Issue: 2007: Vol. 6, No. 3

The New China Anti-Monopoly Law

Article Author(s)

H. Stephen Harris

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Mr. Harris is a partner in Alston & Bird LLP and Chair of its Antitrust Practice Group. He has participated by invitation in several conferences hosted by the State Council of the People’s Republic of China and the Ministry of Commerce in China regarding previous drafts of the Anti-Monopoly Law. He also serves as the International Officer of the American Bar Association Section of Antitrust Law and the Section’s International Task Force, and has chaired or co-chaired working groups that ... 
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After decades of debate, China enacted its long-awaited Anti-Monopoly Law on August 30, 2007, the first comprehensive antitrust law in history of the People’s Republic. The law was the product of a result of input from Chinese agencies, academics and foreign commentators, including antitrust enforcement officials, academics, economists, and practitioners. While the law is a major step in establishing a system of commercial law consistent with international norms, the text and the system that will interpret and apply it raise serious concerns about whether the law will, in practice, be used primarily to protect competition and consumer welfare in China, or whether it will be used as a protectionist device to favor State Owned Enterprises and privatized indigenous companies in Chinese markets.

The law will become effective on August 1, 2008. In the interim, the various agencies that will serve as the primary enforcers are expected to draft, under the aegis of the State Council,1implementing regulations and guidelines to fill in some of the substantial gaps in the statute as enacted. Those agencies are the Ministry of Commerce,2expected to be the lead agency on reviews of mergers and acquisitions , the National Development and Reform Commission,3expected to serve as the lead agency on the investigation and prosecution of cartels and other concerted, anti-competitve conduct, and the State Administration for Industry and Commerce,4expected to act as the primary enforcer of the law’s provisions prohibiting “abuse of a dominant market position” by a single competitor with market power.

Each of these agencies has sought and studied numerous sets of comments from various public and private organizations and companies around the world, hosted many seminars and meetings with representatives of those bodies as well as many leading academic experts in competition law from China and abroad. Many of those useful comments can be recognized in language now incorporated in the final law enacted by the National People’s Congress. But the final version of the law raises many concerns, and fails to answer a number of pressing questions, including: (a) so-called local blockage or regional monopoly;5(b) sectoral monopolies by Chinese firms, including state-owned enterprises, and (c) a perception that China intends to use the law to focus on alleged abuses of dominant positions by some foreign multinationals, to the detriment of foreign competitors, and in protection of Chinese entities. This paper seeks to provide a general overview of the law, highlighting the provisions that have sparked the greatest concern among commentators.

I. Development of the Anti-Monopoly Law

At least since the mid-1980s, there have been serious discussions by Chinese governmental bodies about the possible enactment of a comprehensive antitrust law. The debate took place against the backdrop of imposed dramatic reform of China’s economy from a centrally planned economy to a “socialist market economy,” a change reflected in the latter phrase being inserted into the Chinese Constitution in lieu of a “planned economy on the basis of socialist public ownership.” While some statutes that fell short of fulfilling the characteristics of a typical “comprehensive” antitrust law were enacted, including notably the Anti-Unfair Competition Law,6enacted in 1993, that and other such laws fell short, both as worded and as enforced, of providing broad, unequivocal proscriptions against certain types of conduct prohibited by the competition laws of almost all other major industrialized jurisdictions.

In 1993, when China established a group comprised of officials from the State Administration for Industry and Commerce and the State Economic and Trade Commission to study the anti-monopoly laws of other jurisdictions and begin work on a draft Anti-Monopoly Law of China.7 On November 11, 2002, China acceded to World Trade Organization , an event that resulted in other WTO members pressuring China to enact a comprehensive antitrust law, among other reforms. In response, the National People’s Congress Standing Committee stated that China would draft an antitrust law as part of its preparation for entry into the WTO.8 Building on the early work of state agencies and seeking to respond to foreign demands for passage of an antitrust law in light of China’s membership in the WTO, the State Council Legislative Affairs Office and other agencies solicited the views of foreign governments and non-governmental organizations regarding the revised September 2003 draft law.9That draft also was the topic of a two-day conference hosted by the Ministry of Commerce outside Beijing in October 2003. Leading Chinese academics and a few practitioners from Japan, Germany, and the U.S. attended.10 That conference and others culminated in a February 2004 draft of the law, several provisions of which were broadly criticized as inconsistent with international norms of competition law, especially the possibility that the law would be used to protect Chinese entities from foreign competition, instead of establishing a level playing field for all competitors in Chinese markets.

