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Anti-monopoly Law 'Very Likely' to Pass
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Discussion concerning the drafted Anti-monopoly Law will be included in the agenda of the twenty-ninth session of the tenth National People's Congress (NPC) Standing Committee that meets from August 24 to 30.

This is the third discussion; the second meeting concluded in June. Many legislators revealed that if nothing goes wrong, the law would be approved this time.

Much controversy has swirled around the Anti-Monopoly Law for the last 13 years. China began drafting its first Anti-Monopoly Law in 1994.

The first draft of the law was submitted by the NPC last June. This June's second draft has greatly improved upon the first draft.

Shang Ming, head of the Regulations and Decrees Division of the Ministry of Commerce, said that the second draft is relatively perfect. He does not anticipate making any major changes to the third draft.
But this does not mean that the dispute has ceased. Many controversial issues still exist: how to supervise the monopolistic SOEs (state-owned enterprises), how to design enforcement agencies and how to ascertain the responsibility in cases of administrative abuse. Export cartel exemptions are also in question. Clearly, problems will continue to materialize long after the draft becomes law.

The administration of SOEs

Many new rules have been incorporated into the general principles of the second draft of the law. The most eye-catching legality is the seventh item concerning large SOEs.

The rule affirms that those industries, under the jurisdiction of the state and related to the economic lifelines and the security of the state, together with similar industries accorded special privileges according to the nation's laws, will have their legal business rights protected by the state.

Simultaneously, the state will supervise and regulate their business behaviors and prices in order to protect the consumers' interests and accelerate technological progress.

Huang Yong, a member of the elite group drafting the law and also a law professor at the University of International Business and Economics, commented, "Allowing state controlled and state protected industries dominance clouds supervisory rights regarding competitive behavior of such monopolistic SOEs. The goal to protect consumer's interest becomes impossible to achieve."

Yong noted that, if one took into consideration the domination of state assets, then as a matter of course market access laws should be strengthened. Other competitive operational behaviors, such as rejecting trades, package sales and various additive unreasonable conditions, should also be included in the Anti-monopoly Law.

Another key controversy is the relationship between the Anti-monopoly Law and other sector laws.

The second article of the first draft says that if the other laws have different rules regarding monopolistic behavior, such laws prevail. The 44th article states that if the other administrative departments do not investigate or supervise a case of monopolistic behavior, then the anti-monopoly administration may intervene in such a case. They should first solicit related departments before taking action.

The second draft cancels the right for the anti-monopoly administration to intervene if the other administrative departments do not investigate or supervise alleged monopolistic behavior.

This could cause monopolistic SOEs to be excluded from the domain of anti-monopoly committees or anti-monopoly enforcement organs, Huang said.

The proposed Anti-monopoly Law is also likely to be overridden by many other sector laws.

Shi Jianzhong, another member of the specialist group of the draft law and a law professor at the China University of Political Science and Law, said that the Anti-monopoly Law should be the foundation of other sector laws. These other laws should not be in conflict with the Anti-monopoly Law.

How to frame the enforcement agencies

The second draft reserved the provision that the anti-monopoly committee and anti-monopoly enforcement organ both be designated as enforcement agencies.

The State Council will separately stipulate the constitution, workflow, detailed duties and jurisdiction of the committee. Currently, the enforcement organ constitution also remains pending.

But lawmakers seek to establish an independent, specialized and authoritative enforcement organ directed against monopolies. The fact that different agencies have overlapping jurisdiction in cases of monopolistic practices has invited confusion in the enforcement process.

To set up the enforcement agencies is anything but easy since many of them will likely be tied into different interest groups.

"Devising future enforcement standards and assessing the real power of these policies will depend on the enforcement agencies' constitutions. The process will take time and effort," an expert surmised.

How to ascertain the responsibility for administrative abuse

"How can the law ascertain who is responsible for the abuse of power?"

The legal articles concerning administrative abuse hit some snags, when this question was raised.

The second draft stipulated that serious cases should be referred to its own higher administration authority.

"In such a setting, the anti-monopoly committee and its enforcement organ would exist in name only if the case were transferred to a higher authority instead of directly to them," Huang asserted.

Compared with the Anti-Unfair Competition Law enacted years ago, the articles concerning administrative monopolies showed no signs of enlargement in the second draft.

Export cartel exemption

The public downplays the gravity of "cartel exemption".

The second draft stipulated seven kinds of monopolistic agreements exempt from the law cited in Article 15. They are exempt providing that these agreements do not prohibit free market competition and benefit the consumers. Even if foreign trade frictions arise in these monopoly agreements they cannot be restricted.

An industry insider explained that the to-be-hatched law will target vicious price manipulation, but it excludes export-price fixing arrangements with business associations. The insider added: "The cartel exemption is helpful in evading any anti-dumping investigations conducted against China. But in the interim price fixing protocols reached by domestic exporting enterprises will be much more likely to get battered by overseas anti-monopolies."

( by Chen Lin and He Shan August 23, 2007)

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