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PUBLISHED : Wednesday, 27 August, 2014, 12:02pm
UPDATED : Thursday, 28 August, 2014, 3:30am

Chinese antitrust regulators must address charges of anti-foreigner bias

Hu Shuli calls on officers to adhere to procedural standards in their investigations, and widen the scope of their scrutiny to state-owned giants

BIO

Hu Shuli is editor-in-chief of Caixin Media Company, editor-in-chief of the weekly magazine Century Weekly, executive editor-in-chief of the monthly journal China Reform and dean of the School of Communication and Design at Sun Yat-sen University. She founded CAIJING magazine, a business and finance review, in 1998.
 

Once mocked as a "toothless tiger", China's anti-monopoly law is finally demonstrating some bite, six years after it took effect.

The three agencies responsible for enforcing it - the National Development and Reform Commission, the Ministry of Commerce and the State Administration for Industry and Commerce - recently launched a wave of antitrust investigations mainly targeting multinationals. While some people approve of such strict enforcement, the crackdown has nevertheless raised questions about bias and whether foreign companies were being singled out.

Such a worry is not unfounded. The number of multinational companies under investigation has markedly increased, and now includes Microsoft, Qualcomm, Mercedes-Benz and Chrysler, among many others.

Just a week ago, the NDRC slapped a record fine of 1.24 billion yuan (HK$1.6 billion) on 12 Japanese auto parts suppliers. The heavy penalty ignited fresh speculation and panic among investors. Even observers in China see the crackdown as a move by the regulators to help local firms gain market share.

Through it all, the regulators have denied an anti-foreigner bias and insist that all are equal before the law.

China's anti-monopoly law has been described as no less than its "economic constitution". Indeed, it plays a major role in the protection of fair market competition and, in China's case, also serves as a tool to sever the unhealthy links between government and business in many administrative departments.

The legislation itself was passed only after many years of effort. It must not remain words on paper. Since its enactment, sadly, market development in some sectors has regressed, undermining the foundations for its enforcement.

Over the past six years, both domestic and foreign companies have been investigated. So how did the claims of bias come about? Apart from the visibility of recent cases, one reason stems from how investigators operate. As the European Union Chamber of Commerce noted, there have been accounts that "administrative intimidation tactics are being used to impel companies to accept punishments and remedies without full hearings". Officers have told companies "not to challenge the investigations, bring lawyers to hearings or involve their respective governments or chambers of commerce".

It's a pity the authorities have not seen fit to respond to these charges of procedural abuse.

The antitrust law is still fairly new, and some shortfalls in its implementation may be unavoidable. But if regulators' intent has been misunderstood, they must address the relevant concerns, especially in this case, where many are even doubting the government's resolve to carry out reforms.

The claims of anti-foreigner bias must be addressed. The only way to do it is to enforce the law fairly and openly, treating both domestic and foreign capital the same, sticking to procedural standards, allowing the timely disclosure of information and ensuring that the rights of those being investigated are fully protected.

In recent years, many foreign business associations and companies have complained that doing business in China has become increasingly difficult. This is to be expected, since China has stopped giving preferential treatment to foreign companies.

In a way, the law does act as a warning to foreign capital not to abuse their market leadership, such as by fixing prices. It tells the business world that what is not permitted in Europe and the US will also not be tolerated in China. However, this does not mean that foreign companies should become the guinea pigs of the law; their legal rights must be protected as much as those of Chinese companies.

Enforcement officers must be scrupulous and open about their work. The government must roll out more detailed guidelines for enforcement, to curb officers' tendency to act on their own, and gradually refine them to bring them in line with international best practice.

While under investigation, businesses cannot be judged guilty until a case is proven. They must be given time to build their defence, and the impact on their business should be minimised.

The best way to dispel doubts about regulators' impartiality is to call all misbehaving companies to account - including domestic giants. Legal scholars and consumers have long demanded investigations into state-owned companies such as China National Petroleum Corporation and Sinopec. In 2011, the NDRC even abruptly suspended its probe into China Telecom and China Unicom at the request of the companies; this is unacceptable.

Antitrust laws are an important part of a society based on the rule of law. Given that the rule of law is the theme of the Communist Party's fourth plenum in October, today's talk of an anti-foreigner bias is a good reminder of the importance of public confidence in the execution of the law.

This article is provided by Caixin Media, and the Chinese version of it was first published in Century Weekly magazine. www.caing.com

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