China’s updated Anti-monopoly Law aimed at further protecting foreign firms criticised for not doing enough
- Amendments to China’s Anti-monopoly Law, which are under public review this month, include increasing penalties and obliging police to assist with investigations
- China has been accused, particularity by the United States, of not protecting the interests of overseas firms while favouring state-owned enterprises
China’s proposal to amend its Anti-monopoly Law is aimed at creating a better business environment for private and foreign businesses, but critics say weak and nontransparent enforcement remain a key issue.
The amendments, which are under public review during January, include imposing an obligation on China’s police to assist in antitrust investigations, while also increasing the penalty for failing to report a merger for review from a maximum of 500,000 yuan (US$72,000) to 10 per cent of the companies’ revenue from the previous year. It also includes the setting up of a review process to prevent the government from introducing polices that restrict competition.
“It’s more important for foreign companies because what foreign companies need most in the domestic market is a fair environment for competition and legal protection.”
Before the establishment of the State Administration for Market Regulation in March 2018, the enforcement of the law involved a complicated split between three government branches, including the Ministry of Commerce, which weakened the enforcement of the regulation that had been in place since 2008.
This speculation stemmed from the a lack of public disclosure, with Liu Xu, a researcher from Tongji Intellectual Property and Competition Law Research Centre, claiming that most of 2,142 merger cases unconditionally approved under antitrust reviews from 2008 to the end of June in 2018 were completed without disclosing the full text of decisions and any relevant evidence.
The state-run People’s Daily reported in 2018 that the authorities imposed 11 billion yuan (US$1.6 billion) of penalties in total for violating the law since its inception in 2008, with two thirds involving four foreign companies, namely Qualcomm, Mercedes-Benz, Tetra Pak and General Motors.
“It’s hard for China to refute foreign accusations that China ’s antitrust enforcement is unreasonably preferential,” Liu said.
The addition of a “fair competition review” that prevent the government from introducing polices that restrict competition though, remains unclear as to who will enforce the amendment and what would be covered, including government subsidies or other preferential conditions offered to local firms.
“The Anti-monopoly Law already has provisions prohibiting the abuse of administrative powers, and it is the freedom of the government to check it beforehand. Shouldn’t the investigation and disclosure of such cases be the key?” Liu added.
Last year, the State Administration for Market Regulation ruled zero case on the abuse of administrative power to limit market competition, based on official reports.
At a local level, the Shandong branch of the administration said it investigated five cases without further elaboration. Cases that could be investigated could include officials ordering government purchases only from suppliers recommended by local industry associations.