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China's Anti-monopoly Law: One Year On

Translated by Liu Peng
News, page 5
Original article:

"Do not place too much hope in the anti-monopoly law," advised Zhou Ze, a lawyer with the Beijing Wentian Law Firm, who on the eve of China's Consumer Rights Day (held every year on March 15), sued China Mobile, China's largest mobile telecom carrier, on charges of abusing its market position to charge users exorbitant monthly rental fees.

In late October, Zhou Ze, with the help of Beijing's No.2 Intermediate People's Court, reached a conciliatory agreement with the telecommunication giant. Zhou agreed to withdraw his lawsuit and in return China Mobile agreed to pay a 1,000 yuan "gratitude payment" for his suggestions, they also agreed to stop charging him a monthly mobile rental fee.

This is the first time since the country's new anti-monopoly law came into effect on August 1 last year, that a plaintiff has received any kind of compensation in an anti-monopoly lawsuit launched against a domestic firm.

A Negotiated Settlement

"I have achieved what I set out to do when I launched the lawsuit," said Zhou Ze, adding, that he believed the fact the judge was able to effect a negotiated settlement between himself and China mobile, meant that the judge actually supported his argument.

However, he agreed with the view of many experts, that if he had chosen to continue to pursue the lawsuit rather than agree on a settlement, the court would simply never have ruled in his favor.

After the settlement of Zhou's case, there was a flurry of public comment optimistically predicting that the case would trigger a wave of similar lawsuits against China's monopoly firms.

However, legal experts who are familiar with the legal complexities of the anti-monopoly law, explained that "despite the fact that everyone on the face of the earth knows that China Mobile is a monopoly firm, given the complexity of the anti-monopoly law, ordinary consumers are simply not capable of obtaining the evidence needed to convince the court to even accept the case."

A Difficult Law

When discussing his experience of handling anti-monopoly cases, lawyer Li Fangping repeatedly used the word "difficult": it's difficult for a court to accept anti-monopoly cases, difficult to get them to hold a hearing, difficult to obtain evidence and difficult to get courts to make a judgement.
He recalled how on the very day the new anti-monopoly law took effect, he sued China Netcom, which has since been incorporated into China Unicom - one of China's three telecommunication giants - for monopolizing the country's broadband service.

At that time, the lawsuit sparked off heated public discussions and eventually the Supreme People's Court held a special meeting which resulted in them instructing Beijing's No.2 Intermediate People's Court to accept the case.

Up until now, despite the court having held six or seven hearings, no judgement has been made.

"All that the companies defending the case have to do is claim that something is 'commercial-in-confidence,' and they're able to block all our lawsuits," said Li, adding "Even the judge don't have access to much of the evidence."

Some anti-monopoly legal experts believe that difficulties in implementing the anti-monopoly law have to do with the system. Some have proposed that government authorities and the China Consumers' Association should take the responsibility for launching anti-monopoly lawsuits.

"Some judges have admitted in private that given both the influence and connections that these monopoly firms have with the government, courts are unable to exert their power," said Li Fangping.

Aside from the the Ministry of Commerce (MOC), the other two government departments charged with enforcing the anti-monopoly law, the
the National Development and Reform Commission (NDRC) and State Administration of Industry and Commerce (SAIC) have due to various reasons remained conspicuously silent on the new laws in the 14 months since they were brought into effect.

Is the Anti-monopoly Law Actually Anti-competitive?

The legal experts involved in drafting the anti-monopoly law are one of the groups most disappointed with the way that the new law has been implemented and they've expressed concerns about the negative effect that the new anti-monopoly law is having on market competition.

They noted that in the wake of China's 4-trillion-yuan stimulus package, the advance of the state and retreat of private enterprises has become a noticeable trend. They believe that these developments fly in the face of previous market-oriented reforms.

Some legal experts pointed out that the law was being used as a lever to control both industrial and foreign capital policy and that it was also actually being used by some to suppress competition.

This is by no means an exaggeration. Looking back at the behaviour of some of the monopoly enterprises involved in antitrust lawsuits over the past year, we're left with the impression that the defendants were often arrogant and aggressive in their approach. As one editorial put it, "the state-owned conglomerates are arrogant and the anti-monopoly law is weak."

Exemptions Given to State-owned Enterprises Under the Control of the Central Government

Although China Unicom's acquisition of China Netcom, a tie-up that was directed by the country's state-owned assets regulator, took place after the new law had come in to effect, a merger application for the deal, which is required by the antitrust law, was never submitted.

Despite the anti-monopoly bureau under the Ministry of Commerce stating that the law applied to all Chinese companies and that both domestic and foreign firms were subjected to the same review procedure, some officials held that, as the mergers and acquisitions that took place among China's centrally-owned enterprises were led by the central government, they didn't need require any administrative approval.

A source close to the State Council explained, "How can a bureau-level law regulator possibly oversee a ministerial-level COE?" 

This remark reveals the central problem with enforcing the anti-monopoly law under the current political system.

Legal experts explained to EO that some companies were able to avoid being taken to court on accusations of breaching anti-monopoly law on the basis that their business was related to issues of national security and that business confidentiality maybe compromised.

However, it's not all bad news, some encouraging signs are starting to emerge.

For instance, the fact that China Eastern Airlines proposed acquisition of Shanghai Airlines was first reviewed by the anti-monopoly review bureau - as required by law, is a sign that companies are beginning to pay more attention to the anti-monopoly law.

Similarly, the NDRC's price supervision office was able to use threats of bringing the anti-monopoly law to bear to pressure on China TravelSky Holding Company, a state-owned firm that controls 97% of the airline ticket market, after they attempted to lift domestic airline ticket prices in May this year. The controversial air ticket pricing system eventually collapsed in late September.

Links and Sources
Economic Observer: Advance of the State 
Economic Observer:
Controversial Air Ticket Pricing System Collapses 

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