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INTERNATIONAL ANTITRUST ENFORCEMENT: 

CHINA AND BEYOND 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

REGULATORY REFORM, 

COMMERCIAL AND ANTITRUST LAW 

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

JUNE 7, 2016 

Serial No. 114–80 

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 

BOB GOODLATTE, Virginia, Chairman 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

LAMAR S. SMITH, Texas 

STEVE CHABOT, Ohio 

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 MARINO, Pennsylvania 

TREY GOWDY, South Carolina 

RAU ́ L LABRADOR, Idaho 

BLAKE FARENTHOLD, Texas 

DOUG COLLINS, Georgia 

RON DeSANTIS, Florida 

MIMI WALTERS, California 

KEN BUCK, Colorado 

JOHN RATCLIFFE, Texas 

DAVE TROTT, Michigan 

MIKE BISHOP, Michigan 

JOHN CONYERS, JR., Michigan 

JERROLD NADLER, New York 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

STEVE COHEN, Tennessee 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

PEDRO R. PIERLUISI, Puerto Rico 

JUDY CHU, California 

TED DEUTCH, Florida 

LUIS V. GUTIERREZ, Illinois 

KAREN BASS, California 

CEDRIC RICHMOND, Louisiana 

SUZAN DelBENE, Washington 

HAKEEM JEFFRIES, New York 

DAVID N. CICILLINE, Rhode Island 

SCOTT PETERS, California 

SHELLEY HUSBAND, Chief of Staff & General Counsel 

PERRY APELBAUM, Minority Staff Director & Chief Counsel 

SUBCOMMITTEE ON REGULATORY REFORM, COMMERCIAL AND ANTITRUST LAW

TOM MARINO, Pennsylvania, Chairman 

BLAKE FARENTHOLD, Texas, Vice-Chairman 

DARRELL E. ISSA, California 

DOUG COLLINS, Georgia 

MIMI WALTERS, California 

JOHN RATCLIFFE, Texas 

DAVE TROTT, Michigan 

MIKE BISHOP, Michigan 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

SUZAN DelBENE, Washington 

HAKEEM JEFFRIES, New York 

DAVID N. CICILLINE, Rhode Island 

SCOTT PETERS, California 

DANIEL FLORES, Chief Counsel 

SLADE BOND, Minority Counsel 
(III) 

C O N T E N T S 

JUNE 7, 2016 

Page 

OPENING STATEMENTS 

The Honorable Darrell E. Issa, a Representative in Congress from the State 

of California, and Member, Subcommittee on Regulatory Reform, Commercial and Antitrust Law ........................................................................................ 1 

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

from the State of Georgia, and Ranking Member, Subcommittee on Regulatory Reform, Commercial and Antitrust Law ................................................. 3 

The Honorable Bob Goodlatte, a Representative in Congress from the State 

of Virginia, and Chairman, Committee on the Judiciary ................................. 4 

The Honorable John Conyers, Jr., a Representative in Congress from the 

State of Michigan, and Ranking Member, Committee on the Judiciary ......... 24 

WITNESSES 

The Honorable Maureen Ohlhausen, Commissioner, Federal Trade Commission 

Oral Testimony ..................................................................................................... 6 

Prepared Statement ............................................................................................. 8 

Mark A. Cohen, Senior Counsel, United States Patent and Trademark Office 

Oral Testimony ..................................................................................................... 30 

Prepared Statement ............................................................................................. 32 

Sean Heather, Vice President, Center for Global Regulatory Cooperation, 

U.S. Chamber of Commerce 

Oral Testimony ..................................................................................................... 40 

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

Thomas J. Horton, Professor of Law and Heidepriem Trial Advocacy Fellow, 

University of South Dakota School of Law 

Oral Testimony ..................................................................................................... 59 

Prepared Statement ............................................................................................. 61 

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

Prepared Statement of the Honorable John Conyers, Jr., a Representative 

in Congress from the State of Michigan, and Ranking Member, Committee 

on the Judiciary ................................................................................................... 25 

Material submitted by the Honorable Mike Bishop., a Representative in Congress from the State of Michigan, and Member, Subcommittee on Regulatory Reform, Commercial and Antitrust Law ................................................. 85 

APPENDIX 

MATERIAL SUBMITTED FOR THE HEARING RECORD

Response to Questions for the Record from the Honorable Maureen 

Ohlhausen, Commissioner, Federal Trade Commission ................................... 100 

Response to Questions for the Record from Mark A. Cohen, Senior Counsel, 

United States Patent and Trademark Office ..................................................... 102 

Response to Questions for the Record from Sean Heather, Vice President, 

Center for Global Regulatory Cooperation, U.S. Chamber of Commerce ........ 104 

(1) 

INTERNATIONAL ANTITRUST ENFORCEMENT: 

CHINA AND BEYOND 

TUESDAY, JUNE 7, 2016 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON REGULATORY REFORM, 

COMMERCIAL AND ANTITRUST LAW

COMMITTEE ON THE JUDICIARY, 

Washington, DC. 

The Subcommittee met, pursuant to call, at 4:02 p.m., in room 

2141, Rayburn House Office Building, the Honorable Darrell E. 

Issa (acting Chairman of the Subcommittee) presiding. 

Present: Representatives Goodlatte, Issa, Collins, Ratcliffe, 

Bishop, Johnson, and Conyers. 

Staff Present: (Majority) Anthony Grossi, Counsel; Andrea 

Lindsey, Clerk; (Minority) Slade Bond, Minority Counsel; and 

James Park, Counsel. 

Mr. ISSA. The Subcommittee on Regulatory Reform, Commercial 

and Antitrust Law will please come to order. 

Without objection, the Chair is authorized to declare recesses of 

the Committee at any time. 

We welcome here everyone, and particularly our witnesses supporting International Antitrust Enforcement: China and Beyond, 

and I now recognize myself for an opening statement. 

We convene today’s hearing to examine the enforcement of competition laws across the globe but with a focus on how China is enforcing its laws. This focus is a result of troubling reports that 

China may be using its competition laws or, if you will, its antitrust laws, to advance industrial policy at the expense of America 

and other foreign companies. We will also examine how the executive branch has responded to China’s administration and its competitive laws. 

Over the past 30 years, China’s economy has experienced remarkable growth, increasing at a rate of nearly 10 percent per 

year. During that time, China has become an important trade partner to the United States and a significant influence in the American economy. Between 1990 and 2015, total trade with China rose 

from $20 billion to $598 billion and, just last year, China passed 

Canada as the United States’ largest trading partner. 

China is the second largest U.S. agricultural export market, the 

third largest U.S. merchandise export market, and the fourth larg-
2 

est U.S. service export market. In total, China is estimated to be 

a $400 billion market to American companies. 

While these statistics provide stark numbers, one need only look 

no further than the labels on phones, toys, cars, clothes, and a wide 

array of other consumer products to see a familiar marking ‘‘made 

in China’’ to understand the pervasive impact of China’s economy 

in the United States. As China’s economy developed, so did its laws 

and regulations designed to foster future growth. In 2007, China 

enacted its competition laws called the ‘‘Anti-Monopoly Law,’’ or 

‘‘AML.’’ 

Since the AML’s enactment, there have been troubling reports of 

China deploying the law in a manner that violates international 

norms of due process with the result of prioritizing the advancement of China’s industry policies over promoting competition. 

These reports include allegations that China prevented foreign lawyers from representing their clients before competition authorities, 

threatened foreign executives during the course of competition investigations, targeted foreign companies more frequently than Chinese companies with respect to merger remedies, and conduct investigations pursued the extraction of intellectual property at 

below market rates, and sought remedies that directly benefited 

the Chinese industry. 

Given the size of the Chinese economy and the importance to 

American industry, these are serious allegations. Following these 

reports, the executive branch has responded in a variety of ways. 

Notably, the Commerce Department has engaged with China 

through the U.S.-China Joint Commission on Commerce and Trade 

and the Departments of State and Treasury similarly engaged in 

the U.S.-China Strategic/Economic Dialogue, which is taking place 

this week in Beijing. 

Past meetings with U.S. officials have resulted in non-binding 

voluntary commitments by China to improve transparency, increase due process, and enhance the fairness of the AML. 

