House Judiciary Considers Impact of China’s Antimonopoly Law
On July 13, 2010, the House Judiciary Subcommittee on Courts and Competition Policy held a hearing to consider the impact of China’s new Antimonopoly Law (AML) on U.S. companies.
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(According to China.org, the AML, which entered into force on August 1, 2008, was enacted for the purpose of 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.)
Concern over Exemptions & Possible Harm to Dominant U.S. Firms
In general, those testifying1 before the committee applauded China’s efforts to establish antitrust regulations, however, they pointed to the following areas of concern (partial list):
State-owned enterprises may be exempt. The AML has provisions addressing State-Owned Enterprises (SOEs). However, at best these provisions are ambiguous, and at worst they appear to exempt the strict application of competition policy to SOEs.
Export cartels may be exempt. China’s AML can be interpreted to provide an implicit exemption for export cartels, of which there are many. Therefore, U.S. firms may be competing in third countries against Chinese firms which have been authorized to collude.
Could hurt U.S. companies found “dominant.” The U.S. should be concerned about whether China’s AML will be implemented in such a way as to deliberately target large U.S. firms in order to favor their Chinese rivals. According to one speaker, draft provisions on abuse of dominance by the State Administration for Industry and Commerce (SAIC) would basically force “dominant” companies to justify any reduction of trade or refusal to enter into specified business transactions with competitors and other entities without first requiring the agency to prove anti-competitive behavior existed.
Mergers contrary to China policies may be rejected. If China’s competition agencies adopt an approach to merger enforcement that does not evaluate mergers based on their alleged harm to competition, but rather rely on non-economic factors such as a fragmented market or unduly rely on competitor welfare, the authorities would be able to block mergers and acquisitions that do not cause consumer welfare losses, but may run contrary to a particular China government industrial policy.
Further Analysis, Engagement with China Recommended
One of the speakers recommended that the U.S. develop a new inter-agency group on anti-competitive market distortions to consider distortive decisions by foreign competition agencies.
Others suggested dialogue and advocacy, encouraging more guidance documents from the Chinese regulating agencies, and suggesting the agencies provide an opportunity for public comment on guidelines and other regulations before they are issued in final form.
1Speakers included representatives of the U.S. Chamber of Commerce, Covington & Burling, Latham & Watkins, and Penn State University.
China.org’s translation of the AML is available here.