European Chamber releases statement on China AML-related investigations
2014-08-13 | All chapters
Beijing, 13 August 2014 – The European Chamber has for many years stated that effective implementation of China’s Anti-Monopoly Law (AML) would be beneficial for developing a healthy market economy in China.
Increased enforcement of the AML across a number of sectors over the last year is important as it sends a strong message that companies will be held accountable to the supremacy of law.
Likewise, these high-profile investigations also provide China itself an opportunity to demonstrate that the investigations will be carried out fully in accordance with rule of law. This is timely given the government’s repeated vows to further establish rule of law in China, which will be the focus of the upcoming fourth plenum of the 18th Party Congress. For this to happen, legal best practices must be embraced to ensure that administrative law enforcement is carried out impartially, transparently and consistently.
The procedural transparency of the European Commission could be taken as a model for how to conduct antitrust-related investigations. Inspections must not prejudge the outcome of the investigation and full rights of defence must be afforded to the companies in question. Disconcertingly, the European Chamber is not convinced that this has systematically been the case in China’s recent investigations.
The European Chamber has received numerous alarming anecdotal accounts from a number of sectors that administrative intimidation tactics are being used to impel companies to accept punishments and remedies without full hearings. Practices such as informing companies not to challenge the investigations, bring lawyers to hearings or involve their respective governments or chambers of commerce are contrary to best practices.
While the European Chamber recognises that a number of Chinese companies have been investigated for AML violations, the European business community is also increasingly considering the question of whether foreign companies are being disproportionately targeted in the investigations.
In some of the industries under investigation, domestic companies have not been targeted for similar violations. Furthermore, in some cases that involve joint ventures, it has only been the foreign partner that has been named as being a party to the investigations. A core tenet of a globalised economy is that all business operators, regardless of nationality, should be held accountable to the same criteria and be treated equally. Competition law should not be used as an administrative instrument to harm targeted companies or serve other aims, such as administratively forcing price reductions.
The European Chamber supports China’s goal to correct market imperfections with the goal of creating more market-based prices. However, this goal requires a holistic approach. Top-down measures based on examining the final price are one approach. However, it is perhaps more important to look at other factors that contribute to high prices for consumers. In the sectors in which many of the antitrust investigations have primarily focused, high market prices are caused by numerous factors. High mark-ups by distributors and vendors, heavy import taxes for luxury and other goods and costly duplicative certification and registration requirements should not be forgotten in China’s drive to create a market economy.
China needs to continue its focus on deregulation in favour of post-market supervision. As a part of this, the European Chamber remains convinced that enforcement of the AML could serve as one of the best tools not only for creating a more market-based economy in China, but also for reducing non-compliant and even corrupt behaviour. However, for this to happen, China needs to continue to implement its AML in a transparent, impartial and consistent manner and in a way that is beneficial for consumers and fair for business.
About the European Union Chamber of Commerce in China
The European Union Chamber of Commerce in China was originally founded by 51 member companies based in China on 19th October 2000. It now has approximately 1,800 member companies throughout China across nine offices in seven chapters. The rationale for the establishment of the European Chamber was based on the need of the European Union and European businesses in China to find a common voice within various business sectors. The European Chamber is recognised by the European Commission and the Chinese authorities as the official voice of European Business in China, and seeks greater market access and improved operating conditions for European companies.