Concern about law enforcement centered on foreign firms intensified in May 2004, when the State Administration for Industry and Commerce issued a paper that alleged that foreign firms were engaging in abuses of dominant positions in China, naming Microsoft, Kodak, and TetraPak specifically,11lthough the draft Antimonopoly Law does not distinguish foreign and domestic firms, its initial targets are likely to be foreign firms with prominent positions in Chinese markets”) and Antitrust Distrust, Business China (Jan 16, 2006) (“Many foreign companies fear that they may become victims of China’s first law against monopolies.”).]accusations denied by the named firms.12 a ‘killer of multinational corporations’, nor does it show that China’s Antitrust Law is targeted at multinational corporations only.” Id at 5.] A later submission by SAIC to the Organization for Economic Cooperation and Development’s Global Competition Forum reiterated SAIC’s support for applying the new law solely to private conduct, exempting government conduct.13 Though numerous subsequent drafts made changes that sought to address these concerns, the final has not relieved the concern about the possible protectionist enforcement of the anti-monopoly law. In light of the many lacunae in the statute as passed, it is hoped that Chinese agencies will, before the law’s effective date of August 1, 2008, promulgate implementing regulations and guidelines that would help ensure the law is applied equally to all economic actors.

II. An Overview of the Principal Provisions of the AML

Chapter I (General Provisions), Articles 1 through 12, set out the overarching principles and purposes of the law , as well as the basic structure and functions of the enforcement authorities. Though more specific provisions in later Chapters provide greater detail on these points, some of the broad language in Chapter I raises questions about whether the specific provisions might be interpreted in a non-normative manner in light of Chapter I’s broad language. For example, Article I provides that the Law is enacted for the purpose, among others, to protect “the public interest” and to promote “the healthy development of the socialist market economy.” Such language could be used to support policies inconsistent with an interpretation that would protect open competition based on free market principles. Article 4, similarly, provides that the State shall make and implement competition rules that are “appropriate for the socialist market economy” and a “well-ordered market system.”

Article 3 seeks to provide a general list of the broad types of conduct proscribed by the law. Defined as “Monopolistic Conduct” (a term somewhat at odds with usage of the term in economic literature and in the jurisprudence of other countries), such conduct is defined as the following activities which eliminate or restrict competition or are likely to have the effects to eliminate or restrict competition:

  1. Monopoly agreements between undertakings [further defined in Chapter II];
  2. Abuse of dominant market position by undertakings [further defined in Chapter III; and
  3. Concentrations [i.e., mergers, acquisitions, integrated joint ventures, etc.] conducted by undertakings that may have the effect of eliminating or restricting competition.

Article 7 seeks to provide an overview of the law’s approach to entities controlled by the government , providing that such industries “shall be protected by the State to conduct lawful operation” and that the “State shall supervise and control the price of commodities and services provided by these undertakings (defined in Article 12 as entities that engage in the production or business of commodities or services) so as to protect the interests of the consumer and facilitate technical progress.” Modern economic and competition law theory would rely upon market mechanisms, not governmental intervention, to ensure these entities that are acting as market competitors act in the way most beneficial to consumer welfare.

Article 9 and 10 sketch out the basic structure of the two primary antitrust law bodies, both of which will operate under the aegis of the State Council, namely the Anti-Monopoly Committee and the Anti-Monopoly Enforcement Authority. The Committee is tasked with making competition policy, analyzing and assessing the status of competition in China, publishing anti-monopoly guidelines, and coordinating the administrative enforcement work of Authority. The Authority is charged with the day-to-day enforcement of the law, with specific powers and duties set forth in subsequent chapters. The Authority is empowered to delegate provincial and municipal government agencies to be responsible for enforcement officials, increasing the risk of local bias and inconsistent interpretation and application of the law.

