Anti-monopoly law crucial for consumers
By Zhu Qiwen (China Daily)
Updated: 2004-07-12 10:11

The passage of the anti-monopoly law should be accelerated to better protect China's booming consumer market.

The latest draft version of the law has been submitted to the State Council's Legislative Affairs Office. The country began working on the law in 1994. The law is expected to be completed soon, as the 10th National People's Congress listed it on its agenda for the five-year term ending in 2008.

The task for lawmakers is pressing and arduous. But there is no need for haste before the goals of the new law have been made crystal clear.

So far, it is still unclear which administrative body will monitor the implementation of the upcoming law, although the Ministry of Commerce (MOC) and the State Administration of Industry and Commerce (SAIC) are two obvious candidates.

Yet, a report issued by SAIC in May conspicuously directed its anti-monopoly fire against some multinationals.

By focusing on a few foreign companies including Microsoft, Kodak and Tetra Pak, the report illustrates how foreign competitors have dominated the Chinese market in their fields, and it suggests that regulatory work be pushed forward to put a stop to the monopolistic behaviour.

As the SAIC report points out, China approved almost 450,000 foreign-funded companies, with actual foreign direct investment worth US$484.6 billion, by last August. The contribution of foreign investment to the country's rapid economic growth over the past two decades is evident.

But some foreign companies follow unethical business practices to strengthen their position in the growing Chinese market.

Domestic industries are increasingly exposed to foreign competition, especially as the country speeds up its opening in the wake of its entry into the World Trade Organization in late 2001.

It is understandable that domestic businesses will try to find ways to avoid adapting to the changing market.

But the anti-monopoly legislation serves more than just their concerns. Consumers' interests must also be taken into account.

Unlike Microsoft and Kodak, two famous software and imaging giants which are well known to most Chinese consumers, Tetra Pak received little attention in China until the SAIC report mentioned it.

In comparison with the package demand in China's booming consumer market, the specialized corner of the market that Tetra Pak occupies looks quite small.

This Sweden-based company is one of the world's largest suppliers of packaging systems for liquid milk, fruit juice and other drinks.

In recent years, the rapid rise of a group of domestic dairy brands like Mengniu, Yili, Sanyuan and Guangming has become a phenomenon that Chinese consumers cannot help but be aware of.

The white-hot competition among domestic dairy companies for prime time commercials bears convincing testimony to the explosive growth of this industry.

Chinese consumers have benefited greatly from the increasing availability of quality fresh milk. But few have noticed that all of these leading domestic dairy brands used paper packages with the same trademark - Tetra Pak.

Some domestic packaging firms have complained about the foreign company's dominance in this special paper packing market.

But Tetra Pak argues it has not abused its leadership position and insists the reason why domestic dairy companies have chosen its products is not only technological superiority but also integrated solutions it offers its clients.

The SAIC report stressed the company holds a 95-per-cent share of the domestic asepsis soft-packing market.

Domestic competitors who need to pay close attention to the way their foreign counterparts build mutually beneficial relations with business partners.

The ongoing fiasco involving local retailers and China Unionpay, the only domestic credit card clearance provider, over bank card transaction fees exemplifies how seriously monopoly mentality can sour business relations.

China Unionpay's refusal to cut its card transaction charge in spite of the financial difficulties of local retailers drove the retailers into bank card boycott in South China's Shenzhen and later other cities.

That is the sort of problem market regulators should really respond to quickly.

In fact, Chinese consumers have plenty to complain about, ranging from expensive airlines that still refuse to compensate passengers in case of flight delays to railway price hikes during every Spring Festival.

Though the country's market-oriented reform has broken State monopolies in many sectors, administrative monopoly will hang in doggedly until an effective anti-monopoly law is put in place. For the foreseeable future, this will remain one of the key problems for the government to saddress.

The country's accession to the World Trade Organization requires multinationals be subject to the same privileges and controls as domestic companies.

So, to keep foreign companies in line, the government needs first to strengthen the rules it uses to regulate domestic ones.

Anti-monopoly legislation is to maintain fair competition in the marketplace to serve consumers' interests. It is competition, not specific competitors that will be protected by the new law.

It is reported that Galanz, a domestic microwave manufacturer that has become a global leader, voluntarily lowered its share in the domestic market from 70 per cent to less than 40 per cent two years ago due to worries about market-share-targeted anti-monopoly legislation.

For an original equipment manufacturer like Galanz, which represents the sort of super competitiveness with which China has amazed the world market, a reduction of market share under its own brand will not bite deep into its current profits, since it can produce under other companies' brand names.

But the loss of its long-established reputation simply because of ambiguous anti-monopoly legislation cannot be justified.