The cabinet yesterday gave in principle approval to a draft anti-monopoly law
which would provide a free and fair competitive environment to all enterprises.
A statement from an executive meeting of the State Council presided over by
Premier Wen Jiabao said the draft law, after revision, will be submitted to the
Standing Committee of the National People's Congress, the top legislature, for
deliberation.
"Monopoly is not an offence in itself. The trouble arises when monopolies
wield their dominant status to curb competition," said Huang Yong, an
anti-monopoly consultant at the Ministry of Commerce, adding that the law does
not specifically target multinationals.
The draft law contains articles regulating monopoly agreements, abuse of
dominant market status and large-scale consolidation.
It defines "monopoly" as a single operator controlling half or more of an
industry's overall market share, or two operators colluding to hold two-thirds,
or three holding three-quarters.
While multinationals are reluctant to publicly discuss the proposed
anti-monopoly law, in private, many executives are extremely attentive to every
detail in the draft, said Lester Brown, a Beijing-based lawyer at law firm Allen
& Blake LLP.
"Some foreign-invested businesses have become a little uneasy about the law
in the wake of a State Administration for Industry and Commerce report in 2004,
which warned that foreign business giants were building monopolies in China,"
said Wang Xiaoye, a law professor at the Chinese Academy of Social Sciences who
participated in the drafting of the law.
According to the report, some transnational companies have been using their
dominant positions in technology, brand recognition and capital and management
to suppress competitors and maximize profits on the Chinese mainland. For
instance, Kodak and Fuji account for about 75 per cent of China's film and
bromide-paper segments.
The report lists a number of industries where free competition may be
threatened by multinationals, including software, photosensitive material,
mobile phones, cameras, tyres and soft packaging.
"Though the law may not be to the advantage of multinational companies, China
needs a comprehensive and enforced set of competition laws to become a fully
developed economy," said Wang, adding that China is still very supportive of
overseas investment.
Chinese enterprises, too, face problems.
"To some extent, Chinese enterprises are more vulnerable to the anti-monopoly
law, given their relative lack of experience in this aspect," Wu Xiaochen, a
lawyer with Seafront Law Office, told China Daily.
For instance, it is common practice for some leading enterprises or industry
associations to agree on pricing, which is typical monopoly behaviour, Wu
explains.
"And they will have to think twice when taking over other companies after the
law is enforced," Wu added.
According to the draft, companies seeking mergers or acquisitions will have
to notify the authorities if one or more of the parties involved has a turnover
of 1.5 billion yuan (US$185 million) or more.
Anti-trust legislation is regarded as a basic requirement of the market
economy in developed economies.
China started work on the law in 1994; and the first draft was completed in
2003.
(China Daily 06/08/2006 page1)
