Antitrust 'not target' foreign companies(2)

Attracting attention

Xu said that China may target oil or telecommunications companies and banks next in its investigations.

"The regulator will look at 'industries closely related to the lives of ordinary people with unreasonable pricing"," he said.

State-owned companies play a major role in areas such as energy and banking.

However, in the past few years, these industries also have seen a lot of transactions, some involving foreign investors, said Gregory Puff, Asia practice head of law firm Akin Gump Strauss Hauer & Feld LLP.

"Further regulatory oversight in these large industries in the antitrust area would not be surprising. Meanwhile, in many countries, these industries are geopolitically sensitive, so regulation should be expected to be careful and thorough," he added.

The NDRC, one of three government bodies that enforce the anti-monopoly law, completed a host of probes over liquid crystal display panels, premium liquors, infant formula and jewelry since January.

In two cases — LCD panels and infant formulas — foreign companies were involved.

"Foreign companies investing in China often are making high-profile investments, and frequently large investments. Naturally those type of transactions might attract regulatory scrutiny," said Puff.

Huang said there is no doubt the purpose of the law is to protect fair competition in the market, and it's equally applicable to domestic and foreign companies.

However, compared with other countries' detailed competition laws that date back a century or more, the 5-year-old anti-monopoly law needs further development.

Enforcement in many cases "requires detailed guidance from the law, but now the anti-monopoly law only has eight articles and 57 items," making it too abstract, said Huang.

Anti-monopoly investigations now mainly focus on some urgent and influential sectors or cases that were reported, but they will be extended to more areas in the future, said Huang.

With the enhancement of regulatory bodies' power, enforcement of the anti-monopoly law will become "the new normal," said Huang.

More transparency

The anti-monopoly law is enforced by three government bodies: The Ministry of Commerce enforces merger provisions; the State Administration of Industry and Commerce focuses on non-price related actions and the NDRC takes on pricing arrangements.

"The Ministry of Commerce was more active and visible at the beginning, especially because of the premerger notification requirements. However, the NDRC seems to be catching up, especially with the recent infant formula cases," said Cernak.

"Both have quickly joined the ranks of important competition agencies globally ... it would be helpful if all three agencies were more transparent and explained to the parties why they are investigating and explained to everyone why they took certain enforcement actions," he said.

The State Administration for Industry and Commerce set up a new online portal in late June to post the results of completed anti-monopoly investigations, which has been welcomed as a new step toward transparent enhancement.

In the long run, if Chinese and foreign companies have a better understanding of what they must do to comply with the anti-monopoly law and, if the actions are based on competition principles, the results will be better for Chinese consumers, said Cernak.