VZCZCXRO6936
PP RUEHCN RUEHGH RUEHVC
DE RUEHBJ #4780/01 2000841
ZNR UUUUU ZZH
P 190841Z JUL 07
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC PRIORITY 9999
RUEAWJA/DEPT OF JUSTICE WASHINGTON DC
INFO RUCPDOC/USDOC WASHDC
RUEHOO/CHINA POSTS COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 03 BEIJING 004780 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
JUSTICE FOR CHEMTOB, MASSOUDI 
STATE PASS FTC FOR GENERAL COUNSEL BLUMENTHAL 
STATE ALSO FOR EB/TPP/IPC, INR/B 
STATE PASS USTR STRATFORD/WINTER/MCCARTIN 
USDOC FOR DAS KASOFF AND ITA/MAC/OCEA/MCQUEEN 
TREASURY FOR OASIA/ISA DOHNER/HARSAAGER/CUSHMAN 
 
E.O. 12958: N/A 
TAGS: ECON EIND EINV PGOV WTRO CH
SUBJECT: SCLAO DISCUSSES ANTI-MONOPOLY LAW 
IMPLEMENTATION WITH FTC, DOJ 
 
 
¶1.  (SBU) SUMMARY.  Federal Trade Commission (FTC) and 
Department of Justice (DOJ) officials raised United 
States concerns about China's draft Anti-Monopoly Law 
(AML) and proposed amendments to its 1993 Anti-Unfair 
Competition Law (UCL) in a March 30 meeting with State 
Council legislative Affairs Office (SCLAO) officials. 
SCLAO declined to predict when the National People's 
Congress (NPC) would enact the AML, noting the process 
was arduous because of the contentious issues involved. 
State Council departments would participate in the 
future Anti-Monopoly Commission, hopefully on a 
Ministerial-level.  Promulgation of the AML would be 
followed by State Council formulation of 
implementation rules.  The DOJ and FTC officials 
offered to share U.S. experience with antitrust law 
implementation.  SCLAO said amendments to the UCL 
should be harmonized with the AML, as should other 
laws such as the Price Law.  Whether the future AML 
would cover administratively authorized monopolies was 
not resolved.  The SCLAO was open to further exchanges 
with United States antitrust experts on draft Chinese 
laws and competition policy.  End summary. 
 
Process for AML Enactment 
------------------------- 
 
¶2.  (SBU) Asked about the status and prospects of the 
draft AML, SCLAO Deputy Director General (DDG) Dong 
replied that the draft AML had been submitted to the 
National People's Congress (NPC) where it had 
attracted considerable attention.  While it was 
possible the NPC could conduct the minimum three 
readings within six-months, passage of the law would 
remain difficult due to competing legislative 
priorities and other barriers.  The draft AML had 
provoked a wide ranging discussion at the State 
Council and more difficulties were expected during the 
NPC's readings.  Dong declined to predict when the law 
would be passed. 
 
¶3. (SBU) China's future AML would be important to 
China and the world, she continued.  The AML was 
intended to promote market competition and enhance 
market efficiency.  The demand for an AML in China to 
uniformly regulate market order had grown in the more 
than 20 years of economic reform as China moved from a 
centrally planned economy to a socialist market 
economy and became even more integrated with the world 
economy following China's 2001 accession to the World 
Trade Organization.  Existing problems in China's 
markets included such phenomena as abuse of dominant 
market position, mergers among undertakings, and 
administratively sanctioned monopolies. 
 
¶4. (SBU) DDG Dong approvingly noted past helpful 
comments and suggestions from FTC, DOJ and Commerce 
Department officials.  She said the draft AML 
reflected many of those recommendations. 
 
Future Anti-Monopoly Authority? 
------------------------------- 
 
¶5. (SBU) FTC General Counsel (GC) Blumenthal asked 
about the future Anti-Monopoly Commission and whether 
the SCLAO would be involved in structuring that future 
regulatory agency.  DDG Dong said that according to 
the current draft AML, the Anti-Monopoly Commission 
(AMC) would be supervised under the framework of the 
State Council and be comprised of representatives from 
both State Council commissions and Chinese ministries, 
as well as outside academics and experts.  Dong did 
not anticipate that the SCLAO itself would be a member 
of the AMC.  While not specified in the draft, the 
State Council would likely appoint high level 
officials, such as Ministers, to the Commission. 
 
AML Implementation Challenges 
----------------------------- 
 
¶6. (SBU) DOJ's Stuart Chemtob inquired about the role 
of the State Council in the AML's implementation and 
 
BEIJING 00004780  002 OF 003 
 
 
whether preparations for implementation had begun in 
anticipation of the NPC passing the law.  DDG Dong 
described the AML as a constitution for economic 
matters.  Promulgation of the AML would be only a 
first step.  Implementation would be a long and 
arduous road.  China noted that implementation of 
corresponding laws in the United States, the European 
Union, and Japan had been very complicated.  Dong said 
she expected to participate in the State Council's 
formulation of implementation rules.  Departments 
responsible for legal enforcement would also 
participate.  While no schedule had been decided for 
implementation, some efforts regarding implementation 
rules drafting had begun. 
 
¶7. (SBU) The State Council would most likely focus on 
substantive rules, while procedural rule-making would 
largely be in the purview of China's courts and the 
NPC, DDG Dong continued.  One should expect specific 
rules regarding administrative review of the AML. 
FTC's Tritell commented that DDG Dong has a 
realistic appreciation for anti-monopoly 
implementation difficulties.  The United States would 
be happy to share its experiences from over 100 years 
in implementation of the antitrst laws, he said, 
which DDG Dong welcomed. 
 