We should ensure that U.S. companies are treated fairly, consistently, and objectively by international jurisdiction. Today’s hearing 

will help inform the Committee regarding international competition 

law enforcement, particularly China, and whether other countries 

are influenced by China’s use of the AML. 

Additionally, the hearing will update us regarding how the executive agencies are coordinating with each other and engaging with 

China and other countries on the treatment of U.S. companies and 

citizens abroad. On a personal note, I was an electronics executive 

during the era in which many, many American companies found 

themselves moving abroad, often to Taiwan, the new territories, 

and then into Mainland China. During that era, this was not the 

law, and yet there was inherently a desire to build a future China. 

And to this, on a personal note, I want to build a better China, and 

commerce is the answer, but it’s only the answer if in fact they embrace the international norms that allow them to win when they’re 

competitive and choose other vendors when in fact the most competitive vendor comes from somewhere other than China. 

I look forward to today’s discussion and our excellent panel, and 

it’s my honor to recognize the Ranking Member, Mr. Johnson of 

Georgia, for his opening remarks. 
3 

Mr. JOHNSON. I thank the Chairman. 

Today’s hearing is a welcome discussion of international antitrust enforcement with a specific focus on China’s approach to competition policy under its Anti-Monopoly Law. Over the past several 

decades, one of the most profound developments in antitrust law 

has been its expansion into the global economy. 

In the 1980’s, as few as five countries robustly enforce the antitrust laws. Today, more than 100 jurisdictions are members of the 

International Competition Network, an organization of enforcement 

agencies. This growing interest in antitrust law reflects a broader 

trend that reflects Nations moving away from centrally planned 

economies to open markets. 

In recent years, there has also been some divergence from the 

U.S. approach to antitrust enforcement among Nations with established competition authorities. This change is particularly evident 

in China’s aggressive enforcement of its Anti-Monopoly Law, which 

includes both procompetition goals such as preventing monopolization, and noncompetition directives such as improving economic efficiencies and development in China. 

Some have suggested that these twin goals have at times served 

to protect domestic commerce rather than promote competition. Examining these differences is important because local enforcement 

decisions can have global effects, as Federal Trade Commission 

Chairwoman Edith Ramirez has observed. But diversity and enforcement policy is itself—in itself is not necessarily bad. 

Progressives have long suggested that we rethink our antitrust 

policies to move beyond the excesses of the Chicago school of economic theory, as our former colleague Senator Herb Kohl has referred to it, to incorporate noneconomic values that promote the 

public interest through enforcement policy. 

With this in mind, I commend our enforcement agencies for taking a long view in competition policy that embraces diverse antitrust frameworks and respects local autonomy, while also seeking 

to establish a fair, independent, and transparent enforcement process internationally. While most work remains to be done to broaden 

international consensus and ensure that enforcement policy is not 

just a tool for promoting domestic or industrial policy goals, I’m 

confident that we can continue to work productively to bridge our 

differences and complement divergent enforcement regimes. 

As we seek consensus, it is imperative that we avoid an exceptional view of our own enforcement practices if we are to build 

upon ongoing dialogues with other sovereign Nations to establish 

economic and political comity. Indeed, progressives have long suggested a rethinking of our antitrust policies to move beyond what 

Senator Herb Kohl again referenced as the excesses of Chicago 

school of economic theory, and that we seek to incorporate noneconomic values that promote the public interest through enforcement policy. 

In closing, I thank the Chair for holding today’s hearing, and I 

hope to continue to look beyond our own antitrust enforcement 

practices in future hearings. I also thank our witnesses for their 

testimony. We truly have a wealth of expertise on the panel. I’m 

looking forward to hearing your views, particularly on the issue of 

whether or not there should be just one regime and it be our re-
4 

gime for antitrust enforcement. And when I say ‘‘ours,’’ I mean the 

American formula. And with that, I will yield back the balance of 

my time. 

Mr. ISSA. I thank the gentleman. It’s now my pleasure to introduce the Chairman of the full Committee for his opening statement, the gentleman from Virginia, Mr. Goodlatte. 

Mr. GOODLATTE. Thank you, Mr. Chairman. 

The Judiciary Committee routinely exercises its oversight authority to ensure that our Nation’s antitrust laws are applied in a 

manner that is transparent, fair, predictable, and reasonably stable 

over time. A natural extension of this oversight is ensuring that 

our Nation’s companies and citizens receive comparable treatment 

in foreign jurisdictions. 

As commerce becomes an increasingly global enterprise, the manner in which antitrust and competition laws are applied to companies and citizens located or engaged in business outside of the 

United States also grows in importance. In particular, China has 

risen in prominence as an economic marketplace as well as a competition law jurisdiction. 

Over the past several years, reports have surfaced that allege 

China is deploying its competition laws in a manner that strains 

the boundaries of due process, that focuses on advancing domestic 

industrial policies, and that seeks to extract valuable American innovations without fair compensation. 

I would like to thank Chairman Issa for holding today’s hearing 

to delve into these potentially serious abuses. Today’s testimony 

will help the Committee gain a better understanding of the history 

of China’s competition laws, how they have been enforced, and the 

potential impact of this enforcement on other international competition jurisdictions. Furthermore, it will provide a record regarding how our executive agencies, including our antitrust enforcement agencies, have been coordinating among each other and engaging with China and other foreign countries on international 

competition law enforcement. 

This hearing also serves as a reminder that the United States 

should be a leader in fair and reasonable antitrust enforcement. To 

that end, enacting important antitrust reforms such as the 

SMARTER Act, will help to ensure that the U.S. continues to be 

an example to international competition law authorities. 

I look forward to hearing from today’s excellent panel of expert 

witnesses on these important issues, and I yield back the balance 

of my time. 

Mr. ISSA. I thank the gentleman for his opening statement and 

his comments. 

If Mr. Conyers arrives, we’ll take his opening statement in due 

course. But it’s now my pleasure to introduce the distinguished 

panel here today. The witnesses’ written statements will be entered 

into the record in their entirety, and I would ask each of the witnesses to summarize their testimony within 5 minutes. 

Since virtually all of you are pros, I’ll summarize by saying, the 

red lights work just like they do on city streets. Please look at 

them for the same indications of go, go faster, and stop. To help 

you stay within that time period, please observe them. 
5 

It’s now my honor to introduce our witnesses, but before I do 

that, in concert with the rules of the Committee, I would ask that 

all four of you please rise to take the oath. Please raise your right 

hands. 

Do you solemnly swear that the testimony you’re about to give 

will be the truth, the whole truth, and nothing but the truth? 

Thank you. Please be seated. And let the record reflect that all 

witnesses answered in the affirmative. 

It’s now my pleasure to introduce Commissioner Ohlhausen. 

Commissioner Ohlhausen was sworn in to her position as the 

Commissioner of the Federal Trade Commission on April 4th, 2012, 

to a term that expires September of 2018. Prior to becoming the 

Commissioner of the FTC, the Commissioner spent 11 years working for the Federal Trade Commission in various capacities, including Director of the Office of Policy and Planning and Attorney Adviser to the former FTC Commissioner Swindle. 

She has spent a number of years in the private sector working 

on FTC issues and as a partner at the law firm of Wilkinson Barker and Knauer, LLP. The Commissioner earned her bachelor’s degree in English with honors from the University of Virginia and 

her J.D. from George Mason, newly named Antonin Scalia Law 

School. I see somebody picked that up right away. 

Our next witness, Mark Cohen, is a Senior Counsel at the United 

States Patent and Trademark Office where he leads a 21-person 

team focused specifically on the expertise of China. It’s got to be 

a full-time job with just 21 of you. 

Mr. Cohen has over 30 years of private and public sector inhouse and academic experience in the China transition economies, 

serving in such roles as the director of IP for Microsoft Corporation 

and a counsel at the law firm of Jones Day, a Cleveland-based company of my youth, but worked in their Beijing office. 

In addition to his position at the Patent and Trademark Office, 

Mr. Cohen lectures at universities in the United States and abroad, 

including Harvard, Fordham, and the China University of Political 

Science and Law. Mr. Cohen earned his bachelor’s degree in Chinese studies from the State University of New York in Albany, his 

master’s degree in Chinese language and literature from the University of Wisconsin, and his J.D. From Columbia. I’m impressed. 

Next, we have Mr. Sean Heather. Sean Heather is the Vice 

President of the U.S. Chamber of Commerce Center for Global Regulatory Cooperation, which seeks to align trade, regulatory, and 

competition policy in support of open and competitive markets. 

