Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Chamber of Commerce criticizes China’s anti-monopoly enforcement efforts, (Jun 7, 2016)

By Greg Hammond, J.D.

China has employed its Anti-Monopoly Law (AML) to pursue objectives that do not reflect a free, open, and fair market-based economy, according U.S. Chamber of Commerce Executive Director of International & Antitrust Policy Sean Heather, who testified today at the U.S. House of Representatives Judiciary Committee, Regulatory Reform Subcommittee’s hearing, entitled "International Antitrust Enforcement: China and Beyond."

The hearing focused on the enforcement of antitrust and competition laws against companies and citizens that engage in the global marketplace, with a particular emphasis on China’s enforcement of its competition laws and potential impact of China’s enforcement on other international jurisdictions.

In particular, House Judiciary Committee Chairman Bob Goodlatte (R-Va.) and Regulatory Reform, Commercial and Antitrust Law Subcommittee Chairman Tom Marino (R-Pa.) noted that the hearing would examine allegations of abuse by China of its competition laws, whether Chinese enforcement is impacting how other jurisdictions enforce their laws, and the nature of the U.S. executive branch interaction with China and other foreign jurisdictions on international competition law enforcement.

Chamber of Commerce testimony. SeanHeather, who testified on behalf of the U.S. Chamber of Commerce, arguably offered the strongest criticism of China’s three Anti-Monopoly Law Enforcement Authorities, which include the National Development and Reform Commission (NDRC), the Ministry of Commerce (MOFCOM), and the State Administration for Industry and Commerce (SAIC).

Specifically, Heather noted that the tripartite division of antitrust enforcement responsibilities "tends to lead to dispersion of competition law expertise among several different agencies and a heightened risk of inconsistent interpretation and application of the AML." He also noted that the AML includes provisions encouraging the "healthy development of [a] socialist market economy," carving out a privileged role for administrative monopolies and providing a prohibition on abuse of dominance that is specific to intellectual property rights. These provisions, according to Heather, arguably put China outside international competition law norms. In addition, China’s Anti-Monopoly Law Enforcement Authorities "have skewed the implementation of the AML and related statutes to support China’s industrial policy goals, including through discrimination and protectionism."

Heather also discussed concerns regarding intellectual property law as it relates to competition, noting that the NDRC and SAIC released draft AML IP Abuse Guidelines that endorse "broad, unbalanced essential facilities doctrine, and impose stiff antimonopoly sanctions for refusing to license IP or charging ‘excessively high’ royalties." As a result, according to Heather, "The Chamber is deeply concerned that virtually any unilateral refusal to license could be characterized as an abuse of [intellectual property rights] under the proposed guidelines, and thereby be subject to significant AML sanctions."

The Chamber of Commerce also has due process concerns with regard to China’s enforcement of the AML, noting that the law "regrettably" places the burden of proof on the defendant, but China has historically limited evidence presented to the defendants in support of "often vague or novel theories of harm" and is able to tell defendants that the evidence cannot be shared because it is confidential. Due to the Anti-Monopoly Law Enforcement Authorities’ broader responsibilities, including industrial policy planning and representing the interest of Chinese industries, "stakeholders in China’s government that may not be directly visible have the potential to weigh in and steer the outcome of an antitrust investigation."

FTC testimony. In presenting the prepared testimony of the FTC, Commissioner Maureen Ohlhausen painted a more optimistic picture of China’s antitrust enforcement activities, noting that the Department of Justice Antitrust Division and the FTC have worked closely with the three Chinese anti-monopoly agencies. "One can see a tangible result of our efforts in MOFCOM’s recent adoption of a simplified merger review procedure in 2015 that has reduced costs and delays for many merging companies," Ohlhausen remarked.

She also noted that the Chinese agencies acknowledge issues raised by their procedures, including insufficient transparency, failure to provide a meaningful opportunity for defense, and limitations on the ability to be represented by counsel, but that China has also recognized "that the objective of competition policy is to promote consumer welfare and economic efficiency rather than promote individual competitors or industries, and that enforcement of their respective competition laws should be fair, objective, transparent, and non-discriminatory."

Ohlhausen echoed concerns with regard to the Chinese agencies’ draft guidelines involving enforcement of the AML and intellectual property, noting that, "Application of these provisions would have the potential to reduce incentives for innovation not only in China but also around the world, in light of the sizable market for innovative products in China."

USPTO testimony. Mark A. Cohen, Senior Counsel for the U.S. Patent and Trademark Office’s Office of Policy and International Affairs, focused his comments on the intellectual property aspects of China’s antitrust regime. He noted three clear trends with regard to the current environment for IP and antitrust in China, including: (1) strong antitrust enforcement balanced against weak IP rights for deterring infringement; (2) pursuit of foreigners in antitrust, with little foreign affirmative use of the IP system; and (3) a legal and industrial policy environment where it is very difficult to legitimately license patents to third parties.

News: Antitrust FederalTradeCommissionNews