Tags: china | antitrust | Sino-American | cyber espionage

US Businesses Urge Tough Line Over China Antitrust Policy

Friday, 23 May 2014 08:30 AM

U.S. companies are crying foul over China's oversight of monopoly and pricing issues, as antitrust enforcement threatens to further sour Sino-American business ties already damaged by a row over cyber espionage.

The U.S. Chamber of Commerce, in a private letter sent last month to Secretary of State John Kerry and Treasury Secretary Jacob Lew, urged Washington to get tough with Beijing on its use of anti-competition rules, noting that "concerns among U.S. companies are intensifying."

Beijing's increasing use of its 6-year-old anti-monopoly law (AML) and price competition rules to weigh-in on global mergers and take action against foreign companies is set to further stoke tensions after Washington this week indicted five Chinese military officers with hacking U.S. companies to steal trade secrets.

The Chamber urged U.S. officials to use annual bilateral talks scheduled for July to "secure commitments from China" to address the issue, noting that efforts to compel China had been "insufficient."

"There is significant risk to the U.S. economy that U.S. companies will increasingly be coerced into abandoning deals that would be good for markets and consumers because AML enforcement in China has no principled basis in competition law or economics and is informed by China's industrial policy goals," said the U.S. Chamber letter, a copy of which was obtained by Reuters.

The U.S. State Department and U.S. Treasury Department declined to comment. The U.S. Chamber of Commerce confirmed the letter.


In another sign of the deterioration in Sino-U.S. ties, the official State Internet Information Office said on Thursday that China will investigate providers of important IT products and services to protect "national security" and "economic and social development," the Xinhua news agency said. Products that don't meet security requirements will be banned.

China has also prohibited central government offices from using Microsoft Corp's latest Windows 8 operating system over concerns the software exposes computers to the risk of being controlled remotely, the Communist Party's People's Daily newspaper said on Thursday.

"It has become increasingly clear that the Chinese government has seized on using the AML to promote Chinese producer welfare and to advance industrial policies that nurture domestic enterprises, rather than the internationally accepted norm of using competition law to protect consumer welfare and competition," the U.S. Chamber's letter said.

Last year, China imposed conditions on Glencore's $29 billion takeover of Anglo-Swiss miner Xstrata, citing concerns the merged company would have too much power over the copper market. A group led by China Minmetals Corp. last month bought Glencore's Las Bambas copper mine in Peru for $5.85 billion.


Up to last year, China's Ministry of Commerce (MOFCOM) reviewed 740 merger proposals, blocking one — Coca-Cola's bid to buy top juice maker Huiyuan — and imposing conditions on 22 others, Shang Ming, MOFCOM's anti-monopoly bureau director-general, told reporters in February.

"Antitrust can be a highly political game especially in sectors seen as of strategic significance," said Mark Williams, a law professor and antitrust expert at University of Melbourne. "Beijing has come late to the game. Other countries have had various forms of 'national interest' protection for years."

Separately, the National Development and Reform Commission (NDRC), the Chinese government's main planning body, has used the anti-monopoly law to target technology companies for practices that could lead to what it calls "unreasonably" high prices.

Xu Kunlin, director general of NDRC's price supervision and anti-monopoly bureau, told Reuters the AML was instituted "to protect market order and fair competition," along with consumer welfare. "The NDRC gives equal treatment to all market participants," Xu said.

"Those who have been penalized include state-owned enterprises, private companies, and foreign-owned enterprises, and industry associations."

On Thursday, the NDRC suspended its investigation of InterDigital Inc after the U.S. wireless technology patent developer pledged to change its pricing structure. The Delaware-based firm agreed to change its licensing terms for Chinese manufacturers, in a move that may save Chinese companies as much as 500 million yuan ($80.2 million).

Qualcomm Inc., the world's biggest cellphone chip maker, is facing penalties that may exceed $1 billion in another Chinese antitrust probe. The NDRC, which raided Qualcomm's Beijing and Shanghai offices last year, said in February it suspected the San Diego-based firm of overcharging and abusing its market position.

On Friday, MOFCOM's Shang launched a spirited defense of his organization's activities.

"For a merger involving several jurisdictions, or multiple jurisdictions, everybody doesn't see the problem the same way," he told an antitrust conference in Beijing.

"You can't say that if there's not a problem in another jurisdiction, then there won't be a problem in China."

© 2018 Thomson/Reuters. All rights reserved.

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U.S. companies are crying foul over China's oversight of monopoly and pricing issues, as antitrust enforcement threatens to further sour Sino-American business ties already damaged by a row over cyber espionage.
china, antitrust, Sino-American, cyber espionage
Friday, 23 May 2014 08:30 AM
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