Chapter II (Monopoly Agreements), Articles 13 through 16, provide for the law’s treatment of concerted action (anticompetitive conduct undertaken by more than one entity). Article 13 defines “Monopoly Agreements” as agreements or other concerted conduct that eliminates or restricts competition, and provides a nonexhaustive list of examples of such conduct, including price-fixing, output restraints, market allocation, and boycotts. One example that appears out of step with other competition laws of large economies is “restricting the purchase of new technology or new facilities or the development of new technology or new products.” This language has engendered concerns that the law may interfere with the establishment or operation of research and development joint ventures that are generally accorded lenient treatment by U.S. antitrust agencies and those of other jurisdictions. Article 14 prohibits resale price maintenance (restricting the price at which a buyer resells a product).

Article 15 provides for exemptions from the proscriptions of Articles 13 and 14, for various pro-competitive purposes, also described in a nonexhaustive list. Some exempted conduct, such as unifying product standards and developing new products would appear consistent with the permissive approach toward technology joint ventures in the U.S. and elsewhere. Others, however, such as exemptions for “improving operational efficiency,” “enhancing the competitiveness of small and medium-sized enterprises,” “maintaining the public welfare,” “mitigating the severe decrease of sales volume or excessive overstock during economic recessions,” and “protecting the legitimate interests of international trade and foreign economic cooperation” appear at odds with competition law norms. Could horizontal price-fixing between competitors truly be excused by a finding that the price-fixing improves those competitors’ operational efficiency, or mitigates a decrease of their sales volumes? Only time (and perhaps the anticipated regulations and guidelines) will answer that question.

Chapter III (Abuse of Dominant Market Position), Articles 17 through 19 is based largely on the European competition law approach to defining unlawful single-firm conduct. Article 17 prohibits dominant entities from abusing their dominant market position defined as one “that can control the price or quantity of products or other transaction conditions in the relevant market or can block or affect the access of other undertakings to the relevant market.” This formulation is comparable to the concepts in the U.S. antitrust law definition of market power, being “the ability to raise prices above those that would be charged in a competitive market”14or “the ability of a single seller to raise price and restrict output, for reduced output is the almost inevitable result of higher prices.”15 Inclusion of “or other transaction conditions,” however, is not consistent with the U.S. formulation, but may be seen as more closely approximating the broader European concept. The European Court of Justice, for example, has defined a dominant position under Article 82 as “a position of economic strength enjoyed by an undertaking which enables it to hinder the maintenance of effective competition of the relevant market by allowing it to behave to an appreciable extent independently of its competitors and customers and ultimately of consumers.”16 ECR 3461, [1985] 1 CMLR 282, § 30; Case 27/76 United Brands v. Commission [1978] ECR 207, [1978] 1 CMLR 429, § 65; Hoffman-La Roche v. Commission [1979] ECR 461, [1979] 3 CMLR 211, § 38. ]

Article 17 also provides an illustrative list of types of conduct proscribed, some of which are not consistent with enforcement policies of the U.S. and EU, but do find resonance in the laws of other countries such as Japan and South Korea. These include “selling products at unfairly high prices or buying products at unfairly low prices.” Other examples, such as tying and exclusive dealing, are consistent with the laws of most other developed economies.

Article 18 provides that a dominant market position shall be determined based on factors such as the market share of the entities, their competitive status in the relevant market, and difficult of market entry. These factors are also generally consistent with international norms. However, other factors, such as the financial and technical status of the entities, are not.

Article 19 has generated much criticism. This provision sets out a presumption of a dominant position based on the extent to which a market is concentrated. For example, Article 19(iii) provides that a company will be deemed to have a dominant market position if “the joint market share of three undertakings accounts for three-fourths of the relevant market.” Though another provision states that no entity with less than 10% market share shall be considered dominant, under 19(iii), a third-place firm with 11% market share is presumed dominant if its market share, plus those its two (much) larger rivals, equals 75% or more. Applied rigidly, this provision would lead to results widely at odds with the definition of market power in other jurisdictions, and could undermine the competitiveness of a smaller firm.

