New rules tackle price-fixing monopolies

PUBLISHED : Wednesday, 05 January, 2011, 12:00am
UPDATED : Wednesday, 05 January, 2011, 12:00am

The nation's top economic planning agency announced new regulations yesterday targeting price-fixing by monopolies in a further bid to curb soaring prices and promote fair competition.

The new rules define a price monopoly and set out administrative procedures for dealing with them. They are meant to supplement the country's first anti-monopoly law, launched two years ago.

They come at a time when inflation is rising, with the central government vowing to take measures to crack down on price manipulation.

'The means of restricting competition are taking on new forms and various types of price alliances and abuses of monopoly status have seriously hurt the interests of consumers and also harmed the healthy development of the market economy,' the National Development and Reform Commission said yesterday in a statement on its website.

The new regulations ban rival companies from setting a fixed price or colluding to change prices. They also bar sellers from setting a minimum price.

Market participants are also prohibited from selling products at prices lower than their own cost to squeeze out other competitors.

The rules also prohibit leading market players from abusing their dominant positions by price gouging and demanding that buyers pay extra surcharges.

Analysts say the rules, to take effect on February 1, are part of the mainland's long-term effort to build a legal system for business but will also be important in the short term, helping to stabilise the worst price rises in more than two years.

'They can help curb price-fixing activities in competitive sectors, although state monopolies need to rein in their ambitions as well,' said Xie Simin , senior partner at C&I, a Beijing-based legal service.

That's one major flaw in the existing anti-monopoly law and the new regulations - they are not designed to tackle the country's largest and most tenacious monopolies.

The existing anti-monopoly law has seldom, if ever, been used against the de facto monopolies in the supply of natural gas, water, electricity, petroleum products and airline services, academics said.

Professor Xue Kepeng , from the China University of Political Science and Law, said anti-monopoly legislation applied mainly to competitive sectors of the economy. But state monopolies in key industries, where prices were directly set by the state, could not really be subjected to the law.

Nonetheless, Xie said that even though there was no way to break up state-owned oil industry giants CNPC and Sinopec, if they intended to merge, they would still have to apply for government approval under the existing anti-monopoly law.

The nation's anti-monopoly law was passed by the National People's Congress Standing Committee in August 2007 and came into effect in August 2008.

The NDRC is one of the three anti-monopoly agencies on the mainland, responsible for price-related cases.