During his 16-year career at the Chamber, Mr. Heather has 

worked in a wide range of issues spanning from international trade 

and antitrust to tax technology and corporate governance. Mr. 

Heather is also the co-author of the Chamber’s comprehensive report on China’s enforcement of its competition laws. 

Mr. Heather received his bachelor’s degree in business administration and an MBA both from the University of Illinois. 

Last and definitely not least, we have Professor Thomas Horton, 

professor of law at the University of South Dakota School of Law. 

Professor Horton transitioned to a full-time academic position following a 28-year career as an antitrust lawyer where he served at 

both the Federal Trade Commission and the Antitrust Division of 
6 

the Department of Justice, in addition to partnership at several 

major international law firms. 

Professor Horton earned his bachelor’s degree from Harvard, cum 

laude, his J.D. from Case Western Reserve University School of 

Law, right there on the near east side of Cleveland where he graduated with the Order of the Coif, and a master’s degree with honors in Liberal Studies from Georgetown University. 

Before I recognize the Commissioner, thank you Mr. Horton for 

going to Case. Everyone in my family either applied or went there. 

I went to Kent State. You can tell why. 

Your Honor. 

TESTIMONY OF THE HONORABLE MAUREEN OHLHAUSEN, 

COMMISSIONER, FEDERAL TRADE COMMISSION 

Ms. OHLHAUSEN. Chairman Issa, Ranking Member Johnson, and 

Members of the Subcommittee, thank you for the opportunity to appear before you today. 

International antitrust law has been very dynamic over the past 

two decades. The FTC engages in multilateral fora and bilateral 

consultations. It also offers technical assistance to build stronger 

relationships with foreign competition agencies and to encourage 

convergence on sound economic competition policy and enforcement. The global economy, competition, and consumers benefit 

when competition laws function coherently and effectively. Enforcement predictability also reduces the cost of doing business and improves outcomes for consumers. 

While the FTC’s focus has been global, the agency has devoted 

significant attention and resources to two areas that have received 

particular attention in recent years: China’s antitrust enforcement 

and the application of antitrust intellectual property rights. I personally spend a lot of time on these issues. I have traveled to China 

seven times in recent years to engage in dialogue, both formal and 

informal, on antitrust policy and enforcement, including attending 

a conference on antitrust in Asia in Hong Kong just last week. 

Even before the enactment of China’s Anti-Monopoly Law, or the 

AML, in 2007, the FTC and the DOJ worked with Chinese officials 

to promote predictability, fairness, and efficiency in antitrust enforcement. We have also stressed the importance of economics to 

sound antitrust policy. 

China’s AML resembles the competition laws of the United 

States in many ways, including, for example, provisions on cartel 

conduct and anticompetitive mergers. The AML, however, also has 

important differences, including the prohibition of unfairly high 

pricing and consideration of noncompetition factors, such as the effect of a merger on economic development. 

Our engagement with Chinese authorities on the development 

and implementation of the AML has produced some positive tangible results. A good example is China’s adoption of a simplified 

merger review procedure last year, which saves time and reduces 

costs for merging companies. We have also observed that 

MOFCOM increasingly sets forth its economic analysis in published merger decisions. 

Nonetheless, our efforts with the Chinese AML agencies are best 

seen as a work in progress as there is continued concern regarding 
7 

the procedural and substantive application of the AML. Issues 

raised by Chinese procedures include the degree of transparency, 

the opportunity to present a defense, and the ability to be represented by counsel. Due process is a critical element to ensure 

fair, transparent, and nondiscriminatory application of antitrust 

laws. At the recent meeting in Hong Kong, I was particularly encouraged to see all three Chinese agencies acknowledge these procedural concerns. 

On a substantive level, there continues to be a belief that Chinese agencies are pursuing noncompetition objectives to antitrust 

enforcement to promote domestic industries or Chinese competitors. We take such concerns seriously and have worked through 

multiple avenues, including our most recent vice minister level bilateral meeting in April to encourage China’s agencies to ensure 

appropriate transparency and fairness. 

So far, we have seen some promising responses, including 

through the Strategic and Economic Dialogues, as well as the U.S.- 

China Joint Commission on Commerce and Trade. In 2014, through 

these dialogues, China officially recognized that the objective of 

competition policy is to promote consumer welfare and economic efficiency rather than promote individual competitors or industries, 

and that enforcement of competition laws should be fair, objective, 

transparent, and nondiscriminatory. Through these dialogues, 

China also provided certain commitments regarding AML enforcement procedures. We will continue to engage with Chinese antitrust authorities on these issues. 

International convergence on unilateral conduct remains a challenging area overall, particularly for conduct involving IP rights. 

Many of the concerns about IP-related enforcement have focused on 

China because its competition law prohibits unfairly high pricing 

as well as places limits on refusals to deal. The Chinese AML agencies’ current draft IP guidelines reinforce this concern with provisions that would create liability for refusals to license intellectual 

property deemed necessary to compete in a given market, as well 

as provisions that would prohibit unfairly high IP royalties. 

The FTC and the DOJ have voiced concerns over the potential 

danger of reducing incentives to innovation, not only in China but 

globally, and have thus urged caution in enforcing these provisions. 

The FTC will continue to advocate for policies and approaches that 

promote innovation and competition as these guidelines continue to 

develop. 

Thank you for your time, and I look forward to your questions. 

[The prepared statement of Ms. Ohlhausen follows:] 
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Mr. ISSA. Thank you. It’s now my pleasure to introduce the 

Ranking Member of the full Committee for his opening statement, 

Mr. Conyers of Michigan. 

Mr. CONYERS. Thank you, Chairman Issa, and I want to put my 

statement in the record. 

Mr. ISSA. Without objection. 

Mr. CONYERS. And just note that today’s hearing, with these particular witnesses, promises to be not only informative and timely, 

particularly with respect to China’s enforcement of its Anti-Monopoly Law, and I appreciate your comments in that regard. And over 

the last days even, Treasury Secretary Jacob Lew, who was in 

China for the latest round of talks in the ongoing U.S.-China Strategic/Economic Dialogue, makes our discussion here so significant 

and important. I commend the Chairman for it, and I leave you 

with this one thought. What impact will China’s alleged discriminatory enforcement practices have on American jobs? 

And I thank the Chairman for his indulgence, and I yield back 

the balance of my time. 

[The prepared statement of Mr. Conyers follows:] 
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Mr. ISSA. I thank the gentleman, and hopefully we’ll see the answer to that question as we speak. 

With that, we go to Mr. Cohen for his opening statement. 

TESTIMONY OF MARK A. COHEN, SENIOR COUNSEL, 

UNITED STATES PATENT AND TRADEMARK OFFICE 

Mr. COHEN. Chairman Issa, Ranking Member Johnson, Members 

of the Committee, thank you for the opportunity to discuss competition law in China from the perspective of the U.S. Patent and 

Trademark Office. It’s an honor to appear before you today. 

USPTO is engaged with China on all IP issues, including those 

that involve antitrust and licensing. Last year, Under Secretary 

Lee met with Chinese Vice Premier Wang Yang, and just last 

week, I accompanied Deputy Under Secretary Slifer to Beijing to 

advance talks on critical IP issues. Along with the United States 

Trade Representative, Under Secretary Lee also cochairs the IP 

Working Group of the Joint Commission on Commerce and Trade, 

or JCCT, to engage bilaterally on improvements to China’s IP regime. 

Over the years, the JCCT and related dialogues have included 

several commitments on IP, including on standards, licensing, legitimate sales of IP-intensive goods, and judicial reform. The 

USPTO’s China team consists of 21 people, including experienced 

IP attaches in three Chinese cities. We have signed agreements to 

support cooperative activities in IP with several Chinese agencies. 

We also frequently meet with industry to exchange views, educate 

them, and share their concerns. 

In our experience, the current environment for IP and antitrust 

in China has three pronounced characteristics. These are: one, 

strong antitrust enforcement is counterposed against weak IP protection; two, there’s little foreign use of the IP enforcement system 

while there is considerable foreign concern about being targeted for 

competition law violations; and, three, industrial policy in China 

makes it difficult to legitimately license technology to third parties. 

