Are Ever-Rising Parking Fees Beyond Legal Control?

— An Anti-Monopoly Review

Frank Qian

In 2015, the National Development and Reform Commission (the “NDRC”) further liberalized restrictions on government pricing and government-regulated pricing for certain goods and services. It also implemented a market-adjusted pricing policy that includes parking fees in residential neighborhoods. Concerns about this policy were expressed immediately before this pricing policy was liberalized. Since these services are closely related to the lives of ordinary people, the loosened restrictions will likely lead to individual business operators charging exorbitant fees, thereby contributing to price inflation.

In response to these concerns, an NDRC spokesman said that three specific measures had already been formulated to enhance in-progress and after-the-fact supervision. First, operators are required to strictly follow the rule that prices must be clearly marked. They cannot compel the public to accept their services or fees by taking advantage of their market position; nor can they impose any fee in addition to those fees that are clearly marked. Second, industry administrative departments must strengthen their supervision and control over the conduct of the relevant operators within each industry, and industry entry and exit mechanisms must be improved. Third, administrative departments in charge of pricing must enhance supervision and control of market pricing conduct in accordance with the law. These departments must investigate and act upon unfair pricing conduct involving price collusion and price fraud in accordance with the law. The NDRC spokesman particularly emphasized price transparency and fraud prevention.

The pricing policy for parking lots in residential neighborhoods has been implemented for more than six months. Presently, parking lots in many Shanghai residential neighborhoods have experienced a series of price increases. In view of the versatile types of property rights of parking lots within the neighborhoods, we will discuss parking lots that are leased to owners through property management companies and owned by developers.

The STV Evening News recently reported a dispute arising from a price increase at residential parking lots. In the Oasis Garden located in Shanghai’s Baoshan District, a parking fee increase prompted residents to begin parking their cars at ground level instead of in the underground parking structure. Due to the limited number of ground-level parking spaces, residents began competing for parking spaces by installing ground locks, blocking emergency exits and even occupying greenbelts; meanwhile less than half of the underground parking spaces were occupied.

The story began with the original parking fees within the neighborhood, i.e. 200 RMB per underground parking space per month and 100 RMB per ground-level parking lot per month. This year, following the loosened pricing policy for parking lots in residential neighborhoods, the developer raised the prices for its proprietary underground parking spaces to 500 RMB per month. Motorists who had been parking their cars underground found the price increase unaffordable and began parking their cars at ground level, which is how the problem started. When an STV reporter telephoned the developer, the party answering the phone replied solemnly that “The current 500 RMB monthly fee for underground parking should be affordable, since we have taken into account elements such as various costs, the surrounding neighborhoods, and the conditions and the current circumstances of our neighborhood.”

Does this mean that after the cancellation of government-regulated pricing for parking lots in residential neighborhoods, parking fees are no longer subject to legal restrictions? Does it mean that as long as pricing is transparent, published in advance and not fraudulent, that any price increase by developers is legitimate?

In addition, examining the Pricing Law, we can also shift to another perspective and discover how pricing issues are regulated under the Anti-Monopoly Law. One type of “abuse of a dominant market position” under the Anti-Monopoly Law is known as “unfair pricing”. When determining whether or not “unfair pricing” applies to this case, we must examine whether or not the developer is in a “dominant market position”. To do this, the applicable market must first be identified. In an anti-monopoly enforcement case, the commonly accepted definitions of a “market” include the commodity market and the geographic market.

When considering the commodity market, based on the internationally accepted “SSNIP method” and the method prescribed by the Anti-Monopoly Committee under the State Council in the Guidelines for Defining Relevant Markets (the “Guidelines”), it is not unreasonable to conclude by using the substitution method that the underground parking lots and the spaces assigned for ground parking form a commodity market. The key issue here, then, is how to define the geographic market. The Guidelines define the term “relevant geographic market” as a geographic region where consumers can obtain alternative commodities with relative ease. An analysis of acceptable alternatives shows that after prices rose for the neighborhood’s underground parking spaces, most of the motorists who originally parked their cars underground chose to move their cars to the ground level or greenbelts, but none of them chose to park their cars outside of the neighborhood. In terms of the neighborhood’s location and the motorists’ parking practices, there is no legitimate public parking area that offers overnight parking near the neighborhood (roadside parking should not be considered a part of the relevant market due to its illegality). Further, owners who park at their residential address usually don’t choose a parking place more than ten minutes’ walk from their homes. Consequently, in this case the underground and ground-level parking lots within the Oasis Garden complex can constitute a “market” for the purposes of legal analysis.

In determining whether the operator enjoys a dominant market position, based on the general conditions of Shanghai neighborhoods, let us assume that ground-level parking lots are jointly owned. According to interviews with staff of the property management company, a large number of parking spaces are offered underground while only very limited parking is available at ground level. In other words, while the underground parking spaces owned by the developer account for over half of the parking spaces in the neighborhood, it can be assumed that the developer enjoys a dominant position in the relevant market (i.e. neighborhood parking spaces). Even in the absence of this assumption, it is not difficult to conclude that the developer enjoys a dominant market position based on the various factors set forth in Article 18 of the Anti-Monopoly Law.

When a developer with a dominant market position formulates a pricing policy for its underground parking fees that features unfairly high parking fees, it may be violating Article 19.1.1 of the Anti-Monopoly Law. The Anti-Price-Fixing Provisions formulated by the NDRC detail the circumstances in which an operator with a dominant market position cannot sell goods at an unfairly high price, including: (1) whether or not the selling price is obviously higher than the price of the same goods sold by other operators; (2) where the operator’s costs remain generally stable, whether or not the price is raised beyond the normal range; (3) whether or not the price rise obviously exceeds any increase in cost; and (4) other related factors that need to be considered.

After the NDRC loosened its restrictions on pricing for neighborhood parking spaces, the cost for the developer’s lease of the underground parking lots did not significantly increase. Before 2015, monthly parking fees in residential neighborhoods outside of Shanghai’s outer ring road were 100 ~150 RMB per ground parking space, and generally less than 300 RMB per underground parking space. After the developer of the Oasis Garden raised its fee for a single underground parking space from 200 RMB to 500 RMB (an increase of over 150%), a large number of motorists found that they could not afford the increase, and began parking their cars at ground level, ultimately leading to cars occupying non-parking areas and greenbelts. Furthermore, several other elite neighborhoods within a few kilometers of this neighborhood kept their underground parking fees within 300 RMB per month. It is therefore clear that the developer’s price increase seriously exploited motorists and indirectly resulted in the parking disorder that troubles the neighborhood. For this reason, the developer can be considered to have provided goods or services at an unreasonably high price.

The NDRC is the enforcement authority responsible for investigating and handling price-related monopolistic acts. Motorists living at the Oasis Garden should certainly be entitled to submit a report or file a complaint with the NDRC and petition for an investigation of the developer. When we referred to the Anti-Monopoly Law in the past, we were left with the impression that this law is applied to restrict large enterprises, industry leaders or utilities, and therefore did not seem to be related to trivial matters such as neighborhood parking lots.

In fact, although the Anti-Monopoly Law functions to protect consumers, its objective is different from the objective of the Consumer Protection Law. Even though the NDRC has cancelled government-regulated pricing, developers cannot arbitrarily raise prices -- such arbitrary conduct should not only be examined from the perspective of the Pricing Law, but also under the Anti-Monopoly Law.