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IMPACT OF CHINA’S ANTITRUST LAW AND OTHER 

COMPETITION POLICIES ON U.S. COMPANIES 

HEARING 

BEFORE THE

SUBCOMMITTEE ON COURTS AND 

COMPETITION POLICY 

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

JULY 13, 2010 

Serial No. 111–117 

Printed for the use of the Committee on the Judiciary 

( 

Available via the World Wide Web: http://judiciary.house.gov 

(II) 

COMMITTEE ON THE JUDICIARY 

JOHN CONYERS, JR., Michigan, Chairman 

HOWARD L. BERMAN, California 

RICK BOUCHER, Virginia 

JERROLD NADLER, New York 

ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia 

MELVIN L. WATT, North Carolina 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

WILLIAM D. DELAHUNT, Massachusetts 

STEVE COHEN, Tennessee 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

PEDRO PIERLUISI, Puerto Rico 

MIKE QUIGLEY, Illinois 

JUDY CHU, California 

TED DEUTCH, Florida 

LUIS V. GUTIERREZ, Illinois 

TAMMY BALDWIN, Wisconsin 

CHARLES A. GONZALEZ, Texas 

ANTHONY D. WEINER, New York 

ADAM B. SCHIFF, California 

LINDA T. SA ́ NCHEZ, California 

DANIEL MAFFEI, New York 

JARED POLIS, Colorado 

LAMAR SMITH, Texas 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

HOWARD COBLE, North Carolina 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

DANIEL E. LUNGREN, California 

DARRELL E. ISSA, California 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

TRENT FRANKS, Arizona 

LOUIE GOHMERT, Texas 

JIM JORDAN, Ohio 

TED POE, Texas 

JASON CHAFFETZ, Utah 

TOM ROONEY, Florida 

GREGG HARPER, Mississippi 

PERRY APELBAUM, Majority Staff Director and Chief Counsel 

SEAN MCLAUGHLIN, Minority Chief of Staff and General Counsel 

SUBCOMMITTEE ON COURTS AND COMPETITION POLICY

HENRY C. ‘‘HANK’’ JOHNSON, JR., Georgia, Chairman 

JOHN CONYERS, JR., Michigan 

RICK BOUCHER, Virginia 

CHARLES A. GONZALEZ, Texas 

SHEILA JACKSON LEE, Texas 

MELVIN L. WATT, North Carolina 

MIKE QUIGLEY, Illinois 

DANIEL MAFFEI, New York 

JARED POLIS, Colorado 

HOWARD COBLE, North Carolina 

JASON CHAFFETZ, Utah 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

BOB GOODLATTE, Virginia 

DARRELL ISSA, California 

GREGG HARPER, Mississippi 

CHRISTAL SHEPPARD, Chief Counsel 

BLAINE MERRITT, Minority Counsel 

(III) 

C O N T E N T S 

JULY 13, 2010 

Page 

OPENING STATEMENTS 

The Honorable Henry C. ‘‘Hank’’ Johnson, Jr., a Representative in Congress 

from the State of Georgia, and Chairman, Subcommittee on Courts and 

Competition Policy ............................................................................................... 1 

The Honorable Howard Coble, a Representative in Congress from the State 

of North Carolina, and Ranking Member, Subcommittee on Courts and 

Competition Policy ............................................................................................... 2 

WITNESSES 

Mr. Shanker A. Singham, Partner, Squire Sanders, LLP, on behalf of the 

United States Chamber of Commerce, Washington, DC 

Oral Testimony ..................................................................................................... 4 

Prepared Statement ............................................................................................. 6 

Mr. Tad Lipsky, Partner, Latham & Watkins, LLP, Washington, DC 

Oral Testimony ..................................................................................................... 18 

Prepared Statement ............................................................................................. 20 

Ms. Susan Beth Farmer, Professor of Law, Pennsylvania State University, 

Dickinson School of Law, University Park, PA 

Oral Testimony ..................................................................................................... 27 

Prepared Statement ............................................................................................. 29 

The Honorable Thomas O. Barnett, Partner, Covington & Burling, LLP, 

former Assistant Attorney General of the Antitrust Division, United States 

Department of Justice, Washington, DC 

Oral Testimony ..................................................................................................... 39 

Prepared Statement ............................................................................................. 42 

APPENDIX 

Material Submitted for the Hearing Record .......................................................... 71 

OFFICIAL HEARING RECORD 

MATERIAL SUBMITTED FOR THE HEARING RECORD BUT NOT REPRINTED

Submission entitled: Symposium, Fourth Annual Latin American Round Table on 

Competition & Trade, Barriers to Entry in Mexican Telecommunications: Problems and Solutions This submission is available at the Subcommittee and can also 

be accessed at: 

http://www.brooklaw.edu/∼/media/PDF/LawJournals/BJIlPDF/bjilvol27i.ashx 

(1) 

IMPACT OF CHINA’S ANTITRUST LAW AND 

OTHER COMPETITION POLICIES ON U.S. 

COMPANIES 

TUESDAY, JULY 13, 2010 

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON COURTS AND

COMPETITION POLICY

COMMITTEE ON THE JUDICIARY, 

Washington, DC. 

The Subcommittee met, pursuant to notice, at 4:10 p.m., in room 

2237, Rayburn House Office Building, the Honorable Henry C. 

‘‘Hank’’ Johnson, Jr. (Chairman of the Subcommittee) presiding. 

Present: Representatives Johnson, Jackson Lee, and Coble. 

Staff Present: (Majority) Christal Sheppard, Subcommittee Chief 

Counsel; Eric Garduno, Counsel; Rosalind Jackson, Professional 

Staff Member; (Minority) Stewart Jeffries, Counsel; Tim Cook, 

Staff Assistant; and John Mautz, Legislative Director. 

Mr. JOHNSON. The hearing on the impact of China’s Antitrust 

Law and Other Competition Policies on U.S. Companies will now 

come to order. And without objection, the Chair is authorized to declare a recess. We have called this hearing because there is concern 

within the U.S. business community that China’s new anti-monopoly law, AML for short, might be applied or interpreted in a discriminatory manner. The net effect of this would weaken the ability of U.S. companies to compete in China. If this is happening, it 

would contribute to the uneven balance of trade we already have 

with China and ultimately lead to more American jobs shipped 

overseas. 

China is a sovereign nation entitled to design its laws the way 

it wants. At the same time it is unfair for Chinese companies to 

benefit from our antitrust laws which do not discriminate against 

them, while at the same time, applying their AML in a discriminatory manner against U.S. companies. In these troubled economic 

times, we must be vigilant in ensuring U.S. companies and entrepreneurs are not discriminated against, particularly in markets as 

big and important as China. This is why Congress and the Administration have given so much attention to examining a variety of 

Chinese economic policies, including its currency valuation, intellectual property enforcement and indigenous innovation rules. 

We today are adding to this effort by focusing upon China’s antimonopoly law. The results regarding the AML that have been expressed to date and which our witnesses will focus on include the 

2 

seemingly uneven application of the merger review requirement, 

the potential for the abuse of dominance provisions to encompass 

normal business activity and the ambiguity in how the AML’s 

abuse of intellectual property provision will be applied. Our witnesses will also focus upon the status of State-Owned Enterprises, 

SOEs, under the AML. I understand that up to 50 percent of China’s GDP comes from SOEs and that generally China’s SOEs operate as commercial entities like the Verizons and Fords of the world 

rather than, say, a state run utility. I think it is important that 

the AML is applied to China’s SOEs like any other businesses, 

though I am told this is not the case. I look to the witnesses today 

to verify this and for them to elaborate on how SOEs and the concept of a planned economy fit into the antitrust regime. I also want 

to note that I am planning to lead a congressional delegation to 

China during the August recess to see firsthand various aspects of 

how the Chinese competition laws and their enforcement affect 

American business. 

I am very much looking forward to the trip and the opportunity 

to interface with Chinese competition policymakers on these issues. 

Lastly, while it is important that China establish a level playing 

field with regard to its antitrust laws it should also be mentioned 

that the AML is brand new. The Chinese should be commended for 

updating their antitrust law. This is a positive development for all 

businesses in China, both Chinese and foreign. And an important 

step as China becomes a key player in international economic relations. Because the AML came into effect less than 2 years ago, the 

Chinese government is still developing and implementing regulations for most of the AML’s provisions. That is why at present I 

see no reason to start ringing bells over the AML. 

Nevertheless, we must keep our attention on how China goes 

about applying and enforcing the AML. I also think we should 

make it a priority to continue working with the Chinese to ensure 

discrimination based upon country of origin and the closing off of 

the Chinese market to American businesses does not occur. To this 

end, I hope the witnesses can provide constructive advice on how 

best to engage Chinese policymakers to ensure that the AML isn’t 

applied in a discriminatory manner. I will now recognize my colleague, Howard Coble, the distinguished Ranking Member of the 

Subcommittee, for his opening remarks. 

Mr. COBLE. Thank you, Mr. Chairman, for calling the hearing. 

Good to have our panel of witnesses with us today. Our trade philosophy is that the United States can and should compete in the 

global market. By opening trade and competition with other countries, those countries have a new opportunity to prosper economically and build new long lasting relationships that are driven by 

mutual interests. We have benefited from our trade with China, 

but we have also experienced some serious difficulties, mainly job 

losses. While I firmly believe, Mr. Chairman, that the United 

States can compete with any country, this only applies if there is 

a level playing field. That means the equivalent rules and standards and ensuring matters such as product safety, accurate currency rates, rights and protections for workers, intellectual property protection and enforcement, environmental protection, nuclear 

nonproliferation and most importantly human rights are paraVerDate Aug 31 2005 12:07 Nov 05, 2010 Jkt 000000 PO 00000 Frm 00006 Fmt 6633 Sfmt 6601 H:\WORK\COURTS\071310\57430.000 HJUD1 PsN: 57430
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mount. The United States and China have engaged in a constructive dialogue for nearly 3 decades. We have not always agreed but 

we work through our disagreements to forge a strong relationship 

it seems to me. During this time, China has moved from a state 

controlled economy to an economy and society that reflect mutual 

interests embodied in its trade policies. 

