China antitrust proposals stir foreign business fears
New policy guidelines
BEIJING, April 3, (RTRS): Foreign companies with dominant market positions could be increasingly forced to license technology to competitors or face sanctions under China’s latest draft antitrust policy guidelines, according to foreign business groups and attorneys.
The proposals include a so-called “essential facilities” doctrine, a legal concept that assumes some core infrastructure and technology is so important, or the barrier to entry so high, that refusal to share constitutes monopolistic behaviour.
If interpreted broadly, companies could be forced to license their intellectual property (IP) to Chinese competitors or lower licensing costs to benefit local firms, at a time when China is seeking to promote domestic champions.
Draft guidelines for implementing the country’s 2008 Anti-Monopoly Law put forward by two of the country’s antitrust regulators go beyond global standards, experts and lawyers say. Telecommunications, pharmaceuticals and renewable energy industries, all priority areas for Beijing, are likely to be the most vulnerable.
“China is still fundamentally looking at this as though it is an IP taker rather than an IP creator,” said Lester Ross, a partner at law firm Wilmer Hale’s Beijing office.
China’s antitrust policies are worrying its trading partners, including the United States, which issued a joint statement with China during President Xi Jinping’s state visit to Washington last September that both countries would “avoid the enforcement of competition law to pursue industrial policy goals.”
On March 9, US Assistant Attorney General William Baer, who heads the Justice Department’s antitrust division, testified before the Senate Judiciary antitrust subcommittee
last month downgraded their economic growth expectations and forecast only two more rate hikes for 2016.
Yellen is due to take part in a discussion with former Fed Chair Ben Bernanke on Thursday.
For now it will be up to other central banks -- among them Australia’s, Poland’s and India’s -- to consider policy changes, with rate decisions scheduled for the coming days. about the risk of China using its competition laws to further industrial policy and technology transfers. “This administration worries about it a lot,” Baer said at the hearing.
The issue is likely to be discussed in April when officials from the State Administration for Industry and Commerce (SAIC) and the National and Development and Reform Commission (NDRC), two antitrust regulators to have put forward the proposals in recent months, are expected in Washington for talks, according to a source familiar with the situation. “The concerns of business groups about the draft IP guidelines are wellfounded,” said Yee Wah Chin, a New York-based antitrust lawyer at law firm Ingram, Yuzek, Gainen, Carroll and Bertolotti.
The US Chamber of Commerce and the American Chamber of Commerce in China, as well as the American Bar Association, have urged the NDRC and the SAIC to revise the guidelines before they are implemented. In comments delivered to regulators in February, the two chambers said they were concerned about the effort to change marketdetermined licensing terms “into a right to receive whatever payment the government deems appropriate given its industrial policy de jure.”
Jeremie Waterman, executive director for Greater China with the US Chamber, told Reuters the approach would deter innovation and fuel trade tensions.
“No other competition law jurisdiction in the world would have such a broad, unbalanced essential facilities doctrine,” Waterman said.
The SAIC and the NDRC did not respond to a Reuters request for comment. Chinese antitrust officials have long said their policies do not unfairly target foreign business.
The first two are expected to keep rates steady at record lows, while India is seen cutting them at its policy review on Tuesday as inflation falls.
In China, an update on foreign exchange reserves, expected on Thursday, should show a moderation in the declines noted in recent months when the central bank stepped up efforts to prop up the yuan and dump the dollar to stem capital outflows.