The interplay between Articles 18 and 19 is unclear, and, one hopes, will be clarified by implementing regulations and guidelines. To bring this Chapter into closer conformity with modern economic thought, Article 18 should be applied to permit firms to rebut a presumption of market power under the formulae in Article 19, by demonstrating an absence, in fact, of control over prices or output, and the inability to block entry into the market.

Chapter IV (“Concentrations”), Articles 20 through 31 contains the Current Draft’s merger control provisions, including procedures and substantive tests for approving or rejecting a proposed concentration. Presumably, this comprehensive and competition-focused merger control regime will supersede the abandoned Provisional Rules,17though that is not stated expressly and should be addressed in regulations. Substantial revisions during the drafting process have brought the final law into much closer conformity with merger review regimes (especially with regard to procedural issues and deadlines) than was the case with earlier drafts.

Article 20 defines Concentration to include mergers, acquisitions, and changes of control by other means. As with scores of jurisdictions, China will now require parties of a defined size to a concentration of a defined size to notify the relevant agency of any covered concentration. Under Article 23, the parties must submit information on a notification form, as well as a competitive evaluation report, about the agreements used to effect the concentration, as well as audited financial reports from the most recent accounting year, and other information the Authority may require. Article 25 provides that the Authority must conduct a preliminary review of the concentration and decide whether to implement a further examination (comparable to the U.S. agencies “second request”). Consistent with the approach taken by the U.S. and other jurisdictions, if the 30-day period expires without the Authority’s making a decision, the parties may close the transaction. Under Article 26, where the Authority decides further examination is required, it is obligated to approve or prohibit the concentration within 90 working days after the date of its decision to undertake the second-phase examination. The Authority is required to explain its reasons for prohibiting a transaction.

Substantively, the merger review provisions set out in Article 27 are in many ways consistent with approaches of other jurisdictions, including consideration of the concentration of the market, and the market share and market power of the parties to the transaction. Other factors, however, are outliers among major jurisdictions, including consideration of “the influence of the concentration over national economic development.” Article 28 obligates the Authority to prohibit concentrations that “will or may eliminate or restrict market competition.” This formula does not include a requirement that such a restriction must be substantial (cf. the EU “substantial lessening of competition” requirement) in order to justify prohibition. Article 28 seems to provide a savings clause from the harsh, literal application of this language, but adds a great deal of discretion and unpredictability, by empowering the Authority to permit a transaction where its advantages outweigh its disadvantages, or where the concentration is “in harmony with the public interest.” Article 31 provides that a separate national security examination be conducted where a concentration presents national security issues.18

Chapter V (Prohibition of Abuse of Administrative Powers to Restrict Competition), Articles 32 through 37, provides the law’s response to one of the most difficult competition issues presented by the unique circumstances of China’s transitional economy, namely how (or whether) to apply the law to government-controlled Chinese entities that are acting as competitors in the marketplace. This issue includes the problem of so-called “regional blockage,” a term that refers to the reportedly common and multifarious actions of the remarkably autonomous governments of municipalities, provinces, and autonomous regions, to hamper or altogether prevent entry into their markets by Chinese entities from other parts of China. The law includes fairly strong proscriptions against “abusing” administrative powers to limit the entry of products or competitors from other regions, it is not clear what sanctions would, or could, be applied to punish such conduct.

During the debate surrounding the drafting of the law, many commentators emphasized the importance of ensuring that it apply fully and equally to all entities acting as competitors in the marketplace, including government-controlled entities such as the State-Owned Enterprises. Some earlier drafts contained fairly strong language designed to accomplish this goal. Article 35 of the April 8, 2005 Draft, for example, provided as follows:

The Government and its subordinate departments shall not promulgate rules with provisions eliminating or limiting competition in violation of laws and administrative regulations so as to prevent the establishment of a unified and orderly national market and of a fair competitive environment.