In North Carolina, trade with China has had a significant impact. Many of our textile plants sit empty and many other products 

including furniture that were once manufactured in our district are 

now either a symbol or shipped to North Carolina retail stores from 

China. North Carolina is rebuilding and retooling, but we also need 

a level playing field where we can compete against other countries, 

not unlike China. 

To that end, we have the opportunity today to discuss competition policy in China and how it impacts the United States. The 

United States was the first country to codify a competition law, the 

Sherman Antitrust Act of 1890. Since that time, over 100 nations 

have implemented some form of competition act. These laws have 

the potential to lower prices and increase innovation for products 

and services around the globe but if they are implemented improperly, they can unfairly benefit comic companies at the expense of 

foreign rivals. 

In 2007, China, as you pointed out, Mr. Chairman, adopted the 

Anti-Monopoly Law. While the AML bears all the hallmarks of a 

modern competition statute, we have yet to see how it will be implemented. I look forward to hearing from our panel of witnesses 

today about the potential of the AML. I am also interested to learn 

what more Congress and the Administration can do to ensure that 

China can benefit from our experiences developing competition policies. A sound and effective competition policy is in our mutual interest in seems to me. And I am hopeful that today’s hearing will 

help us understand China’s AML and why it is in our mutual interest. I yield back the balance of my time, Mr. Chairman. 

Mr. JOHNSON. Thank you, Mr. Coble. Without objection, any 

other Members’ opening statements will be included in the record. 

And at this time, I am now pleased to introduce the witnesses for 

today’s hearing. 

Our first witness is Mr. Shanker Singham, a partner at Squires 

Sanders law firm where he specializes in antitrust and international trade law, including WTO and market access issues. Mr. 

Singham is speaking on behalf of the global regulatory cooperation 

project of the U.S. Chamber of Commerce. Mr. Singham is also the 

chairman of the International Roundtable on Trade and Competition Policy. Welcome, sir. 

Our next witness is Mr. Tad Lipsky, a partner at the law firm 

of Latham & Watkins where he specializes in U.S. and international antitrust and competition law. I also want to note that 

from 1992 through 2002, he served as the chief antitrust lawyer for 

the Coca-Cola company, a company which is close to my heart. And 

welcome, sir. 

Next we have Professor Susan Beth Farmer, a professor of law 

at Penn State’s Dickinson School of Law where she teaches courses 

in American and comparative antitrust law. She was also a Fulbright scholar in 2008 at the University of International Business 

4 

in Economics in Beijing, China, where she researched and studied 

the Chinese legal testimony, particularly the AML. Welcome. 

And last but not least, we have Mr. Thomas Barnett, a partner 

at the law firm of Covington & Burling where he specializes in 

global antitrust and competitive law. From 2005 through 2008, he 

was the assistant attorney general of the Antitrust Division of the 

United States Department of Justice. I want to thank you all for 

your willingness to come and participate in today’s hearing. Without objection, your written statements will be placed into the 

record and we would ask that you limit your oral remarks to 5 

minutes. You will note that we have a lighting system that starts 

with the green light and in 4 minutes it goes to yellow and then 

in 5 minutes red. After each witness has presented his or her testimony, Subcommittee Members will be permitted to ask questions 

subject to the 5-minute limit. Mr. Singham, please begin. 

TESTIMONY OF SHANKER A. SINGHAM, PARTNER, SQUIRE 

SANDERS, LLP, ON BEHALF OF THE UNITED STATES CHAMBER OF COMMERCE, WASHINGTON, DC 

Mr. SINGHAM. Chairman, Members of the Subcommittee, I am 

honored by the opportunity to address you today on the subject of 

China and competition policy on behalf of the U.S. Chamber of 

Commerce. As we noted in our written testimony, China’s transition to a market economy where competition on the business merits 

is the norm continues to be a challenging one. It should not surprise anyone given the history, but China’s attempts to move in 

this direction should be applauded. However, there are some systemic issues that the U.S. Government must consider in developing 

a responsible approach to China and its transition. First, China’s 

transition is not yet complete. And there are profound challenges 

in the operation of a competition agency embedded in an economy 

that has not yet fully accepted competition policy as a normative 

organizing principle. In these cases, there is a danger that competition agencies may become another tool in the hands of an industrial policy focused government to distort markets rather than to 

ensure their competitiveness. We have seen evidence of a number 

of policies, such as compulsory licensing in China’s new patent law 

and China’s indigenous innovation policies that are focused on 

skewing the marketplace away from business competition on the 

merits and toward preferring certain technologies and certain 

firms. China’s competition law, the AML, will not operate in isolation. Indeed it would not be surprising if China’s competition agencies were used to achieve some of the industrial policy goals that 

some of the more recent developments in intellectual property and 

indigenous innovation are intended to express. 

While we generally applaud the development of the competition 

law in China, which is a significant part of China’s transition to 

a market economy, we note that in the unique market that is 

China, there remain concerns as to whether the AML will deliver 

on its goal of ensuring that firms of all nationalities operating in 

China will find a competitive marketplace there. We have summarized these concerns in our written testimony and they are broadly 

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leged private firms be subject to the same disciplines as other private enterprises? 

The AML, as written, suggests differential treatment will be applied and this will lead to anti-competitive market distortions. Currently, China is forcing a number of administrative mergers without competition review to better position certain China SOEs in the 

market. 

Two, will China use its AML to erode intellectual property rights 

of U.S. and other foreign firms in order to give advantage to that 

China competitiveness? Based on the revisions to the patent law 

which increase the scope for the use of compulsory licensing and 

other methods of technology transfer, as well as China’s recent indigenous innovation policy, this danger is real. 

Three, is there a danger that China will rely on discredited antitrust doctrines to promote industrial policy goals in the areas of 

merger control and unilateral conduct by giving greater weight to 

the welfare of competitors as opposed to consumers. Of particular 

concern is the use of discredited doctrines to build an anti-competitive approach to refusals to deal at essential facilities that would 

be completely outside the mainstream of international best practice. The type of analysis that the Chinese competition agencies are 

pushing with respect to unilateral conduct in particular, which involves branding certain firms dominant and then severely restricting their scope of action is very problematic. 

In response to this concern, the U.S. Government should be careful and consistent in its own messaging on domestic policy as only 

departure from consumer welfare and business competition on the 

merits however slight will likely be seized on by China to justify 

its own policy. Four, there is concern about China’s approach with 

respect to activates in both public and private sector where cartels 

formed in China have significant impacts on U.S. and other foreign 

markets. We believe as we make clear in our written testimony 

that all of the distortions referred to above some of which may emanate from the application of the AML have some which come from 

other laws and policies are anti-competitive market distortions, 

ACMDs which incidentally are not necessarily unique to China. 

But in China, these affect both U.S. firms, as well as Chinese consumers in the Chinese economy. It is, therefore, in both the interests of the U.S. and China to limit ACMDs and we suggest in our 

written testimony ways in which this can be done. 

To summarize, one, we suggest a new intra-agency process built 

around ACMDs. This process would involve key stakeholders in the 

U.S. Government that have vested interest in their reduction, as 

well as sound application implementation and enforcement of the 

AML. We suggest this group report to Congress on the competition 

effects of ACMDs. We suggest evaluation of the potential for international agreements on ACMDs and we support the excellent technical assistance programs that the FTC and DOJ already provide 

to recognize the fundamental reality in the Chinese market. In 

summary, we are very willing to help the Committee as it tackles 

this subject and we can respond to any questions the Committee 

has. 

Mr. JOHNSON. Thank you, Mr. Singham. Next, Mr. Lipsky, 

please. 

6 

[The prepared statement of Mr. Singham follows:] 

PREPARED STATEMENT OF SHANKER A. SINGHAM


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TESTIMONY OF TAD LIPSKY, PARTNER, LATHAM & WATKINS, 

LLP, WASHINGTON, DC 

Mr. LIPSKY. Thank you, Mr. Chairman. Thank you very much to 

the Subcommittee for this opportunity to appear. Shanker in his 

written testimony and in his brief oral statement, has just summarized the matter very effectively and it is also obvious from your 

own introductory statements that the level of knowledge you have 

about the development of the AML and the current situation we 

are in is already pretty well developed. We agree that the law is 

new and many of the potential problems have been identified are 

largely questions of implementation and I would identify myself 

very strongly with the Chairman’s statement that we need to—I 

don’t recall his exact words, but the feeling was we need to continue and intensify our engagement with the Chinese agencies and 

the Chinese officials who concern themselves with antitrust enforcement in China and who develop policy. And Congressman 

Coble, you have asked the very simple question, what can we do? 

So let me, in my very brief oral summary of my statement, try 

to contribute to that question because I support the idea of continuing and intensifying our engagement. First, the United States 

should have a coherent message about what antitrust law is all 

about. We stand, I think, first in the world in identifying ourselves 

with the purpose of antitrust being to encourage competition on the 

merits, policy that rewards innovation, efficiency, productivity and 

competitiveness to maximize the wealth that our societies can create with our scarce resources. I think other nations are either—do 

not implement or do not implement as effectively that approach to 

antitrust, and I think the United States has a lot to say and why 

this is a policy that makes sense and why a failure to unify antitrust policy around the concept of competition on the merits renders the enforcement of the law incoherent, unpredictable and susceptible to parochial influence, ultimately dragging down economic 

performance and conflicting with many of the economic and trade 

goals that you identified in your opening statements. 

So the United States, number one, should be a vigorous advocate 

of competition on the merits as the central focus of antitrust. As 

Shanker mentioned, this makes it imperative that the U.S. antitrust agencies conduct themselves with great care when they 

present views on issues of antitrust policy to the business community and the public. The whole world watches these 100 jurisdictions that now have be antitrust enforcement when the United 

States speaks about antitrust because we have still, by far, the 

longest and strongest tradition of antitrust enforcement. When we 

put forth new ideas, we have to make sure that great care is taken 

to make sure that abroad where there is much less experience with 

antitrust, things are not taken the wrong way. 

