U.S. Ramps Up Criticism Of China’s Enforcement Of Its Antitrust Laws Against Foreign Companies

I. Introduction

For some time, many in the antitrust community have expressed concerns about how China is enforcing its antitrust laws against foreign companies. The past several months have seen a steady stream of criticism from the United States that in certain areas—notably, dominant firm conduct, intellectual property rights and mergers—China is selectively enforcing its antitrust laws outside of international norms in order to protect domestic industries. The criticism includes pointed complaints, comments and recommendations from the U.S. enforcement agencies, U.S. business groups and antitrust practitioners. This article provides a brief overview of some of the comments and recommendations being offered to the Chinese government.

2. Discussion

The FTC and DOJ

On Sept. 10, 2014, U.S. Federal Trade Commission (FTC) Chairwoman Edith Ramirez gave a speech entitled "Standard-Essential Patents and Licensing: An Antitrust Enforcement Perspective."1 Among other topics, Ramirez explained that in the area of SEP licensing, the FTC and the European Union (EU) recently have taken similar approaches with respect to FRAND (Fair, Reasonable and Non-Discriminatory)-encumbered SEPs. In short, they have brought enforcement actions based on a patent holder's alleged breach of a voluntary license agreement by seeking injunctions against willing licensees; the agencies have not, however, pursued enforcement actions based on particular royalty terms and they have not precluded the availability of injunctive relief where a licensee is unwilling or unable to abide by the terms of a license for FRAND-encumbered patents. But China, Ramirez explained, appears to be taking a different course and seems to be willing to impose liability based solely on what it perceives to be unfair royalty terms a patent owner demands for a license to its FRAND-encumbered SEPs, as well as on royalty demands for licenses for patents that might not be subject to a voluntary FRAND commitment. Ramirez expressed "serious concern" that China's approach suggests "an enforcement policy focused on reducing royalty payments for local implementers as a matter of industrial policy, rather than protecting competition and long-run consumer welfare."2

Two days later, Bill Baer, assistant attorney general for the Antitrust Division of the U.S. Department of Justice (DOJ), gave a speech entitled, "International Antitrust Enforcement: Progress Made; Work To Be Done."3 Among other things, he said that he shared Ramirez's concern regarding antitrust regimes (i.e., China) that appear to be advancing industrial policy goals by "imposing liability solely based on the royalty terms that a patent owner demands for a license," and the apparent forced adoption of a specific royalty rate that is not necessary to remedy the actual harm to competition.4

These comments were precursors to FTC Commissioner Maureen K. Ohlhausen's Sept. 16, 2014 speech entitled, "Antitrust Enforcement in ChinaWhat Next?"5 Ohlhausen focused on two areas where China may be moving away from, rather than towards, international...