ABA COMMENTS ON THE NEW DRAFT CHINESE ANTIMONOPOLY AND ANTITRUST REGULATIONS

The Regulations on the Prohibition of Acts of Monopoly Agreements and the Regulations on the Prohibitions of Acts of Abuse of Dominant Market Position have been published by the State Administration for Industry and Commerce (SAIC) for public comments on April 27, 2009. They represent an attempt China is making to better regulate its antitrust and antimonopoly system.

The American Bar Association (ABA) has submitted its comments one month later, on May 29, 2009, in the hope that it would be useful for the Chinese regulator to drag from the experience of US lawyers in antitrust and competition law. Comments from the ABA can be reviewed at the following link: http://www.lehmanlaw.com/fileadmin/lehmanlaw_com/Press_Release/abaprcamlsaicdraftregs5-09finalcombo.pdf

We have reviewed the draft regulations and substantially agree with the comments provided by the ABA. In particular, we note that a main finality of having a comprehensive system put in place is to safeguard the competitiveness of the market. We insist that definitions in the regulations should be set forth in detail and that the various articles may not conflict with each other. Further, the provisions should be drafted in such a way that the least space possible is left to interpretation of their content, in order to avoid discretional application from the Courts.

A main point of discussion with regard to the Regulations on the Prohibition of Acts of Monopoly Agreements is the definition of prohibited agreements, and the criteria utilized to determine their existence. It is critical here to have relevant provisions drafted so that agreements that could bring technological innovation are not penalized. Additionally, bidding activities should be unlinked to the Regulations and the tenderer should have the freedom to create its own set of rule, as long as such rules are transparent to all the bidders.

In the Regulations on the Prohibition of Acts of Abuse of Dominant Market Position great attention has to be paid on the definition of abusive conduct, and a mechanism should be introduced to save conducts whose benefit for consumers is larger than the threat to competition (i.e. product innovation). Punishing similar conducts could substantially damage the economy of the country.

Barriers to entry need to be redefined. In particular, duties to protect competitors are not justified under the antitrust principles. Finally, there should be clear distinction between lawful obtainment of dominant position (i.e. through creation of a product well superior than the ones developed by competitors) and abuse of the dominant position.