Our current policy discussion on the possibilities of extending the 

reach of section 5 of the Federal Trade Commission Act I submit 

would stand as an example of how we might have been a little bit 

careless in conducting a domestic dialogue without thinking very 

carefully about how that dialogue is heard at foreign antitrust 

agencies. Once we have a coherent message, we neat advocacy and 

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tioned. Shanker mentioned the possibility of an interagency task 

force with regard to China. I support that. 

Let me just mention one other idea here in my brief time. So far 

as I am aware, even though we rely on our antitrust agencies to 

have dialogue with China and other foreign antitrust agencies, so 

far as I am aware there is no direct recognition in the statutes that 

authorize our antitrust agencies to act in their organic statutes or 

in their appropriation statutes. There is nothing that directly authorizes them to engage in these activities of having dialogue with 

the Chinese officials, nor with the officials of any other antitrust 

agency around the world or with the international organizations 

that concern themselves with antitrust policy. 

This would be the international competition network, the competition committee of the OECD and some others that have been 

mentioned. There is an excellent recommendation in the Antitrust 

Modernization Commission Report that there be some specific 

budgetary and recognition and some recognition in the authority 

for the agencies so that they are encouraged to engage because 

Congress has, in effect—if Congress would, in effect, certify and approve and fund efforts of this nature, I think they would feel much 

more at liberty to be presenting the kind of dynamic advocacy that 

I think it sounds like all of us here recognize is required. 

Let me conclude my remarks there. Thank you very much for the 

opportunity to appear. And, of course, I will be glad to answer any 

questions. 

Mr. JOHNSON. Thank you, Mr. Lipsky. 

[The prepared statement of Mr. Lipsky follows:] 

20 

PREPARED STATEMENT OF TAD LIPSKY


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Mr. JOHNSON. Next, Professor Farmer. 

TESTIMONY OF SUSAN BETH FARMER, PROFESSOR OF LAW, 

PENNSYLVANIA STATE UNIVERSITY, DICKINSON SCHOOL OF 

LAW, UNIVERSITY PARK, PA 

Ms. FARMER. Thank you. Chairman Johnson and Ranking Member Coble, I appreciate the invitation to discuss the developments 

of the Chinese antitrust law and their effect on American business. 

International competition law and enforcement certainly raises important policy issues and congressional attention is appropriately 

focused on these considerations. The AML, however, is only 2 years 

old. It went into effect in 2008 and in that short time, three separate agencies have been organized to enforce the various aspects of 

the law. They have issued many rulings, guidelines and procedures 

and have begun to investigate and take decisions on individual 

cases. Of course, the AML had been in development for more than 

a decade. 

So the 2-year life of the law may understate its actual development. Importantly, a number of the decisions and the regulations 

will affect and have affected American businesses operating in 

China. In order to assess the impact of the AML, I would start with 

the words of American Justice Oliver Wendell Holmes. He explained that the life of law has not been logic, it has been experience and these experiences included the felt necessities of the time, 

the prevalent moral and political theories and intuitions of public 

policy. He concluded that the law embodies the story of a nation’s 

development through many centuries and it cannot be dealt with 

as if it contained only the axioms found in a math book. 

China’s experience shows the difficulties of moving from theory 

to law to implementation rules to the construction of the efficient 

apparatus for implementation and then finally to enforcement 

within a system that has frankly grown far more quickly than its 

administrative capacities. Based on that background, I would like 

to comment on a few features of the AML that you both raised as 

important considerations. First, the AML considers the same kinds 

of categories of businesses as the American Sherman and Clayton 

Acts. The general prohibitions concern anti-competitive agreements, monopolization or abuse of the dominant position and anticompetitive mergers. 

However, the AML goes further and because there are Chinese 

characteristics to be considered and it has separate sections on the 

important category of the Chinese economy state-owned enterprises 

and administrative monopolies. 

In addition, China has chosen to have three enforcement agencies enforcing separate sections of the law which however are not 

airtight. It is important that they be able to communicate with 

each other and that their regulations are both consistent and 

transparent. There are some overlaps and there may be some differences of concern. 

Finally, unlike current American policy, Chinese law explicitly 

incorporates other noncompetition factors into the analysis. This is 

found in Article 1 and Article 4. The sections on merger control and 

abuse of dominance regulated by MOFCOM and the SAIC probably 

affect American business more than other of the provisions of the 

28 

AML. During the first year of the AML, MOFCOM reviewed 52 

transactions. There is no official statistics available for the second 

year, but if the review is moving along at the same pace, the Commission may have reviewed up to 100 mergers. During the first 

year, out of the 52 transactions, only one was prohibited and 5 

were approved with conditions. All of these mergers involved one 

or more American parties. The abuse of dominance section and the 

merger control provision both contain explicit statements that national security, economic development, noncompetition issues may 

be considered in deciding the merger and determining whether or 

not a firm with a large share of the market has dominance. This 

is a concern. However, it is important to note that both of the agencies have been busy issuing their own rules and regulations and 

SAIC is a good example in that it has issued 2 regulations, one in 

2009 a revision just a few months ago asking for and receiving 

comments from American experts, including some sitting at this 

table and they were listened to. 

So while there are some important differences between the 

American antitrust law and the Chinese, it appears that they are 

committed to capacity building. And while the development certainly involves Chinese characteristics, there is a trend toward 

viewing antitrust through a lens of consumer welfare along with 

the majority of jurisdictions, including the American. Thank you. 

Mr. JOHNSON. Thank you, Professor Farmer. 

[The prepared statement of Ms. Farmer follows:] 

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PREPARED STATEMENT OF SUSAN BETH FARMER


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Mr. JOHNSON. Now, Mr. Barnett. 

TESTIMONY OF THE HONORABLE THOMAS O. BARNETT, PARTNER, COVINGTON & BURLING, LLP, FORMER ASSISTANT ATTORNEY GENERAL OF THE ANTITRUST DIVISION, UNITED 

STATES DEPARTMENT OF JUSTICE, WASHINGTON, DC 

Mr. BARNETT. Thank you, Mr. Chairman, for the opportunity to 

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am testifying in my personal capacity today. I view the AML as 

holding great promise. The adoption of this competition law regime 

in China is part of the transformation of the Chinese economy from 

a centrally directed economy to a market-based economy and that 

is a very critical change. My experience with the AML principally 

comes from my time as the head of the Antitrust Division. During 

that time, we were heavily engaged with the Chinese officials who 

are drafting the AML. I spent time on two trips in Beijing meeting 

with various senior Chinese officials as well as many of my staff 

meeting in Beijing as well as in the United States. Our impression 

was uniform, that the Chinese officials were well informed, open to 

exchanging ideas and sincerely focused on crafting a first-class 

competition law regime. 

They understand what the U.S. Supreme Court has explained. 

Our competition laws rest on the premise that unrestrained interaction of competitive forces yields the best allocation of resources, 

lowest prices, highest quality and greatest material progress. On a 

closely related point, the U.S. Antitrust Modernization Commission 

which this Committee helped to establish has underscored that regulation or governmental control can be the antithesis of competition, tending to preserve monopolies and other noncompetitive market structures. Accordingly, by reducing barriers to entry and encouraging investment and innovation, the AML and the market oriented approach that it represents should promote economic growth 

in part by providing greater opportunities for U.S. businesses in 

China. With respect to the AML itself, as many people have noted, 

the Chinese government succeeded in crafting a competition law 

that generally falls within international norms. 

And I would like to think that our consultations made a difference. They listened to our comments and as various iterations 

of the AML came out, they incorporated those comments and improved the final product. I would particularly commend the AML 

for including a prohibition on the use of administrative powers to 

create a monopoly or restrict competition. These are some of the 

most enduring and harmful types of restrictions on competition. 

There are provisions in the AML which do not necessarily reflect 

an international consensus, Professor Farmer has pointed out the 

three different agencies. There are also prohibitions on dominant 

firms charging too high or too low a price, something that is very 

difficult to administer and that can be counterproductive. The key 

question as many have noted is implementation. It needs to be enforced in a way that promotes economic growth with a focus on efficiency and improving welfare. This fundamental challenge is as 

true in China as it is here in the United States and around the 

world. The short version is it is too early to tell how it is being enforced in China. 

To take an example that the Chairman pointed out, Article 55 

of the AML talks about the right to exercise intellectual property 

rights, but also talks about how it can be an abuse without defining where the line is. That is a line that we are still looking to see 

drawn. Our focus, I suggest, should be on helping the Chinese 

agencies to implement the law in a principled and effective manner 

that will spur economic growth and which should have the effect 

41 

of opening opportunities for U.S. and other businesses operating in 

China. 

Specifically, the U.S. agencies should continue to exchange ideas 

and best practices with Chinese agencies, both in general and in 

specific enforcement matters. Second, private businesses operating 

in China need to ensure their compliance with the AML, but they 

should also participate in the policy discussions. Both the Chinese 

agencies and the business community can learn from each other in 

this process. Third, we should encourage further agency guidance. 

Each of the agencies has been issuing guidance. Indeed the NDRC 

issued something today with a call for public comment for which 

I commend them. 

Fourth, we should encourage participation by the Chinese agencies in international organizations such as the International Competition Network. That very dialogue can help promote better practices and convergence. As I said, the AML holds great promise. If 

implemented in a manner consistent with international norms, the 

AML should provide a win-win-win situation for all involved including not only Chinese consumers, but U.S. businesses. Mr. 

Chairman, thank you for the opportunity to participate in the hearing. 

[The prepared statement of Mr. Barnett follows:] 

42 

PREPARED STATEMENT OF THOMAS O. BARNETT


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Mr. JOHNSON. Thank you, Mr. Barnett. We will begin questioning. This question is for all of the panelists. It has been asserted that China’s state-owned enterprises are not subject to the 

AML. Do you believe this? Let me ask you this question also. If 

China’s state-owned enterprises are not subject to the AML, what 


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recourse, if any, do other countries have in addressing competitive 

distortions that are created by non-application of the AML to stateowned enterprises? 

