China Antitrust: In Through The Unfair Competition Door?

The Wall Street Journal Law Blog recently did a post entitled, China Getting Hip to Antitrust (h/t to The TabletLawyer Blog, who alerted me to this post), on a Chinese antitrust ruling "slated to come down."  The Wall Street Journal Blog is, in turn, based on a Fortune Magazine story by Roger Parloff.

The post and the story focus on a Shanghai People's Intermediate Court No. 1 lawsuit brought by Sichuan Dexian Technology Co., in November 2004, alleging Sony engaged in 'monopolization and abuse of its dominant marketing position.'  Sichuan Dexian claims Sony's use of an electronic coding feature in its digital cameras and videocameras that requires they use only Sony batteries violates China's unfair competition laws.  Sony says its "closed" system "offers technological advantages as well as safety."

Dexian's suit is based on a broadly worded Chinese unfair-competition statute that has been used mainly to allege fraud or false advertising.  But, according to Fortune, "the statute's broad language - requiring companies to observe 'principles of voluntariness, equality, fairness and bona fides' - might also encompass antitrust claims."   The thought is that that with China constantly debating whether to enact true antitrust laws, this case "is seen as a kind of test case for how Chinese courts might apply the future law, says Peter J. Wang, a partner in the Shanghai office of Jones Day."

Color me skeptical.  I find it difficult to believe Sony could, under antitrust law concepts, be said to have a dominant position in the market to abuse:

Dexian's allegations against Sony (Charts) would probably fail as a "monopolization" or "abuse of dominance" claim in the U.S. or European Union for a simple reason, says Jingzhou Tao, an attorney in the Beijing office of DLA Piper. Canon and Sony each have about 20 percent of China's digital camera market, according to IDC, while Kodak has 14 to 15 percent. "Whether Sony has a dominant position in that market," says Tao, "is far from clear."

I also just do not see the Shanghai court putting into force anti-monopolization law through the back door.  Doing so would be too much judicial activism, particularly when there is already so much talk in China of enacting explicit anti-monopolization law.  I do not see such laws being enacted in the short term either.      

On January 30, 2006, I did a post, entitled, "China's Proposed New Antitrust Laws," in which I expressed my doubts on China enacting an antitrust law within the year, as so many were predicting:

At this point, I am of the view that it is simply too early for great concern.  I am, however, particularly looking forward to see how the new laws handle the fact that the Chinese government itself owns so many of China's largest companies.

In a September 5, 2006, post, entitled, " Chinese Antitrust Laws -- I Don't Think So," I again expressed doubts regarding China enacting an antitrust law any time soon:

Every few months there is an up-tick in interest regarding China's "upcoming" antitrust law.  We seem to be in another such phase right now.  But each time enactment looks closer, it is put off and the reason for that is simple: China is not ready for such a law to be applied to its State Owned Enterprises (SOEs).

I still have my doubts on the legislation and I have even bigger doubts on such laws coming in through the back door of the Sichuan Dexian v. Sony case.  It is, however, a very interesting case that certainly does bear watching. 

For more on the Sichuan Dexian case, check out the following:

• "China Court Hears Antitrust Case," by Morrison & Foerster antitrust attorney, Jesse Markham [subscription may be required]
• "Landmark antitrust suit in Shanghai court," in the China Economic Review