The Information Office of the Ministry of Commerce held a special press conference on anti-monopoly (hereinafter referred to as the “Conference”) on February 27. Yao Jian, spokesman of the Ministry of Commerce, Shang Ming, Director-General of Anti-Monopoly Bureau of the Ministry of Commerce and Wu Hanhong, member of the expert advisory group of the State Council Anti-Monopoly Committee and professor of Renmin University of China attended the Conference and took questions from reporters. Conference minutes are recorded as follows:
Yao Jian: Good morning, all reporters! Welcome to the press conference today. I am Yao Jian, spokesman of the Ministry of Commerce. Today, Shang Ming, Director-General of Anti-Monopoly Bureau of the Ministry of Commerce, Wu Hanhong, member of the expert advisory group of the State Council Anti-Monopoly Committee and professor of Renmin University of China and I will, focusing on the topic of anti-monopoly, introduce the overall situation of carrying out anti-monopoly by the Ministry of Commerce and its latest anti-monopoly development and prospects, and then take reporters’ questions concerning the topic.
Now, I would like to first introduce the overall situation and effect of anti-monopoly carried out by the Ministry of Commerce.
Anti-monopoly is a new task for the Ministry of Commerce (hereinafter referred to as “we” sometimes). How to implement the Anti-monopoly Law is an unprecedented challenge for us. Over more than five-years as of the implementation of Anti-monopoly Law, the Ministry of Commerce has made great efforts in institution building, supporting legislation, case review, publicity, training and international exchange and so on, which have yielded fruitful results.
First, we have established a professional law enforcement team. According to “three determinations” of the State Council, the Ministry of Commerce is responsible for conducting anti-monopoly review for concentrations of business operators in accordance with the law. In September 2008, in order to perform the duty of anti-monopoly review for concentrations of business operators, the Ministry of Commerce set up the Anti-Monopoly Bureau. Over the five years, we have established a scientific workflow and trained a professional young team by establishing systems, strengthening capacity and gradually optimizing the internal organizational structure.
Second, we have initially established the legal system on anti-monopoly review for concentrations of business operators. As a basic law for protection of competition, Anti-monopoly Law provides principles and needs complementary rules to increase the legal operability. After over five years of efforts, the Ministry of Commerce continues to promote anti-monopoly legislation, which lays a more solid legal foundation for anti-monopoly review for concentrations of business operators.
Thirdly, we have properly handled major complicated cases concerning concentrations of business operators. Coca-Cola was prohibited to acquire Huiyuan Juice. More than 20 major transactions of international influence have been approved with additional restrictive conditions, such as Glencore’s acquisition of Xstrata, Google’s acquisition of Motorola, Pfizer’s acquisition of Wyeth and so on, which not only maintains the fair market competition order but also maintains the legitimate rights and interests of the majority of consumers.
Fourthly, we have vigorously fostered legal awareness and culture regarding competition from all aspects of the whole society. In order to improve legal awareness of anti-monopoly of all levels of governments, enterprises and the public, the Ministry of Commerce has attached great importance to anti-monopoly publicity and training and has carried out a series of publicity and training activities in a variety of ways.
Fifthly, we have deepened international cooperation to draw upon successful international experience. Compared with developed countries, China’s anti-monopoly work started late comparatively. Thus, it is necessary to consider China’s national conditions and learn from the successful experience of foreign countries. The Ministry of Commerce has established or starts to establish cooperation mechanisms with anti-monopoly institutions in the United States, Europe, the BRIC countries, neighboring countries and regions so as to continuously improve the ability of legislation and enforcement and seek to promote technical exchange in terms of major cases.
In addition, the State Council Anti-monopoly Committee Office has been set up in the Ministry of Commerce, to mainly provide services and coordination for the leadership of the committee and the member units, including organizing and preparing market competition assessment report, competition policy and anti-monopoly guidelines, informing anti-monopoly information, organizing meetings, establishing centralized market condition database, coordinating anti-monopoly enforcement, promoting publicity and training about anti-monopoly law and contacting expert advice group and so on.
Generally, through the efforts of the past several years, we have effectively prevented possible damage to market competition from corporate transactions, helped protect fair market competition, improve economic efficiency, protect consumers’ interests and public interests as well as promote healthy development of socialist market economy.
That’s all for my brief introduction. Now, Shang Ming, Director-General of Anti-Monopoly Bureau of the Ministry of Commerce will introduce the latest anti-monopoly work and consideration of future work of the Ministry of Commerce.