Mr. SINGHAM. Mr. Chairman, I think the application of the AML 

to state-owned enterprises, the language could be at best somewhat 

ambiguous and at worst there is a direct equivalent application between private firms and state-owned enterprises. However, the 

Chinese agencies do have the right to conduct competition advocacy 

directly with state-owned enterprises and with administrative 

agencies to promote competitive outcomes, and I think one of the 

things that we could be encouraging the Chinese competition agencies to do is to engage in complete and effective competition advocacy with state-owned enterprises. 

It is certainly important that there is a level playing field and 

that competition law apply to state-owned enterprises as well as 

private firm, but it is important to note that that does not necessarily mean that exactly the same antitrust tests would be applied as between private enterprises and state owned firms. Stateowned firms are revenue maximizers at best. They are able to sustain low cost pricing for long periods of time. They gain benefits 

from their connections to government and therefore the tests that 

you might apply would be different and we would encourage the 

Chinese agencies to bear that in mind as they conduct that type 

of advocacy. But we would certainly think that it is very important 

for the agencies to engage in constructive competition advocacy and 

that we take advantage of our technical assistance programs that 

the FTC and DOJ are engaged with the Chinese on to stress the 

importance of advocacy. 

Mr. JOHNSON. What is the difference between advocacy and enforcement in this context? 

Mr. SINGHAM. The difference is under the law, a different approach will be applied between private firms and state-owned enterprises in terms of actual implementation. So what the Chinese 

have done through the AML is create a vehicle for the Chinese 

competition agencies to directly advocate competition and advocate 

pro competitive solutions to state-owned enterprises. Every country’s competition agency ought to be conducting competition advocacy with respect to domestic regulation as well as actual stateowned enterprises and so forth. 

Mr. JOHNSON. But what about enforcement? 

Mr. SINGHAM. Well, we certainly would like to see enforcement 

both with private firms and state-owned enterprises. As you pointed out in your opening statement, China’s state-owned enterprises 

are operating as commercial companies. In China, they have effects 

in the U.S. market, they have effects in third country markets and 

U.S. firms that are competing against China state-owned enterprises in China, in the U.S. and in third-country markets need to 

have some assurance that the benefits and privileges that stateowned enterprises are receiving as a result of their connections to 

government do not lead to artificial reductions in cost and therefore 

an advantage that does not derive from business competition on 

the merits. I should point out that there is a spectrum of state 

owned enterprises in China. 

52 

You have one extreme, a fully government owned company; on 

the other extreme, you have a private firm that simply benefits 

from state privileges and tax preferences and so forth. And so the 

real problem with respect to state-owned enterprises and competition in China is the network of anti-competitive market distortions 

that benefit certain firms in China and disbenefit other firms and 

obviously have been impact on U.S. firms as well. 

So you can’t really answer your question without developing 

some tools that the U.S. Government would be able to deploy to 

deal with these anti-competitive market distortions. Be they tax 

distortion, be they special regulatory exemptions, however the distortion occurs. But we need to develop some tools to be able to deal 

with those from a competition perspective. 

Mr. JOHNSON. All right. Thank you, Mr. Lipsky. 

Mr. LIPSKY. Thank you. I think Shanker has dealt very effectively with this question. I think a way to consider a way to think 

about the problem, think back to the days when our own aviation 

air transportation industry was heavily regulated. There was an 

administrative agency, the Civil Aeronautics Board, airlines could 

not enter a route or leave a route without the permission of the 

Civil Aeronautics Board. They could not merge without permission. 

They could not make agreements without permission. As a matter 

of fact, they couldn’t even have a discussion about a potential 

agreement without the permission of the CAB. 

In that format, the only thing that was left to the competition 

agencies was actually to appear before the Civil Aeronautics Board 

and say please allow more competition, allow prices to be more 

flexible, allow more carriers to enter and leave routes. 

So this is a very long-term process. We should think of this as 

the beginning of a very long road to implement all of the things 

that China needs to do to make the full transition from the legacy 

of central planning to a competitive economy that much more resembles the United States, other OECD jurisdictions. This is why 

we need to get organized for advocacy with the Chinese and the 

same could be said with some other countries because if you look 

at all of the steps necessary for the transition, it not only involves 

placing more and more assets and productive activities in private 

hands, reducing the involvement of the government, the government ownership, the government financing, the government management, the presence of government officials in private firms. 

That is a very tall order and a very grand transformation. There 

is no silver bullet or magic words we can say. We need to think 

of this as a long-term prospect of making the transition complete. 

And that would be my recommendation. 

Mr. JOHNSON. So you are pretty much saying just kind of stay 

the course, wait and see what develops? 

Mr. LIPSKY. I don’t think I am saying wait. I am saying we need 

to ramp up our involvement. We need to ramp up the dialogue, the 

commitment, the way that we articulate, the very good values and 

economic principles and legal approaches that are already reflected 

in our law. I am not saying they translate directly to the Chinese 

case. In many respects they won’t. But we need to keep focus on 

the issue, keep dialogue with the officials, keep proving to them 

again and again this lesson of history that the free market competiVerDate Aug 31 2005 12:07 Nov 05, 2010 Jkt 000000 PO 00000 Frm 00056 Fmt 6633 Sfmt 6601 H:\WORK\COURTS\071310\57430.000 HJUD1 PsN: 57430
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tion is the best way to get a productive and innovative and progressive economy, creating benefits for all of the consumers, both the 

Chinese and the countries like the United States with which the 

Chinese trade. So I guess it would be constant pressure constantly 

applied is maybe the way I would put it. 

Mr. JOHNSON. All right. Thank you. Professor. 

Ms. FARMER. Thank you. I agree that reducing the state-owned 

enterprises is an important goal and China has been working on 

that, making slow but some steady progress because frankly a state 

owned enterprise may not be as efficient as a privately owned one. 

Mr. JOHNSON. I am sorry. Would you say the last part? 

Ms. FARMER. An SOE may provide large employment, but it may 

not be as efficient. There are a couple of tea leaves that we may 

be able to read. Just recently, the State Council has adopted a policy encouraging foreign investment. And since a number of the 

large industries are currently state-owned, this may indicate some 

opening wedge. State-owned enterprises are not limited to railroads 

and public utilities. They include construction, salt and tobacco. 

Two recent cases send mixed messages. There was a private monopolization case filed against China Netcom. The case was settled 

in favor of the private individual. So that suggests that the AML 

may well apply. On the other hand, there was a recent telco merger 

which apparently was not notified to MOFCOM and the justification was apparently that the telcos are state-owned enterprises and 

they were regulated by the sector regulator. So there is still a little 

bit of flux in the system. But I certainly agree with the other panelists that continued progress on lowering state ownership would 

be a positive development. 

Mr. JOHNSON. Does that include state-owned ownership? Does 

that include ownership by persons who are in key positions within 

various units of Chinese society? 

Ms. FARMER. Yes, I think Mr. Singham was quite correct in explaining that it is a fairly complicated picture. It is not just ownership by the central government. 

Mr. JOHNSON. Mr. Barnett. 

Mr. BARNETT. Mr. Chairman, I think it is important to keep perspective here in that it is quite clear that 2 years ago, none of these 

state-owned enterprises were subject to any anti-monopoly law. 

Today you have a law that on its face says that they must comport 

or operate their businesses in accordance with the law. And certainly that is a position that the United States should encouraging 

to the extent that they are engaged in commercial enterprises, they 

should be subject to the same competition laws as any other commercial enterprise. 

From my perspective, though, I am going to dissent slightly from 

Mr. Lipsky’s predicate, although I agree with his conclusion. The 

U.S. Government, I think, to commend it has been very engaged 

with the Chinese on this front on a multiprong effort, everything 

from the trade folks over at USTR to the competition agencies, the 

FTC and the DOJ, as well as the Department of Commerce, USAID 

in part working with the Chamber. There has been an intensive 

focus on trying to encouraging the Chinese to explain to them, as 

Professor Farmer was saying, these state-owned enterprises, if you 

protect them, you are going to protect inefficiency. If you want to 

54 

promote and maintain the kind of economic growth that you have 

enjoyed for the last 15 years or so, you are going to need real competition to drive innovation, drive costs down. 

And there are officials in China who, I believe, understand that 

and who are pushing toward the application of these competition 

laws to all entities, including state-owned enterprises. Is it clear 

that they have accomplished that yet? No. And that is why I agree 

with the conclusion that the U.S. Government should—and the 

U.S. business community should remain very focused on trying to 

encouraging them in that direction. 

Mr. JOHNSON. So you believe that they are headed in that direction. What is your suspicion as to the outcome? 

Mr. BARNETT. I suspect it is going to be a slow process that will 

not an steady process it may well be, you know, 3 steps forward, 

1 or 2 steps back. As I think Mr. Lipsky was pointing out, these 

are complicated issues. Even in the United States they are complicated issues. And so in the long run, though, I believe that you 

will see more and more of these state-owned enterprises probably 

both becoming more private and in any event more subject to competition law discipline if you will. And so I am an optimist on this 

front. But I do think patience and persistence are called for. 

Mr. JOHNSON. Will that process lead to more individual freedoms 

in China? 

Mr. BARNETT. That is the a fascinating question. There are certainly many who believe that economic liberty and other liberties, 

political liberties often go hand in hand. I guess what I would focus 

on is to say if the AML is implemented in the way it is set up to 

be implemented, that it will lead to greater economic liberty, greater material wealth for Chinese consumers, Chinese citizens and 

that that is ultimately a good on multiple fronts. But how it plays 

out in other realms, I leave that to other experts. 

Mr. JOHNSON. Anyone care to give an opinion about that? 

Mr. SINGHAM. Well, I would agree with Mr. Barnett’s comment 

there that economic freedom is derived from the kind of competition policy, competitive marketplace where consumers are empowered and become real economic actors in their own right. It doesn’t 

answer the question. It doesn’t tell you that this will lead ultimately to greater freedom measured by other indicia. But certainly 

this is a pathway to greater levels of economic liberty for Chinese 

citizens and for Chinese firms. 

Mr. JOHNSON. All right. I will now yield to questions from Mr. 