Unfortunately, that and similarly salutary language were deleted in subsequent drafts and are absent from the final law. Such provisions, if they could have been implemented, might have gone far in addressing the distortions of competition resulting from various practices of State-Owned Enterprises and the likely broad exemptions of certain sectors of the Chinese economy. It seems certain that the enactment of these provisions sparked significant behind-the-scenes political opposition.19 A few commentators have indicated the possibility of a separate statute prohibiting administrative monopolies.20 But the opportunity to do so as part of a “comprehensive” Anti-Monopoly Law has been lost, undermining severely the extent to which the new competition law regime can play a substantial role in China’s transition to a market economy, and apparently reflecting a continuing desire by some officials to attempt to control the market as it affects government-related enterprises.21

By focusing almost exclusively on the issue of internal regional blockage, the law’s provisions addressing government conduct largely fail to address the broader Administrative Monopoly concern that failing to apply the law to SOEs fully and equally may create a de facto exemption of government entities – which constitute a substantial segment of China’s economy – from the reach of the law. Article 7 of Chapter I and Article 51 of Chapter VII are the slim reeds left to those seeking to invoke the law to restrain the government’s protection of Administrative Monopolies. Article 7 states as follows:

Industries controlled by the State-owned economy and relied upon by the national economy and national security or industries implementing exclusive operation and sales in accordance with the law shall be protected by the State to conduct lawful operation by the undertakings. The State shall supervise and control the price of commodities and services provided by these undertakings and the operation of these undertakings so as to protect the interests of the consumer and facilitate technical progress.

The undertakings mentioned in the paragraph above shall operate, in good faith, in accordance with the law and in a self-disciplined manner, accepting public supervision and shall not harm the interests of the consumer from a controlling or exclusive dealing position.

Article 51 provides as follows:

The administrative agencies or organizations authorized with administrative powers of public affairs by laws and regulations shall be admonished by the superior authorities if they abuse their administrative power to eliminate or restrict competition; the individuals in charge of this matter or any others who are directly responsible shall be punished in accordance with the law. The Anti-Monopoly Authority may provide advice of legal settlement to its superior authorities.

The interplay between Article 7 and Article 51 is unclear. It appears that the Authority’s only course of action to seek to address anticompetitive conduct by government entities may be to complain to the State Council and seek its intervention, including by providing recommended remedies.

Chapter VI (Investigation of Suspicious Monopoly Behaviors), Article 38 through 45, sets out in greater detail the powers of the Authority. Under Article 39, these include: “on-the-spot” inspections, questioning individuals, and examining and copying documents, subject to written approval of senior officials of the Authority. Article 41 provides that commercial secrets obtained during an investigation shall be kept confidential. Subjects of an investigation are required, by Article 42, to cooperate. That article also prohibits obstruction of an investigation. Though the scope of the right will presumably be further illuminated by regulations, Article 43 provides the subject of an investigation and other interested parties the “right to submit statements” and obligates the Authority to “hear the opinions” of such entities. Article 45 empowers the Authority to suspend an investigation based on undertakings promising the elimination of the effects of anticompetitive conduct through “concrete measures,” subject to reinitiation of an investigation if the parties fail to comply.

Chapter VII (Legal Liability), Articles 46 through 54, outlines the sanctions and process for applying the law. Article 46 empowers the Authority to impose fines of from 1 to 10 percent of the parties’ total sales volume in the relevant market from the previous year, for violations of prohibitions on Monopoly Agreements. “Mitigated punishment” or exemption from punishment is permitted where the undertakings involved in a monopoly agreement report their conduct to the Authority and provide important evidence. This may be the basis for a formal leniency program that could be set out in subsequent regulations. Article 47 provides for fines in the same range of fines for abuses of a dominant market position, but no leniency provision.

Under Article 48, if parties to a concentration consummate the transaction and it is found to violate the law, the Authority shall order the parties to cease implementation of the transaction, and may order divestiture of all or part of the stock or assets within a specified time and “other necessary measures to restore the market situation before the concentration.” The Authority may also impose a fine of less than 500,000 RMB (at the current exchange rate, approximately US$60,000).