Shang Ming: Good morning, everyone! I am glad to meet you and answer your questions about anti-monopoly progress of the Ministry of Commerce in last year. The past year is a memorable year for the implementation of China’s Anti-Monopoly Law. On the occasion of the fifth anniversary of implementation of Anti-Monopoly Law, we have organized a variety of commemorative activities to summarize the work in the past five years and make the ideas of the future work clear. The Third Plenary Session of the 18th CPC Central Committee clearly proposed that “the market plays a decisive role in allocating resources” and required “to strengthen market supervision and oppose monopoly and unfair competition”, proposing new requirements for anti-monopoly work in the future. Now, I would like to tell you the latest anti-monopoly progress of the Ministry of Commerce in the past year.
Major work done in 2013
Since the implementation of Anti-Monopoly Law, the Ministry of Commerce has attached great importance to administration in accordance with the law and strengthening of supporting legislation by issuing two rules or normative documents annually on average. After five years of efforts, we have preliminarily established a multi-level rule system, including the rules of the State Council, State Council Anti-Monopoly Committee Guidelines, regulations of the Ministry of Commerce, relevant guidance of Anti-monopoly Bureau of the Ministry of Commerce and so on. It aims to make specific regulations on concentrated application standards of the operators, application methods, review methods, relevant market definition and handling of issues failing to be applied in accordance with the law. It improves operability of Anti-Monopoly Law, enhances the transparency of law enforcement and lays a solid legal foundation for the concentrated review of the operators. In 2013, we have focused on drafting two regulations.
(I) Interim Provisions on Applicable Standards to Simple Cases
In end of December 2012, I introduced two key legislations. One is about simple cases and the other is about additional restrictive conditions. At present, these two supporting legislations have witnessed substantial progress. Late last year, we completed the preparation of draft of the Interim Provisions on Applicable Standards to Simple Cases of Concentrations of Business Operators. It was officially promulgated on February 11 this year and came into force on the next day. The purpose of the provision includes two aspects: first, to improve enforcement efficiency. Enforcement practice over the past five years has proved that the vast majority of cases have no harm to competition except a few. Cases approved unconditionally account for 97% and cases with additional restrictive conditions and banned cases together account for only 3%. In 2012, cases were reviewed according to classification. In terms of those cases which will not cause harm to market competition, review was accelerated, resulting in very good results and significant improvement of clearance rate in preliminary examination stage. Second, to reduce the burden on enterprises. For simple cases, we will further study the time for providing declaration materials and review so as to reduce the burden on businesses.
According to new regulations, we divide simple cases into four categories and provide for the applicable standards as follows:
First, lateral transaction. Namely, the sum of market share of all business operators involved in concentration in the same relevant market is less than 15%.
Second, vertical transaction. Namely, both transaction parties are not in the same relevant market but in different upstream and downstream markets. No matter which market it is, the market share of the business operator involved in concentration shall not exceed 25%.
Thirdly, mixed transaction. In other words, it is neither vertical nor lateral. For example, the both transaction parties are adjacent. In this case, the market share of the business operator involved in concentration shall not exceed 25% in any market.
Fourthly, special transaction. For example, the transaction between the joint ventures established overseas and involved in no economic activity in China or between different shareholders of the same joint venture that is controlled by a single shareholder instead of more than two shareholders.
You may ask why there are two different figures for concentration of different nature. Namely, one is 15% and the other is 25%. It is determined by the impact of transaction on competition. According to competition theory and enforcement practice, lateral transaction occurs between fellow competitors, resulting in that one competitor is merged by the other. As a result, the competitive strength of the acquirer may be significantly increased and the pressure exerted by other competitors is significantly reduced. Therefore, it may eliminate or restrict market competition. In contrast, non-lateral (including vertical and mixed) transaction is relatively unlikely to cause damage to market competition. Trouble may occur only when one side has relatively high market share.
In order to ensure effective implementation of applicable standards for simple cases and prevent possible negative effect, two protection mechanisms are also regulated as follows:
First, six exceptions are clarified as follows:
1. Joint venture jointly controlled by two or more business operators is controlled by a single business operator through concentration and that such business operator is a competitor of the joint venture in terms of similar products;
2. It is difficult to define relevant market involved in concentrations of business operators;
3. Concentrations of business operators may cause adverse effect on market access and technological progress;
4. Concentrations of business operators may have adverse impact on consumers and relevant other business operators;
5. Concentrations of business operators may have adverse impact on national economic development;
6. Other circumstances that may have adverse impact on market competition in the opinion of the Ministry of Commerce.
In case of the above cases, even if concentrated transaction meets simple standards it shall not be regarded as a simple case.
Second, the three conversion situations are regulated as follows:
1. The declarer conceals important information or provides false materials or misleading information;
2. The third party claims that concentrations of business operators have or may have the effect of eliminating or restricting competition and can provide relevant evidence;
3. The Ministry of Commerce finds significant changes in centralized transaction or relevant market competition conditions.