Coble, the Ranking Member. 

Mr. COBLE. Thank you, Mr. Chairman. I thank the panel again 

for being with us. Mr. Barnett, you referenced the tension between 

China’s recognition of intellectual property rights and its condemnation of the abuse thereof. How do you see this balance playing out today, A? And, B, are you concerned that China may try 

to appropriate U.S. companies’ intellectual property for their own 

use? 

Mr. BARNETT. I do think that there is a risk that the Chinese 

competition agencies, as well as other competition agencies around 

the world can look at the normal exercise of an IP right, a refusal 

to license or a request for a royalty rate that the licensee views as 

too high as something that violates their competition laws. From 

55 

my perspective, that would be an unfortunate and counterproductive implementation of the AML. We have not really seen 

that yet, but it is something that we should very much keep an eye 

on because the agencies, I don’t believe, have indicated clearly 

where they will draw the line. 

On this point, I want to underscore something that Mr. Lipsky 

said. This is an issue in the United States and Europe and elsewhere as to what is a lawful exercise of an IP right and what is 

an abuse. In having our domestic dialogue and/or our dialogue with 

our European counterparts and other, it is very important that we 

keep in mind that others, including the Chinese agencies are 

watching carefully what we say and do. And that that should be 

part of the thinking as we engage on these issues. 

Mr. COBLE. Thank you, sir. Professor Farmer, in our discussion 

of state-owned enterprises, some of you raise concerns about prominent Chinese officials owning Chinese companies. Does this mean 

that you have concerns about U.S. officials owning or having significant ownership in U.S. companies? 

Ms. FARMER. That is a difficult question to answer. 

Mr. BARNETT. If I understand the question, there is the issue 

that the U.S. Government has in the last couple of years become 

a major shareholder for example in a number of large U.S. corporations. And that is an issue that while it may have been necessary 

given the circumstances at the time, in my own view that is something that the U.S. Government should be trying to get out of as 

quickly as possible so that it can then let the market, the private 

market continue to work without direct governmental involvement. 

Mr. COBLE. By the same token, Mr. Barnett, or Professor Farmer, do you think that the Chinese should also withdraw? 

Mr. BARNETT. I would say if you are talking about commercial 

activity as opposed to traditional governmental activity, I believe it 

is better to have that kind of activity in the private sector. It is ultimately, as Professor Farmer was alluding to, likely to lead to 

more efficient companies, higher quality products, lower prices to 

consumers. 

Mr. COBLE. I got you. Thank you. 

Mr. BARNETT. In both countries. 

Mr. COBLE. Thank you, thank you, Professor. Mr. Lipsky, you alluded over 100 countries have some sort of antitrust or competition 

law, including the European union. Today’s hearing focuses on concern that China could use its recently enacted anti-monopoly law 

to discriminate against modern competitors. Have United States 

companies faced this kind of discrimination from other nations 

with antitrust regimes and if so how was it handled or how it was 

disposed of? 

Mr. LIPSKY. Let me answer this way, not necessarily focusing 

specifically on the European union’s competition law, but competition laws of general applicability, which is what most antitrust 

laws are, applying to restrictive agreements, mergers acquisitions 

and all kinds of structural transactions. These are extremely broad 

and powerful systems of law. And to the extent they are enforced 

seriously, you have tremendous potential for very serious effects on 

the structure of particular industrious and on trade in particular 

commodities and services. 

56 

In many jurisdictions, we find a lot of the same issues that we 

have been discussing with respect to China today, namely the potential that these very powerful legal tools will be applied in a way 

that is not transparent, that tends to favor parochial interests, 

rather than to pursue competition on the merits. So we have had 

a lot of issues trying to get—just as we are trying to do with China 

today, trying to get other jurisdictions to clarify, to commit themselves to nondiscrimination, to non-protectionist policies. And a 

good place may be to look for a kind of catalog as to how to go 

about this. 

The antitrust section of the American Bar Association has for at 

least about 18 years now had a regular program of becoming aware 

of and commenting upon the adoption of antitrust laws, amendments to antitrust laws, the issuance of regulations pursuant to 

antitrust law, including in China, and under a certain authority of 

the American Bar Association, the section of antitrust law in combination with other sections like the section on international law 

has commented and has made specific recommendations with respect to the laws, the regulations and the procedures, remedies, 

virtually any topic you can think of. 

And so there is a very broad menu of jurisdictions and legal principles and procedures and remedies where this very same potential 

that we are discussing with respect to China today also exists and 

there again, the solution is engagement. We can’t force these other 

jurisdictions to conform their antitrust laws to our ideas. But we 

can persuade. We can show them the lessons of history. So that is 

a concern in many, many jurisdictions throughout the word. 

Mr. COBLE. Thank you, Mr. Lipsky. 

Mr. Singham, what rights and remedies does a U.S corporation 

have for anti-competitive conduct in China by a Chinese company? 

And does China recognize private rights of action? And, finally, if 

so, has any non-Chinese company brought suit or initiated suit 

against a Chinese company for violation of the AML. 

Mr. SINGHAM. There have been private cases in China involving 

violations of the AML. A number of those cases have sort of fallen 

on technicalities, but your question raises another serious point, to 

what extent can U.S. companies and other foreign companies rely 

on Chinese courts and how does that system operate in conjunction 

with the AML? And certainly there are some concerns about the 

ability of the courts to, A, grasp these issues and, B, to operate in 

ways that aren’t distorted by protection of Chinese companies’ type 

interests. That’s not unusual, and that’s not unique certainly to 

China. That’s the case in many, many countries that are new to 

competition law. 

I think training of judiciaries has been an effective way of 

engraining competition principles and competition culture into judiciaries of many countries. I think that’s something we would certainly recommend with respect to China. 

Mr. COBLE. I thank you. I thank the panel. 

Mr. Chairman, I yield back. 

Mr. JOHNSON. Yes, if it’s okay, I would like to engage in another 

round of questions. 

Mr. COBLE. Yes. 

Mr. JOHNSON. All right. Thank you. 

57 

Mr. Singham, I believe you mentioned that there had been 100 

cases filed within the last couple of years in China. Was that you 

or was that Mr. Lipsky? Or that was you, Ms. Farmer? One hundred cases, and I think five had been approved with conditions, and 

one had been denied. 

Ms. FARMER. Yes, that’s the merger control regulation. We don’t 

have official statistics for the full 2 years, but we know that 52 

cases were notified and reviewed over the first year. And of those 

52, one, the Coke Huijuan Juice merger, was prohibited and five 

additional were approved with additional conditions. And of those 

five they involved one or both parties that were non-Chinese firms. 

So if the number of pre-merger filings is approximately the same, 

then MOFCOM may have reviewed up to 100 mergers, but the statistics have not been released yet. 

Mr. JOHNSON. Are they going to be released or is that a matter 

of secrecy? 

Ms. FARMER. Obtaining information in a timely manner can be 

difficult, because these are relatively new agencies that are still engaged in capacity building, but the information does become available. 

Mr. JOHNSON. Anyone else have any comment about how the 

U.S. can actually monitor the progress of the application of the 

AML? Yes, sir. 

Mr. BARNETT. Well, Mr. Chairman, it is difficult to get specific 

information, but one of the things that I encourage the U.S. Government to focus on when engaging the agencies is the importance 

of transparency and good process in their decision making. And 

that includes not only during the review process, ensuring that the 

parties know what’s going on, know what the issues are and understand what the evidence is but when you make a decision that you 

explain the decision to the parties and to the world. That type of 

sunlight, if you will, can be a good disciplining force on the decision-making process and can help others understand what you’re 

doing, I think. 

And I commend the current Attorney General, Christine Varney, 

who has made this one of the centerpieces of her international dialogue, the importance of this kind of transparency in merger review 

and other cases; and I couldn’t agree more with it. 

Ms. FARMER. If I could turn from merger cases to monopolization 

or dominance cases. Five—at least five have been filed, not by the 

government but private parties. It’s interesting to note that they 

are occurring in Beijing and Shanghai. The Supreme Court of 

China has determined that these cases are so complicated that 

they should be filed at the immediate court level or in the intellectual property section of the lower court because these courts are experienced in dealing with complex cases and economic consideration. So I think that’s a salutary feature of the law going forward. 

Mr. JOHNSON. Mr. Singham. 

Mr. SINGHAM. I think we’ve talked a lot in this hearing about the 

importance of persuasion and persuading the Chinese competition 

agencies to adopt an economic-welfare-oriented approach to competition policy implementation. I think that’s very important, and 

we should continue to do that. But I would agree with Mr. Barnett 

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suade the Chinese about the benefits of economic welfare and consumer welfare as a guiding light for competition policy enforcement. 

But I think we also have to be realistic. And China’s competition 

policy and the AML does not sit in a vacuum. It doesn’t rely entirely on academic niceties. I think Professor Farmer alluded to 

this. And in view of that realism I think what we need to do is 

have greater tools for accountability so that where there are 

divergences from those types of normative principles, especially 

whether there are that are beyond international best practice. And 

I think there is a serious risk that we may well see this in the area 

of intellectual property and competition policy. 

Mr. JOHNSON. What kind of tools are you talking about? You 

mean for U.S. companies or outside companies or what are you referring to? 

Mr. SINGHAM. I think the starting point—and I think Mr. Lipsky 

made this comment as well—is—— 

Mr. JOHNSON. I’m sorry to keep asking questions about what others have gone over. 

Mr. SINGHAM [continuing]. The need to really organize ourselves 

on how we address competition policy not just in China but in 

other countries as well in terms of how we express our views best 

in the interagency process. We have a history of being very successful with countries that have newly incorporated competition laws 

or antitrust laws in terms of technical assistance, but many of 

those countries are countries that have basically accepted competition policy as an organizing principle in the economy. 

