On August 30, 2007 the Standing Committee of the National People’s Congress adopted China’s long-awaited antimonopoly law. The law will come into effect on August 1, 2008, more than 13 years after drafting began. The law bans agreements that restrain trade including price-fixing cartels and other forms of collusion, and provides for investigation and prosecution of single-firm monopolistic conduct. The law further prohibits dominant firms from wielding their market power through anticompetitive tying arrangements and refusals to deal, among others, and provides a framework for analyzing mergers and acquisitions that threaten competition.
Drawing the greatest attention in the new antimonopoly law are provisions that require increased scrutiny of transactions involving foreign investments in China. In this regard, Article 31 specifically allows China’s authorities to review all potential mergers and acquisitions for their impact on “national security.” Although this provision is seen as a direct response to similar legislation adopted in the United States and other countries, it also appears to address a growing concern in China with regard to perceived threats to the county’s economic security. This has been caused, in part, by recent foreign acquisitions of major industries and popular domestic brands in China.