In case of the above cases, even if the case has been regarded as a simple case, the Ministry of Commerce can revoke the identification of such simple case and handle it as a non-simple case.
(II) Provisions on Additional Restrictive Conditions for Concentrations of Business Operators
We have completed the draft and are currently going through the necessary legal procedures. This provision provides comprehensive regulations on the type of restrictive conditions, consultation, asset divestiture and the buyer, divestiture procedures, change and cancellation of restrictive conditions, legal responsibilities and so on and will replace Interim Provisions on the Divestiture of Assets or Business in the Concentrations of Business Operators issued in July 2010.
We are more concerned about this provision. According to the cases of concentrations of business operators published in China, we can see that there are diverse measures for additional restrictive conditions in China, which is caused by specific circumstances and different competition of the cases. Currently, we are summing up the enforcement experience of these cases and stating the effective practice in the provisions.
II. Law enforcement
(I) Case overview
Since 2008, the number of the concentration of business operators reviewed by the Ministry of Commerce grew rapidly. As at the end of 2013, the Ministry of Commerce has received a total of 866 declarations for concentration of business operators, registered 797 cases and settled 740 cases. Among all the settled cases, 717 were unconditionally approved (about 97% of the total); 22 conditionally approved and 1 prohibited (about 3% of the total).
Compared with the situations in the previous years, the number of cases in 2013 ramped up. The Ministry of Commerce received a total of 224 declarations, an increase of 8% over the previous year, registered 212 cases, a growth of 12.8% and settled 207 cases, an increase of 26%. In all the settled cases, four cases have been approved conditionally.
(II) Major cases
1. Glencore’ acquisition of Xstrata. The case is so far an acquisition of the largest scale in the mineral industry of the world. With earnest review, the Ministry of Commerce held that this acquisition may possibly eliminate or limit competition in the copper concentrate, zinc concentrate and lead concentrate markets. In April 2013, the Ministry of Commerce conditionally approved this acquisition, requiring Glencore to sell all the equities of its Las Bambas Copper Project in Peru in a stripped manner, to maintain its original terms of exchange for eight years, namely to supply copper concentrate of specific quantity to the Chinese clients through signing long-term contract and upon regulated price terms and to provide long-term and off-the-shelf supply of zinc concentrate and lead concentrate to the Chinese clients according to the international general contract terms within eight years.
2. Japanese Marubeni Corporation’s acquisition of American Gavilon Holdings. This case is one of the major mergers and acquisitions in the field relating to trade of bulk agricultural products. As the world’s largest importer of soybean, China imports over 80% of its soybeans. On April 22, 2013, the Ministry of Commerce conditionally approved this case, requiring Marubeni Corporation and Gavilon Holdings to keep independent from each other in terms of business for exporting and selling soybeans to China, and they should also set up firewalls between the business relating to their export of soybeans to China and they should not exchange such information as operation, sale and pricing.
3. MediaTek’s merger of MStar. Before the merger, MediaTek and MStar take a market share of 65% and 15% respectively in the main control chip of LCD TV in Mainland China. On 26 August, 2013, the Ministry of Commerce conditionally approved this merger, requiring that after the completion of the merger, the MStar should keep its business related to the main control chip of LCD TV and other business independent. The Ministry of Commerce also limited the shareholders’ right of MediaTek, forbidding MediaTek to engage in other business that will influence competition or acquire other competitors without prior approval.
4. Baxter’s acquisition of Zinpro Corporation. Baxter and Zinpro Corporation both enjoy high market share in the field of global kidney replacement therapy. This trade may impose heavy influence on the market structure and competition of the products related to continuous kidney replacement therapy and the commodities related to hematodialysis. On August 8, 2013, the Ministry of Commerce conditionally approved this acquisition, requiring that Baxter stripped its business related to continuous kidney replacement therapy and terminated its agreement with Nipro for contract manufacturing in China.
We maintain intense communication with the declaring party in the process of review, asking their advice as much as possible, and when it is necessary, we will employ a team specialized in economic work to carry out analysis over competition so as to make cautious decisions according to the assessment factors specified in the law. For the cases we have approved conditionally, the remedy measures are adopted according to the specific situation of each case.
(III) Disclosure of case information
The Ministry of Commerce has been worked actively to keep the public informed of the government affairs with a view to improving the work transparency of the government. On the basis of timely disclosing the prohibited and conditionally approved cases in accordance with the Anti-monopoly Law, the Ministry of Commerce disclosed the information about 458 cases unconditionally approved from 1 August, 2008 to September 30, 2009 in November 2012. Then, the Ministry of Commerce disclosed on a quarterly basis 270 cases unconditionally approved between October 2012 and 2013.