Regarding the first item, China’s weak enforcement system, Chinese IP damages are too low weakening fundamental protections 

IP right holders need. IP holders who run afoul of Chinese AML 

authorities often do not believe that their legitimate rights have 

been protected. In summary, China is pursuing IP abuse without 

first having adequately secured IP use. 

As an example of this unbalanced environment, the antitrust fine 

imposed against Qualcomm for 975 million U.S. Dollars is thousands of times more than the average damages in a patent litigation in China. Second, surveys and press reports suggest that many 

foreign companies feel targeted. While Chinese antitrust authorities have taken pains to show that they are enforcing their laws 

evenhandedly, this sense of feeling targeted is coupled with little 

affirmative use of China’s IP system as well as concerns over due 

process and a sense that foreigners’ rights are not being adequately 

protected. 

As for the third item, industrial policy, I share the concerns of 

many here. Much of the problem with commercialization of technology today in China is due to an overinterventionist Chinese 

economy. Notwithstanding the international consensus that IP is a 
31 

‘‘private right,’’ China’s state planners have created a wealth of 

interventions in IP creation and licensing from which it is reasonable to assume antitrust policy is not excluded. 

These three serious problems highlight the challenges our companies face: Weak IP protection, targeting, and industrial policy. 

The Administration has pushed back on the more onerous aspects 

of these policies. USPTO is also taking the lead on highlighting 

challenges involved in licensing IP to China, including negotiating 

with our Chinese counterparts, training programs, and research. 

In summary, the Administration strongly supports China’s efforts to develop an antitrust regime consistent with the practices 

of other market economy countries. However, there are many aspects of China’s economy that may not be fully market driven in 

the context of both IP and IP-related antitrust. 

Thank you, and I look forward to your questions. 

[The prepared statement of Mr. Cohen follows:] 
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Mr. ISSA. Thank you. 

Mr. Heather. 

TESTIMONY OF SEAN HEATHER, VICE PRESIDENT, CENTER 

FOR GLOBAL REGULATORY COOPERATION, U.S. CHAMBER 

OF COMMERCE 

Mr. HEATHER. Thank you, Chairman Issa and Ranking Member 

Johnson, for today’s important hearing and inviting the Chamber 

to testify. 

The Chamber’s approach to antitrust is grounded in the belief 

that antitrust should be transparent, fair, predictable, reasonably 

stable over time, consistent across jurisdictions, and based on 

sound economic analysis. 

For the past several years, the Chamber has worked with China 

on its Anti-Monopoly Law, and China has made some positive 

progress. In part, improvements can be traced to high level engagement between the two governments. The Chamber welcomed the 

commitment by the two Presidents during President Xi’s State visit 

in 2015 where it was agreed, quote, ‘‘Both countries affirm the importance of competition policy approaches that ensure fair and nondiscriminatory treatment of entities and that avoid the enforcement of competition law to pursue industrial policy goals.’’ However, China’s antitrust enforcement has yet to live up to this ideal. 

The AML itself allows China’s agencies wide latitude to inject industrial policy into their enforcement activity. Further, stakeholders in China’s government, not directly charged with enforcing 

the AML, have the potential to weigh in and steer the outcome of 

an antitrust investigation. As a result, in many cases, foreign companies find themselves as a victim of industrial policy goals that 

promote also discrimination and protectionism. Merger reviews 

have created opportunities for China’s own national champions to 

expand and increase their market share, have capped prices for 

products and technology on which domestic companies rely, and 

protect famous Chinese brands from acquisition by foreign companies. 

To date, all merger transactions blocked or conditionally approved have involved foreign companies. Similarly, AML transactions—AML investigations have forced foreign companies that 

market consumer products to reduce prices, even when such prices 

appear to be the result of market forces rather than anticompetitive conduct. 

The Chamber is particularly concerned with China’s ongoing efforts to develop IP abuse guidelines under the AML. Those guidelines endorse a broad, unbalanced essential facilities doctrine, impose stiff Anti-Monopoly sanctions for refusing to license IP or 

charging, quote, ‘‘excessively highly’’ royalties. 

As drafted, the guidelines would force companies that possess 

critical technologies to license their intellectual property to Chinese 

competitors or to lower licensing costs to benefit local firms. As 

China concludes its drafting process later this year, the American 

business community hopes that China will remove its unbalanced 

essential facilities doctrine, delete provisions on excessive pricing, 

and eliminate provisions that prohibit or restrict the refusal to license. We believe such a course correction is ultimately in China’s 
41 

long-term interest as it seeks to move up the value chain and become a global innovative contributor. 

Let me mention a word or two about due process. Concerns regarding the substance of China’s AML and its enforcement are 

compounded by continuing concerns over transparency and due 

process. Limited evidence is often presented to the target in support of vague or novel theories of harm. The absence of an independent judiciary, as well as potential threats of retaliation, deters 

companies from seriously considering an appeal. The result, more 

often than not, is an investigative process that incentivizes the foreign target of investigation to settle on terms favorable to the Chinese government. 

Looking beyond China, the Chamber actively follows upwards of 

a dozen jurisdictions annually. Many of the concerns we discuss 

here today exist elsewhere in the world to varying degrees. Today, 

it can be difficult to discern what is an appropriate international 

antitrust norm. Take a statement from the Korea Fair Trade Commission regarding its 2015 enforcement plan. It stated that one of 

its primary goals was to strengthen enforcement against global monopolistic enterprises holding original technologies having a significant influence in the Korean industry. 

The wording of such a statement demonstrates how perverse 

uses of antitrust can creep toward becoming an acceptable international norm. Last year, China issued a fine to Qualcomm for just 

under a billion dollars. That amount may seem like a lot, but it is 

actually the third highest fine behind the questionable fines issued 

by Europe against Intel and Microsoft. China also raised eyebrows 

over the condition it imposed on the Microsoft-Nokia merger, only 

for Korea to follow and place significantly more questionable conditions on that same merger. 

In these examples, China’s actions can be seen to further stretch 

international norms while also claiming to live within them. It also 

demonstrates that the world of international trust presents problems beyond China. 

In closing, the Chamber greatly appreciates the work of the U.S. 

antitrust agencies and this Administration, yet more work needs to 

be done. Let me conclude by highlighting some of the recommendations from my written testimony for Congress and this Committee 

to consider. 

First, it is important to endorse a whole-of-government approach 

wherever antitrust is misused and abused. It is critical that competition policy advocacy, vis—vis, China occur within the framework of the Administration’s broader economic and commercial policy toward China as set forth by the President of the United States. 

Second, Congress, through rigorous oversight support, should 

support the Administration to do everything in its power to ensure 

provisions of China’s IP abuse guidelines are at least as consistent 

with U.S., EU, and Japanese approaches. This must be a top and 

urgent priority. 

Finally, Congress should be more vocal in its support for addressing these concerns through bilateral investment treaty negotiations 

with China and through competition chapters in our trade agreements. 

Thank you, and I look forward to answering your questions. 
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[The prepared statement of Mr. Heather follows:] 
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Mr. ISSA. Thank you. 

Professor Horton. 

TESTIMONY OF THOMAS J. HORTON, PROFESSOR OF LAW AND 

HEIDEPRIEM TRIAL ADVOCACY FELLOW, UNIVERSITY OF 

SOUTH DAKOTA SCHOOL OF LAW 

Mr. HORTON. Chairman Issa, Ranking Member—— 

Mr. ISSA. Could you pull it a little closer to you so we could hear 

you? 

Mr. HORTON. Chairman Issa—— 

Mr. ISSA. And make sure the light is on, the little button down 

in the middle. 

Mr. HORTON. Oh, there we go. 

Mr. ISSA. There we go. Thank you. 

Mr. HORTON. Thank you. 

Chairman Issa, Ranking Member Johnson, distinguished Committee Members, counsel, and staff members, thank you so much 

for inviting me to testify here today. And thank you Chairman Issa 

for your kind words about Case Western Reserve University in 

northeast Ohio. 

To understand China’s Anti-Monopoly Law and its recent enforcement efforts, it’s necessary and crucial not only to carefully examine the words of the Anti-Monopoly Law but to read them in the 

context and light of Chinese history, culture, and traditions. First 

and foremost, we must recognize that China may be the only civilization the world has known upon which Western thought exercised 

little or no influence until modern times. China’s historical culture 

was largely independent of Western influences, and its responses 

to its people’s economic needs are often peculiar to China and 

sharply differentiated from other countries. 

