InsideCounsel » March 2008
Antitrust Anxiety
China’s new anti-monopoly legislation raises more questions than it answers.
A 2004 survey by the Fair Trade Bureau of China’s State Administration of Industry and Commerce (SAIC) concluded that Microsoft Windows had a 95 percent market share in the country. Kodak, the report said, had also obtained a dominant position with 50 percent of the film market. These companies and other multinationals, the authors concluded, frequently used their positions to curb or restrict competition.
But SAIC couldn’t do anything about its findings. That’s because—outside the M&A area—China had no meaningful antitrust laws. However, all that will change as of Aug. 1 with the enactment of the Anti-Monopoly Law of China (AML). Much like the antitrust legislation of developed countries, the law prohibits monopoly agreements, abuse of dominance and concentration.
“Our clients have known for a long time that this was coming, so it’s no surprise to them,” says Rocky Lee, a partner in DLA Piper’s Beijing office. Still, the AML, like most Chinese legislation, is long on principle and short on details, creating difficulties for multinationals that have never had to concern themselves with antitrust considerations in their China dealings.
“There is a general feeling of dissatisfaction about the law’s vagueness, especially for companies that have practical concerns about going forward,” Lee says. It’s not that the Chinese won’t address some of the uncertainties. It’s simply that no one has any idea just how they will be addressed. Or, for that matter, who will be addressing them.
Bureaucratic Beast
Naturally, the Standing Committee of the National’s People Congress will weigh in. “We’re expecting at least 20 sets of regulations, rules and implementation guidelines from the Congress this year,” says Bob Kwauk, managing partner of Blake Cassels & Graydon’s Beijing office.
The China’s Supreme People’s Court will also have its say. “When the AML comes into effect, the court will be issuing what amounts to a quasi-judicial interpretation of the law,” says Steven Huang, a partner at J&F PRC Lawyers in Beijing.
Also in the mix are provincial authorities, who will have their own interpretations of how to apply the law.
Equally problematic are the AML’s enforcement provisions.
The law’s enforcement mechanism involves no less than three levels of government agencies. On the State Council level, the AML establishes an Anti-Monopoly Committee; on the ministry level, the State Council will designate an Anti-Monopoly Law Enforcement Agency; and on the local level, the Law Enforcement Agency may empower corresponding local agencies to do the enforcement work. Given China’s size, local agencies are a must because the relevant market for antitrust purposes could be a province, an autonomous region, a region within a province or even a single municipality.
At first look this structure may appear to be neat and tidy, if a bit cumbersome. But the harsh reality is that the AML sets out neither the composition nor the working rules governing the Anti-Monopoly Committee, nor does it specify which government agency will be the Anti-Monopoly Law Enforcement Agency.
Because of its level of fragmentation, looking at China’s current bare-bones antitrust infrastructure doesn’t offer much insight either. The National Development and Reform Commission presides over monopoly agreements; SAIC regulates the monopolistic behaviors of public utilities; and the Ministry of Commerce (MOFCOM) oversees mergers and acquisitions.
