Towards an extraterritorial application of the Chinese anti-monopoly law that avoids trade conflicts

(ProQuest: ... denotes non-US-ASCII text omitted.)I. INTRODUCTIONOn August 30, 2007, the twenty-ninth session of China's tenth National People's Congress adopted the Anti-Monopoly Law (AML), which entered into force on August 1, 2008.1 Over four years later, results seem promising but leave room for improvement. The AML has been actively applied, especially concerning merger control, but seems perhaps less promising regarding horizontal agreements-particularly price fixing-as well as vertical restraints.2 In addition, China's adoption of the AML harmonizes with China's membership in the World Trade Organization (WTO) and its desire to become a world player on the globalized market.3Many scholars in Europe and the United States follow the evolutions of the Chinese AML with great interest.4 The AML and its application in China undoubtedly are important to companies outside China, particularly to the increasing number of foreign companies doing business in the Chinese market.5Many foreign companies have already experienced the importance of the AML, particularly in take-over attempts or mergers relating to the Chinese market. For example, in 2009, the Chinese Ministry of Commerce (MOFCOM)6 blocked the proposed merger between Coca-Cola and the Chinese company Huiyuan.7 In such cases, where the merger concerns a proposed collaboration with a Chinese company active on the Chinese market, the application of Chinese competition law (and the AML) is unquestionably appropriate. But the AML's applicability is less clear in a truly extraterritorial context-for example, when two foreign companies, completely located outside of China (but presumably selling products or offering services on the Chinese market) merge, or when two completely foreign companies make horizontal or vertical agreements abroad (but again, presumably with on consumers in China).8This so-called extraterritorial application of antitrust law has been an important issue in the United States and in Europe. Since a 1945 decision of the Second Circuit sitting as a court of last resort in United States v. Aluminum Co. of America (the Alcoa case),9 the U.S. Sherman Act has applied where the effects of an agreement were felt in the United States.10 In Europe, the European Court of Justice (ECJ) adopted similar reasoning in the so-called Woodpulp case,11 whereby European competition law was applied to an agreement by Canadian, Finnish, and U.S. producers because the agreement was implemented in the (then) European Community.12Such application has resulted in conflict. For example, Europeans reacted negatively to the outright extraterritorial application of U.S. law controlling a merger between two large pharmaceutical companies located in Europe,13 while Europeans were also applying their law extraterritorially by threatening to block the announced merger between two U.S. located aircraftproducers, Boeing and McDonnell Douglas.14 Until recently, these conflicts over the extraterritorial application of competition law seemed to be limited to conflicts between the traditional large players on the global market-Europe, the United States, and Japan. But given China's recent AML, the question arises how China will position itself in this debate.Whether the AML can be applied extraterritorially is, at least theoretically, not a difficult question for the simple reason that Article 2 of the AML explicitly addresses it.15 Instead, this Article argues that the AML shall also apply to monopolistic conduct outside Chinese territory that has the effect of eliminating or restricting competition on the domestic market of China. The relevant question, then, is whether China will make use of Article 2's theoretical possibility to apply its AML extraterritorially.16The extraterritoriality of the AML is not at all merely a theoretical question. Recently, MOFCOM announced that it had questions concerning a planned merger between two Russian companies, both located solely in Russia, but both having important influence on the Chinese market. …

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