Second, it’s important to keep in mind that China’s political system does not share our values of Western legal traditions. China 

is not in any sense a Western-styled democracy, and in reality, the 

country still is without rule of law. 

Furthermore, the leaders of the Chinese Communist Party are 

not interested in bringing about a change of allegiance by bringing 

Western political systems to China. Consequently, China’s AntiMonopoly Law enforcement activities ultimately are not directed 

toward carrying out or reenforcing Western neoclassical economic 

ideologies but toward helping to protect the socialist rule of law 

system with Chinese characteristics. 

China’s determination to chart its own antitrust course without 

following or adhering to Western ideologies has resulted in four 

major trends during the first 8 years of AML enforcement. 

First, China aspires to protect and buttress its economy by safeguarding what it perceives to be fair market competition in the 

consumer and public interest of China’s citizens. 

Second, China’s determined to protect at all costs its own perceived long-term security and economic interest. 

Third, China’s focused on protecting its indigenous business and 

entrepreneurs, including its diverse multitude of small- and medium-sized businesses. 

And fourth, China’s demonstrating a strong propensity to focus 

on potential barriers to entry and use of exclusionary practices. 
60 

Ironically, echoing the comments of Representative Johnson, America would be well served by following similar objectives in our antitrust enforcement policies instead of continuing the current underenforcement of antitrust laws which have led to alarming levels of 

concentration and diminished competition in industry after industry. 

Rather than simply criticizing China and trying to lure it into 

following current neoclassical American economic models, we 

should humbly ask ourselves whether we might learn from the Chinese and their Confucian traditions and values. On one hand, 

China should be lauded for promulgating an aggressive antitrust 

policy that takes into account Confucian norms of ethics, morals, 

and fairness, and seeks to inspire increased corporate social responsibility. We would be well served to pursue similar objectives. 

On the other hand, as stated here by the other witnesses, the 

Chinese and their antitrust enforcers are going to need to pay more 

attention going forward to their own Confucian traditions and values. Ongoing business and governmental corruption in China must 

be aggressively addressed. Furthermore, the Chinese need to acknowledge and realistically address the pressures on their AML enforcers to aggressively target foreign companies in order to protect 

and bolster indigenous Chinese companies and businesses. 

And finally, the theft of IP and IT to bolster the Chinese economy must stop. Instead of trying to pretend that they’re acting neutrally and objectively in their AML enforcement, the Chinese need 

to find better ways to focus primarily on competition policies as opposed to industrial protectionism. 

As always, the future is uncertain, but the stakes could not be 

higher. Whether we like it or not, China’s and our economies are 

inextricably linked and positively correlated. Both China and the 

West must continue our ongoing dialogues and seek to continue 

building strong economic, cultural, and political bridges. After all, 

much more than future international antitrust enforcement is at 

stake. Thank you. 

[The prepared statement of Mr. Horton follows:] 
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Mr. ISSA. Thank you. 

We now go to the gentleman from Georgia for his round of questioning, Mr. Collins. 

Mr. COLLINS. Thank you, Mr. Chairman. I want to take just a 

moment to sort of broaden out the picture just a little bit, and I 

think it’s what we’re looking at and this is sort of an open question 

to all. 

I think we all can understand that China, and with even the last 

comments Mr. Horton said, is very protectionist, very looking after 

theirself, but yet at the same time wanting to aggressively market 

everywhere else in the world. Okay. We can understand that even 

from a capitalist standpoint in looking at that. 

The problem I’m looking at is, especially in this area of IP, I 

mean, this is a country that have its own, quote, State-owned business moving factories out of Mainland China to other areas in the 

Middle East to keep their own theft from occurring. So I think 

we’ve got an issue here, but I have just a general question, and it 

was mentioned in a couple of your comments. 

In the area of trade, in the area of working with the world, with 

the negotiations of the TPP and with the past few years of the 

AML, what do we see in China in regard—have you seen an uptick 

in the protectionism—I know I have seen in some areas—in maybe 

a response to the other countries and the TPP? I’d like to get 

your—just a perspective, maybe an overall perspective on that. And 

anybody wants to start. Ms. Secretary or whoever wants to start. 

Mr. Cohen. 

Mr. COHEN. Maybe I’ll take a first shot at that. Obviously, you 

know, USTR is the lead on negotiating—— 

Mr. COLLINS. Right. 

Mr. COHEN [continuing]. The TPP. In our bilateral discussions, 

China has expressed an interest in the TPP, although I think its 

primary focus is on its own internal demands and needs. And I 

think in that area we do see a heightened level of technical interest 

and engagement on intellectual property, primarily because China 

wants to become an innovative economy. 

Mr. COLLINS. Right. 

Mr. COHEN. And that’s really shaping its engagement globally. 

Mr. COLLINS. And I want to just bring that up, and again, feel 

free, as a matter of discussion. But you could probably—with it 

being an innovative economy, I think, are we seeing other problems 

here when you’re looking even outside and even internal estimates 

of their growth and the issues of their economic growth, which is, 

at best, stagnating, at best, from the norms of where they were basically governing. What are we seeing when you’re saying innovation and—where are we seeing the innovation? It still seems that 

they’re copying a great deal and then protecting it as it comes 

along. Is that an unfair statement, especially in a restrictive economy at this point? 

Mr. COHEN. I think the good news is China is interested in innovating, and the bad news is China is interested in innovating. The 

good news is that hopefully it will help foreign rights holders of foreign companies if they can compete equally and fairly. And in some 

areas, China is achieving some measure of success. High-speed rail, 

for example. 
81 

Mr. COLLINS. Right. 

Mr. COHEN. Some of the research in the life sciences, and we’ve 

seen a lot of activity in patenting. But there is concern that in the 

process of seeking to become an innovative economy, the field won’t 

be balanced or fair and that foreign entry could be restricted. 

Mr. COLLINS. Well, and I think that’s what we’re seeing. 

Mr. Horton and Mr. Heather, I’d like to say this. The interest is 

not—to me, creativity, and what we talk about in this Committee 

a lot, is creativity is thinking something new. Creativity is not seeing my pencil and then making another—copying it and painting 

it red instead of yellow and calling it creative. That’s not creative. 

And I think that’s some of the concern. 

But the other concern is using—and I’d like to hear from the two 

here, is taking this idea of protection but also then taking companies that have made innovative strides, have went into China to 

actually work, becoming—where it becomes more of an economic 

disincentive, they’re saying you’re taking over and then we’re—basically, all we’re doing is rate manipulation at that point. 

Mr. Heather and then Mr. Horton, I’d like to hear your comments on that. 

Mr. HEATHER. Yes. In response for the Chamber’s antitrust policy, I’m not our China expert who’s actually in China, but I think 

if he was here today, he would share with you the way the Chamber looks at it is outside of the antitrust realm, that there are a 

range of Chinese policies that are all geared toward kind of industrial policy means and ends. And therefore, the antitrust law, in 

some ways, runs counter to those larger policies that the Chinese 

government is advancing and, therefore, opens up itself to the opportunity to advance those industrial policy goals. 

It’s also important to I think note in the China context that the 

three Chinese agencies, NDRC, MOFCOM, and SAIC all have 

other missions within their jurisdiction that are much more central 

to the way the Chinese organize and operate their economies. And 

the AML function that they fulfill is kind of on the margins of what 

is their core responsibility, which is more in this industrial policy 

vein. 

As it relates to IP protection and these things, I think there’s a 

number of avenues in which the U.S. Government and the Chamber have been advocating by which to eliminate forced transfer of 

U.S. companies where they go into China and then as a condition 

of investing in China, as a condition of operating in China, they are 

required to somehow joint venture with the state-owned enterprise 

to pass off their technology in some way, shape, form, or the other. 

There’s a number of ways in which we’re working to try to combat 

that, including through negotiations of a U.S.-China bilateral investment treaty. 

Mr. COLLINS. Okay. Mr. Horton. 

Mr. HORTON. I grew up in a family where I was indoctrinated as 

to the importance of the patent laws. My father has 39 patents in 

the ceramic engineering field, primarily for the use in aircraft engines. And so I believe that the patent laws are amongst the most 

important laws stated in our Constitution that Jefferson wrote into 

the Constitution. The bad news for the Chinese and why they’re 

stealing IP is that their innovation is not happening from their 
82 

large state-owned enterprises and their institutions are not producing enough good research. They’re filing more patents than anyone in the world, but most of them are sham patents that have little value. 

