After 20 years of repeated discussions, deliberations and amendments, the Anti-Monopoly Law has finally been passed by the Standing Committee of the National People's Congress (NPC), China's top legislative body. The law will take effect as of August 1, 2008.

The passage of the law could be encouraging news for Chinese economic development. At present, the Chinese economy is clouded by monopolies, reflected in the collusion by instant noodle companies to raise prices this summer. Moreover, with increasing mergers and acquisitions, some industries are verging on the monopolistic, igniting concerns of regulatory bodies and the common consumer.

Huang Jianchu, an initiator of the law and a legal expert with the Standing Committee of NPC, said in a press conference that the debut of Anti-Monopoly Law will be a conducive and lawful measure to protect fair market competition and to boost the healthy development of the Chinese economy. Huang stated that the Anti-Monopoly Law covers major monopolistic practices in the market economy, for instance, forging monopolistic agreements, abusing dominant positions in the market and restricting market competition. The new law defines those practices clearly and proposes punishment measures.

Varied responses

Neelie Kroes, the EU Competition Commissioner, paid her first official visit to China in early September. During her visit, Kroes said the Anti-Monopoly Law is an important step for China to build an effective competition system. She stated that the EU has accumulated years of experience and is prepared to offer knowledge from its own experience with EU competition policy and regulations to China.

Kroes' visit took place in the framework of the EU-China Competition Policy Dialogue, a policy exchange mechanism established in 2003 whose primary objective is to establish a permanent forum for consultation and transparency between the two sides and to enhance the EU's technical and capacity-building assistance to China regarding competition law.

Kroes noted that the ever-expanding mutual investment, cooperation and communication regarding anti-monopoly efforts will not only benefit the EU and China's respective economies, but will also help boost the international economic development.

However, the European Union Chamber of Commerce in China (EUCCC) has more worries. Joerg Wuttke, Chairman of EUCCC, said he hoped the Chinese economy would open further to provide a fair competition environment for people doing business in China. At the same time, he also pointed out that one article in the law caught his attention. "As well as the anti-monopoly checks stipulated by this law, foreign mergers with, or acquisitions of, domestic companies or foreign capital investing in domestic companies' operations in other forms should go through national security checks according to relevant laws and regulations," he said.

Wuttke said he was not sure how the government would proceed on this.

The American Chamber of Commerce in China also welcomed the law. The Chairman of AmCham-China, James Zimmerman, described the law as a "defining moment in the development of China's legal system, which establishes a basic framework to build a fair, uniform and national competition law system that benefits consumers by recognizing and preserving the incentives to compete."

Meanwhile, AmCham-China stated it would like to know the exact definition of the forbidden monopolistic practices and relevant punishment measures.

Shang Ming, head of the regulation and decrees division of the Ministry of Commerce, said the greatest concern of foreign companies was probably the mention of national security checks. Shang stated that this section of the law was out of the concern for national security and that it was a common practice internationally. Shang said that domestic acquisitions will also be subject to such checks.

Not against big business

It is not only foreign companies that have concerns; domestic ones have their worries as well. Some companies, especially industry tycoons, are afraid of being charged with running a monopoly when they intend to expand their business.

Huang Jianchu claimed that the Anti-Monopoly Law is not an opposition to bigger companies taking dominant positions. Huang explained that the marketization degree of the Chinese economy is not enough and the development of economies of scale hasn't yet matured. Therefore, Huang said the Anti-Monopoly Law doesn't prevent companies from expanding and achieving economy of scale to reduce cost.

Huang said the purpose of Anti-Monopoly Law is to encourage the further growth of companies on one the hand, but restrict monopolistic actions on the other. "Companies can improve their competitiveness through expanding their operations legally in an atmosphere of fair competition," said Huang.

Implementation is key

Wang Xiaoye, a law expert with the Chinese Academy of Social Sciences, said the biggest concern is whether the law could be effectively carried out.

"The Chinese economic transformation period is not totally finished yet, and the Anti-Monopoly Law still needs to be perfected," said Wang Xiaoye. "It is predictable that the law will be confronted with serious challenges at the beginning."

The biggest problem of the Anti-Monopoly Law is the lack of enforcement and litigation. The law states that the State Council will decide on relevant departments to shoulder the workload for anti-monopoly investigations. Wang said it is without doubt that several departments will be involved and effective cooperation is needed.

Currently, the National Development and Reform Commission, the Ministry of Commerce and the State Administration for Industry and Commerce are the major government organs shouldering the anti-monopoly responsibilities.

"I think there are two possibilities for there being no clear distinction on the execution department," Wang contended. He said that one solution would be to create an independent department directly under the State Council; the other would be the creation of an institution under the Ministry of Commerce. There is no decision yet, but a consensus is that the new department must be independent from any outside interference.

Wang believed the second challenge is regarding administrative monopoly. Although the Anti-Monopoly Law shows that legislators have a strong opposition to administrative monopoly, it is stated in the 51st article of the law that the task of the anti-administrative monopoly is shared by governmental bodies at all levels. Because of this diffusion of responsibility over enforcement, it may be difficult to prevent administrative monopoly.

As a basic law regulating market order, the Anti-Monopoly Law requires that relevant supporting laws and regulations be established. The prescriptions of the law currently rely more on principle and need specific definitions of each aspect.

"The life of law lies in its implementation," said Huang Jianchu. "It is important to choose a responsible department to enforce."

So far, there is no such department.