Time to crack down on commercial bribery

The present Anti-Unfair Competition Law has lost its deterrent effect, but likely amendments should be good for the economy if applied fairly and transparently

PUBLISHED : Sunday, 05 June, 2016, 12:26am
UPDATED : Sunday, 05 June, 2016, 12:26am

Just when it might have seemed that the mainland must be weary with corruption fatigue after the sustained crackdown on graft in official places high and low, market supervisors will soon be turning their attention to another clean-up that is important to the health of the business sector and the country’s integration with the global economy. A new report predicts a surge in investigations into commercial bribery and enforcement actions once amendments to the Anti-Unfair Competition Law take effect.

The present law, introduced in 1993, has lost its deterrent effect as it has fallen off the pace of market changes. Beijing released a draft of the amended law, which covers business-related bribery, in February and such are official hopes for its positive effects on competition that it could be passed later this year.

The prediction of a crackdown on commercial bribery is based on a survey of 277 mainland companies by the China Institute of Corporate Legal Affairs and the law firm Fangda Partners. One in four of the respondents were private companies, 22 per cent were state-owned enterprises and the remainder were multinationals or joint ventures.

The competition law not only targets sales and purchasing but also unfairly gaining a competitive edge, and includes payments channelled through third parties. The report said industries at highest risk of bribery were pharmaceutical and health care, real estate and construction, fast-moving consumer goods and finance and investment.

So long as it is applied fairly and transparently by a restructured regime under the State Administration for Industry and Commerce, the new law should be good for the mainland economy because it would address widespread complaints by private business of a lack of a level playing field. Commercial bribery also feeds into political corruption.

There have been several high-profile commercial bribery cases in recent years, including a record 3 billion yuan (HK$3.57 billion) fine imposed by a mainland court on British pharmaceutical firm GlaxoSmithKline. There are worries among some foreign companies whether the new law will be used as a weapon to force them out of the mainland market. Regulators need to tread a fine line lest they scare foreign investment away from China. Transparency and vigilance are the best safeguards against perceived selective targeting.