III. International exchange and cooperation
Since 2008, the Ministry of Commerce has been engaged in international exchange in an all-round respect. It has signed memoranda with EU, the US, the UK and South Korea to establish cooperation mechanism. Through the above mechanism, the Ministry of Commerce keeps itself informed of the latest theory and legal effects about foreign anti-monopoly, which plays an important role in completing the legal system for the concentration of business operators and improving law enforcement ability of China. In 2013, we deepened the cooperation and carried out cooperation in law enforcement in the field of reviewing transnational mergers and acquisitions with the enforcement agencies in the major judicial districts of Europe and America. In the meantime, we initiated cooperation with the BRICS countries and made exploration in establishment of regular cooperation mechanism; we actively took part in the negotiation in terms of the competition in the free trade zone and reached consensus with Switzerland and Iceland and we enhanced exchange and cooperation with such international organizations as UNCTAD, OECD and APEC.
IV. Publicity and training
Anti-monopoly is a brand-new work in China. The Ministry of Commerce has attached great importance to the publicity and training related to anti-monopoly for the purpose of improving the legal awareness of the government sectors, the enterprises and the public for anti-monopoly. Since 2008, the Ministry of Commerce has held 19 anti-monopoly training meetings with over 1700 persons from the commercial departments of all levels trained; it has organized multiple training classes for the state-owned enterprises and private enterprises; it has compiled a book called Basic Knowledge to Anti-monopoly; and it has also produced wall charts for promotion of anti-monopoly. To innovate training forms and improve training effects, we sent staff from the commercial departments of all levels to accept training in foreign countries in 2013 through projects between China and Europe as well as projects between China and Germany.
Work focus in 2014
The new government of China will continue to expand reform and opening-up, boost the reform of economic system, show care to the relation between the government and the market, give more respect to the market discipline and enhance the role of the government as guided by the spirit of the 18th National Congress of the Communist Party of China and the Third Plenary Session of the 18th National Congress. As an important law about the socialist marketing economy of China, the Anti-monopoly Law will play an increasingly important role in deepening reform and expanding opening-up. In 2014, we will focus on the following work:
The first is to continue to complete the supporting legislation. We will formulate supporting measures for Interim Provisions on Applicable Standards to Simple Cases Concerning Concentration of Business Operators, promote the introduction of Provisions Concerning Restrictive Conditions of Concentration of Business Operators, and research and revise Measures for Review of Concentration of Business Operators.
The second is to strengthen law enforcement. We will strengthen the investigation of the cases for operators’ illegal concentration of business operators. We will improve the law-abiding awareness of the enterprises through strict enforcement so as to maintain the market competition order, thus offering a sound environment for the fair competition between different enterprises.
The third is to advocate the competition culture. We will innovate the forms of publicity and training, strengthen the pertinence, advocate the competition culture in the whole society, improve the law-abiding awareness of the enterprises and encourage the enterprises to grow stronger through engagement in the competition in the international and domestic markets.
The fourth is to deepen international exchange. We will deepen the anti-monopoly cooperation with Europe and America, concentrate on the exchange and cooperation with the BRICS countries, carry out information exchange with the partners over the transnational cases reviewed at the same time, and jointly maintain effective market competition, thus providing guidance and service for the “go global” policy of Chinese enterprises.
Yaojian: What is mentioned above briefs the introduction to the general information and progress of anti-monopoly. Now we would like to take the questions of the reporters.
Reporter with International Business Daily: Professor Wu, as an economist, how do you assess the professionalism of the anti-monopoly law enforcement of the Ministry of Commerce?
Wu Hanhong: It’s my pleasure to be invited for the Conference, and I would like to brief on the backgrounds with respect to this matter. Economics plays a key role in the anti-monopoly review of concentration of business operators. First, Economics can provide theoretical support for the concentration of business operators and the anti-monopoly review. Industrial Organization Theory and Industrial Economics clearly analyze the advantages and disadvantages of mergers and acquisitions. Apart from the advantages, the disadvantages may be eliminating and limiting competition. Therefore, economics can offer some guidance in a theoretical sense. On the other hand, there may be repetition about mergers and acquisitions in the economics theory. The early merger and acquisition theory holds that it is not good for enterprises to become “huge”, because it may be harmful for competition. In the 1980s, the mainstream theory of Industrial Organization Theory instead holds that to be “huge” may not always be harmful. In most cases, if an enterprise becomes “huge”, it may exert a positive influence on the progress of technology and the development of market. All these show that economics can provide support considering that theory holds certain understanding over mergers and acquisitions in the market. Furthermore, some countries and regions have formulated guidance for mergers and acquisitions. The US even drew up Guidance for Horizontal Mergers and Acquisitions of Enterprises, the issuance of which relies on the development results of economic theory. That is how economic theory provides theoretical support for mergers and acquisitions.