The good news for the Chinese and what we might think more 

about emulating is that they have a growing bamboo thicket of capitalism of small business and entrepreneurs, and really, new innovations, new patents, new ideas come out of small companies. They 

come out of the garages. They come out of the Bill Gates working 

in his garage. They don’t come out of the big companies. And so 

the Chinese are seeking to protect their small businesses, something we’ve gotten away from in the United States with our antitrust policy where we’ve allowed and even encouraged dominant 

firms with heavy market concentration, who then can make monopolistic profits that they don’t put back into research. So we should 

emulate the Chinese in protecting our small businesses, entrepreneurs, and doing everything we can to encourage them. 

Mr. COLLINS. Mr. Chairman, I yield back. 

Mr. ISSA. I thank the gentleman. 

We now stay with Georgia and go to the Ranking Member, Mr. 

Johnson. 

Mr. JOHNSON. Thank you, Mr. Chairman. 

Professor Horton, are there any other lessons that U.S. antitrust 

policy can take from China’s antitrust enforcement efforts? 

Mr. HORTON. Yes, I believe that there are. First, I think that in 

areas like monopoly leveraging, resale price maintenance, where 

our Supreme Court, just a few years ago in the Leegin case, overruled on a 5 to 4 basis more than 100 years of sound antitrust policy under the name of neoconservative economics, and in predatory 

behavior by dominant firms. 

I think the Chinese are very progressive, and ironically, could 

end up being leaders in world antitrust enforcement if we in the 

United States do not become more progressive and put behind us 

the 40 years of neoclassical economics that have led us astray and 

that are really a key part of what we’re hearing in today’s current 

election cycle about all the unfairness that’s endemic in the American economy. 

Mr. JOHNSON. What say you to that, Mr. Heather? 

Mr. HEATHER. I think that we’re talking about apples and oranges. The Chinese system is one that doesn’t have a rule of law, 

which I believe Professor Horton referred to, and so I think any 

discussion about what policy debate we may have in the United 

States about the role U.S. antitrust law should play in our market 

is not akin to what happens in China. 

Mr. JOHNSON. Well, I guess their enforcement mechanisms, without an independent judiciary, they’re made in a different way. 

But Professor Horton, any rebuttal from you as to Mr. Heather’s 

comment? 

Mr. HORTON. Well, I think that the Chinese Anti-Monopoly Law 

where it’s very sound and progressive is it talks about fairness, 

fairness to consumers, fairness to competitors, and a stable economy. And we seem to think that fairness is some kind of mushy 

idea that has no place in economics. In fact, fairness is funda-
83 

mental to a sound economic system, and the Chinese recognize 

that. We need to get back to that. 

Mr. JOHNSON. Now, our independent judiciary, Mr. Heather, does 

it have fairness as its benchmark of making decisions or does it— 

I mean, what do you say to that, to what Professor Horton just 

said, the ideals that we apply our antitrust policies? I mean, what 

is our—is our—is there—can we learn something from the Chinese 

in terms of adopting ideals such as fairness to consumers? 

Mr. HEATHER. Well, given the fact that we have had the due 

process concerns in China’s antitrust proceedings, I think it’s ironic 

that we’re talking about—or you’re depositing the question whether 

or not we can learn anything about fairness from China. I think 

that certainly I expect our judiciary to provide fairness when anyone goes before it, but I think the question that underpins this is 

whether or not the Chicago school of economics is the school by 

which the U.S. antitrust laws should remain guided or be informed 

by. 

To that point, in referencing that in the context of China, it’s one 

thing to make these kinds of broad statements; it’s another thing 

to have the rigorous economic analysis to support them. And none 

of the cases that we see coming out of China has an economic proof 

to go with the statements that they make. 

And I think that regardless of where we want to take U.S. antitrust laws, which have changed over the last 100 years in terms 

of how they’re interpreted, and I suspect they will change over the 

next 100 years, there will still be a requirement in the U.S. system 

to underpin that with rigorous economic analysis because it’s not 

just about the law, it’s about the economics. 

Mr. JOHNSON. And our courts apply rigorous economic thought to 

its decisions on antitrust policy? Yes. 

Mr. HEATHER. I believe they are—do so in most cases, yes. 

Mr. JOHNSON. I guess it depends on what school they are trained 

from, perhaps. But let me move on. 

China issued some regulations today on electronic payment services, and as global payment networks prepare to establish payment 

processing services in China, they potentially face impediments 

under these new rules, which I’ve not seen. I don’t know if any of 

you all have, but the potential is there. 

They will be required to implement Chinese security and 

encryption standards rather than globally interoperable security 

standards, which are well established and internationally recognized. How can the U.S. continue to push for competitive access to 

the Chinese market while protecting the integrity of the international payment system in light of divergent security and 

encryption standards? 

Mr. Cohen, let me ask you that question. 

Mr. COHEN. Well, there have been longstanding concerns about 

market access for payment processing and for encryption and security standards that have been raised for a good 10 or 15 years, and 

we’ve been raising them bilaterally as potentially discriminatory 

treatment of U.S. companies and U.S. rights holders, and in some 

cases, demanding forced transfer of technology with some successes 

to date. 
84 

I’m not familiar with the latest rules. My office has mostly been 

concerned about forced transfers of intellectual property or adopting standards that primarily rely on China’s indigenous innovation 

and would thereby discriminate U.S. innovation and U.S. technology. 

Mr. JOHNSON. What do you say to that, Professor Horton? 

Mr. HORTON. Well, I would be concerned about the Chinese interoperability standard because I do think that the Chinese are very 

cognizant of their own security interest, and one of the big problems with the IP and IT theft has been the concern that this is 

going to Chinese military technology. 

So I think that we should put tremendous pressure on the Chinese to not allow their own indigenous system that they might take 

advantage of to be the standard for operating in China. I think the 

House here could put increasing pressure on China, as could the 

executive branch, to turn their own Confucian values around and 

say, you have to be fair toward the rest of the world, not just your 

own consumers and public. 

Mr. JOHNSON. All right. 

Mr. Heather. 

Mr. HEATHER. I’m unaware of the regulation you mentioned, but 

our China team would be more prepared to comment and answer 

questions you have that we can have followup with your staff. 

Mr. JOHNSON. Thank you. 

Mr. ISSA. Thank you. 

Mr. JOHNSON. Ms. Ohlhausen, I will get to you next time. 

Mr. ISSA. We’ll now go to the gentleman from Michigan, Mr. 

Bishop. 

Mr. BISHOP. Thank you, Mr. Chair, and I thank the panel for 

your insight today. I wanted to give you a chance to review some 

of the recent reports highlighting the problem of Chinese companies using stolen images and deceptive advertising to lure American consumers into buying poor quality apparel direct from the 

Chinese manufacturers. 

And that said, Mr. Chair, I’d like to ask unanimous consent to 

be able to submit this document which depicts blatant pictorial examples of Chinese advertising—— 

Mr. ISSA. Without objection—— 

Mr. BISHOP [continuing]. Using stolen images. 

Mr. ISSA [continuing]. With unanimous consent, it will be granted. 

[The information referred to follows:] 
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Mr. BISHOP. These images are so blatant and lawless, there is no 

incorporation of any Confucius laws of anything, especially ethics 

or fairness. 

American companies are increasingly discovering that their copyright images are being used in advertisements on sites like Google 

and Facebook, are preying upon Americans and the American consumers. When the customer receives the item, they look nothing 

like the picture they saw online in the advertisement. The clothing 

items are typically made of inferior material. They are constructed 

cheaply. They arrive in sizes that oftentimes are nowhere near and 

probably just big enough to fit a child. 

Consumers—we all know that customer service as well is nonexistent, and the American buyer has no option whatsoever for returning the product or getting a refund. These false and misleading 

advertisements using stolen images result in consumers receiving 

merchandise far below the quality they’re expecting and threaten 

the competitiveness and sustainability of American clothing companies, which we all know are in great jeopardy right now anyway 

trying to compete. 

