Academic journal article China Perspectives

Taming the "Foreign Tigers": China's Anti-Trust Crusade against Multinational Companies

Academic journal article China Perspectives

Taming the "Foreign Tigers": China's Anti-Trust Crusade against Multinational Companies

Article excerpt

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Thirty years after the launch of the "reform and opening up" policy, China finally implemented its first anti-trust law in 2008, a move lauded by an international law firm as a "tremendous leap forward" that brought the country "squarely into the modern world of antitrust and competition law." 0) Yet, given the law's novelty on Chinese soil, few would have expected China to suddenly begin aggressively enforcing it. Since 2013, Chinese anti-trust regulators have become active in deploying the anti-trust law to initiate probes and impose hefty fines on industry associations, for- eign carmakers, eyewear makers, and baby formula manufacturers, mean- while justifying "dawn raids" on selected firms. Many of their high-profile targets are multinational firms that until then enjoyed a comfortable pres- ence in China. Facing tightened enforcement, foreign companies and cham- bers of commerce are complaining that regulators are using the law selectively against foreign firms and that investigations lack transparency and respect for the rule of law. Chinese regulators, on the other hand, argue that they are impartial towards domestic and foreign companies, and that they are merely enforcing the anti-trust law in order to create a level playing field for both domestic and foreign companies, benefit Chinese consumers, and bring China closer to the rule of law.

Drawing upon this controversy, this article argues that China's rising anti- trust activism is explained by at least two factors. First, the Chinese state is pursuing an industrial policy to encourage indigenous innovation and grow national champions through a palette of regulatory tools. In this context, enforcement of anti-trust law emerges as an important policy tool not only to foster fair competition, but also to serve as a de facto interventionist measure to pressure foreign enterprises to cut prices and oblige them to contribute to the Chinese market and domestic companies. Second, the growing aggressiveness of anti-trust enforcement is possibly fuelled by in- ternal competition and political infighting among the three regulatory bod- ies, which are all striving to gain political capital under the current uncertain political dimate.The article will demonstrate that the resulting complaints from foreign companies and trade associations that they are being selec- tively targeted are not totally unfounded. To show that the enforcement of the anti-trust law is impartial, Chinese regulators must demonstrate its strength and willingness by striking hard against the monopolistic practices of domestic companies - particularly the powerful state-owned enterprises.

Anti-monopoly law and recent enforcement

After almost 15 years of drafting, China's Anti-Monopoly Law (AML) was finally promulgated in August 2007 and became effective one year later. Recognised as China's "economic constitution," the AML is China's first com- prehensive competition law that oversees issues including merger control, monopoly agreements by multiple firms, and abuse of dominant market position. Its declared purposes include protecting market competition and the legitimate interests of consumers, and above all, protecting public in- terest and promoting the socialist market economy. The law is enforced by three governmental bodies. The National Development Reform Commission (NDRC), China's top planning agency responsible for the administrative con- trol of the economy, is tasked with overseeing pricing-related monopoly practices while retaining authority under the Price Law (1997). The State Administration of Industry and Commerce (SAIC) takes care of non- pric- ing-reiated monopoly practices. The Ministry of Commerce (MOFCOM) is responsible for merger review and monopolisation in foreign trade. Apart from the three enforcement agencies, the State Council has established the Anti-Monopoly Commission. A consultation and coordination body with no substantive enforcement powers, the Commission is responsible for organ- ising, coordinating and supervising AML-related activities. …

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