Economics Theory also gives technical support for anti-monopoly review of mergers and acquisitions. When the Ministry of Commerce reviews any case about mergers and acquisitions, it does not need to define the market in general circumstances, but if the market is not clearly defined, the assessment on the market shares and the market forces will be limited to certain extent. Therefore, to define the market is where the Economics Theory works.
Demand elasticity analysis, SSNIP analysis, and price correlation analysis are all tools offered by Economics Theory to define the market. The Economics Theory also assists in the assessment of competition effects. Since the Ministry of Commerce commenced this work in 2008, it has impressed me as follows in terms of the professionalism of the Anti-monopoly Bureau in the Economics Theory: first, the Bureau works hard and carefully. We have been relatively late for review of the anti-monopoly in mergers and acquisitions. In such a case with insufficient professional knowledge, related personnel and resources, the staffs of Anti-monopoly Bureau of the Ministry of Commerce actively learn the related economics theory in an open-minded manner. If we recall the anti-monopoly review of concentration of business operators conducted by the Anti-monopoly Bureau of the Ministry of Commerce in the past five years, we will find that the Bureau is gradually improving in its professionalism. In the first place, the Ministry of Commerce does not disclose much information about the review of the acquisition of Huiyuan Group by Coca Cola, but with the improvement of the enforcement of the Anti-monopoly Bureau, it has been somewhat well done in the respects of professional competence, reasonableness and logic sense. It can even include 6 to 7 pages of analysis on competition in its review decisions. That means a great leap forward.
Second, I think the members of the Anti-monopoly Bureau are tolerant and liberal. For example, they may rely on external resources, such as employ outside specialists to research certain issue in tricky cases. Under the circumstance that the law enforcement resources are insufficient and the professional standards need improving, such a mechanism is desirable in analysis of important cases.
At last, I feel that the enforcement of the Anti-monopoly Bureau is done by the methods that are unique in China. Just as the considerations related to conditionally approved cases introduced by Director-General Shang, they not only satisfy some international practices, including structural relief and behavioral relief, but also connect with the features and conditions of China. This is desirable.
Reporter with CCTV News Center: Hello, Director-General Wu, as it is known that the Ministry of Commerce, the National Development and Reform Commission and the State Administration for Industry and Commerce are jointly responsible for the enforcement of anti-monopoly, but many are still not clear about the division of work among these three institutions. Would you please brief on the work division of these three organizations, especially the work of the Ministry of Commerce?
Shang Ming: Thank you for your question, I would like to make a general dissemination here. In legal sense, the Anti-monopoly Law governs the following three behaviors: the first is the conspiracy of enterprises: if two enterprises negotiate the prices or the exchange terms, it will do harm to the market as well as the consumers. The second is that the enterprise abuses market dominance. The premise is that the enterprise is huge with power for market control, or otherwise, it would never be possible to use such a position. The third is mergers and acquisitions, or concentration of business operators. What matters is still that whether the above two results may be incurred from mergers and acquisitions of enterprises. What we focus on is whether there is any unilateral effect. If an enterprise becomes huge, whether it can do anything as it wants, or whether it will abuse the market dominance or produce coordination effects to facilitate its conspiracy with other operators will be decided by itself. In most countries, these three behaviors are monitored by a supervision department. However, as required by our national conditions, we set up three supervision departments. That is the problem. But it is certain that these three departments have clear division of work. The National Development and Reform Commission is responsible for price monopoly. All the price monopolies shall be controlled by it except concentration of business operators. Concentration of business operators shall be supervised by the Ministry of Commerce. Price monopoly includes Carte monopoly agreement (or enterprise conspiracy) and abuse of market dominance. Between the two behaviors under the administration by the National Development and Reform Commission, the behavior unrelated to price falls into the authority of the State Administration for Industry and Commerce.
Reporter with Macau Asia Satellite Television: For specific cases, now UK Tesco has been acquired by Vanguard, and it is said that the Ministry of Commerce is conducting anti-monopoly review. Would you please brief the current progress? In addition, Telecom and Unicom submitted their renovation plans in December of last year and January of this year respectively. Is there any conclusion about their anti-monopoly behaviors, and how is their progress?
