â— If McDonald's and KFC's chain stores across the country implement a price, why not a 4S shop? Why is there a continuous anti-monopoly investigation on the auto market, but is it possible for the fast food chain industry to open up?
â— In the investigation of anti-monopoly issues, 4S stores and fast-food chain stores lack comparability. From the perspectives of barriers to entry, nature of goods, competition, and lock-in effects, there is a significant difference between the automobile distribution market and the fast food chain market.
â— 4S shops and fast-food chain stores do not analyze the analogy, to cover the differences between the objects, ignore the competition conditions of different markets, constitute an improper analogy, so as to doubt the effectiveness of China's auto industry anti-monopoly law enforcement.
Since 2011, the National Development and Reform Commission’s Price Supervision Bureau has started research on the automotive market based on reports. Since the beginning of 2014, the Price Reform Bureau of the National Development and Reform Commission and the local price authorities have conducted anti-monopoly investigations on the automobile industry, involving a number of automobile manufacturers, upstream suppliers and authorized dealers (4S stores).
The cases currently investigated include Japanese auto parts and bearing manufacturer price monopoly cases, FAW-Volkswagen-Audi and dealer price monopoly cases, Chrysler and dealer price monopoly cases, and BMW dealer price monopoly cases. In addition, it also includes the automobile insurance commercial insurance rate and agency fee price monopoly case of Zhejiang insurance industry related to the automobile industry. Several cases are still under investigation.
In the anti-monopoly tide of the auto industry, some commentators have questioned that 4S stores are franchise stores, which are different from ordinary dealers. Both McDonald's and KFC have franchise stores. The prices of their products are highly unified and strictly controlled throughout the country. Should they be defined as “horizontal monopoly†or “vertical monopoly� What the skeptics mean is that if a fast-food chain store sells hamburger fried chicken, it can be sold at a national price. Why can't a car 4S shop sell cars and accessories?
So, what are the similarities and differences between 4S stores and fast food chains? Why is there a continuous anti-monopoly investigation on the auto market, but is it possible for the fast-food chain to open up?
Dual rail distribution and monorail distribution
Global fast food chain companies usually adopt a two-track distribution system, which uses a vertical integration and dealer model, which is characterized by the simultaneous operation of direct-operated stores and franchise franchisees. Therefore, between the fast food chain company and its franchise stores, there are both the vertical relationship between the franchisor and the franchisee, as well as the horizontal competition within the brand between the direct store and the franchise.
For example, McDonald's revealed that the company has so far operated more than 32,000 restaurants in nearly 120 countries and territories around the world, 80% of which are licensed restaurants operated by independent entrepreneurs. In China, McDonald's currently operates only direct sales stores in Beijing, and accepts applications in 24 cities in Guangdong, Sichuan, Hubei, and Fujian. McDonald's transfers the entire operating and mature restaurant to the franchisee and authorizes it to use the McDonald's brand to ensure that the franchisee can operate smoothly.
The two-track distribution of fast-food chain companies aims to expand by franchise, objectively requiring franchisees to get more protection, guidance and certainty from sales territory to price, so that franchisees focus on improving sales, ensuring hygiene and improving consumer experience. To improve brand competitiveness.
Unlike fast food chain companies, automakers often use a monorail distribution system to sell automotive products to end users through dealers. In the United States, state car franchise laws require car dealers to be authorized dealers to exclude manufacturers from adopting other car dealership models. For example, Tesla used the direct sales model to sell cars directly to consumers and provide services, and was refused to authorize distribution in Texas and other states to be brought to court by the Automobile Dealers Association.
In China, authorized distribution since 2005 has become the dominant mode of automobile distribution. Last year, the State Administration for Industry and Commerce stopped the auto brand authorized dealers to record and parallel import pilot policies, which promoted the development of unlicensed dealers from multiple angles. At present, the total dealers established by imported cars, joint venture vehicles and self-owned brand car manufacturers only have wholesale functions, and the business scope does not include retail. That is to say, in the Chinese market, all types of automobile manufacturers currently adopt a monorail distribution system.
In short, for a car manufacturer that uses a monorail distribution system and does not have a direct sales store, it is only a vertical relationship between the supplier and the dealer with the 4S store. This makes car manufacturers significantly different from fast-food chains that use dual-track distribution.
Authorized distribution and franchising
The combination of the words “authorization†and “franchise†in the automobile dealership industry and the fast food chain industry may be one of the reasons for the analogy between McDonald's, KFC and 4S stores. However, the confusion of the use of words and the confusion of concepts cannot hide the differences of objects.
