The U.S. Chamber of Commerce said in a report released on Monday said that China's use of its six-year old antimonopoly law has been subjective and that enforcement agencies have skewed its implementation to favor China's own industrial policy and local companies. Discriminatory use of the law "arguably violates commitments that China undertook when it acceded to the World Trade Organization," the chamber said, adding that China agreed to fair competition when it joined the trade organization.
China has used the antimonopoly law "to pursue objectives that have no place in a free, open and fair market-based economy," it said. It added that using the law to pressure foreign companies to cut prices may "violate Article XI:1 of the GATT 1994, which generally prohibits restrictions on the importation of goods."
Chinese agencies that enforce the country's antimonopoly law didn't respond to requests for comment on Monday, which was a holiday in China. Previously they have dismissed criticism from foreign business groups, pointing to actions they have taken against domestic companies. They also say the rising number of investigations under the country's relatively new antimonopoly law have precedent in similar actions in the U.S. and Europe in previous decades.
The announcement comes as foreign investors are increasingly worried about recent tactics by Chinese regulators to control product pricing in industries ranging from dairy to auto parts to technology. The Chinese government has opened pricing probes and slapped fines on foreign companies, prompting many to lower their prices.
Chinese regulators last month levied fines of $200 million on 10 Japanese auto-part makers for alleged price manipulation and two others probed were exempt from the fine. Audi AG and Mercedes-Benz parent Daimler AG are awaiting possible punishment following similar probes.
Microsoft Corp. and Qualcomm Inc. are being investigated for potential monopolistic activity.
BMW, Audi and Daimler responded to the investigations by cutting prices. Qualcomm has said it is cooperating with authorities; Microsoft has said that it abides by laws in China and is cooperating with investigators.
The U.S. Chamber said in its report that China's National Development and Reform Commission, China's economic planning body, has been using "heavy-handed tactics" on foreign companies, warning them that they shouldn't "put up a fight" and that use of external lawyers would result in doubled or tripled fines. The report also cited an August announcement by the European Chamber of Commerce in China, which said it heard "alarming" accounts from European companies that intimidation tactics are being used to force companies to accept punishment without full hearings.
A growing number of U.S. businesses say they feel unwelcome in China amid a crackdown on monopoly pricing and corruption. A survey by the American Chamber of Commerce in China released last week shows that 60% of companies feel less welcome in China than before, a sharp increase from 41% in the previous poll a year ago. In a new question for its members, 49% of respondents believe that foreign firms are being singled out for attack.
China's entry into the WTO in 2001 was a significant step to opening the country to trade and economic development.
The U.S. Chamber has previously claimed that China has violated WTO commitments, stating last year that China's indigenous innovation program favors Chinese firms and pressures foreign companies to transfer technology to China's homegrown companies. The chamber has also criticized China for taking few steps to improve foreign access to express delivery and telecommunications services.
China has said it abides by WTO standards.
Source: Wall Street Journal by Laurie Burkitt
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