Article 52 provides that refusing to submit required documents or information, submitting fraudulent documents or information, hiding, destroying or removing evidence, or otherwise obstructing an investigation can result in fines on individuals of less than 20,000 RMB and on enterprises of less than 200,000 RMB. In “serious” cases, the Authority may impose fines from 20,000 RMB to 100,000 RMB against individuals and from 200,000 RMB to 1 Million RMB on enterprises. In addition, criminal penalties may apply.

Article 50 provides simply that undertakings that violate the law and cause damage to others “shall bear civil liability.” This may enable parties to seek damages, either before the Authority (and on appeal, before one of the People’s Courts), or directly before a People’s Court. Whether this provision subjects government entities to civil liability is also unclear, though Articles 7 and 51 would seem to call that prospect into question.

Article 53 provides for an initial administrative reconsideration of Authority decisions, followed by an administrative suit, both in accordance with existing procedural laws. Article 54 provides for administrative sanctions against, as well as possible criminal punishment of, Authority officials that abuse their power, neglect their duties, accept bribes, or disclose confidential information.

Chapter VIII (Supplementary Provisions) Articles 55 through 57 includes miscellaneous provisions. Article 55 is perhaps the most widely criticized of all the law’s provisions. It cryptically addresses the applicability of the law to intellectual property rights, as follows:

This Law is not applicable to conducts by undertakings to protect their legitimate intellectual property rights in accordance with the IP law and relevant administrative regulations; however, this Law is applicable to the conduct of undertakings to eliminate or restrict market competition by abusing intellectual property rights stipulated in the IP law and administrative regulations.

The AML provides no guidance regarding what may be deemed an “abuse” of IP rights. Earlier drafts of this provision seemed to give greater, though still insufficient, assurance that the enforcement of such rights in accordance with the laws creating them would not be considered a violation of the Anti-Monopoly Law. This provision, together with the language Article 17(iii) rendering a refusal to deal a possible abuse of dominance, have created serious concerns that the AML may be used to impose compulsory licenses as a “remedy” for refusals to license such IP to competitors. A refusal to license, without more, is not typically regarded as a violation of competition laws of most major jurisdictions.22

The other supplementary provisions in Chapter VIII include Article 56, which provides for an exemption for concerted actions related to entities engaged in the production, processing, sales, transportation, and storage of agricultural commodities, creating a much broader exemption for the agricultural sector in China than exists in other major jurisdictions.23 Finally, Article 57 provides that the AML shall become effective as of August 1, 2008.

Article 47 makes the law applicable to business groups and industrial associations that eliminate or restrict market competition in violation of the law. Though such broad language could be read to apply to administrative monopolies, it is highly unlikely that this is the intended construction. Instead, this provision will likely apply to trade associations, chambers of commerce, and other business-related groups. Chinese government entities are heavily involved in many Chinese business organizations, raising the possibility that Article 47 could render the law applicable to such quasi-government entities despite the deletion of the administrative monopolies chapter in the law.

Article 49 provides that the law is not applicable to the “cooperation, association or other coincident conduct by “farmers and the farmers’ professional economic organizations during the course of the production, manufacture, transportation, storage and other operating activities of the agricultural products.” This is the only sectoral exemption (if one excludes the exemption for conduct covered by laws or administrative regulations of relevant industries or sectors, under Article 2). The exemption is broader than the Capper Volstead Act’s24immunity for agricultural cooperatives under U.S. law.

III. Concluding Thoughts

The agencies that will likely be comprised within the Anti-Monopoly Enforcement Authority reportedly are, or will soon be, at work on implementing regulations. A desirable level of compliance with the law will be possible only if the regulations provide such greater clarity to enable competitors and their counsel to assess current or contemplated conduct against objective rules. Many of the provisions that have engendered the greatest concerns by commentators could be improved, and those concerns reduced if not eliminated, through such regulations.

Concerns that the law may be used to compel dominant high tech firms to grant licenses to competitors, for example, should be addressed through regulations making clear that IP owners have a right to refuse to license their technology, absent proof of separate conduct violating a specific prohibition in the law, not the overbroad provision in Article 13 prohibiting restrictions on the purchase or development of new technology. Similarly, implementing regulations should ensure that the enforcers do not use the provisions regarding international trade and the development of the China economy to discriminate in enforcement against foreign firms or in favor of Chinese entities. Finally, the several articles that prohibit conduct absent justification provide no definition or guidance as to what may constitute sufficient justification to constitute a defense.

