The Standing Committee of the People’s Congress read the draft anti-monopoly law for the second time on June 24, 2007. Six new proposals (Chinese only) have been added onto the draft law. Since there is so much hype about the much anticipated law, I will detail what was added in the 2nd read.
1. The central government shall formulate and implement regulations to strengthen and improve macro control, and to effect a unified, open, competitive, and orderly market system.
国家制定和实施与社会主义经济相适应的竞争规则，加强和完善宏观调控，健全统一、开放、竞争、有序的市场体系。
The overall policy concern underlying this addition is to achieve a balanced and coordinated relationship between anti-monopoly and other economic policies.
2. Operators can legally combine and merge through fair competition and voluntary association to expand the scale of operations, and improve their market competitiveness.
经营者可以通过公平竞争、自愿联合，依法实施集中，扩大经营规模，提高市场竞争能力。
This addition is aimed at achieving a balance between combating monopoly and allowing Chinese companies to join forces against global competition. However, in order to accomplish large scale mergers, operators must face a proposed western-style legislative hearing in order to effectively prevent monopoly.
3. Operator in dominant market positions may not abuse their position to exclude or restrict competition.
具有市场支配地位的经营者，不得滥用市场支配地位，排除、限制竞争
This new rule corresponds with # 2. As many developed countries allow companies to gain dominant market positions yet at the same time regulate against the manipulation of such position to the detriment of trade, China sees that it should adopt similar antimonopoly rules that keep companies in check once they become big enough to be able to abuse its market power. During the 2nd read session of the law, the issue of price fixing was also raised.
4. State-owned companies with a national franchise are to be scrutinized in their pricing.
专营专卖将被严格监控
There has been growing dissatisfaction in China with state-owned companies in many industries, i.e, telecom, oil & gas, and other utilities. These companies seem to be immune from market forces in that they charge unreasonable fees for their products and services. This new provision represents an attempt to keep state-owned companies in strategic industries on the national pedestal yet scrutinize their commercial activities relative to consumer protection.
5. Industry associations should strengthen self regulation to guide the operators to compete legally, and to maintain the market competition order.
行业协会应当加强行业自律，引导本行业经营者依法竞争，维护市场竞争秩序。
Industry associations wear a semi-governmental hat. It has been given the responsibility of guiding players in relevant industries to play by the rules of the Pricing Law fair competition regulations.
6. Foreign mergers and acquisitions may not endanger national security
外资并购不得危及国家安全
This provision places national security checks on acquisitions of domestic firms. Mr. Paul Jones has a very interesting comment on this, and I quote here in full:
The draft has been amended since the first reading to include provisions regarding a review of mergers and acquisitions with regard to security considerations. The Chinese version of the article on this topic specifically mentions the concern expressed in the U.S. regarding the proposed acquisition of Unocal by a Chinese company. This aspect does not appear in the English language news stories that I have seen.
