Baby milk formula produced by Abbott Laboratories, one of the six milk powder producers fined by the NDRC in August Photo: CFP

 

China's antitrust law has been in place for more than five years, but its full impact has not been felt until recently. Since the beginning of this year, the government has strengthened its efforts to probe monopolistic behavior in several sectors, such as high-end liquor and infant milk formula products.

The National Development and Reform Commission (NDRC), one of the government agencies that enforce the Anti-Monopoly Law in China, has been active in punishing violations of the law.

In January, six LCD panel producers - four from Taiwan and South Korea's LG and Samsung - were fined 353 million yuan ($57.93 million) in total by the NDRC for fixing panel prices in China.

In February, domestic high-end liquor producers Moutai and Wuliangye were fined a total of 449 million yuan by the NDRC for price-fixing.

In August, six milk powder producers - including Guangzhou-based Biostime and five overseas firms - were handed a record fine of nearly 670 million yuan for price-fixing practices.

Xu Kunlin, head of the anti-monopoly bureau of the NDRC, told the media in August that the next target for the anti-monopoly campaign would be industries like energy, telecommunications, autos and banking, which are closely related to people's daily life.

The NDRC also said in July that it was looking into pricing in the pharmaceutical sector. International drug makers such as UK-based GlaxoSmithKline and Japan-based Astellas have been contacted by the NDRC with regard to the investigation, according to media reports.

Industry insiders and experts noted that the pharmaceutical industry is likely to become the next target for the country's anti-monopoly investigations.

Partition of power

In many other countries a single department is in charge of enforcing anti-monopoly laws, but in China the responsibility is shared by three government agencies.

The NDRC investigates pricing-related monopolistic conduct. The Ministry of Commerce (MOFCOM) is in charge of monopoly investigations related to mergers and acquisitions. And the State Administration for Industry & Commerce (SAIC) enforces non-price conduct, such as supply restrictions and joint boycotts.

Some legal experts have suggested setting up a unified organization for anti-monopoly work in China, as the current system is very unusual compared with common practice around the world.

The partition of power could hinder the efficiency of anti-monopoly law enforcement, Southern Weekend reported on September 26, citing Wang Xiaoye, an expert on the Advisory Board of the State Council Anti-monopolistic Commission.

For instance, some anti-monopoly investigations could involve both price-fixing and other kinds of violations, which could make the situation awkward sometimes, according to Wang.

However, progress made by one agency may create constructive "peer pressure" for the other two, according to Xue Guocai, a lawyer at Shanghai Zhonghua Law Firm.

"The three agencies may compete with each other in finding out corporate monopolistic behavior, which would be a good thing for antitrust efforts in China," Xue told the Global Times Wednesday.

While the NDRC has been making clear progress in its anti-monopoly efforts, the SAIC announced that it dealt with 12 antitrust cases in 2012, a big increase compared with only one case back in 2009. MOFCOM also announced that its anti-monopoly bureau has reviewed nearly 700 cases during the past five years.

No challenge

The total number of staff at the three anti-monopoly agencies in China who deal with antitrust issues is less than 100 people, compared with over 2,000 employees in the equivalent agency in the US. This has raised doubts among experts about whether such a small group of people can handle all the antitrust issues in China, according to the Southern Weekend report.

Despite the doubts, few companies have challenged the authorities' decisions. Zhan Hao, an antitrust lawyer at Beijing-based AnJie Law Firm, who represented Dumex in the milk powder antitrust case, told Southern Weekend that none of the milk powder companies have chosen to appeal.

None of the milk powder companies wanted to challenge the NDRC ruling, Zhan told Southern Weekend, adding that he advised them not to, "otherwise they would face an even bigger fine."

Similar to the laws in other countries, anti-monopoly regulations in China contain a provision for exempting companies from punishment if they cooperate with investigations.

Xue at Shanghai Zhonghua Law Firm told the Global Times that companies do have the right of appeal in antitrust cases, but few companies have chosen to exercise this.

"The current economic transformation period means that the government is still very strong while the market is comparatively weak, which has also been reflected in the enforcement of antitrust laws," Li Shuguang, a professor at the Beijing-based China University of Political Science and Law, was quoted as saying in the Southern Weekend report.

No exceptions

Most of the companies fined by the NDRC for monopolistic behavior have been foreign companies, and recent government investigations in the pharmaceutical and automobile sectors have also targeted foreign companies. However, the NDRC said that it was not deliberately focusing on overseas firms.

The NDRC is not targeting a specific group of companies in its antitrust investigations, but rather a specific kind of monopolistic behavior, Xu, the antitrust official from the NDRC, told the media last month.

In the ongoing pricing investigation for the automobile industry, domestic companies are also involved, according to officials from the China Automobile Dealers Association, which is cooperating with the NDRC in the investigation.

Some have suggested that the NDRC's antitrust investigation should also include State-owned companies. The only case of an antitrust investigation into a State-owned company so far was the probe into China Unicom and China Telecom in 2011 regarding possible monopolistic behavior in the broadband market.

But after two years, the case is still ongoing. Xu told the media last month that the NDRC has been urging China Telecom and China Unicom to address the issue, and the two companies were given three to five years to deal with it.

"The antitrust law is supposed to maintain a fair competitive environment for companies, and every company in the market should be treated equally," Xue told the Global Times.

"If proper action could be taken to tackle monopolistic behavior in State-owned companies, this would be real progress for the antitrust cause in China," Xue noted.

Global Times