Chinese Antimonopoly Law Taking Shape

On June 8, it was reported that the Chinese State Council had approved draft legislation of the so-called Antimonopoly Law. This legislation aims to provide a free and fair competitive environment to all enterprises. The new law, which is expected to be passed in March 2007, contains articles regulating monopoly agreements, abuse of dominant market status and large-scale consolidation. Furthermore, the law defines a “monopoly” as either a single operator controlling half or more of an industry's overall market share; two operators colluding to hold two-thirds; or three operators holding three-quarters.
Also, companies seeking mergers or acquisitions will have to notify the authorities if one or more of the parties involved has a turnover of RMB 1.5 billion (US$185 million) or more. However this was later reported to be worldwide sales of 12 billion RMB ($1.5 billon) or China sales of 800 million RMB ($100 million). Nevertheless, the draft law has been met with suspicion among foreign observers. Some foreign multinationals have expressed discomfort at the law, while Britain's Financial Times warned that the law was, at worst, a “dangerous mistake” because it did not deal with the bloated government sector, is largely toothless, and could be used as a measure against foreign companies within the Chinese market.

Authored by

D. Sexton
202-589-1836
dsexton@dbmlawgroup.com