And the China of today is not necessarily the China of even 5 

or 6 years ago. I think it is very important that we therefore reorganize or at least organize an additional interagency process 

around these kinds of anti-competitive market distortions. Simply 

because a competition agency is doing something does not mean 

that it is pro-competitive. There may be many examples of competition agency action that actually take you away from a competitive 

market, and we need to ensure that where that occurs we have 

tools for engaging the Chinese in a dialogue and that we have a 

metric-based, rule-based way of doing that so we are not sort of 

constantly playing whack a mole with each new regulation or decision or whatever comes out of China but we have a consistent policy that’s based on persuasion certainly, persuading people of what 

the normative principles ought to be in competition policy enforcement and why it is good for their own economies but also with a 

bit of a stick as well. 

Mr. JOHNSON. Yes, Mr. Lipsky. It just seems like we’re dancing 

tenderly. We’re tiptoeing in terms of testimony, I’m saying. This is 

not getting right to the—I suppose this is a tough issue to deal 

with with a sledgehammer. 

Mr. LIPSKY. It is tempting to look for a silver bullet or something 

concrete to do that will materially advance things. 

I wanted to just address there’s a mild suggestion that has crept 

into the remarks here that I was perhaps critical of previous U.S. 

Government in action on this issue, and I want to remove any such 

suggestion by saying that there should be—I think we’re all saying 

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sources, there should be encouragement, there should be recognition, there should be better structure and organization to monitor 

what’s happening in China; and the same could be said elsewhere. 

I didn’t mean to cast aspersions, but, nevertheless, I believe it is 

still correct to say that there’s no place in the statutes of the 

United States or in the statements that accompany budgetary appropriations or authorization, there is no place that says, Department of Justice Antitrust Division, Federal Trade Commission, 

please do this, please monitor how these other antitrust laws affect 

U.S. business. It is I think perhaps indirect, and it’s implicit. It has 

certainly become a custom and a very creditable custom in the 

agencies to engage in these matters. 

And yet I have to say that, having been at this for a while, every 

time there is a change in leadership at the Antitrust Division or 

at the Federal Trade Commission, the officials that we would expect to really take the opportunity and spearhead the American interest in foreign antitrust enforcement and how it affects the global 

economy and U.S. business, there is always a momentary—a moment of butterflies in the stomach where you hear, well, I hear he 

doesn’t like to travel or I hear she won’t participate in the JapanU.S. bilateral because she won’t eat sushi under any circumstances. There’s always a question as to how the personal preferences and predilections of the senior officials will affect the way 

that the United States agencies participate in this very, very important dialect. 

Well, it shouldn’t be a question of personal predilection. It should 

be a welcome responsibility. 

Mr. JOHNSON. Should that come through some form of legislation 

or some regulatory rule? 

Mr. LIPSKY. Well, certainly the first step would be simply to recognize that it is a proper activity, an activity that the Congress is 

aware of and acknowledges. And I don’t know—— 

Mr. JOHNSON. I hear you right now and—but I’m just wondering, 

in your view, what would need to be done in order to ensure that 

we have some continuity in this area between changes in our personnel? 

Mr. LIPSKY. I believe that even the simplest expression of recognition, support, and encouragement of this activity, whether it 

was in the authorization legislation or report or many flexible ways 

that Congress could deal with this short of enrolled legislation it 

seems to me. 

I’m confident that the agencies—I would be very interested in 

Mr. Barnett’s view on this, but I’m confident that an explicit congressional recognition of the value and importance of this function 

would be embraced eagerly by the officials of these agencies. 

Mr. JOHNSON. Yes, sir. 

Mr. BARNETT. I heartily endorse the sentiment that the agencies 

should be engaging with many other countries, but China in particular in many ways, one of the most important. 

I guess I would say to me it’s mainly a question of making sure 

they have adequate resources. I believe and it was certainly my 

perception at the time that I understood quite clearly that Congress was interested in our focusing on that. There are multiple 

ways for Congress to do that. There was certainly not an authority 

60 

or lack of authority to do it, given the amount of time and resources that we devoted to it. But it could well be that even more 

resources are valuable. 

In that respect, and also to address the continuity point, one specific thing that probably could use more—even more focus or more 

opportunity is not so much the exchange between senior officials 

but opportunities to interact at the career level, at the staff level. 

And I’ll use the example of the relationship between the U.S. agencies and the European Commission. 

There used to be a lot—well, there can be divergences, but there 

used to be a lot more. The agencies have now developed a relationship so they talk on almost on a daily basis on major matters, and 

they educate each other, and they end up coming to more convergent results. And we’ve not seen the same sort of divergence we 

saw 10 years ago. 

It’s very dif—it’s harder to do that with the Chinese agencies, 

but if we can find ways for career staff to spend time with the career staff of the Chinese agencies—and, remember, Professor 

Farmer talked about capacity building. These are complex issues, 

and you’re asking people who grew up in a centrally directed economy to apply a set of principles that derive from a market-based 

economy that’s not necessarily intuitive to them. It’s hard to overestimate the importance of training the rank and file on these principles, on the economics and how to do this best. That I think is 

largely a matter of resources. 

Mr. JOHNSON. Are the Chinese receptive to that kind of dialogue? 

Mr. BARNETT. They were. I certainly raised this expressly with 

them when I was in Beijing even before the AML was enacted, 

looking ahead and realizing that implementation would be key. 

And we talked about—they seemed very open to it. 

In that regard, I will commend—I think it is in Mr. Singham’s 

testimony—there is, for example, one program with the USAID 

that sets up a series of conferences and seminars, and that’s a positive thing. But I’m talking about more of this and more person-toperson interaction. I think they will be cautious about it, but I 

think they are eager to learn. And if you structure it in the right 

way I think they will be open to it. 

Mr. JOHNSON. Yes, sir. 

Mr. SINGHAM. I think there’s one issue that we haven’t addressed 

necessarily here that we need to address in order to do all these 

things more effectively, and that is there is a disconnect between 

the level of authority of the competition agencies in the U.S. with 

respect to other members of the U.S. Government. And particularly 

in countries that are new to competition or new competition agencies, those agencies are not very powerful at all. They have very 

little political power within their own systems. And so there is a 

slight disconnect there in terms of our expectations of them. 

And particularly in China there are many decisions that are really competition decisions that are not made and will not be made 

by the competition agencies in China going forward. They will be 

made by other branches of the government, and they will be imposed to some extent the Chinese competition agencies. And for 

that reason, while I agree with everything that everyone has said 

here in terms of the persuasion, the technical assistance, the—even 

61 

to the extent Mr. Barnett suggested the placement of resident advisors, which I think is one of the best methods of technical assistance that you can find generally—we also need to have some 

tools—and these may be legislative tools—that gives some measure 

of accountability where an anti-competitive market distortion occurs either because the competition agency is engaged in it or because it is going on in the Chinese market and the competition 

agency is doing nothing about it. That enables us to be more effective in our advocacy of competition policy concerns. 

We suggested in our written testimony reform of the interagency 

process and also congressional reports by that interagency group, 

the reports from that interagency group to Congress on anti-competitive market distortions, measurable market distortions that 

have welfare-damaging impacts. Because that is also a tool that 

can be used in China and in other countries to demonstrate that 

a particular anti-competitive market distortion visits a certain 

amount of harm on that country’s own consumers and their own 

economy. And that would enable us to build up those forces and 

people within countries not just in China but around the world who 

want to have competition policy implementation enforcement based 

on economics and not on support of national champions or what 

have you. 

Mr. JOHNSON. All right. Mr. Coble. 

Mr. COBLE. Thank you, Mr. Chairman. 

I have two questions, Mr. Chairman. 

Mr. Singham, how would you would rate the current Administration’s engagement with China on the issues of competition policy? 

Mr. SINGHAM. I would commend the current Administration as 

well as the previous Administration on engagement with China on 

a very, very difficult issue. I think everyone is agreed that the 

transition of a country from a completely centrally planned economy to a market economy is a hugely challenging task, and I think 

the current Administration is doing a good job of engaging in the 

technical assistance area and engaging in other dialogues with the 

Chinese to persuade them to adopt a competition policy that is 

more in line with international best practice than was the case 2 

or 3 years ago in our ongoing discussion with them which has been 

going on for about 15 years on this competition law. 

I would say, though, that the Administration is limited in its 

ability to be effective because of the paucity of tools that it has. In 

our written testimony, we suggest increasing the toolbox to enable 

actors not just in DOJ and the Federal Trade Commission but in 

other agencies that have a stake in a competitive market in China 

to also engage. 

Mr. COBLE. Thank you, sir. 

Mr. Lipsky, finally, it is virtually impossible to discuss China 

without talking about the country’s human rights situation. Google 

recently had its licensed renewed in China despite a very public 

dispute with the country regarding censorship. In the meantime, 

Google’s share of the Chinese market seems to have fallen relative 

to its Chinese competitor Baidu. While the licensing issue does not 

seem to implicate China’s AML per se, it seems possible that China 

could pursue a lengthy and costly legal campaign against a comVerDate Aug 31 2005 12:07 Nov 05, 2010 Jkt 000000 PO 00000 Frm 00065 Fmt 6633 Sfmt 6601 H:\WORK\COURTS\071310\57430.000 HJUD1 PsN: 57430
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pany that is critical of any of China’s internal policies. Is this a 

real concern and, if so, how should it be addressed? 

Mr. LIPSKY. Well, the—I am not privy to the details of that particular dispute—— 

Mr. COBLE. And nor am I. 

Mr. LIPSKY. But the generic issue of mixing these different policy 

considerations always has the potential to lead to the perception 

that the competition aspect has been inappropriately mixed with a 

non-competition policy and thus that the competition enforcement 

standard has been distorted. And I would point out that the history 

of monopolization proceedings in the United States has also from 

time to time raised this question, abuse of dominance proceedings 

in the European Union have raised this question, and we need to 

be vigilant. We need to urge transparency. That really is the only 

way to control the inappropriate or the abusive reliance on competition law proceedings to achieve what is not an economically efficient result. 

The case United States vs. IBM lasted 13 years. There were 

some very lengthy, expensive, and complex proceedings brought 

under section 5 of the Federal Trade Commission Act against the 

breakfast cereal makers and against the oil companies. And that 

same potential always exists, and it will exist under the cognate 

provisions of the Chinese law. And so I think we just have to be 

vigilant, urge transparency, insist on accountability, and continue 

to pursue that over time. 

