What does China's anti-monopoly law mean to international business transactions?
There is no such thing as a slow month in international trade law, particularly when it comes to China, which seems to make the news on a near daily basis. This month was no exception as China made headlines for its application of an anti-monopoly law.
The Law at Issue
On August 30th, 2007 The People’s Republic of China passed the “Anti-Monopoly Law of the People’s Republic of China” (AML). Its intended purpose is “preventing and restraining monopolistic conducts, protecting fair competition in the market, enhancing economic efficiency, safeguarding the interests of consumers and social public interest, promoting the healthy development of the socialist market economy.” (Article 1) The law defines the “monopolistic conducts” it seeks to prevent as: (1) monopolistic agreements among business operators; (2) abuse of dominant market positions by business operators; and (3) concentration of business operators that eliminates or restricts competition or might be eliminating or restricting competition.
The AML in Plain English
The AML was perceived as a positive move for China; a first step towards developing a modernized antitrust and competition legal environment. The law can be broken down into four different sections: “(1) prohibiting certain types of agreements unless they fall within specified exemptions (2) prohibiting certain behavior classified as abuse of dominant market positions, providing a framework for determining when dominance exists (3) establishing a broad merger review scheme and (4) prohibiting abuse of government administrative powers restraining competition.” So what is the problem with China’s AML? The answer to this question lies in the way in which China is enforcing its antitrust laws.
Trouble with the WTO
Earlier this week, the U.S Chamber of Commerce accused Chinese anti-monopoly regulators of treating foreign companies and state owned enterprises differently under its AML. The accusation comes after China cracked down on foreign companies in the past few months with surprise raids, lengthy investigations and increased fines by China’s government antitrust enforcers. The U.S. Chamber of Commerce further alleges that China’s antitrust laws, which as noted above were created with the stated purpose of advancing competition, are being used for the opposite purpose, to concentrate power in domestic and state enterprises only.
At this point, the U.S.’s claims are just that, claims and allegations. However, if found to be true, China could find itself in some trouble with the WTO. If the AML has been misused, China may be in violation of its WTO commitments. In response to the allegations, China’s Foreign Ministry spokesman Qin Gang stated that “China, will, as always, encourage foreign companies and enterprises to take part in the competition in China’s market and carry out various forms of cooperation. We are willing to create a sound investment environment for them. Meanwhile, they are also required to abide by Chinese laws and regulations.”
It is unclear whether the allegations will cause China to adjust its approach to regulation or whether the WTO will move forward with charges based on the US’s claims.
For More Information
If you would like more information regarding China’s antitrust laws or to learn more about international trade and transactions please contact the lawyers at Whitcomb Law, P.C.