Status of UCL and Opportunities to Comment 
---------------------------------------- 
 
¶8. (SBU) In response to a question concerning the 
relationship between the competition policy elements 
of the UCL and the draft AML, DDG Dong said the State 
Administration of Industry and Commerce (SAIC) was 
drafting amendments to the UCL and had not yet 
submitted a draft to the SCLAO.  Dong would 
participate in a review of that draft after it reached 
the SCLAO. 
 
¶9. (SBU) Reminded of the remarkably transparent 
procedures regarding access to the draft AML and 
opportunities to comment on it, Dong said she expected 
the same transparent procedures for the UCL once a 
draft was completed.  Chinese laws and regulations on 
the legislative process mandated that most laws be 
made in the open and transparently, with the exception 
of laws and regulations concerning national security, 
foreign exchange and other specific situations.  With 
regard to the draft UCL amendments, Dong said the 
draft may have been circulated domestically to 
individual departments and enterprises, but not to the 
United States. 
 
¶10. (SBU) Dong added that China had also solicited 
public comments on the just enacted Property Law via 
the Internet.  Public comments have also been sought 
on drafts of the Contract Law, Labor Contract Law and 
real estate regulations prepared by the State Council. 
In accordance with the annual State Council 
legislative plan, China would focus on transparency 
and openness and increasingly solicit public opinions. 
Drafts would also be delivered to experts and industry 
representatives and departments for comment.  Dong 
encouraged the United States to pay more attention to 
Chinese requests for public comment.  United States 
views could be submitted then and the SCLAO hoped to 
hear opinions from the United States on a broad range 
of issues. 
 
¶11. (SBU) Pressed by FTC's Tritell on whether 
provisions of the UCL would be harmonized with provisions 
of the AML, DDG Dong acknowledged the importance of the 
issue while repeating that, although SCLAO intended to 
coordinate on the topic, it had yet to receive finished 
draft amendments to the law from SAIC.  DDG Dong noted the 
two laws dealt with different subject matter. The AML 
regulated insufficient market competition while the UCL to 
regulated excessive competition.  A precise definition of 
excessive competition had not yet been established, but in 
Dong's view it referred to acts such as fraudulent 
advertising. 
 
BEIJING 00004780  003 OF 003 
 
 
 
¶12. (SBU) DOJ's Chemtob pointed out that other Chinese 
laws also had competition-related provisions, e.g., the 
Price Law in part addressed predatory pricing and collusion. 
Would other laws' competition provisions also be harmonized 
with the AML?  DDG Dong said yes without any further 
elaboration. 
 
Contentious Administrative Monopolies Issue 
------------------------------------------- 
 
¶13.  (SBU) FTC's Tritell asked whether the issue of whether 
to subject or exempt administratively authorized monopolies 
from review under the AML had been contentious in NPC 
readings of the bill, as the topic had been during the 
bill's drafting.  DDG Dong replied that NPC delegates had 
not formed consistent opinions on the matter.  Similarly, 
comments collected from experts and the public were also 
divided.  Opinions fell into two groups.  First, someQ 
commentators observed that most countries regulated just 
three types of monopolistic activities -- namely, 
monopolistic acquisitions, dominant market positions, and 
mergers.  The list did not include administrative 
monopolies, so this group argued that the issue need not 
appear in China's AML.  A second set of commentators argued 
that inclusion of the issue in the draft AML would be 
beneficial to resolution of the unique problems associated 
with China's administrative monopolies.  The NPC would make 
the final decision on whether administrative monopolies 
would be covered by the AML. 
 
¶14. (SBU) FTC General Counsel Blumenthal said United States 
officials were heartened to see administrative monopolies 
addressed in the current draft AML, and argued that 
addressing the issue in the AML was in China's self- 
interest.  He encouraged DDG Dong and her colleagues to 
consider the United States' experience with the Commerce 
Clause of the Constitution and the European Union's 
experience with the Treaty of Rome as reference points for 
this contentious issue.  DDG Dong noted that even in the 
absence of a promulgated AML, Chinese authorities had 
regulations to prohibit administrative restraints on 
economic activities in regional areas and reforms of 
certain administrative monopolies -- such as the oil, energy 
and postal industries -- had already begun.  Even though the 
State Council would not be able to make the final decision 
about the AML's coverage of administrative monopolies, it 
would continue to make concerted efforts in other areas to 
address the problem. 
 
¶15. (SBU) In closing, DDG Dong emphasized that the SCLAO 
had benefited from exchanges with DOJ, FTC, and Commerce 
Department officials on the AML.  The SCLAO in time may 
reach out with additional questions or requests for help. 
United States laws and experience were the foundation 
driving China's development of its AML.  SCLAO was happy to 
meet frequently with DOJ, FTC, and Commerce officials. 
 
¶16. (U) SCLAO participants in this March 30, 2007 meeting 
included Deputy Director General Dong Chaojie and Zhang 
Yaobo. 
 
¶17. (U) United States participants included FTC's General 
Counsel William Blumenthal, Randy Tritell, and Dina Kallay; 
DOJ's Deputy Assistant Attorney General Gerald Masoudi, 
Stuart Chemtob, and Hill Wellford, and United States 
Embasy economic officers Chris Beede and Matthew Dolbow. 
 
¶18. (U) The FTC/DOJ delegation cleared this reporting cable 
July 18. 
 
RANDT