Private Action Under China’s AML: Just As Important As Google?

2010-01-20

An industrial regulation to safeguard the fair trade of books was slammed recently by two organizations for violating the Chinese Anti-monopoly Law.

The statement was made last Friday against the controversial "Regulation on Fair Trade in Book Business," which forbids online stores from selling books for less than 85 percent of the original price.

Co-drafted by the Beijing Consumer Association and the Consumer Rights Protection Committee under the Beijing Lawyers Association, the statement said the regulation removes the retailer's right to set independent prices. This leads to unfair competition.

The industrial regulation, drafted by the Publisher Association of China (PAC), Books and Periodicals Distribution Association of China and China Xinhua Bookstore Association and issued on Jan 8, made it clear that online bookstores are not allowed to offer discounts of more than 15 percent on books published within one year of sale. (China Daily)

Most of the attention given to the Anti-monopoly Law since it came into effect has been 1) reporting on cross-border M&A review; and 2) panicky commentary by foreign lawyers about how the AML might lead to a lot of protectionism.

However, some of the more interesting stuff, which has gone unnoticed, involves challenges to State action, including SOEs and agency decisions. There have already been several private actions (including civil suits) brought against alleged unfair competition by SOEs, such as mobile phone companies. These almost always involve issues related to pricing schemes, like the example above.

The book sales matter has yet to rise to the level of a lawsuit, but it is another good illustration of private individuals and organizations using relatively new Chinese law to challenge the way that the State manages the economy.

Needless to say, trying to figure out the desired balance between State action/management and private enterprise is difficult and will be a source of tension for years to come. At the moment, there seems to be a movement by the central government towards consolidating more power in the hands of the SOEs, a more aggressive industrial policy.

At the same time, though, you have the AML and the ability of private parties to bring actions against improper undertakings and consolidations, including those brought about by State action. Granted, when these private actions collide with State measures that have backing from, say, the NDRC, the civil suits will be unsuccessful. Most of the cases that have actually been filed, not surprisingly, have not proceeded to final judgments.

But just the fact that the law is on the books, that complaints like the one above are being raised and lawsuits moving forward, represents a very exciting development.

Perhaps this sort of thing won't get the same kind of media attention in the short term as Internet restrictions, but I have a feeling that 50 years from now, commentary on the broad effects of the AML might be seen as quite significant.

Tags: China Law