Shang Ming: Generally, I will not speak too much about specific cases. I think we should not draw up conclusions about pending problems, but for the case you just mentioned, I have little knowledge of it. Currently, we are reviewing the case relating to merger of Tesco by Vanguard. This involves supermarket retailing. You can also refer to such cases of foreign countries. The review would be time consuming, because it is complex with thousands of products involved. Now we are in the process of review. We need a lot of time to collect evidence. We will analyze the evidence to assess the market competition. In the process of review, we would like to share with or disclose to you the information in appropriate manners. The second case you just mentioned is about communications. I just heard it from you, and we have not received any application for mergers and acquisitions yet.
Reporters with Global Times: My first question is for Director-General Yao. The Third Plenary Session of the Eighteenth National Congress proposes to give full play to the decisive role of market in resource allocation and try to eliminate market barriers. I would like to ask that what the Ministry of Commerce has done to maintain a fair market competition order. And my second question is for Director-General Shang. The monopoly of sate-owned enterprises is criticized by many people now. What do you think are the difficulties for the anti-monopoly review of state-owned enterprises, and what further measures may take?
Yao Jian: The Third Plenary Session of the 18th Central Committee put forward to build a rule-by-law business environment, make endeavors to eliminate regional blockade and industrial monopoly, and establish a unified, open and orderly-competition market system. The Ministry of Commerce links both domestic and international markets. For ten years since its founding, the Ministry of Commerce has been constantly advancing the market-oriented reform of Chinese economy, including forcing the reform through opening to the outside world and forcing to further deepen the domestic market system. In respects of improving the market system and building a market-oriented business environment, I give main considerations to the following:
First, strength the rule-by-law construction, including the implementation of Anti-monopoly Law as we have just mentioned, the implementation of Foreign Trade Law, and the implementation of three laws on foreign investments. Recently, we are still continuously pushing the legislation of domestic market and improving domestic laws and regulations. We can see from the implementation of Anti-monopoly Law that, the implementation of a series of laws and regulations plays an increasingly important role in building a rule-by-law business environment in China.
Second, the Ministry of Commerce takes the lead to carry out special rectifications on such prominent problems as regional blockade and industrial monopoly in concert with relevant departments of the State Council. In last December, we particularly issued the Work Plan for Eliminating Regional Blockade and Industrial Monopoly which deployed tasks in six aspects regarding the existing prominent problems. First, implement and improve the consolidated taxation policy for trans-regional enterprises. Second, solve the problem of discriminatory charging against non-local products or services. Thirdly, solve the problem of abusing administrative power by asking organizations or individuals to buy designated products or services. For instance, prior to administrative approval, some administrative departments may require enterprises to buy special service from a designated institution, like design service or agency service. Fourthly, solve the problem of setting up barriers against access of non-local products or outward shipping of local products. Fifthly, intensify efforts to financial services, increase coverage of financial services and provide sound financial services in urban & rural areas and nationwide. Sixthly, focus on cleaning up a number of laws and regulations. Government departments at all levels have promulgated a great number of laws and regulations, especially department rules, imposing limitations on the formation of a unified market and the flow of goods among regions, which therefore should be cleaned up. Through work in these six aspects, we hope to further advance the improvement of domestic market.
Thirdly, combat infringement & counterfeiting and maintain market order. The State Council has a dedicated leading group of combating infringement & counterfeiting situated at the Ministry of Commerce, which will organize a special meeting each quarter to continuously facilitate the work of combating infringement & counterfeiting, including promoting the authentication of software. Last year, national administrative law-enforcement organs put 262,000 cases on record, and public security organs solved 59,000 cases, involving more than RMB 40 billion.
Fourthly, review the trade policy compliance. The concept of trade policy compliance is derived from WTO rules and our accession commitments. For 12 years since our entry, WTO has been reviewing China’s trade policies every two years. The last review took place in 2012, when WTO members raised more than 1800 questions to China. The fifth trade policy review will be held in this July. The relevant preparatory work is under way. In light of the requirements of the State Council, the Ministry of Commerce shall be responsible for ensuring the consistency between China’s trade policies and WTO rules. Presently, WTO members show more concerns over the following aspects regarding compliance: first, industry support means, such as the PV industry; second, framework of subsidy policies, for instance, quite a number of provinces and cities in China will provide subsidies for a specific industry or event; thirdly, service market access; fourth, equal treatment to state-owned enterprises, private enterprises and foreign-funded enterprises. Besides, WTO members also pay high attention to China’s reform and opening-up policies, like the free trade zone recently launched. Interpretations and clarifications for these concerns constitute an obligation that we should undertake in the WTO policy review, and also will play an important role in promoting China’s economic system reform, further expanding opening-up and running state affairs according to the law. With this work, the Ministry of Commerce also expects to further improve China’s market order and create a unified, open, orderly-competition and rule-by-law atmosphere.