Authorized distribution means that a supplier licenses a limited number of distributors that meet supplier standards in a specific geographical area in order to sell their products or services. Authorized distribution is closed because it is difficult for unlicensed dealers to obtain supplies, and is often used for retailing of branded goods, luxury goods, and complex or bulk durable consumer goods. Authorized distribution is also used for industrial products with strong professionalism, relatively fixed users, and certain requirements for after-sales service, such as medical equipment and electromechanical equipment.
Franchising is when a party (franchisor) licenses its trade name, logo, know-how and other intellectual property rights to another party (the franchisee), provides technical and operational assistance, and licenses its franchise. A distribution model for usage fees is typical of chain fast food, hotels, supermarkets and convenience stores. Through the franchise agreement, the franchisor not only provides franchise for goods or services, but also establishes a standardized marketing mechanism, requiring the franchisee to adopt a unified business model and strictly control the franchisee's business activities.
Authorized distribution is similar to franchising.
Well-functioning authorized distribution and franchising can effectively reduce distribution costs, expand the market, establish a brand image, and maintain brand reputation. Authorized dealers and franchisees are independent operators and have no affiliation with the licensor or franchisor. Authorization or licensing is subject to the standards and conditions established by the licensor or franchisor. In addition, franchises usually contain vertical restrictions that are common in authorized distribution models, such as: exclusive purchases (the franchisor prohibits franchisees from purchasing from other sources), exclusive distribution (the franchisor promises not to supply outside the franchise network).
But there are also important differences between authorized distribution and franchising.
One of them is the extent and breadth of intellectual property licensing. Although both models may involve licensing of intellectual property, particularly trademarks or logos associated with goods or services, franchises typically include licenses for trade names, know-how, and business models. Or, franchising involves more intellectual property. Therefore, franchisors tend to have more control over franchisees than authorized distribution.
For example, a fast-food chain company uses its trade name through a licensed franchise store, hoping that consumers will have the same sense of trust and identity for all single stores. In the regional market where KFC releases the franchise, the average consumer cannot distinguish between the direct store and the franchise store, because from the store name, the store layout to the product category, the franchise store and the direct store are highly consistent, and there will never be a “Li Four "KFC, "Wang Er" KFC.
Car licensing is different. Authorized distribution agreements are usually finely defined, and the authorized dealers use the automobile manufacturer's registered trademarks and logos for sales purposes, while avoiding third parties misunderstanding that the dealer is a subsidiary or affiliated entity of the automobile manufacturer. For example, consumers visiting FAW-Volkswagen Audi Beijing 26 4S stores, will find 4S shop companies are different, such as: Ogilvy Audi 4S shop, Monterey Audi 4S shop, Yazhijie Audi 4S shop. Each 4S shop exhibits a certain degree of consistency due to the Audi licensing standards, but from the storefront, showroom, work area, customer lounge area, to pre-sale, sale, after-sales prices and services, each 4S shop presents a multi-angle difference.
Access, competition and lock-up: the essential difference between car dealership and fast food chain
The lack of comparability between 4S stores and fast food chain stores, in addition to the difference in the details of the two modes of authorized distribution and franchising, the more important substantive reason is that from the perspective of access barriers, commodity nature, competition status, locking effect, etc., the automobile dealership market and There are significant differences in the fast food chain market.
According to the KFC franchise website, the KFC franchise contract is for 10 years. The one-time payment fee currently includes the restaurant purchase fee of more than 2 million RMB, the initial cost of joining is about 300,000 yuan, and the training fee is 4 months before the store. 6% of the franchise continuation fee and no less than 5% of the advertising and promotion fees are paid according to the turnover.
The data shows that the average single-store construction cost of a 4S shop in China's joint venture car is about 20 million, and the cost of building a high-end imported car 4S can reach 80 million to 100 million or even higher. If we further consider the cost of supervision, investing in 4S stores selling cars and investing in franchise selling fried chicken, the barriers to entry are obviously not an order of magnitude.
From the nature of goods, car dealers sell large durable consumer goods. Taking passenger cars as an example, China's new car dealership market is fiercely competitive. There is a significant demand substitution between cars of the same model and the same price. Consumers have a variety of choices when buying cars. However, bulk durable goods after-sales service has a locking effect. The after-sales service requirements for specific brands and models are based on after-sales accessories (including original and homogeneous parts) for the brand and model, based on the maintenance technical information of the specific brand and model. Therefore, the automobile after-sales has different degrees of locking effect according to the brand case. Otherwise, the zero-to-zero ratio will be difficult to sustain.
