Draft Anti-Monopoly Legislation May Enable Official Challenge to Market Share of Foreign Invested Enterprises

March 15, 2005

Articles in the Chinese press (see below for links to three examples, in Chinese) indicate that some Chinese officials consider the proposed Anti-Monopoly Law to be a potential tool to punish successful foreign invested enterprises. The National People's Congress hopes to enact the Anti-Monopoly Law before 2008. The articles suggest that specific foreign invested enterprises with significant market share, termed "dominant market position," could face remedial action once the National People's Congress enacts the new law. Although both domestic and foreign scholars agree on the need for such legislation, the new law will likely provide cover for government efforts to develop indigenous Chinese companies that can use China's enormous market as a springboard to global markets. Any such initiatives would almost certainly be at the expense of foreign companies already in the Chinese market. One Chinese scholar commented at a recent American Bar Association (ABA) meeting that many more foreign companies than Chinese ones have "dominant market position" in China.

The ABA’s Sections on International Law and on Antitrust Law provided extensive comments to the Ministry of Commerce in 2003 that outlined numerous concerns with the existing draft law. The two ABA sections expressed concern, for example, about the draft law’s provisions relating to intellectual property (IP) abuse. The ABA commentators were concerned that the protections that existing Chinese law affords to IP could directly conflict with enforcement of provisions of the Anti-Monopoly Law. In such a situation, a government regulator could easily vitiate IP protections, harming the interest of an existing market leader.



A January 31 People's Daily article addressed the impact of foreign investment on the Chinese economy and its development. It includes a critique of the market positions of some multi-national corporations (known as MNCs or, in Chinese, as 跨国公司).

A February 7 article from the legal press provides a summary of Chinese market conditions and discusses some of the international sources for the legislation.

A February 16 article uses the negotiations between the foreign and Chinese companies surrounding the IP underlying DVD technology as an example of foreign companies overreaching and stifling competition.