CADA tightened the regulation of contract

As 2010 authorized contract of auto brands’ sales will be soon signed, some auto dealers noticed that despite the industry's criticism of imparity clauses has been more than two years, 2010 version of authorized contract still consists of suspected illegal clauses or clauses violating the justice. As a result, some auto dealers have launched a new round of offensive expecting to present their proposals to industry organizations and government departments so that trade organizations and government departments could take their advice into serious account and eventually eliminate these imparity clauses in the authorized contract.

According to some dealers of authorized auto brands, there exist some unacceptable terms such as some chief dealers make unreasonable sales and inventory targets for them. Moreover, chief dealers also require their subordinate dealers to purchase the particular 4S shops’ equipment and auto parts .In addition they also limit the prices of cars and split the auto’s sale market. Some chief auto dealers even interfere with subordinate dealers’ personnel, finance and other daily operations.

Industry experts point out that existence of imparity clauses is supposed to violate laws including Anti-Monopoly Law, Company Law, Contract Law, Civil Law and Measures for the Implementation of Management of Automobile Brand Sales. Imparity clauses can add risks to the dealers’ business and then restrict competition in Chinese car market, which will harm the sustainable, healthy development of China’s auto industry and the legitimate rights and interests of Chinese consumers.

October 20, 2009, a ceremony was hold in Changchun, China to celebrate China’s auto output reached 10 million. The above fact signals the development of China’s auto industry has stepped into a new era. New situation is pushing China to rationalize all kinds of relations in China’s auto industry so as to wipe out all factors which have negative impacts on China’s target to bring it auto industry into a higher level and the sustainable, healthy development of China’s auto industry .Only by do that can we create favorable conditions for healthy and sustainable development of China’s auto industry.

In 2007 departments of Chinese government including the Ministry of Commerce, State Administration for Industry & Commerce of the People’s Republic of China and China Automobile Dealers Association started the revision of Measures for the Implementation of Management of Automobile Brand Sales. Meanwhile they agreed to formulate operating technology specification standards for chief dealers and authorize the operating contract. At present, all tasks are actively advancing.

In the process of regulating the authorized operating contracts, imparity clauses suspected illegal or violating the justice were revealed by the Media. In the second half of 2008, China Automobile Dealers Association organized a considerable self-examination of dealers’ authorized contracts and finally found some terms which was illegal or violating the justice. Then, China Automobile Dealers Association requested relevant auto manufacturers and chief dealers eliminate those terms as soon as possible .Actually most companies have positively adjusted the imparity clauses except for some companies that still retain the similar clauses.

For example, agreement between one chief dealer of a certain auto brand and its subordinate dealer ruled that without formal permission during the period of their agreement its subordinate dealer couldn’t directly or indirectly sell or participate in the sales of any other competing auto brands as importers, distributors, dealers and manufacturers with the help of an agent, partner or associated company .Due to the intervention of China Automobile Dealers Association's and the opposition from its subordinate dealers, the chief dealer eventually eliminated the exclusive contract terms listed above. Nevertheless, there are still some other unreasonable terms. Moreover, similar terms still occur in other auto brands’ contracts. Therefore, it is imperative for us to eliminate those unacceptable clauses before the signing of 2010 authorized contract of auto brands’ sales.

Before the signing of 2010 authorized contract of auto brands’ sales contract Chinese Automobile Dealers Association called all auto brands’ chief dealers actively do self-examination and to eliminate all those unacceptable terms as soon as possible. What’s more, China Automobile Dealers Association would also submit their proposals to State Administration for Industry & Commerce of the People’s Republic of China and the Ministry of Commerce and other relevant government departments to further regulate the content of the authorized operating contracts and to promote healthy development of China's auto industry. (Translator: Qinghua Wade)

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