Shang Ming: Problems relating to state-owned enterprises are frequently encountered in the anti-monopoly process both at home and international cooperation. First of all, how do you view a state-owned enterprise? From the perspective of Anti-monopoly Law, we view it as an operator, called “concentration of business operators”, and it is also a market operator, with nothing special, subject to the provisions of Anti-monopoly Law as all other enterprises, which is reflected in the following three aspects. First, in terms of system design, the Anti-monopoly Law and its supporting regulations contain no preferential terms for state-owned enterprises or foreign-funded enterprises; all enterprises shall follow uniform rules. Second, during law-enforcement practices, we have several cases, including mergers between state-owned enterprises, mergers between state-owned enterprise and other enterprises, and others mergers involving state-owned enterprises. These cases are complex, some of which can be sorted out, but in real sense, cases involving foreign-funded enterprises might account for a higher proportion; this is a result of the large scale of foreign-funded enterprises or a greater number of declarations for concentrations of business operators and cannot reflect the issue of preferential treatments to certain enterprises. We make no exception in our inspections and decisions. Third, deal with illegal behaviors, mainly referring to failure in declaration for concentration of business operators by law. Over the past five years of law popularization and case trial, some illegal behaviors of enterprises in whatever nature were reported, so in the future process of dealing with declaration failure, we will have specific regulations and deal with illegal behaviors of enterprises in whatever nature in accordance with the same law. Large transnational corporations, with a history of 30-40 years or even 100 years, grasp more knowledge of concentration of business operators or the whole anti-monopoly law and maintain continuous communication with anti-monopoly authorities, while some Chinese enterprises just get acquainted with this system and have very limited knowledge in this respect. Therefore, in the future we will spend quite some time or energy on promotion and training activities for enterprise of all kinds. We will try to prevent erroneous judgments or declaration failures caused by poor knowledge of law.
Reporter with the 21st Century Business Herald: The first question is that, after the launch of anti-monopoly summary procedures, enterprise burdens will be lightened; however on the other hand, if the standard settings are unreasonable, they will probably cause certain damages to market competition; you have introduced four categories of simple cases, where standards used may be somewhat different from abroad, so can you briefly introduce several considerations on reasonability of these standard settings. The second question is that, as you mentioned structural remedies and behavioral remedies when talking about additional restrictive conditions, can you briefly introduce their differences, future operations and supervision considerations?
Shang Ming: We have repeatedly answered these questions, but there are always some new situations every time. Speaking of summary procedures, they should be based on our own law-enforcement practices. Previously, the same procedures applied to all cases. As our administrative resources are limited, only representing a fraction of overseas regulatory authorities, we need to sum up how to use limited law enforcements for more important cases. According to China’s actual needs, separate cases that should be handled in a simple manner. We should analyze these cases and determine those cases to which the summary procedure may apply based on five years of law-enforcement practices. Second, we have developed an easy standard by reference to foreign practices. EU provides the most typical standard, while America has no specific standard but relies upon experiences of investigators. EU’s standard used to be our then-current standard. Now, EU has lifted that standard by 5%. We take a cautious attitude, and practices prove that, no competition will occur when putting these cases into simple cases. In order to ensure no problems exist in simple case review, we have the second insurance valve, i.e. six aspects mentioned previously. Despite conformity to that standard, if any of these six aspects appears, simple cases won’t apply; with this double insurance, no competition will occur in our handling of simple cases. So here, I would like to specify that, concentration of business operators cases involve anti-monopoly issues; even if the small market share is far from monopoly, there may be other problems that should be handled in other procedures. Our current standard has been developed in combination with China’s practical situations and overseas experiences, so unexpected situations are unlikely to happen together with exceptional circumstances.
As to structural remedies, we have exchanged ideas with many regulatory authorities. In their history, there also have been a variety of remedy measures, dominated by structural remedies and supported by behavioral remedies, including the combined use of structural remedies and behavioral remedies. Currently, we are still at the early stage of law-enforcement practices. The case handling gives more considerations to specific situations of each case, which can effectively reduce or eliminate damage to competition. In the process, we will inform the acquirers of our concerns and competition issues that we think may happen, and the parties shall put forward solutions. Therefore, the existing solutions are largely provided by acquirers themselves. As mentioned by Professor Wu, innovations of several cases lie in business separation after acquisition. Other regulatory authorities barely use this method, and we are in the trying; however business separation doesn’t come by grabbing balls, but instead, we have conducted market tests, taken advice from all relevant parties, carried out comprehensive assessment and finally confirmed their feasibility theoretically, although it puts forward higher requirements on subsequent supervision. We rely on our own strength for supervision, and meanwhile, employ some capable regulatory institutions for supervision on behaviors according to their commitments. Thank you!
