cable enterprises and stricken the competitors targetedly and purposely by using the online media publishing platforms, while the supporter behind www.dianlan.cn is Far East Cable Co., Ltd. (hereinafter referred to as the "Far East Cable"), a wire and cable enterprise in Jiangsu Province.
Such statement has suffered strong opposition by Bai Guangsen, a staff member in charge of www.dianlan.cn. According to him, entrusted by Jiangsu Cable Chamber of Commerce, www.dianlan.cn has been carrying out the business according to the laws and rules, not a platform for a certain enterprise, which initially gained the support and recognition of many Jiangsu wire and cable companies, and the government departments. After implementing the activity for more than a year, it, together with Jiangsu Cable Chamber of Commerce, began to be vilified due to the “price monitoring reminder” issued to some companies that led to strong dissatisfaction.
It needs to establish a self-discipline organization to govern chaos
In December 2012, a non-profit social organization – Jiangsu Cable Chamber of Commerce – was launched and established by 12 well-known optical and electric wire and cable enterprises in Jiangsu, including Far East Cable, Hengtong Group, Baosheng, Shangshang Cable Group, Jiangnan Cable and Trigiant Group, aiming at self-governance of chaos existing in the wire and cable industry.
“Upon the establishment of Jiangsu Cable Chamber of Commerce, the wire and cable industry had huge chaos, where jerry building, winning bid with low price and other phenomenon were very common. The extensive development has left potential quality problems to the industry", said Chief Executive Officer and Secretary General of Jiangsu Cable Chamber of Commerce Huang Jieping to the reporter. For this reason, the leading wire and cable enterprises in Jiangsu Province have a responsibility of “self-purification” for the industry because the province is the country's key optical and electric wire and cable industrial base.
As far as the reporter has learned, after the establishment of Jiangsu Cable Chamber of Commerce, it proposed to restrict the industry’s malicious competition behavior in the form of "price monitoring reminder", and then developed Regulations on Management of Monitoring Reminder that was approved by voting by the 2nd Council of the 1st-Session Jiangsu Cable Chamber of Commerce on February 25, 2014, and published online. On November 24, 2014, the Regulations was modified again and published online.
The foresaid Regulations and "price monitoring reminder" were approved unanimously by Jiangsu Cable Chamber of Commerce.
According to the production by Huang Jieping, in order to reflect fairness and impartiality, Jiangsu Cable Chamber of Commerce decided to introduce a third-party price monitoring advisory agency. In 2013, Jiangsu Cable Chamber of Commerce signed an entrust agreement with a third-party advisory agency - Baicebang (www.dianlan.cn)- assisting early warning in price monitoring and analysis for the key projects’ wire and cable bid and bidding, comparing between and analyzing the projects’ bid-open price monitored and the industry average price in the market at the same time, strictly in accordance with the respectively developed and released regulations and rules from a professional data point of view, as well as submitting the analytical results to Jiangsu Cable Chamber of Commerce for examination and approval to decide whether or not to issue a "price monitoring reminder" eventually.
The data shows that www.dianlan.cn was established by Baicebang, a wire and cable industry’s professional technology and price advisory service agency, whose unique "network red this price", through online monitoring and real-time release of wire and cables’ “raw material costs”, “full costs (industry average costs”, “tender control price” and “market monitoring price”, makes a variety of wire and cable technical regulations and market prices well known by users in order to guide rational purchase by the users.
Huang Jieping believes that as a form of strengthening self-discipline and supervision, the price monitoring reminder aims to reduce the occurrence of illegal behaviors in the wire and cable industry, and standardize the market competition. It also represents an important measure to "strengthen the industry self-discipline and integrity system construction," "enhance the wire and cable product quality", and "promote a healthy development of the industry”.
To the understanding of the reporter, currently there have been nearly ten thousand wire and cable enterprises at all sizes in China, with low industry concentration degree, serious excess capacity, and intense competition. Within the industry, adulteration, fraud and other quality illegal behaviors of producing and selling unqualified products are more common.