Mr. COBLE. Thank you. 

Mr. Chairman, I yield back. 

Mr. JOHNSON. Thank you. 

Sheila Jackson Lee, our distinguished congresswoman from 

Houston, Texas. 

Ms. JACKSON LEE. Mr. Chairman, thank you so very much; and 

my apologies to the witnesses. I have just landed, flying into Washington, D.C. But I am delighted that I was able to make the hearing before it had concluded. 

I want to thank the Chairman and the Ranking Member for 

what is a vital discussion; and I hope that you will engage me as 

I pursue some issues that I think are very, very important. 

I have been engaged in this issue for a number of years ago the 

Member of the Judiciary Committee when Chairman Hyde was a 

Member and a Chairman, of course, and raised a number of issues 

about the abuse of intellectual property. And certainly as I respect 

our friends and allies in China and have marveled at the ability 

to develop a very thriving middle class, one that is continuing to 

grow, I’ve also been appalled at the extensive abuse of intellectual 

property, much of it coming from the United States. 

Many of our friends are prone to talk about the trillions of dollars of debt that we have—I think $14 trillion may be the number 

at this point—and look awry at any efforts that our present government, my party, has engaged in to invigorate the economy which 

sometimes calls for stimulating it. But part of our crisis, if you will, 

goes a lot to the imbalance of export and import. 

And, frankly, I do not want to be quoted to suggest that the 

abuse of intellectual property is such a cause of it, but I would say 

that the inequities in markets like China and China having a large 

63 

part of our debt, which makes me enormously unhappy because I 

think the playing field in China is not even uneven. It doesn’t exist. 

We were advocates of China getting into the World Trade Organization as I understand that they are in. But, more importantly, 

this Congress went against its better judgement and supported the 

PNTR, the Permanent Normal Trade Relations, and I think the 

U.S. Chamber of Commerce might have been enthusiastic about it. 

We thought it was going to be a quid pro quo. 

Now all we get from China is lost jobs and closed doors. We get 

the sanctioning and censorship of Google and others. As the Ranking Member mentioned, we get continued human rights violations. 

And we get a big, empty bank account where we are losing money, 

even more so now with the approach that they are taking on trade, 

but, more importantly, over the years where they have abused intellectual property, where they have gained their economic edge because they have stood up on the backs and shoulders of Americans, 

from my perspective. 

So my question to the—I am not interested in soft-pedaling this 

potential crisis, meaning the AML laws that may, in essence, make 

us more than second-class international citizens. It may not even 

put us on the ballpark, if you will. Probably be something like some 

of the soccer games that we saw and the rulings of some of those 

referees that ruled us out. 

So I would like to pose to Mr. Singham, who is with the U.S. 

Chamber of Commerce, that we may find it a grand opportunity to 

be in alliance. Why is everyone soft-pedaling some of the legal 

schemes that are being proposed? And if these AML laws thrive, 

then they’ll have some other laws, which is, knock three times at 

our door, we’ll think about it and let you know in about 10 years 

whether you can do business in China or whether you can do it in 

an even playing field. 

So I would like to know some real solutions to laws that can be 

passed by a sovereign entity, which China is, to make them part 

of the international arena and, to be very frank with you, to get 

back some of the bounty that they’ve taken from the American people and others around the world that have advanced them to our 

disadvantage. 

Mr. Singham. 

Mr. SINGHAM. Congresswoman, you make some excellent points; 

and I’d like to—and you make your point that it is sort of way beyond the narrow scope of the AML, but I agree and I said in my 

oral testimony and the written testimony that it is very important 

that we do not regard the AML in a vacuum, that in China it is 

not in a vacuum. 

Other policies and other laws in China do affect the implementation of the AML, but you raise a much, much greater and bigger 

point which is the issue of trade liberalization and competitive 

markets, which is essentially trade liberalization only really works 

when you have competitive markets inside the border and how can 

we get there with respect to China. 

One of the things that we absolutely have to do—and I would 

agree with you on this point—it is to ensure that we are not competing—U.S. firms are not competing with firms that have their 

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tions, whether they are in China or anywhere else, quite frankly. 

And so I would agree with you that we need to have a much more 

proactive approach to the issue of anti-competitive market distortions. 

When trade barriers were high, it didn’t really matter what happened inside markets that we were trading with. As trade barriers 

have come down, these kinds of behind-the-border barriers, these 

kinds of anti-competitive distortions have become much, much 

more significant. 

I would certainly argue that they are just as if not more important now than the sort of traditional border trade barriers, and 

that’s one of the reasons that the U.S. Chamber has set up a global 

regulatory corporation project to try to align some of these policies 

and try to deal with this particular problem, which affects not only 

U.S. firms but it affects U.S. jobs, it affects—because it is not just 

a competition in China or in the U.S., but it is a global competition, 

and U.S. firms are competing globally, and supply chains are competing globally. And where there are these kinds of distortions you 

are going to have an effect on the profitability of U.S. firms and 

their ability to employ U.S. people. 

I agree with you. There’s a complete alignment here between 

U.S. firms and U.S. workers on this point. We ought to be able to 

say that business competition on the merits is the way that economies grow. And we ought to be able to agree that that is how 

economies develop, that is how consumers are empowered, and 

that’s how the global economy grows. We all have a vested interest 

in that. 

While we say that, we ought to be able to say to our people, let 

competition decide our outcomes. Business competition on the merits, let that be the decider of outcomes. But we will be aggressive 

if we see that countries or government departments are artificially 

distorting their markets and, therefore, lowering the costs in an artificial way of businesses that are competing directly or indirectly 

with U.S. firms. 

So in our written testimony we’ve advocated a revision of the 

interagency process around anti-competitive market distortions, a 

way of measuring anti-competitive distortions so that we are actually dealing in real data and metrics. We’ve talked about looking 

at evaluating international agreements on anti-competitive market 

distortions. Many of these provisions already exist in existing trade 

agreements or the beginnings of them exist. We are debating now 

in the Trans-Pacific Partnership Agreement a chapter on competition policy that deals with some of these issues. 

If the AML is used by Chinese competition agencies in the way 

that you fear, we ought to have a set of tools to look at that interference, which is what it would be in the market as an anti-competitive distortion, and we ought to have a way of dealing with 

that. So I think there we are in a lot of agreement. 

Just on your point about intellectual property abuse—and this is 

critical because, as other members of the panel have noted intellectual property abuse—many competition agencies are taking the 

view, not the U.S. but other country’s competition agencies—many 

other country’s competition agencies are taking the view that refusal to license the intellectual property is by itself an abuse, is by 

65 

itself a competition problem that the competition agency should get 

involved in. And we see some of that certainly in the provisions of 

the SAIC and other parts of the Chinese government in terms of 

how we will apply Article 55 on abuse of intellectual property. 

But I would make this point. For those competition agencies, 

competition policy and intellectual property are intention. But if 

you have a welfare-enhancing economic approach to competition 

policy and implementation, there is no tension between competition 

policy and intellectual property policy. Both policies have the same 

innovation and welfare-enhancing goals. So if we can succeed— 

however we do it, with whatever tools we can use, but if we can 

succeed in getting and insuring that the AML is applied in ways 

that make economic sense, that are welfare enhancing, then we 

will not have a situation where the AML is being essentially 

abused to erode the intellectual property rights of U.S. and other 

firms. 

Now there are certainly cases where firms do abuse intellectual 

property rights, and I’m not talking about that right now. But the 

key here is to ensure that the AML is implemented in a way that 

is based on economics, sound economics and consumer welfare. If 

you do that, then all the provisions that could be used—could be 

abused, I would say, to erode intellectual property rights won’t be 

used in that way. So I think that’s the key with respect to intellectual property. 

Ms. JACKSON LEE. Mr. Chairman, if you would indulge me for a 

moment, I’m on a line of questioning. 

I think intellectually, Mr. Singham, you’re absolutely right, if we 

analyze it in the way that you’ve analyzed it. And of course I think 

the modems and policies that you’re speaking of I assume is policies that the U.S. Chamber of Commerce is looking at as you engage in doing business or helping your members do business—a lot 

of your members are very large companies—as they do business 

internationally around the world. 

I’m reading just a paraphrase of the language of AML, and what 

strikes me is language that says monopolistic conduct and economic activities within China, which is what AML is supposed to 

apply to, and foreign conduct that eliminates or has a restrictive 

effect on competition. Now, if you have one judge, then any foreign 

business that comes out of a climate of capitalism versus government-owned, directed, controlled businesses as China does could be 

found to be in violation of the AML, and it could be in violation 

on the basis of they are getting too much of the market share and 

making too much money. 

And so if I might—if someone else wants to launch in and let me 

yield to any of the other persons about the danger of language that, 

in essence, would close the door. Our companies that might make 

the first trip over—and I’m, obviously, using metaphors because 

we’ve been over—would be large companies to a certain extent and 

could be easily accused of conduct that eliminates or has a restrictive effect on competition and be a foreign entity. 

My thought is the Chairman has held this hearing and what are 

we doing in terms of protective laws from our perspective? We’re 

in the WTO. We’ve got the PNTR. I have not seen major—I 

shouldn’t say that. I assume the existence of Google and others— 

66 

there is probably a long litany of companies, obviously, doing business there. The question is, where is the balance? 

But do we now need to look at laws that would match the laws 

that China has if they are laws that are preventative or blocking 

rather of our businesses from the United States—and that’s what 

I’m framing my question around—loss of jobs and the businesses 

that have either gone there or not been able to thrive because they 

have been blocked from coming into China. Do we not need laws 

that respond to that kind of litmus test? 

Mr. Lipsky. 

Mr. LIPSKY. Let me address this concern as follows: 

The law that you referred to, the provision of the AML that 

you’ve referred to, is in many respects consummate with legal 

norms that have emerged in other jurisdictions. In other words, in 

the United States, we have a statute which says that foreign conduct can be reached under U.S. antitrust law so long—I’m paraphrasing and simplifying quite a bit—but essentially as long as 

that conduct has a substantial direct and foreseeable effect on U.S. 

commerce. 