Despite the law’s shortcomings, China’s enactment of the law should be seen as an important step toward the liberalization of the Chinese economic system and, more fundamentally and more broadly, the establishment of the rule of law. But much work is needed to flesh out the substantive and procedural provisions of the law, and to move the law and its application toward the mainstream of modern competition law.

* Mr. Harris is a partner in Alston & Bird LLP and Chair of its Antitrust Practice Group. He has participated by invitation in several conferences hosted by the State Council of the People’s Republic of China and the Ministry of Commerce in China regarding previous drafts of the Anti-Monopoly Law. He also serves as the International Officer of the American Bar Association Section of Antitrust Law and the Section’s International Task Force, and has chaired or co-chaired working groups that prepared Comments of the ABA Section of Antitrust Law and Section of International Law regarding drafts of the Anti-Monopoly Law, and of the China Working Group of the Antitrust Committee of the International Bar Association that also submitted comments on drafts of the law.

  1. The State Council is the “highest executive organ of State power” and of “State administration.” Regarding the State Council’s functions and organizations, see generally the State Council website at
  2. MOFCOM is a ministry under the State Council. For information regarding the organization and functions of MOFCOM see generally the MOFCOM website at
  3. Regarding the general functions and organization of the NDRC, see generally the NDRC website at
  4. SAIC is an organization directly under the State Council. For additional information regarding the functions and organization of SAIC, see generally the SAIC website at (NB: this website was offline intermittently during the preparation of this article).
  5. See discussion of regional blockage in “Challenges/Obstacles Faced by Competition Authorities in Achieving Greater Economic Development Through the Promotion of Competition,” by SAIC official Wang Xue Zheng, January 9, 2004, working document CCNM/GF/COMP/WD(2004) 16, at 2 (explaining that a serious problem is caused by local governments blocking products entry into their markets of products competitive with ones produced there, in part because tax revenue collected on products is shared by the local government where production is located; further explaining that, though the Unfair Competition Law prohibited such local blockage those provisions have not been effectively enforced), available at the OECD website at See also Wang Shaoguang, “The Rise of Regions: Fiscal Reform and the Decline of Central State Capacity in China,” in Andrew G. Walder, ed., The Waning of the Communist State: Economic Organs of Political Decline in China and Hungary, 109 (1995)(“Because power and resources are dispersed, the exercise of central control now depends to a large extent upon the consent of the sub-national units whose actions are slipping from central control.”).
  6. An official English translation of the law is available on the China State Intellectual Property Office (“SIPO”) website at (this law is sometimes referred to as the “Law Against Unfair Competition,” the “Unfair Competition Law” or the “Counter-Unfair Competition Law”).
  7. See Wang Xiaoye, Chinese Anti-Monopoly Law: Issues Surrounding the Drafting of China’s Anti-Monopoly Law, 3 Wash U Global Studies L Rev 285 (2004). See also Law and Order: Government Officials to Draft Antimonopoly Law, New China News Agency (Jan 19, 1995).
  8. Beijing Amends Laws to Prepare for WTO Entry, Xinhua News Agency (Mar 7, 2001), quoting Zeng Jianhui, spokesman for the Fourth Session of the Ninth National People’s Congress.
  9. An unofficial English translation of this draft is on file with the author. Regarding the September 2003 Draft AML, see generally ABA Section of Antitrust Law, Competition Laws Outside the United States, 5 (1st. Supp. 2005). EU Official Says China Has Made ‘Important Steps’ Forward on Competition Policy, BBC Monitoring Internat’l Reports (Nov 24, 2003) (reporting that European Union (“EU”) Commissioner Mario Monti was “impressed by the ‘openness and willingness’ shown by Chinese officials in cooperation on competition policy” and citing the execution of a memorandum of understanding between the EU and China for establishing a dialogue mechanism on competition policy).
