Forbes: Controlling Chinese Antitrust Abuses Against Foreign Patent Owners Requires U.S. To Make Sound Decisions At Home, by Richard Epstein
This article originally appeared in Forbes on January 8, 2015.
Key commercial players in both the European Union and the United States have raised a chorus of well-timed complaints about the systematic bias in China’s enforcement of its Anti-Monopoly Law (AML). In principle antitrust laws should be used to foster, not stifle competition. The AML, however, is a peculiar amalgam of sensible prohibitions against horizontal mergers and nebulous provisions such as Article 17 that makes it illegal to set prices in “selling commodities at unfairly high prices or buying commodities at unfairly low prices.” Such broad language has allowed Chinese officials to selectively enforce against foreign firms a law neutral on its face. Far from being a device to promote competition, the AML is used to harass foreign firms that provide much needed competition to China’s state-protected agencies.
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It is critical that American legal authorities do not, by their public pronouncements or administrative decisions at home, give aid and comfort to China’s discriminatory treatment of the patented technologies of foreign companies under the AML. The antitrust laws should not be applied so as to single out patents or any other intellectual property rights for special treatment; all property deployed in the marketplace should be treated equally under the competition laws.
The unfortunate situation in China could spread to other countries, who may seek to imitate Chinese practices for local advantage, or to retaliate against them in a protectionist trade war that could easily cycle out of control. The best hope for containment is for China to undertake a two-front reform effort. First, it must reign in its fuzzy substantive provisions that insulate domestic firms against foreign competition. Second, it has to back off the selective enforcement of its basic rules. Back home, American policymakers and enforcement authorities must bend over backwards to make sure that their domestic actions do not lend cover or support to China’s misuse of its own antitrust law.