Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Commissioner Ohlhausen “increasingly concerned” with China’s version of competition enforcement, (Sep 16, 2014)

By Greg Hammond, J.D.

FTC Commissioner Maureen K. Ohlhausen expressed her growing concern with China’s version of antitrust enforcement at the Second Annual GCR Live Conference in New York City, September 16, 2014. In her remarks—“Antitrust Enforcement in China – What Next?”—the Commissioner noted that FTC engagement with China is a top priority in order to move forward “harmoniously and fruitfully” in shaping global competition policy.

In her talks with Chinese enforcers, Ohlhausen noted that she almost always promotes the values of predictability, fairness, and transparency in enforcement, which supports five actionable agency goals: (1) only competition-based factors should guide antitrust policy and enforcement decisions; (2) those decisions should be informed by industrial organization economics; (3) competition regimes should abide by commonly-accepted best practices; (4) the agency should offer a clear window into its enforcement actions and analyses, and parties should be given due process to argue their positions and defend their conduct or transaction; and (5) the model competition agency should aspire to international cooperation in both multilateral and bilateral settings.

“I am beginning to worry that the Chinese may be moving away from rather than towards international norms,” Commissioner Ohlhausen said. Specifically, she outlined two examples: (1) China is purportedly relying on non-competition factors when analyzing mergers and acquisitions, and (2) China may be rebalancing the value of intellectual property to favor short term efficiency gains over long term dynamic efficiency gains.

Non-competition factors. According to Ohlhausen, a growing number of Western businesses and organizations are claiming that China is using its Anti-Monopoly Law (AML) to promote industrial policy. The U.S. – China Business Council issued a report stating, “concerns raised by international observers during the AML drafting process – such as the role of industrial policy considerations in competition reviews, lack of due process, and insufficient transparency – remain relevant based on China’s initial enforcement efforts.” The AML was partially enacted for “promoting the healthy development of the socialist market economy,” which—to Ohlhausen—could mean the protection of “jobs, Chinese state-owned entities, or other foundational aspects of a socialist economy.”

China’s merger enforcement actions involving the AML have also raised eyebrows. Specifically, Ohlhausen noted that, although 80 percent of Chinese merger and acquisition deals involving a Chinese target are reportedly domestic-to-domestic, they represented only 7.6 percent of reviewed deals. However, every merger case that was either rejected or conditionally approved by China’s Ministry of Commerce (MOFCOM) involved a foreign company. Nevertheless, Ohlhausen believes that the Chinese antitrust agency heads’ recent response to mounting criticism—in which they argued that their processes are “fair, transparent, and follow regulations”—suggests they want to be “accepted internationally as a serious and disciplined enforcer.”

Antitrust & Intellectual property. Another area of concern that departs from international norms is how China’s State Administration for Industry & Commerce intends to apply the essential facilities doctrine to all potentially essential patents. “I am concerned that certain actions here in the U.S. may have given some cover to the Chinese for their departure into this line of thinking,” Ohlhausen stated. The Commissioner specifically pointed out the FTC’s decisions in In re Robert Bosch GmbH (File No. 121 0081, Docket No. C-4377) and In re Motorola Mobility LLC and Google Inc. (File No. 121-0120, Docket No. C-4410), in which she dissented.

Specifically, she took issue with the lack of transparency and guidance the two FTC settlements provided to patent holders and others subject to the Commission’s jurisdiction, as well as how the settlements created potentially confusing precedent for foreign enforcers. Despite the Commissioner’s arguments that Chinese enforcement has misinterpreted U.S. laws, they argued that “it is not unreasonable for them to follow a position apparently supported by at least some in the U.S. and adopt it for China.”

“I think we will see the Chinese increasingly advocate their version of antitrust enforcement and we may be confronted with the reality that ‘international norms’ may no longer mean what we once thought,” Ohlhausen stated. “To continue our prominent role in shaping global competition policy, we, too, must continue our focus on future engagement with the Chinese officials on these topics.”

News: Antitrust FederalTradeCommissionNews