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Anti-monopoly law to take effect tomorrow

By Diao Ying (China Daily)
Updated: 2008-07-31 14:31

The country's first anti-monopoly law, which was proposed 15 years ago and was not passed until last year, takes effect tomorrow.

The law, seen by some as the "constitution for the market economy" because of its importance in promoting an environment of fair competition, is regarded by investors and legal experts as a landmark law in China's transition to market economy and further opening up.

Foreign investors should take the law as a positive sign for their future investment in China, said Li Shuguang, a professor at China University of Politics and Law, who participated in drafting the law.

"This is a defining moment in the development of China's legal system," said James Zimmerman, chairman of the American Chamber of Commerce in China.

"The new anti-monopoly law establishes a basic framework to build a fair, uniform and national competition law system that benefits consumers by recognizing and preserving incentives to compete," said Zimmerman.

Li said that unlike before, when multinationals would hesitate over which ministry to approach when making investments, they now know which department to apply to.

"After the law takes effect, the decision-making process will become more transparent and will help to reduce investment risks," said Li.

Despite this progress and positive signs, experts think it is a law in transition and that much work needs to be done to enforce it efficiently.

Shi Jianzhong, another legal expert who also participated in drafting the law, said it is probably the shortest anti-trust law in the world since it only lays out certain principles.

"But we should not see it as a compromise," said Shi, who said that since China does not have much experience in anti-monopoly cases, it would be difficult to evaluate its influence on the market after it is put into practice if there are specific requirements at the very beginning.

The enforcement part of the law is still unclear, and that is another concern for investors. When passed last year, the law mentioned an anti-monopoly committee directly under the State Council but did not say who would enforce it.

According to sources, three government bodies - the Ministry of Commerce, the National Development and Reform Commission and the State Administration for Industry and Commerce - will enforce the law.

The anti-monopoly committee may coordinate enforcement but it is not a professional law enforcement body, according to Huang Yong, a professor of University of International Business and Economics.

Huang said this arrangement could challenge enforcement bodies since cases could be complex and beyond the management of one single ministry. Huang suggested these bodies work together.

"We sincerely hope the authorities will focus on modern economic principles and prevailing international practices when applying the new law," said Zimmerman.

"We will be observing with interest how the law is put into practice and look forward to continuing to support the government's moves to develop its competition-law system."