So I would like to, if I could, refer this question to Commissioner 

Ohlhausen and Mr. Cohen, and I just would like to know what 

steps you’re taking to eliminate this practice by Chinese companies 

in order to protect American consumers and to protect the intellectual property of American companies and prevent this kind of activity by Chinese companies in the future. 

Ms. OHLHAUSEN. Thank you, Congressman Bishop. The FTC, as 

you know, in addition to our antitrust authority, is also a consumer 

protection agency, and so we work internationally with other consumer protection authorities to address these kinds of issues. Now, 

there can be a challenge for how you reach a company in another 

country. What is their contact with the U.S.? 

So to the extent we can reach companies that are misleading consumers, if they have some presence in the U.S., then we can try 

to bring an enforcement action. Otherwise, we need to work with 

our international counterparts. 

I would say our relationship with the consumer protection authorities in China is not as developed as they are with the consumer protection authorities in Canada and Europe and some other 

more developed economies, but we continue to try to work and 

build these kinds of relationships. 

Mr. COHEN. So if I may, Congressman, the problem with counterfeit and shoddy substandard goods emanating from China is well 

known. Chinese exports are accountable for about 80 percent, if I 

remember correctly, of U.S. seizures of infringing goods. There’s a 

lot of litigation both within China and outside of China due to China’s manufacturing and sales of counterfeit and substandard goods. 

Under the JCCT rubric, there is a commitment by the Chinese 

to work on reducing the incidence of these goods. We’ve been trying 

to work with platforms such as Alibaba, JD.com, and others to address this problem. The first recourse is, of course, voluntary steps 

taken by legitimate platforms to take down the goods, to respond 

to complaints, and to respond to the complaints not only of consumers but of rights holders who observe the counterfeit goods. 
91 

There’s a huge magnitude to this problem in terms of the growth 

of the platforms, the sales coming from overseas, the facility and 

ease with which the goods can be distributed, including by small 

parcels, which are hard to detect. And it’s really an issue that skips 

many different agencies within U.S. Government and the Chinese 

Government, including our own Customs and Border Protection, 

our FBI, State and local enforcement, the USPTO, U.S Trade Representative, Federal Trade Commission. So it requires a lot of coordinated effort, including working with our rights holders and consumers to address the problem. But it’s going to take time and considerable effort. 

Mr. BISHOP. Thank you very much for your answer. 

Mr. Chairman, I yield back. 

Mr. ISSA. I thank the gentleman. 

We’ll now go to the gentleman from Texas, Mr. Ratcliffe. 

Mr. RATCLIFFE. Thank you, Chairman. I appreciate all the witnesses and your testimony today. I think this topic is especially 

timely, given the U.S.-China Strategic and Economic Dialogue 

that’s taking place this week. 

The trends that we’ve seen with respect to China enforcing its 

antitrust laws to advance its own industrial policies are troubling, 

to say the least. In fact, it’s difficult to imagine China having a 

truly objective antitrust law when the very text of that law states 

that its purpose is to promote a socialist market economy. 

But even more telling, I think, are the anecdotes that we see 

from American and European companies, which in some cases are, 

frankly, shocking. We’ve seen reports of intimidation tactics, bullying companies into accepting punishments without full hearings, 

and even in some cases, companies being told not to challenge their 

investigations or even bring their lawyers to some of the hearings. 

You know, beyond the direct impact of China’s behavior on 

American companies, I’m a little bit concerned that other rising 

economies out there will see China’s behavior and perhaps follow 

suit. So the bottom line is, I think, that if China wants to be taken 

serious as a leading economy, then these issues need to be addressed or remediated. 

Mr. Heather, I want to start with you. I appreciate you being 

here to testify today. I know this can be a sensitive issue within 

the U.S. business community and I know some folks may actually 

fear retaliation for speaking up and voicing their experiences. So 

I appreciate you being here to speak on behalf of U.S. companies. 

Let me start with what I mentioned before, the U.S.-China Strategic and Economic Dialogue. What meetings and conversations do 

you hope that our Administration is initiating in that regard? 

Mr. HEATHER. Well, I believe that the S&ED has come to a conclusion in China I think as of this morning. I believe the outcomes 

statements from those meetings were posted late this morning. I do 

not believe there were any new developments coming out of this 

S&ED related to competition policy. That being said, I think the 

S&ED and the JCCT have been enormously helpful in particularly 

addressing those egregious due process concerns that you mentioned. In fact, I think most of the folks I talked to would say that 

it’s probably been a year since those most egregious practices have 

been communicated back to the United States. So there is an effec-
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tive dialogue there at the highest levels of the United States Government with China and China has shown some responsiveness. 

That being said, in my testimony I said there are still due process concerns with a company being able to understand what the 

theory of harm is against them, being able to see the evidence 

China has collected so they can mount a defense and respond to 

that evidence. So there remains many due process challenges in 

China, but those most egregious offenses that you refer to in your 

comments are things that, at least for the last year or so, seem to 

have subsided and you can track that pretty closely with these high 

level commitments that came out of the S&ED and the JCCT. 

Mr. RATCLIFFE. Well, I’m glad to hear your perspectives on that. 

Let me ask you this question, are there areas of the United States 

broader economic and commercial policy toward China that you 

think might be exacerbating some of the concerns that we’re talking about today? 

Mr. HEATHER. I think the answer to that is absolutely. As I testified, that the AML can be used as a force for good in creating 

greater competition within the Chinese market, but the legal 

framework that is the Anti-Monopoly Law also allows for supporting the social development of the market economy, as they 

refer to it. It carves out space for their state-owned enterprises and 

does a number of other things that provide unique twists on what 

antitrust enforcement would be in the United States being consumer welfare focused. 

Mr. RATCLIFFE. Thank you. 

I move on quickly with my remaining time to you, Commissioner 

Ohlhausen. In your testimony you talk about China’s agencies pursuing noncompetition objectives through competition enforcement 

to promote certain industries or particular Chinese competitors. 

You also talk about the fact that the FTC is working with other 

agencies within our government to advance consistent cooperation 

enforcement policies. 

I want to ask you in my remaining time, what is the interaction 

with the other agencies? And more particularly, are you receiving 

any pushback at all or a message that maybe you need to stop or 

back off a little bit with respect to China for the sake of U.S.-China 

relations? 

Ms. OHLHAUSEN. We work closely with the Department of Justice, and the Department of Commerce on these issues. And what 

we try to do is give advice to the antitrust agencies in China as 

fellow antitrust enforcers so that we can engage with them on an 

expert-to-expert kind of dialogue. I don’t think we’ve gotten any 

pushback about what we’ve been doing or what we’ve been saying 

from other parts of the U.S. Government. 

Now, when I’ve talked to Chinese officials, we certainly have to 

be sensitive to the fact that their laws do allow for some noncompetition factors to be included. But one of the things that I’ve specifically advocated, and it’s consistent with the general U.S. position, is if they are taking noncompetition factors into account, they 

should be clear about that. It shouldn’t be just rolled up in a competition analysis so that we don’t know what part is competition 

and what part may be some kind of an industrial policy. So at least 

as a first step be transparent about the reasons for their decisions. 
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As a later step, it would be better to remove those kinds of noncompetition factors from an antitrust analysis completely. 

Mr. RATCLIFFE. Thank you, Commissioner. 

My time has expired. I yield back, Mr. Chairman. 

Mr. ISSA. I thank the gentleman. 

I’m going to follow up where that left off, though, Commissioner. 

China is part of the WTO, right? So any subjective, unwritten, we 

just win, you lose is subject to a challenge, isn’t it? 

Ms. OHLHAUSEN. I’m not a trade expert, but I think that’s correct. Certainly, they have to make commitments. 

Mr. ISSA. Right. But you’re an expert on unfair trade practices. 

Ms. OHLHAUSEN. Unfair trade practices being antitrust and consumer protection. 

Mr. ISSA. Right. But as the chief watchdog of consumer protection. 

Ms. OHLHAUSEN. Yes. 

Mr. ISSA. Domestically, what they’re doing of injecting nondefined subjective standards is in fact the kind of manipulation 

that you investigate in private enterprises all the time to find out 

how these unpublished wrong selective interpretations go on, right? 

Ms. OHLHAUSEN. Right. Well, certainly, in the U.S. our antitrust 

law has evolved so that we only consider competition factors in the 

competition analysis. 

Mr. ISSA. That wasn’t the question. 

