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China law awash with confusion

China law awash with confusion

CHINA’S NEW anti-monopoly law has seen mixed reactions from foreign law firms, as some lawyers claim that a loose interpretation of the law could see a flood of Chinese consumers taking action…

CHINA’S NEW anti-monopoly law has seen mixed reactions from foreign law firms, as some lawyers claim that a loose interpretation of the law could see a flood of Chinese consumers taking action against large corporations.

Although hailed as a success in the Chinese local media and a long-awaited change for the business and legal community, distractions such as the Beijing Olympics and the Sichuan Earthquake have been cited as problems marring the development of clear guidelines around the anti-monopoly law — which had been tipped to bring the region up to speed with international standards on fair competition.

With three authorities charged with implementing and enforcing the law instead of the original plan to appoint one, there’s much speculation as to how the responsibility will be divided between the enforcement agencies — and how further guidelines on the law will be drafted.

“At a late stage, they’ve settled for keeping the three current authorities,” said Erik Soderlind, head of Linklaters Asian Competition/Antitrust practice. “How the power is to be allocated between these is still a bit unclear and thus it’s also unclear as to who is going to be responsible for the drafting of further guidelines on how the law will be understood.”

Linklaters expressed disappointment as the law came into effect on 3 August, noting that it was hardly the breakthrough the legal and business community had anticipated. The firm said that when it was first adopted last August, it was expected to include about 40 implementing rules, guidelines and regulations within 12 months but that the reality has extended far from these original plans.

Soderlind said there was still some confusion around definitions, provisions of the law and guidelines on how the law will be enforced. “At this point, it is still more difficult to predict how the law will be enforced than we would have wished for. That is a disappointment,” said Soderlind.

Of particular contention is Article 50 of the anti-monopoly law. Chun Fai LUI, special counsel at Baker & McKenzie Shanghai, said it will be an interesting provision to watch because depending on how the courts and the enforcement agencies interpret that section, a floodgate of consumer lawsuits and litigation could be opened. “It could be interpreted broadly and mean that an unhappy consumer can just take an action against what they perceive as a big corporation abusing its market position,” he said.

Fai is a little more positive about the outcomes of the new law, particularly its ability to raise the public awareness of anti-competitive issues in China. “This has been widely reported in the Chinese media,” he said. “People know about this new law but they don’t really know what it means — the actual interpretation is something that lawyers like us need to express.”

See the Lawyers Weekly special China Report, starting page 26

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