  10. The author was a participant in this conference.
  11. Report: Anti-Monopoly Law Vital, China Daily (Aug 20, 2004); Tang Zhengyu, Towards an Anti-Monopoly Law; China Vows to Upgrade Its Competition Safeguards, China L & Practice (July 1, 2004); Monopoly Law Badly Needed, Report Says, China Daily (May 25, 2004). A copy of an unofficial English translation of the SAIC Report is on file with the author. The concern about selective legal enforcement continues. See, for example, Chris Buckley, China to Consider Introducing Anti-Monopoly Law, Reuters (Dec 28, 2005) (predicting that “it may be foreign multinationals—not China’s state conglomerates—that are the initial targets of the law” and quoting Nathan Bush as stating that “[a
  12. See, for example, Kodak Denies Monopolistic Accusations, Fin Times, 8 (June 8, 2004). The principal author of a predecessor report entitled Be Aware of the Anti-Competitive Acts of Multi-National Corporations in China and Their Countermeasures, Professor Sheng Jiemen of Peking University Law School, Director of the Economic Law Institute of Peking University and an advisor on the drafting of the Anti-Monopoly Law, states, in a paper entitled How Does the Chinese Government Regulate Foreign Investors’ M&A of Domestic Enterprises (on file with author), that the reports are “merely a legal analysis of the monopolization trend and the unfair competition acts carried out by some multinational corporations and some industries, aiming at arousing the attention of the Chinese government.” Professor Sheng goes on to write that “antitrust regulation should be nationality-free” and that “unfair competition acts and abuses of the dominant position conducted by the Chinese enterprises should also be subject to legal regulation.” He notes that the report “is only an analysis of a social economic phenomenon, which does not mean that [he is
  13. “Challenges/Obstacles Faced by Competition Authorities in Achieving Greater Economic Development Through the Promotion of Competition,” Wang Xue Zheng, January 9, 2004, working document CCNM/GF/COMP/WD(2004) 16, at 2 (“Antitrust law is supposed to be against private anticompetitive conduct and is not supposed to be applied to markets that are controlled or regulated by the government, . . . .”), available at the OECD website at
  14. NCAA v. Board of Regents, 468 U.S. 85, 109 n.38 (1984); Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2, 27 n.46 (1984).
  15. Fortner Enterprises, Inc. v. United States Steel Corp., 394 U.S. 495, 503 (1969).
  16. Michelin v. Commission [1983
  17. See Sheng Jiemen, How Does the Chinese Government Regulate Foreign Investors’ M&A of Domestic Enterprises (copy on file with author)(the draft Anti-Monopoly Law’s provisions will “only consider whether the merger or concentration will hinder competition or not” and will ‘not consider the nationality of applicants”).
  18. Cf. the Exon-Florio Amendment to the Defense Production Act of 1950, 50 U.S.C. app. § 2061 et seq.
  19. See “China Unveils Competition Rules; Observers Fear Political Resistance May Delay Implementation of the Country’s First Antitrust Law,” South China Morning Post, July 2, 2003 (quoting one observer as saying that “the government’s encouragement of competition could be hampered by its need to support state-owned enterprises identified as China’s first multinationals”).
  20. Comments of Prof. Sheng Jiemen to representatives of the American Bar Association, at the ABA Annual Meeting, 2005, Chicago.
  21. Cf. Stanley B. Lubman, Bird in a Cage: Legal Reform in China After Mao, 182 (Stanford 1999)(discussing SAIC’s position that it should be able to “’supervise and manage’ contracts in which one party is a state or collective enterprise and which could injure ‘state interests’”).
  22. See Adam Cohen, “Politics and Economics: China’s New Draft Law Sows Worries in the West,” Wall Street Journal, Jan. 30, 2006 (describing concerns of world’s largest patent-holding companies and possibility of forced royalty-free licensing).
  23. Cf. the narrow exemption extended to agricultural cooperatives by an original provision of the Clayton Act, 15 U.S.C. § 17, and by,the Capper-Volstead Act, 7 U.S.C. §§ 291-292.
  24. 7 U.S.C. §§ 291-292 (2000).