Nipping monopoly activities in the bud

The penal action against Samsung and LG, and four Taiwan companies, earlier this month for manipulating the prices of LCD panels on the Chinese mainland sent another signal to multinational companies to abide by China's Anti-Monopoly Law.

Slapping fines on the companies for price-fixing on the mainland is in line with the extraterritorial jurisdiction of the Anti-Monopoly Law, which is an international practice.

Many countries and regions have included mergers and acquisitions (M&As) between "real" overseas-funded enterprises that have their headquarters abroad in the list of antitrust review.

The Anti-Monopoly Law states that the law will apply to enterprises' conducts outside the People's Republic of China if they have restrictive effects on or eliminate competition in the domestic market of the PRC. In other words, the extraterritorial jurisdiction system of the law also pursues the principle of effect, though it is not explicitly stated.

China, as the world's largest home appliance producing country, largest exporter of home appliances and largest home appliance sales market, is also the biggest victim of price-fixing by Samsung, LG and other companies. Thus the penalties imposed on the companies are more than justified.

Overseas companies that want to expand their operations on the mainland should understand that their actions, even if taken outside China, fall within the purview of Chinese economic laws if they have a large enough impact on the Chinese market.

Today, China can use the extraterritorial jurisdiction of the Anti-Monopoly Law because it is the world's second largest economy and the second largest importing country. And the huge potential of the Chinese market means that no company can afford to lose.

The extraterritorial jurisdiction system of the Anti-Monopoly Law applies not only to price manipulation, but also to concentration of business operators, that is, M&As.

The Ministry of Commerce has taken the first step in implementing the extraterritorial jurisdiction system of the Anti-Monopoly Law in M&As. Since giving the conditional green light to InBev's acquisition of Anheuser-Busch, the ministry has reviewed more than 10 anti-monopoly extraterritorial jurisdiction cases on M&As that include Google's acquisition of Motorola Mobility, Western Digital's acquisition of Hitachi Global Storage Technologies and Pfizer's acquisition of Wyeth.