The lock-in effect means that auto suppliers that do not have a dominant position in the highly competitive new car sales market may have a dominant position in their branded automotive aftermarket. Automobiles are characterized by high value and long service life. Monopolistic behaviors in the aftermarket of automobiles, such as limited resale price of accessories and exclusive supply of after-sales accessories, exclusive purchases and excessive pricing, may result in significant consumer welfare losses due to the lock-in effect.
In addition, the 4S model is China's current automobile-led distribution model, in which the licensing agreements for various brands of automobiles are similar. When similar vertical agreements form a network that fully covers the relevant market, its cumulative effect may significantly limit market access and competition.
Unlike car dealers, fast-food chains sell fast-moving consumer goods, and the substitution between various brands of fast food and light meals is obvious and the competition is fierce. In recent years, Chinese fast food brands have expanded rapidly, and the sales and expansion speed of Western-style fast food leading companies have declined since the end of 2012.
As for the lock-in effect, there is no empirical data showing how many people are inseparable from a particular fast food brand every day. If someone has such high brand loyalty, it can be presumed to be a cautious case and a small probability event.
Whether the retail price of the fast food chain is suspected of being illegal
Then, in response to the questioner's question, how to assess the legality of the national retail price of fast food chains? Take KFC as an example. According to the FAQs of the company's franchise website, KFC's franchise agreement stipulates that franchisees are not allowed to adjust product prices at will. That is to say, regardless of the promotion activities, the same product in the same period in the KFC stores across the country (including direct stores and franchise stores) prices may be exactly the same.
The parent company controls the price of the subordinate entity as the company's legal rights, so the uniform retail price of the KFC direct store is understandable. Unlike direct sales stores, franchisees are independent operators and have no affiliation with KFC. Then, does KFC limit the price of franchise stores to the fixed resale price prohibited by Article 14 of the Anti-Monopoly Law?
Regarding the legality of monopoly agreements, China's Anti-Monopoly Law provides an evaluation framework for “prohibition and immunityâ€. If the operator can prove that his or her conduct is in the statutory situation as stipulated in Article 15, it will not seriously restrict the competition in the relevant market, and will enable consumers to share the resulting benefits. Violation of Article 14 may be based on Article 15. Exemption.
According to the law enforcement practice of anti-monopoly jurisdictions such as China and the European Union, the burden of proof that the operator proves that the fixed resale price and the limited minimum resale price are in compliance with the exemption conditions is very high and therefore difficult to complete. However, based on the above analysis of the dual-track distribution, franchise model and fast food chain market, the franchisor's behavior of limiting the price of fast-food chain franchise stores, according to Article 15 of the Anti-Monopoly Law, advocates the possibility and space of exemption.
Unfinished auto industry antitrust
Anti-monopoly law enforcement emphasizes case analysis and focuses on specific market competition dynamics such as industry characteristics, regulatory conditions, and access barriers. Putting a simple label for a certain type of behavior in an industry does not provide an effective solution for protecting or restoring market competition. In short, the 4S shop and the fast food chain store do not analyze the analogy, cover up the differences between the objects, ignore the competition conditions of different markets, constitute an improper analogy, so as to doubt the effectiveness of China's auto industry anti-monopoly law enforcement. .
The high barriers to entry and the lock-in effect of automobile after-sales led to horizontal and vertical monopolistic behaviors and abuse of dominance. This is the objective background for China to launch anti-monopoly investigations in the auto market. Similar vertical agreements in the automotive market have led to cumulative effects, especially the price and channel issues of aftermarket parts and maintenance technology information that deserve careful consideration and continued attention.
The road to anti-monopoly in the auto industry is far from complete. For the newly changed coaches of the National Development and Reform Commission, the anti-monopoly work of the automobile industry is still in progress; before the Spring Festival, the Ministry of Transport announced the "Administrative Measures for the Implementation of the Openness of Automobile Maintenance Technology Information (Draft for Comment)", echoing the ten ministries and commissions. The Guiding Opinions on Promoting the Transformation and Upgrade of the Automobile Maintenance Industry to Improve Service Quality; The revision of the “Implementation Measures for the Management of Automobile Brand Salesâ€, which has touched many interests, has been delayed and delayed. What kind of changes will the anti-monopoly bring to China's automobile dealership and after-sales service competition, and how many dividends will be brought to Chinese consumers will have no shortage of fresh expectations.
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