Cover editorial, EO print edition issue no. 417
Translated by Zhang Junting
Original article: [Chinese]

It's been half a year since the a reform of China's telecommunications industry led to the merger of China Unicom and China Netcom, but despite that the deal was big enough to trigger an antitrust review, regulators have yet to show any concern in the past half year.

Legal documents show that both China Unicom and China Netcom knew perfectly well that the merger should obey anti-monopoly law, and independent financial consultants with China Unicom also clarified the importance of it being in accordance with China's Anti-monopoly Law, which went into effect last August. But why has there still been no review?

China Unicom claimed the merger was based on a reform plan drafted by the Ministry of Industry and Information Technology, thus guaranteeing it would not run afoul of antitrust regulation. Does China Unicom really believe a reform plan ratified by a government ministry had such ironclad authority? That such a ministry's order could outweigh a law considered by many to be China's economic constitution?

Through all of these questions, the companies' silence was a tacit approval of its sidestepping of the law. It was admission that administrative power could outmuscle law, that there is always wiggle room in regulations so long as authorities can provide the right paperwork. If this is so, the Anti-monopoly Law is a handicapped one.

If it can't regulate domestic businesses, how can it deal with foreign ones? As central government-owned enterprises accelerate their restructuring, more and more firms would satisfy reporting thresholds set by the law. Will they refer to the China Unicom precedent and skip the review process in the future?

It's been eight years since China's entry into the World Trade Organization, during which time China has learned the importance of managing the economy by the book instead of by the will of government officials. The merger between China Unicom and China Netcom was a crucial step, which should be taken steadily and cautiously, but it should also survive both legal and historical scrutiny.

Accordingly, China Unicom should apply for an anti-monopoly review, even though this might lose face for the company. However, face should never be more important than the dignity of law. If China Unicom can right the wrongs and the authorities plug up loopholes in the law, the merger can still become a classic antitrust case in the implementation of anti-monopoly law.