Ms. JACKSON LEE. Just for a moment, I understand that we interpret our laws differently or at least in a more open manner than 

I perceive a law like this as it relates to China. So I think we’re 

talking about two different approaches in interpretation of individual laws. 

Mr. LIPSKY. Well, to the extent that the law is interpreted to create the kind of disadvantage for U.S. companies or foreign companies, we do have some historical experience with a somewhat similar situation where trade remedies were proposed. There was a provision of our trade act—I am not a trade expert, Shanker is, and 

he may wish to comment—but I think it was referred to as Special 

301. It was a provision—as far as I know, there was never a successful proceeding invoked under that provision. 

There was a very intense, competitive battle reflected in the 

Kodak/Fuji case. Ultimately, I think a trade complaint was filed on 

behalf of Kodak. But, as I recall, it was not a Special 301 complaint. It was—they stepped right to the brink of invoking that provision but never invoked it. 

So we can certainly consider similar provisions to the extent we 

are encountering tilting of the playing field under the guise of competition law enforcement. Or, in that case, I think it was actually 

an accusation of lack of competition law enforcement in Japan. 

My own feeling, having not studied the matter carefully but just 

based on my own experience with this and similar disputes of this 

nature, is that what we are advocating is probably more likely to 

work out better for all parties in the long run. I think if we think 

of our relationship to China with respect to trade and related matters primarily and a partnership, I mean, our success is bound up 

with theirs and vice versa. If they do hold a lot of debt, that means 

they have a great percentage in our success. 

So we’re going to be in this dialogue for the very long run, and 

I’m not saying we shouldn’t use sticks. If there is serious trade distorting—unjustified trade distorting conduct, wouldn’t discourage 

Congress from applying the appropriate stick. But you can’t use 

only sticks. You have to feel your way through the dialogue. It’s 

67 

like any long-running, important partnership. Both parties have to 

give and take. There are a huge number of issues on the table in 

the bilateral relationship between the United States and China, 

and I—— 

Again, we’re kind of at the inception of the AML. A lot of jurisdictions go through tremendous adjustments. When the European 

Union implemented its rules on restrictive agreements in 1962, it 

was kind of a bureaucratic catastrophe, because they elicited thousands and thousands of petitions from businesses who were afraid 

that their arrangements were going to be condemned, and then 

they had bureaucratic gridlock for years and years. So I’m sure I 

could think of examples of United States enforcement. Our initial 

experience with the Sherman Act and the Clayton Act was not an 

entirely happy experience. 

So I think the door has in a sense just opened, and we need to 

look at the record as it rolls out and pay close attention and try 

to insist on transparency and accountability and impose a little discipline and encourage our executive branch to get on it and stay 

on it and see where we are as time progresses. 

Mr. JOHNSON. Mr. Barnett. 

Mr. BARNETT. If I could make expand slightly on that, to put it 

in perspective. You raise a lot of very important issues, but one 

way to think about this is should we view the AML itself as something that’s good or something that’s bad for U.S. businesses? In 

my view, it should by viewed as generally something good. There 

is certainly the potential for it to be applied in a way that could 

be protectionist or harmful to U.S. businesses and Chinese consumers, but, importantly, it is substituting for a regime that before 

had much more direct ways to exclude U.S. businesses from operating in China. It is an instrument to open up the markets there. 

There is a long ways to go, as Mr. Singham has pointed out. And 

you’ve not heard the witnesses say that the AML has been abused 

in very clear circumstances. What you’ve heard is that it may be 

in the future. A lot of the examples that have been pointed to of 

concern are other laws in other areas. 

In that respect, there is an additional potential benefit to the 

AML. Not everyone in China thinks the same way. You now have 

individuals at the various agencies, to the extent that they are persuaded that a market-based economy is the way to encourage 

growth and a focus on opening up markets to competition, including foreign competition, they can be a voice within the government 

to advocate for opening up and bringing down trade barriers. We 

have seen that type of advocacy be effective in other countries. 

So without minimizing your point that those are very serious 

issues and agreeing that we should bring a lot of different tools to 

bear on it, I just want to put in perspective that the AML itself can 

be an engine for good. 

Mr. SINGHAM. Yes, I think that’s right. One of the most important provisions in the AML is the provision that deals with advocacy and competition advocacy by Chinese competition agencies 

with other branches of the Chinese government. 

Now if you look at—as Mr. Barnett said, if you look at what we 

had before the AML, there was really no way that there would be 

a voice of competition or a voice for competition in any branch of 

68 

the Chinese government. So we shouldn’t underestimate how important that is. 

Now that it is there, it doesn’t mean it will be a force for positive 

pro-competitive markets necessarily, but I think it is incumbent on 

us to try to work with the Chinese, recognizing the efforts that 

have been made and to develop the kind of individuals who can 

lead the charge on promoting competitive markets in China. 

It’s interesting that in the field of competition what a difference 

individuals can make. I did a lot of work with Brazil when Brazil 

was starting its road on competition policy and happened to have 

some very, very good heads of competition agencies in Brazil who 

made huge inroads into what was also a—perhaps not as planned 

as the Chinese economy but was emerging from import substitution 

and a sort of command economy in Brazil. So I think we shouldn’t 

underestimate the power of these competition agencies to be a force 

for pro-competitive markets. 

I would say, in answer to your question about laws and so forth, 

that there are a number of laws already on the books that apply— 

could be applied in this area. Mr. Lipsky mentioned the Kodak/Fuji 

case. Where there are anti-competitive practices in foreign markets 

that have an effect in the U.S. under the Foreign Trade Antitrust 

Improvements Act, you can rely on U.S. antitrust law. 

There was a case in New York involving a vitamin C cartel 

where the Chinese government essentially said that it was a stateowned enterprise and the state basically forced the anti-competitive 

activity. And this was a defense in the case that was brought in 

New York. 

I think those are cases where, under the FTAIA, our antitrust 

agencies could meaningfully be involved. 

And on the trade side, many of our trade laws, section 337, section 301, the GSP preferences that we have, there are many, many 

trade laws that apply disciplines where there is anti-competitive 

activity. Now, historically, that has been rarely used; and it tends 

to be contained to private anti-competitive activity. 

I think the one area where legislative—some analysis of potential 

legislative solution could be explored is the area of where you have 

a market where the anti-competitive activities are primarily in the 

public sector or primarily government anti-competitive activities. 

But we ought to include those within what we count as anti-competitive practices for the purposes of those laws. So I think that 

certainly could be done. That would require us to apply the same 

discipline as to ourselves. 

And the Antitrust Modernization Commission, which has been 

mentioned on this panel, did make a recommendation to look at the 

state action exemption. The state action exemption protects state 

activity and allows states to essentially get away from anti-competitive activities where they are acting as states, as opposed to 

market participants. We need to revisit that, quite frankly. But 

there’s a lot of those types of laws that we refer to in our written 

testimony where we can do that. 

But I do agree with what Mr. Barnett said, is we need to bear 

our problems. We do need to address the problems and develop 

tools to address the problems, but we also need to take a 25,000- 

69 

foot look and say, well, there has been progress here. Let’s try and 

build up—— 

Ms. JACKSON LEE. If you could wrap up, and I appreciate it. 

Professor, I didn’t know if you want to finish. 

Let me just thank the Chairman and indicate and comment to 

the answer to my question is, of course, I think, Mr. Barnett, you’re 

right. The underlying premise of anti-monopolistic laws is good. I 

mean, our laws, our antitrust laws started with a framework to enhance competition opportunity. 

Those of who are still practicing law—I practiced law previously—know that, depending on what side of the case you are, 

sometimes our antitrust laws are paper tigers. You’ve seen mergers 

come and go and meet a basic standard and most people say how 

in the world could we allow these two entities to merge? They’ve 

obviously created an anti-competitive marketplace. 

I would only offer that this is a very important hearing; and I 

think all of these variables have to be integrated—deficits, the 

abuse of intellectual property, the potential—and I use that example because it is the most consumer-based, glaring example of when 

technology and design and talent that is taken from another and 

is utilized in this instance by China with anti-monopolistic laws if 

misinterpreted or used in a one-sided manner. No matter what 

country or what company is attempting to interact with China it 

is to the disadvantage of the overall market or the overall economy 

as we look at the world economy. And my point is let us not tiptoe 

through the violence. 

I would like to help China have a vigorous marketplace that has 

its doors open to all of us, and I’d like for the United States in particular to benefit from its partnership with China. My disappointment is that—and maybe I need a 10-year or 20-year view. I voted 

on the PNTR in the late ’90’s—is to actually look at what the benefit is bringing to the United States when we engage in the PNTR. 

It seems that we always get a lopsided impact when we engage 

in—— 

Mr. Chairman, I think that we should continue to be cautious. 

I think this review is very important. We want an invigorated market, but we don’t want a lopsided market. I look forward to more 

extensive testimony and considering legislation or not depending 

upon how we see the future. 

I thank the Chairman and I thank the witnesses very much for 

their testimony. I yield back. 

Mr. JOHNSON. Thank you. I thank the gentlewoman from Texas. 

I also thank the witnesses. This has been a relatively long hearing, but at least there were no breaks and so you could keep moving along with the discussion. So I want to thank you all for contributing to it and for coming. This is a very important hearing, 

and I look forward to this Committee following up on some of the 

recommendations that have been made by you. Thank you very 

much. 

Let me see, I’m getting a little ahead of myself here. Members 

will have 5 legislative days to submit any additional written questions which we will forward to the witnesses and ask that you answer as promptly as possible to be made a part of the record. 

70 

Without objection, the record will remain open for 5 legislative 

days for the submission of any other additional materials. 

With that, this hearing for the Subcommittee on Courts and 

Competition Policy is adjourned. 

[Whereupon, at 6:02 p.m., the Subcommittee was adjourned.] 

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SAS3-18.eps
103 


SAS3-19.eps
104 


SAS3-20.eps
105 


SAS3-21.eps
106 


SAS3-22.eps
107 

Æ 


SAS3-23.eps