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UPDATED: September 22, 2014 NO. 39 SEPTEMBER 25, 2014
Trust Issues
China resolves to stringently enforce its anti-monopoly law, no matter the origin of the offender
By Zhou Xiaoyan

LOSING THEIR LUSTER: A sales outlet of Chenghuang Jewellery in Shanghai on August 13, 2013. The Chinese jewelry vendor was heavily fined for anti-trust violations that month (IC)

Xu Kunlin, Director General of the Bureau of Price Supervision and Anti-Monopoly under the NDRC, said China's three anti-trust regulators have fewer than 100 staff members altogether.

"With such a small team, our investigations mainly follow public reports, so they are selected by consumers," said Xu, amid some foreign companies' complaints that they fall victim to "selective enforcement" of anti-monopoly probes in the country.

"Some of the NDRC monopoly investigations involve overseas multinationals, but that does not mean that we are specifically targeting only them," he said. "As a law-enforcement agency, we treat local and overseas companies equally to ensure justice for all. This is the spirit of the law, and the principle we always adhere to in the process of enforcing the law."

"Some business operators in China have failed to adjust their practices in accordance with the anti-trust law. Others have a clear understanding of the law but they take the chance," Xu told Xinhua News Agency.

Xu said the NDRC has always ensured that the defendants can make statements, seek hearings and legal redressal during the course of anti-trust enforcement.

"For example, in an auto parts price-fixing case, Sumitomo from Japan filed a written statement which was accepted by the NDRC. We reduced the fine from 342.72 million yuan ($55.8 million) to 290.4 million yuan ($47.3 million)," Xu said.

Shi Jianzhong, a law professor at the China University of Political Science and Law, said that it is groundless to accuse China of using antitrust investigations against foreign businesses.

"Since the law was enacted six years ago, investigations have covered state-owned, private as well as foreign businesses. They are all equal in the investigations. No company can escape punishment once it violates the law," he said.

Shen Danyang, a MOFCOM spokesman, said the recent anti-monopoly investigations concerning a number of foreign companies are intended to promote fair competition and protect consumers' rights.

"Probes on monopolistic behavior are universal practice. Companies in China, no matter whether they are domestic or foreign, must bear the burden of legal consequences if they violate Chinese laws," Shen said.

Harley Seyedin, President of the American Chamber of Commerce in South China, said he believes that Chinese laws will treat domestic and outside businesses equally. He said the ongoing anti-trust probes will not affect his member companies' future investment in China.

"While in China, you have to respect and follow laws and regulations in China," he told Beijing Review. "There are no so-called 'foreign businesses' in China. Once you come here as a foreign company, you establish a Chinese company that is subject to Chinese laws, that pays Chinese taxes and that acts as a Chinese citizen."

"It doesn't matter whether those companies are U.S.-invested or not, we would expect those companies to respect and follow Chinese laws, just as all companies in the United States should follow U.S. laws," he said.

"If you only come to China for its cheap land and labor and a lax law enforcement environment, then you're not welcome," he said.

Wang Xiaoye, a law professor at the Chinese Academy of Social Sciences who has participated in the drafting of China's anti-trust laws, said the law is modeled on EU legislation. Wang said there is nothing alien or unique about the country's anti-trust law.

She said it is less draconian than in other jurisdictions, particularly the United States, where offenders can go to jail and often do, since it is a violation of criminal law. As is the case in the EU, violations of China's Anti-Monopoly Law are a civil matter.

"What has happened in China recently represents normal practice everywhere," she said.

"Foreign companies that feel wrongfully accused of anti-competitive behavior should take their cases to Chinese courts," she said. "If they feel confident that everything they have done is right and they have not violated the law, they can bring their cases to the courts," she said.

The end of an era

Experts say foreign businesses in China should get used to the fact that the age of super-national treatment for foreign players has come to an end in the country and China is getting serious about creating a fair market.

In the early years of reform and opening up, in order to lure foreign investment, local governments used to offer foreign businesses a number of preferential policies on land and taxes. But now, although China still attaches great importance to foreign investment, the "super-national treatment" for foreign businesses has come to an inevitable end.

Zhang Jianping, a senior researcher at the Institute for International Economic Research at the NDRC, said foreign companies are still in an "adjustment period" to a more stringent enforcement of anti-trust law as enforcement has been somewhat lacking in previous years.

Chinese officials have urged companies operating in China, domestic and foreign, to review their operations to see if their practices fully abide by the anti-monopoly legislation.

Huang Yong, Director of the Competition Law Research Center at the Beijing-based University of International Business and Economics, said most foreign companies have rich experience in addressing anti-trust issues, but they need to gain a better understanding of China's anti-trust laws.

"Closer communication with Chinese regulators should be highlighted," Huang said.

Bai Ming, a research fellow with the Chinese Academy of International Trade and Economic Cooperation, said intensified enforcement of the Anti-Monopoly Law will become a new norm in China. He said in the future, anti-trust probes will become more and more frequent in China and all businesses should get used to it.

"In the past, regulators only targeted businesses that have severely breached the law due to defective law enforcement and systems," Bai said. "However, after six years' accumulation of experience, China's law enforcement has greatly improved. The enforcement of anti-trust legislation is aimed at maintaining market order and sustaining a fair market environment, in order to better protect consumer rights."

The wave of anti-trust investigations has to date swept a wide range of sectors, such as LCD manufacturers, milk formula makers, pharmaceutical factories, liquor makers, auto makers, insurance companies and cement producers.

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