Anti-Monopoly Law to influence Chinese oil firms

The law, which will come into effect on August 1, 2008, will prohibit companies from making monopoly agreements, halt abuse of dominant positions in markets and limit policies of excluding or limiting competition. Debates on the monopoly positions of domestic oil companies have swamped media and general discussion in China recently. Privately owned gas stations are frequently voicing complaints that the companies raise the wholesale price of oil products unreasonably and limit oil supplies, leading to slimmer profits.

He Jun, senior analyst with the Beijing-based consulting firm Anboud, said that these activities can be regarded as abuse of dominant positions in the market. „The new law may influence the operations of domestic oil giants in the future,” Yan Yiming with the Shanghai-based Yan Yiming Law Firm said. „Those companies have great negotiating power. If their business partners, mostly companies in refining, oil product and retailing industries, find them raising the price unreasonably, they will now be able to bring a lawsuit against them.” However, Yan conceded that striking changes are unlikely in the industry in the near future.

„The State Council has not yet set up the executive institutions necessary to implement an anti-monopoly law,” Yan explained. According to the new law, the State Council is to set up an „anti-monopoly commission” to organize, coordinate and direct the anti-monopoly work. Yan said that the State Council will set up a commission comprised of the pricing department under the National Development and Reform Commission (NDRC) and the Fair Transaction Bureau under the State Administration for Industry and Commerce (SAIC).

„I do not believe it appropriate for the pricing department to have a place in this commission,” Yan said, „As a governmental planning institution, the pricing department should not be permitted to contribute to an anti-monopoly commission that advocates a fair market economy.” In addition, Yan pointed out that no affiliated detailed explanation of the law has been issued yet, without which courts are unable to implement the law. Nor does the new law provide for the assignation of criminal responsibility, either on a company or an individual basis, Yan added. Yan said, China’s current criminal law does, to some extent, allow for punishment of certain illegal monopoly activities, and he thought that the criminal law can also be amended to facilitate the implementation of the anti-monopoly law.

„But maybe it is too early for China to add more anti-monopoly clauses into the criminal law, as we have no related experience at the moment,” Yan said. The new law also says that the government will still protect what it terms „reasonable” operation activities of those companies that are related to the lifeline of the country’s economy. China’s large domestic oil companies have received a great deal of negative attention in recent years for what is perceived to be as grasping huge profits from the industry while being awarded billions of Chinese Renminbi in compensation from the government for its losses in the refining business. (petrolplaza)