Monopoly no more
- By Mei Xinyu
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E-mail Beijing Review, January 25, 2013
![A salesperson in Suzhou, Jiangsu Province, demonstrates the use of a new Samsung LCD TV [CFP]](http://images.china.cn/attachement/jpg/site1007/20130125/001ec949c22b126c227909.jpg "A salesperson in Suzhou, Jiangsu Province, demonstrates the use of a new Samsung LCD TV [CFP]") |
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A salesperson in Suzhou, Jiangsu Province, demonstrates the use of a new Samsung LCD TV [CFP] |
Right at the start of 2013, the National Development and Reform Commission (NDRC) fined six overseas companies, including South Korea's Samsung and LG, for rigging prices for LCD panels, calling attention to foreign companies who try to undermine China's anti-monopoly law.
As the world's biggest home appliance producer, exporter and sales market, China is also the biggest victim of price manipulation by companies like Samsung and LG. Therefore, punishing those companies is justifiable.
All overseas companies that intend to do business on the Chinese mainland must realize that even actions taken outside China are within the jurisdiction of Chinese economic laws should they have a large enough impact on the Chinese market.
International practice
Is China getting in over its head to punish price manipulators outside China? Certainly not. The principle of extraterritorial jurisdiction—or the ability of a government to exercise authority outside of its national boundaries—in the anti-monopoly field is an international practice, and most countries with anti-monopoly laws have adopted the principle. Many countries and regions have included mergers and acquisitions (M&As) between overseas enterprises whose headquarters are abroad into anti-monopoly review. All these countries practice extraterritorial jurisdiction when behaviors of foreign companies adversely impact domestic companies.
Article 2 of China's Anti-Monopoly Law says the law "shall apply to the monopolistic conduct outside the territory of the People's Republic of China that has the effect of eliminating or restricting competition on the domestic market of China."
Even if a country claims extraterritorial jurisdiction, it must also be capable of exercising such power. China is the world's second largest economy and second largest importer. The huge domestic market has enabled the Chinese Government to stand up to foreign companies that ignore China's economic laws, and any company with global ambitions cannot afford to lose the Chinese market.
Extraterritorial jurisdiction applies to not only price manipulation but also the consolidation of business operators, or M&As. Any M&A between two or more foreign companies must be reported if it reaches the threshold set by the Chinese Government.
In fact, the Ministry of Commerce (MOFCOM) has taken the first step in implementing extraterritorial jurisdiction regarding M&As. Since the conditional approval of the Belgium-based brewer InBev of American brewing giant Anheuser-Busch in 2008, the MOFCOM has reviewed more than 300 anti-monopoly cases involving extraterritorial jurisdiction. Most of the cases got unconditional approval, but some 10 cases were either approved subject to conditions or rejected, such as Google's acquisition of Motorola Mobility, Western Digital's acquisition of Hitachi Global Storage Technologies and a joint venture between Henkel Hong Kong and Tiande Chemical Holdings.
The necessity
Many foreign companies are unaware of China's extraterritorial jurisdiction power, so it is necessary for China to exercise its authority.
BHP Billiton and Rio Tinto announced on June 5, 2009 a plan to set up a joint venture to operate their iron ore businesses in the state of Western Australia. On the same day, Colin Barnett, premier of Western Australia, told the media that he hoped Aluminum Corporation of China would invest in Rio Tinto instead of there being an alliance between Rio Tinto and BHP Billiton, because he feared all the iron ore in Pilbara would be controlled by one company. However, he did not mention China's ability to exercise its extraterritorial jurisdictional authority on the alliance between Rio Tinto and BHP Billiton.
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