Reporter with the Reuters: Since the Ministry of Commerce put forward several additional restrictive conditions when reviewing some acquisitions of international companies, such as the Glencore case, in the future, if necessary, will you continue to do so when reviewing acquisitions of foreign companies? Mr. Xu, Director-general of the Anti-monopoly Bureau of National Development and Reform Commission, put forward the possibility of designating a specific institution in charge of the anti-monopoly work, what do you think of this possibility?
Shang Ming: There are many reports on the internet, but I have never said anything about it. These are explorations on future possibilities. I cannot clearly understand your first question, because Glencore’s acquisition of Xstrata is just one of our cases, which represents the consolidation of a large resource company with another large international resource company, also frequently encountered in our anti-monopoly process. Now, quite a number of cases under review involve consolidations of transnational companies; if an anti-competition effect has been produced, we will take appropriate measures according to each specific case.
Wu Hanhong: As to the unity of law-enforcement agencies, actually I was involved in the preparation and modification of China’s Anti-Monopoly Law very early, during which, almost all scholars agreed that there should a unified law-enforcement agency. However, just as when this law was born, some people from relevant institutions also stated that, in view of the status quo of China’s ministries and commissions as well as the immature conditions of establishing a unified, efficient and authoritative law-enforcement agency, the current way of law enforcements by three agencies respectively may be an inferior alternative, not necessarily the best. However, I personally expect that, with the deepening of China’s economic system reform and the development of market economy, both reality and theory need an anti-monopoly law-enforcement agency, so there should be a specific agency in charge of operation, as early as possible in my opinion; however, these factors are actually beyond the authority of the Ministry of Commerce, and should be answered by the State Council. I firmly believe that, the future direction of China’s anti-monopoly law enforcements will be a unified, efficient and orderly law-enforcement agency.
Reporter with the China Daily: Thank you, Mr. Yao. I would like to ask Mr. Shang that, you just mentioned there are 22 cases approved with additional conditions, including several behavioral conditions, could you please introduce some considerations made at that time? Seeing from situations over the past five years, as to anti-monopoly, what are your ideas for the future work? Will the number of cases maintain at this level or will increase? What characteristics will there be in the future?
Shang Ming: Our procedures for handling cases that may affect competition are basically as follows: We will review the latest factors in the Anti-monopoly Law, and upon detection of any problems that may affect competition, we will inform the declarer of our concerns, and the declarer will put forward conditions for reducing or eliminating such damage, also recognized as a commitment which may include structural or behavioral aspects. We will not necessarily accept this commitment, but instead, we will make assessment accordingly. If we think this commitment is acceptable, it will be put in our announcement as a restrictive condition. Two scenarios may emerge, the best remedy result and the best structural commitment, as consolidation reinforces an enterprise, which affects competition, so I cut that aspect, which is the most effective, commonly used and also most popular way among regulatory authorities. However, the actual process of handling each case is very complex. For example, we once handled such a case that, market competitors were very small, or that industry was going down, even if I cut it, he still could not sell his assets in a normal way; after reducing a competitor, we hope to create a new one, so as to maintain adequacy of market competition, but actually this is in vain without a successor, when we will say you can make acquisitions but must perform business separation to keep competition with two divisions. This is just like the inferior alternative mentioned by Professor Wu. When doing separation, such as chemical reaction tanks, these chemical sectors don’t manufacture a product with one set of devices, while our review for market competition is the market concentration of that product is too high, just like bathing a baby and then throwing him away together with water, which is probably not a good option, so at that moment, we may take other measures instead of structural remedies, such as business separation. Besides, the behavioral remedies mentioned previously mean that, after getting bigger, you cannot abuse your bigger position, including treating other enterprises equally and carrying out transactions at reasonable prices. Overall, we hope to strengthen your competitive power through acquisition, without leading to a worsening competition environment. Our additional restrictive conditions are designed to ensure market competition will not affect relevant sectors or consumers after acquisition. All these are our considerations, so each case cannot be copied, and it is too early to summarize which way gains more favor from China’s anti-monopoly authority.
Yao Jian: The theme of today’s press conference is anti-monopoly. We hope convey such a message through this press conference that, the Ministry of Commerce will continue to advance the progress of running state affairs according to the law, gradually form a legal system led by the Anti-monopoly Law, Foreign Trade Law and Foreign Investment Law and make further implementations so as to build a rule-by-law market environment. We have professional team members who understand domestic industrial development and economic conditions and familiarize with international rules, the combination of which will further facilitate the deepening reform and economic development of Chinese market.