International Law

Anti-Monopoly Law: New Guidance for China?s State Sector

By Stan

One of the big questions hanging out there since the adoption of the Anti-monopoly Law (AML) a couple years ago has been the treatment of State-owned Enterprises (SOEs) and the regulation of the State sector. One of the pillars of competition law is to promote fair competition, and monopolies and monopolistic conduct often runs counter to that principle.

China’s State sector, and its industrial policy in general, presents a competition law problem. How do you square the existence of dominant SOEs, many of which have very large market shares, with fair competition?

The AML provides some basic guidance on this issue. Article 7 acknowledges that although SOEs may engage in monopolistic conduct, they will be protected by the State. In other words, they will receive special protection. At the same time, however, the State recognizes the danger posed by these special privileges and has a duty to regulate SOEs and their pricing behavior.

Articles 8, and 32-37 address specific actions of government actors in restricting competition, laying out certain situations and actions that are prohibited.

Not a lot of detail there, and I have not heard too much on this issue recently. Until Friday, when Grandpa Wen brought up the subject at the meeting of the National People’s Congress.

China will accelerate the reform of monopoly industries to facilitate fair competition among private and state-owned businesses, Premier Wen Jiabao said in a government work report delivered at the parliament’s annual session Friday.

There are calls for government to loosen the grip and invite private sector to join the competition in monopoly industries.

We’ll have to wait and see what all this means once individual policy documents are released. One specific area mentioned was the use of competition to affect pricing of natural resources in the area of energy in the furtherance of environmental goals.

The government said it will deepen the reform of prices for resource products and environmental protection charges as the current state-controlled pricing mechanism does no good for conserving energy and resources, and achieving sustainable development.

Wen noted pushing forward these reforms requires the government to balance the interests of different parties and ensure that the basic living conditions of people with low incomes are not adversely affected.

© Stan for China Hearsay, 2010. | Permalink | 2 comments | Add to del.icio.us
Post tags: anti-monopoly law, china state sector, competition law, legal reform, National People's Congress, Wen Jiabao

Full post as published by China Hearsay on March 06, 2010 (boomark / email).