Sat, Sep 07, 2013 - Page 9 News List

Foreign firms in China
jump to beat probes

Anti-corruption campaigns target both Chinese and foreign companies, but unequal enforcement raises concerns

By Michael Martina and Kazunori Takada  /  Reuters, BEIJING and SHANGHAI

In some cases, legal teams had been hired to interview employees to ensure their behavior when talking to clients and competitors does not violate Chinese law, lawyers said.

“The recent level of enforcement is certainly making companies sit up and take notice,” said Francois Renard, a Beijing-based antitrust expert with law firm Allen & Overy.

Officials have said little to explain the motivation behind the antitrust investigations.

China’s three regulators — the NDRC, the State Administration for Industry and Commerce (SAIC) and the Ministry of Commerce — did not respond to faxed questions for comment.

The SAIC handles non-price related anti-competition issues and commercial bribery, while the Commerce Ministry reviews mergers and acquisitions.

Official media have said the probes are part of efforts to toughen enforcement of the anti-monopoly law and are not just directed at foreign firms.

However, various reports have also said that Chinese pay more for some foreign products than in other countries.

According to a study by Dutch-based Health Action International, a non-profit group, prices charged for Western drugs in northwestern Shaanxi Province last year were about 11 times an international reference price.

A Xinhua news agency commentary in late July said some imported cars were twice as expensive in China than overseas.

Tariffs and other duties do push up the price of foreign goods in China. Nevertheless, some executives said they believed multinational companies were being singled out.

The NDRC has launched nearly 20 pricing-related probes into domestic and foreign firms in the past three years, according to official media reports and research published by law firms.

However, antitrust experts say that few involving Chinese firms were major cases or resulted in stiff punishment.

Of six milk powder makers fined a record US$110 million last month for anti-competitive behavior, five were foreign, including Mead Johnson Nutrition Co and Danone.

“MNCs [multinational companies] are understandably obvious targets for this expanded enforcement on competition issues because of their size, market share and vulnerability,” said Scott Kennedy, director of the Research Center for Chinese Politics and Business at Indiana University.

Antitrust experts believe bureaucratic rivalry may also be a factor behind the investigations. When the anti-monopoly law was being drafted, a single entity was supposed to handle enforcement, they said, which set the stage for the three agencies to work out distinct roles after considerable wrangling.

“The only thing the three could agree on was that they didn’t want the other agencies — or even worse, a new agency, to get it. So a deal was made to carve up enforcement responsibilities,” said Mark Williams, an antitrust expert and a law professor at Hong Kong Polytechnic University.

Five years later, many experts see the increased enforcement as an attempt by each agency to prove its worth.

Regardless of which leaders or agencies are setting the agenda, there is skepticism among academics and lawyers that regulators have the mandate or the political clout to go after top Chinese state firms.

An exception appears to be energy giant China National Petroleum Corp. In the past week, authorities have announced that four senior executives and a former chairman are being investigated for “serious discipline violations,” shorthand generally used to describe corruption.

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