Price Monitoring Reminder "annoys" the enterprises
"Over the past year, the issuance of the price monitoring reminder improved the phenomenon including the industry's low-price malicious competition, surround-bidding and forging bid, and bidding up price, which now has become a weapon of the industry in resisting low-price competition, and of the users against high-price surround-bidding”, said Bai Guangsen.
According to the data shown on the official website of Jiangsu Cable Chamber of Commerce, from 2015 up to now, the Chamber has issued 582 Tender offer analyses and advice letter to the relevant tenders, 140 Reminder letter to the bidders, and 147 Price monitoring reminder to the users, bidders and government supervision departments, involving 188 bid sections.
The continuing issuance of the "Price Monitoring Reminder" touches the interests of the enterprises involved in "early warning", contradiction arises as a result that leads to a lot of dissatisfaction.
In November 2015, launched by Electric Cable and Wire Branch of China Electrical Equipment Industry Association (CEEIA-ECWB), 26 nationwide cable enterprises (11 listed companies and 8 chambers (federations) of commerce) jointly signed an announcement, boycotting publically the “price monitoring reminder” conducted by Jiangsu Province Chamber of Commerce and Baicebang (www.dianlan.cn). According to the information disclosed by insiders, the deep-seated reasons for the boycott lie in the establishment of Wire and Cable Price Branch of Price Association of China, directly constituting competition to the activities of CEEIA-ECWB.
The reporter has noticed that on the boycott list there are many local enterprises of Jiangsu Province that initially gave unanimous support to the activities, such as Far East Cable, Hengtong Group, Baosheng, Shangshang Cable Group, Jiangnan Cable, Trigiant Group and other well-known wire and cable companies.
"Now it has not been a simple boycott. The Joint Declaration is directly rumor, libel, slander, and false accusation, as the reminder analyzes the price of wire and cable products, and reminds the users to pay attention to the too-high or too-low price, which deters them. Even the enterprises who unanimously agreed to support the activities have begun to go back on their promise, because the reminder may touch their improper interests", said Bai Guangsen. He thinks the Joint Declaration has constituted infringement on Jiangsu Cable Chamber of Commerce and Baicebang (www.dianlan.cn) that therefore sued Wanma Group, one of the listed companies among the enterprises signing the Joint Declaration, to court.
Baicebang refuted the “slander behavior” in the Joint Declaration one by one. Based on the material obtained by the reporter, the Joint Declaration puts forward many questions to Baicebang. For example, it calls Baicebang as a "dishonest debtor", "conducting illegal activities", "operating illegally without license", "being immoral and implementing selective 'law enforcement', and “extorting".
Regarding Baicebang as a "dishonest debtor", the reporter didn’t find such saying through the official court inquiry system, while Bai Guangsen told the reporter this is reputation defamation of Baicebang, with an obvious bad faith. As to "conducting illegal activities", it is totally non-existent, because the online platform www.dianlan.cn as a marketing channel, registered by Baicebang, belongs to a non-profit website that has never engaged in paid-service activities, so it is not required to process the relevant license. “Being immoral, and implementing selective 'law enforcement'’, and “extorting” are directly slander, due to the fact that www.dianlan.cn reproduced two industry insider articles, and didn’t have any substantive business negotiation with the enterprises mentioned in the articles before or after the reproducing, let alone the existence of forcing and blackmail plot.
In this regard, the reporter contacted several enterprise principals the signing the Joint Declaration, most of whom said they are not very clear about the specific circumstances, and that the boycott was launched by CEEIA-ECWB, so it may gives the details. Then the reporter called Wu Shimin, Deputy Secretary of CEEIA-ECWB that launched the Joint Declaration, who stated "at present, the case has entered the proceedings, so it is inconvenient to comment".
