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The China’s anti-monopoly law was drafted for about thirteen years before it was enacted. The anti-monopoly law was officially declared by the Tenth National People’s Congress. The law was effected a year after its official launching. Its main objective was to regulate the competition at the China’s market. The significant impacts of the law were being channeled on foreign investment. Therefore the new Chinese law was aimed at bringing greater regulation than the other existing twelve PRC laws. The other issues which it was meant to solve were anti-competitive conduct as well as the anti-trust provisions. These meant that foreign investors have to undergo more restrictions before they were allowed to invest in the Chinese local companies. For example the foreign investors had to be checked by the anti-monopoly on addition to the existing checkpoints before they gained the approval of the Ministry of Commerce.
The anti-monopoly law defined monopolistic conduct in three different ways. The first one was based on the set agreements between the participating parties followed by misuse of the position as a dominant market during its normal undertakings. Finally a law was enacted to monitor concentration conduct in order to restrict competition. Anti monopoly law demands that all business operators declare there concentration stands to the agencies before concentrating there businesses. Before the enactment of the anti monopoly law an AMEA structure was designated by the Chinese government. From then a detailed AML has not been implemented. The declaration threshold and the AMEA structure have caused much worry and problems to the international or foreign investors. Before the enactment of new Chinese law the powers of A&M were under anti-trust review.
The China’s Anti-Monopoly Law into the modern business world of competition and antitrust law. The Chinese law basically differs from other competition law in a number of ways. One of the differing aspects is the maintenance of the socialistic heritage of its common market. One of the main issues of the AML is protection of the interests of its people as well as its socialistic economy. The anti monopoly law seeks to protect the competition of its market and the interests of its consumers which are considered to be legal.
The fourth article of this law demands that formulation and implementation of completion laws by the state. The rules that were to be made had to be in agreement with the socialistic economy. The socialist economy seeks to perfect and strengthen the macro economy. The china’s behavioral prohibitions have not been effectively enforced and for these reason there is no much clarity on the compliance business steps that must be taken. The behavioral prohibitions are likely to affect the market price of China in the near future. Monopolization of enterprises enables a company to accumulate profits and this is not good since it widens income distribution. The social gap comes as a result of competition barrier. The law was implemented in order to resolve the widen gap in income distribution which is the characteristic of industries that are considered monopoly.
The economic lifeline of china is public ownership which is a socialistic tradition. Monopoly industries came about as a result of low returns on investment and the invested authority on infrastructure. Market oriented mechanisms came into being as a way of shifting from what was considered planned economy and this happened in early 1990s. This has resulted to invasion of the market by enterprises which are considered to be monopolies. Some companies who have entered the market as monopolies though they are in middle stage have the privilege of enjoying the advantages of both systems. The benefits being enjoyed by these companies emerge from the two systems which are dubbed as administrative and economic monopolies. Monopoly companies are superior to other industries because of the unfair distribution of funds which is very unreasonable. Therefore there are many social issues which have its origin on the superiority of monopolies.
Income distribution in monopoly companies. Research reveals that monopoly countries and industries hold large amounts of the money that is available. These companies are characterized by the excessive profits that they obtain and as a result there is a wide gap between the different sectors of the economy. The countries with such companies own most of the profits that are obtained from the central authority enterprises. For this reason monopoly industries has some authorities and powers which if used badly can continue to widen the existing social gap. Since most of this companies posses resources of great value they tend to accumulate profits. Most of the time the government gives such companies the permission to exclusively produce the product that has high demand. Excessive distribution is a common factor in monopolistic companies. That is the reason why companies producing specific products tend to have wages which three to four times higher that other companies. Personal income is usually a translation of monopoly profits and such acts do not agree with societal interests.
One of the main economic characteristic of the market is competition. This is what is lacking in China since its market development is what is controlling the monopolistic economy. This is the reason why its monopolistic economy has enacted unreasonable rules in order to hinder market competition. As a result monopoly has been maintained in China due to the tough restrictions and barriers that have limited the foreign investors. In china labor resources are optimized through disparity compensation. This policy is based on the fact that productive efficiency is a function of compensation which is the measure of labor. Therefore one can only get high salary by working efficiently.
