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Country fighting against monopolies
By Jia Hepeng (China Business Weekly)
Updated: 2004-12-05 10:36

Chinese authorities are stepping up efforts to prevent and/or bust multinational firms' monopolies, but officials and analysts suggest, in some sectors, foreign companies' dominance in the local market will continue for some time.

"The proposed anti-monopoly law and other related policies will not end the dominance of some international companies within their particular sectors, such as Microsoft in the software industry," noted Sheng Jiemin, a law professor at Peking University.

"But the efforts may prevent the firms from abusing their power."

Sheng, who helped draft China's proposed anti-monopoly law, said industry leaders often abuse their dominant position by forcing trade partners and/or consumers to accept unfair deals and/or prices.

China's Ministry of Commerce last month announced it had completed the first draft of the anti-monopoly law.

The document has been submitted to the Law Committee of the National People's Congress (NPC), China's top legislature, for review.

The draft legislation includes stipulations that identify and specify the duties of supervisory authorities, said Shang Ming, head of the ministry's antitrust office.

For example, the Ministry of Commerce will deal with enterprises' mergers and administrative monopolies, and the State Administration for Industry and Commerce (SAIC) will be tasked with preventing agreements between firms to create monopolies.

Meanwhile, the National Development and Reform Commission will monitor and take action against price agreements and bid rigging.

It will take two years of study and discussion before the NPC passes the legislation, Sheng predicted.

Chinese authorities expect the anti-monopoly law will prevent China's State-owned conglomerates and multinational firms from monopolizing China's market.

SAIC officials vowed, at a seminar in Shanghai earlier this month, they will enhance efforts to prevent foreign companies from stealing, unfairly, market share from Chinese firms.

The administration plans to use the Unfair Competition Law, the Price Law and the Regulation on Foreign Companies to Merge and Acquire Chinese Companies in the battle.

SAIC in May released a report, written after an extensive investigation, about multinational firms' monopolistic actions in China.

The report indicated China's software sector has been dominated by foreign firms such as Microsoft, and that Kodak and Fuji account for about 75 per cent of China's film and bromide-paper segments.

In terms of bacteria-free paper-packing, Sweden-based firm Tetra Pak holds 95 per cent of the Chinese market.

Since late last year, domestic experts, manufacturers and media have accused Tetra Pak of using its dominant position to force food producers to sign unfair agreements.

Critics contend Tetra Pak has sold packing machines to hundreds of food producers in China for very low prices -- on the condition they use Tetra Pak's paper-packing material.

Chinese media have quoted Sang Lin, a SAIC official, as saying the administration has been investigating Tetra Pak's alleged monopolistic practices.

Details of that investigation have not been made public.

Tetra Pak has denied the accusations. The firm's officials have said the company's dominance in paper packing does not mean it has monopolized China's market.

Chinese food producers can select other materials, such as plastic, to pack their food and milk, Tetra Pak's officials have also said.

Just because some multinational firms dominate the market does not mean they are monopolizing the market, said Wang Xiaoye, a scholar at the Institute of Law, which is affiliated with the Chinese Academy of Social Sciences.

"Many of them lead the industry through their innovative technologies," Wang said.

To determine if multinational firms are monopolizing China's market, authorities must see if the companies are affecting their local competitors with actions such as offering below-cost prices, Wang added.

Standards must be used to determine if a sector is being monopolized, added Wang, who was also a member of the committee that drafted the anti-monopoly legislation.

She added that the proposed anti-monopoly law is mainly aimed at preventing some State-owned conglomerates, through administrative powers, from monopolizing the market; for example, imposing unilateral pricing on some public goods.

Sheng said the proposed law is consistent with legislation in other countries.

"For international companies from developed countries, the anti-monopoly law, and other related measures, will be easy to abide by, because China's laws are very similar to regulations in other countries," Sheng said.

Several international companies, including Microsoft and Kodak, have said they support China's fight against monopolistic practices.

As China's market is opening very quickly, measures to prevent authorities from abusing any anti-monopoly legislation are as important as stipulations to prevent monopolistic practices by corporations, Wang said. "Judicial supervision must be increased if a powerful anti-monopoly law is enacted. Foreign firms should be able to sue China's law enforcement departments in Chinese courts if they feel they are being hurt by authorities' anti-monopoly efforts," Wang said.

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