The industry "self-purification" has been questioned
According to the learning of the reporter from the principals of the signatory enterprises of the Joint Declaration and local industry trade (federation) associations, they raised wide questions on Baicebang’s "consulting service’s advisory power, probative power and credibility", stating that it has no legal qualification as a price evaluation agency, so has no right to determine the industry average costs in the market, and the “price” developed by Baicebang has no advisory and probative power; moreover, it has no right to make reminder on whether or not the (pre) tender offers are below the industry average costs in the market.
Bai Guangsen said Baicebang is entrusted by Jiangsu Cable Chamber of Commerce, so all its behaviors are within the scope of mandate. Its data analysis is professional, not generating mandatory binding force to any third party. Also, any unit or individual has the right to report illegal violations of price, and it is understandable and lawful to remind the relevant departments of possible illegal violations of price.
A wire and cable enterprise principal who declines to be named told the reporter the biggest supporter behind www.dianlan.cn is Far East Group. The so-called "Price monitoring reminder" is nothing but a tool to strike the competitors, not an industry self-discipline behavior stated. Why the Far East Cable has never received a "Price monitoring reminder"?
In this regard, Chairman of the Board of Far East Holding Group Jiang Xipei said the accusations in the Joint Declaration are purely non-existent, but rumor, libel, slander and false accusation. Not only Far East Cable but also many other enterprises have not yet received the “Prince monitoring reminder”, which depends on whether or not the enterprises have illegal violations.
Currently, Far East Holding Group and Far East Cable have sued reputation infringement by CEEIA-ECWB, and asked for compensation of RMB 49.99 million. The case has been accepted by the court. At the same time, there will be some other enterprises and some local chambers of commerce involved in the matter suing it to the court to pursue its responsibilities.
According to Bai Guangshen, www.dianlan.cn, an open public platform, is entrusted by Jiangsu Cable Chamber of Commerce, which is not a certain enterprise’s platform; meanwhile, he hopes the industry enterprises to actively provide relevant information and material to better implement the industry self-purification behavior. No matter the "price monitoring reminder" or other forms of supervision, the only purpose is to standardize the enterprise behaviors, and to achieve the initial objective of industry self-discipline.
It is reported that the country has also gradually launched the corresponding standardized documents, affirming the supervisory role of the market-oriented professional service agencies, and proposed clearly to fully exercise the regulatory role of laws and regulations, self-discipline role of industry organizations, and the supervisory role of public opinions and society, to achieve a mutually social governance, and promote market entities to seek self-discipline and integrity operation.
In October 2015, Several Opinions of the CPC Central Committee and State Council on Promoting the Price Mechanism Reform pointed out that it needs to strengthen data analysis of report, publish analysis report regularly, warn business operators and alert consumers; also, it needs to pay attention to improving price monitoring and early warning, monitoring and examining cost investigation, and so on.
"This shows that carrying out price monitoring and reminding activities satisfies the national macroeconomic situation, which is advocated by the country", said Bai Guangsen, who believes that in the current the wire and cable industry still exists chaos, and the priority is how to better play the role of social supervisory forces besides the government supervision, rather than making unfounded speculation and slander.
For the “weird circumstances” in the wire and cable industry presently, the industry insiders say Shanghai Electric Cable Research Institute and its controlling TICW, EMTC and CEEIA-ECWB should be responsible for the industry’s serious excess capacity and "Gresham's Law”.
"Almost when the industry enterprises make investment or expansion, they can obtain a feasibility report as long as they pay, and most of the return on investment is very good. In fact, however, the average capacity of the wire and cable industry has been seriously excessive by about 60% for long time, and even some projects suffered bankruptcy before putting into operation. A lot of land, plants and equipment are idle, with huge bad loans. The chambers of commerce or enterprises shall promote integrity, self-discipline and self-rescue, otherwise they would suffer losses. The above institutions have dominated the industry for decades, and earned a huge amount of interests. This time, among the 26 enterprises and 8 local chambers (federations) of commerce involved, most of them are associated with these institutions, which is actually an open but unspoken secret", said those insiders.