The Chinese political party adopted a detailed competition law after a very long time. The anti-monopoly laws which are derived from Europe or Germany have the international standards. This is not the case with the implemented Chinese law because of some of its unique characteristics. The international community is watching to see its manifestation during its implementation and enforcement. Basically the china’s anti-monopoly law deals with issues of misuse of dominant position, refusal of agreements that are regarded to be anti-monopoly, merger control and it finally prohibits or rejects monopolies in the administrative position. The final prohibition basically deals with misuse of government powers when addressing the effects that has been felt as a result of anti-competitive dealings.
Despite its implementation in china this law goes further and governs monopolistic conduct out of the Chinese boundaries. Therefore the law restricts the existing competition in china’s home market. One of the emerging issues is the application of the Chinese anti-monopoly law outside china’s boundaries. The effects being felt by the international law as the result of the AML law restricts the markets outside china is enormous though these effects are insubstantial to china making it to continue dominating the market. The china’s anti-monopolistic law eliminates competition outside the borders of china and in addition to that it also go ahead and separate vertical from horizontal agreements. Under the horizontal monopolistic agreements relationships which are competitive in nature have been made illegal this is clearly quoted in some sectors of the thirteen article of the anti-monopoly law.
In article thirteen of the anti-monopoly law there is an endless list of competition agreements that are prohibited. For example there are serious restrictions on altering of prices, restricted production as well as the amount of produce to be sold. These restrictions and prohibitions are too much when one looks at the important aspect of business growth as well as the economy. For example competition is essential for any economy to grow therefore elimination of competition is an obstacle to growth. Under this law invention of new technology is illegal and since a market can only remain in its potential position by inventing new technology that will make it more competitive and appealing market growth has been limited because of this new anti-monopoly law.
Implications of the anti-monopoly law on foreign markets. In article fourteen of the same article vertical agreements which influence fixation of resale prices have been prohibited. In article fifteen a few restrictions on technology and price setting has been relaxed. These issues have been relaxed in order to ensure the quality of the products that are on the market. Foreign investors are being warned to critically look at the impacts of Chinese anti-monopoly law on there business. One of the reasons for the warning is because of their previous operations which have been mainly under the confines of competition law. Therefore these multinational companies are well acquainted with the competition law of the previous regime in which they have been operating. Currently china is considered to be among the big emerging markets and for this reason this multinational has to avoid loss as a result of non-compliance to the current laws.
Though this law is applicable to both foreign and domestic Chinese companies it’s evident that priorities will be given to china through its new policies. That is the reason why the seventh part of the anti-monopoly law gives Chinese owned firms that makes major contribution to development of states economy substantial protection. Meaning that, Chinese owned companies have been given priority over the other firms that are owned and operated by foreign investors. The main concern that has been raised by many is that this statement seeks to empower the already existing monopolistic Chinese firms. As a result income distribution will be unbalanced this will in turn increase the social gap that already exists. Chinese firms which influence the economy and security of china include gas, telecommunications and energy industries. It very disturbing since these firms is already monopolistic in nature. Many restrictions have been put on foreign investors for instance article thirty one of the same indicates that foreign investors who will wish to acquire Chinese goods that are of states security will have to undergo national security as well as competition review. For this reason trading with china as a foreign investor has been mad to be very expensive.
Therefore foreign industries with large investment in china need to take much care in order to avoid abusing the dominant powers which have been exclusively listed in the anti monopoly law. It’s also important for any foreign to accomplish any necessary legal requirements before carrying out his business in china. This is essential for minimization of anti trust risks. It’s recommended that foreigners seek to understand the details of the anti- monopoly law before engaging into meaningful business with china. It’s apparently clear that foreign investors are not going to stop investing in china because of the many restrictions and prohibitions in the anti trust law. There is need for foreign investors to renew there existing business agreement as a way of avoiding trouble with the antitrust law. An example of such reforms includes critical analysis of there horizontal agreement to see if there are any conflicting issues with the current AML provisions. Another place that needs analysis is the distribution agreements which have price fixing provisions that have been changed in the new anti-monopoly law.