Ms. OHLHAUSEN. Okay. 

Mr. ISSA. But I’ll go to Mr. Cohen. The Federal Trade Commission regularly goes after people with false and deceptive practices, 

implying that you can win when in fact you can’t. The WTO does 

require that there be essentially a transparent policy, and protectionism is inherent—not tariffs, but protectionism is inherently 

barred within the WTO, and the Administration, our government, 

can sue, as we are sued, if somebody believes we’ve crossed that 

line, correct? 

Mr. COHEN. As long as it offends a WTO requirement, that’s correct. 

Mr. ISSA. So in the case of Mr. Ratcliffe, his examples. The example of this dialogue of antitrust being mixed with, we just want our 

companies to win, that in fact could lead to WTO action, couldn’t 

it? 

Mr. COHEN. Again, the lead agency here is USTR, which is not 

represented. The WTO disciplines on antitrust are rather limited. 

There are certain provisions in the TRIPS Agreement regarding—— 

Mr. ISSA. Actually, I wasn’t talking antitrust. I was talking about 

other subjective standards that are causing determinations to be 

made that are inconsistent with the actual antitrust laws. 

Mr. COHEN. Perhaps if there are external influences that are inconsistent with the WTO requirements, such as national treatment 

or most favored Nations treatment in investment or market access, 

and those could be cognizable carried issues. 

Mr. ISSA. Thank you. Let me follow up with this sort of a general 

question, but I think it’s directed to the Commissioner primarily. 

Is it fair to say that active engagement—and I’ll use a term that’s 

my term, not yours—calling out China for its double standards on 
94 

intellectual property and on antitrust, calling them out in a respectful way, but consistently and aggressively, if you will, at least 

behind closed doors, isn’t that an essential part of what we have 

to do at a minimum to keep China’s inherent policies from tipping 

the scales against us? 

And I want to be careful. I’m not necessarily an expert on Confucianism, but it does appear as though China only does that which 

we push hard to make them live up to. Is that a fair statement 

somewhat in your estimation? 

Ms. OHLHAUSEN. Well, I do think it’s been important to have an 

honest but respectful exchange with the Chinese officials about 

where there might be deficiencies in their system or where there 

have been some inconsistencies. So for example, when the U.S. 

Chamber put out their report in 2014, the Chinese agencies had a 

press conference where they pushed back and they said, no, we are 

not administering our law in an unfair way. But what was important is they then continued to engage with us and we saw not just 

words but deeds followed on by that to have some improvements. 

Mr. ISSA. And you keep using the word ‘‘respectful,’’ and I think 

that’s critical. This is a large trade partner, but I’m going to ask 

respectfully each of you to answer yes or no. Is it true that China 

is abhorrent in their respect for intellectual property both patents 

and particularly copyright and trademarks? 

Commissioner? 

Ms. OHLHAUSEN. Are they—I’m sorry, I missed the word. Abhorrent? 

Mr. ISSA. Abhorrent was the word I used, but deficient, quite deficient by international standards. Is that fair to say? 

Ms. OHLHAUSEN. I think it’s fair to say that they’re weak. 

Mr. ISSA. Okay. Would you go further, Mr. Cohen? 

Mr. COHEN. Yes. They are somewhere between weak and abhorrent. Some areas they’re improving, but the track record is pretty 

bad. 

Mr. ISSA. And I’ll go with the ‘‘improving,’’ but I’ll stick with the 

‘‘abhorrent’’ too. 

Mr. Heather, you certainly represent a huge amount of companies that are constantly frustrated. Would you use the word abhorrent, deficient, regardless of improving below international standards of many developed countries? 

Mr. HEATHER. I won’t worry about the adjective. I will just simply say, yes, China’s enforcement of intellectual property rights is 

substandard. 

Mr. ISSA. Thank you. 

Mr. Horton, Professor Horton? 

Mr. HORTON. I would say seriously deficient. Addressing your 

comment quickly, the United States enabled China to get into the 

WTO, the United States has been China’s best economic ally in 

promoting its growth and helping it. And the United States is still 

the greatest economic engine on the face of the Earth. So if the 

United States stands up and tells the Chinese, look, you have to 

treat us with the same kind of fairness and equal rights that you 

want to instill in your own Anti-Monopoly Laws, that’s what it’s 

going to take if you want to continue having shipload after shipload 

of goods come here into the United States. 
95 

Mr. ISSA. So we should speak regularly and affirmatively if we’re 

going to go have them behave? 

Mr. HORTON. I would say we should followed Teddy Roosevelt 

and speak softly and carry a very big stick. 

Mr. ISSA. I thank the gentleman. 

I now go the gentleman from Georgia for a second round. 

Mr. JOHNSON. Thank you, Mr. Chairman. 

Ms. Ohlhausen, what has been the relationship between the FTC 

and, if you know, the Department of Justice in terms of the Chinese antitrust enforcement authorities? Have they reached out? 

What is the relationship between your agency and DOJ, if you 

know, and the Chinese enforcement agencies? And if you could describe that relationship, if any. 

Ms. OHLHAUSEN. Certainly. We signed a memorandum, the DOJ 

and the FTC in 2011 signed a memorandum of understanding with 

the three Chinese antitrust agencies. And what that does is establish a framework for cooperation and dialogue between the U.S., 

the senior competition officials in the U.S. and in the Chinese 

agencies. 

We also developed a guide for case cooperation on particular 

cases where we are investigating, the U.S. agencies are investigating and the Chinese agencies are—or a Chinese agency, usually MOFCOM, is investigating, to allow us to talk about it or coordinate in some way. So that’s some of the more formal ways that 

we do this. 

And under the memorandum of understanding we have regular 

high level meetings. We also have a lot of informal engagements 

and talks. And so, for example, as I mentioned, I’ve been to China 

on numerous occasions, often to meet with these officials and to 

talk with them, to further understanding, to raise important concerns that we might have about their enforcement. 

Mr. JOHNSON. So would it be safe to say that improvements are 

being made in terms of Chinese acknowledgment of American 

ideals in terms of antitrust enforcement? And also with respect to 

intellectual property, if you could comment about that. 

Ms. OHLHAUSEN. So I think there are improvements being made. 

I don’t think we are close to saying all the problems are taken care 

of. I do think that there has been progress. It’s been slow, it’s been 

very incremental. And one of the things that we often try to talk 

about or I often try to talk about is why these approaches, the U.S. 

approaches are not not just good for the U.S., but they’re good for 

the Chinese economy. 

Certainly, the Chinese officials rightly are caring about the Chinese economy and their growth and their innovation. And so I 

think it’s incumbent on us to explain to them why our approach 

will lead to the best outcomes for their economy and for their movement from a manufacturing economy to an innovation economy. So 

protecting IP rights can help their own industries advance, their 

own industries invest, and have them become stronger players in 

an innovation model. 

So I think that’s an important part of the dialogue. And when 

we point to the problems with them devaluing IP rights, it’s not 

just that it may hurt U.S. companies, but it may hurt their own 

economy in the long run. 
96 

Mr. JOHNSON. So this kind of dialog between an advanced Nation 

such as America and a developing Nation with respect to China, is 

this the way to go or should we—you said carry a big stick, Professor Horton. Is there a different way of approaching this than the 

way that we’re doing it now? Would you recommend another approach, Professor Horton? 

Mr. HORTON. Well, first we have to recognize that we’re dealing 

with essentially a dictatorship. The Chinese Communist Party is 

not in any way, shape, or form a democracy as we know it here in 

the United States. And that kind of government goes back thousands of years in China. So we’re coming to any negotiations with 

China from a very different perspective and standpoint. 

Putting ourselves in the Chinese Communist Party leader’s 

shoes, they see all the changes that are transpiring in the world. 

They fear what was happening in Tiananmen Square, they fear the 

spread of democracy in China. And so on the one hand they’re trying to tamp all of this down while at the same time creating this 

economic miracle that can help keep them in power by giving more 

money and goods to the Chinese citizens. 

So I think on the one hand we need to step back and say, we’re 

dealing with the Chinese from a very strong position. We have a 

very sound fundamental democracy. We have a very sound fundamental economy. We have excellent allies throughout the world. 

We have excellent trade relations. So we should not be intimidated 

by China’s growth or it’s 1.5 billion people. We should go into any 

negotiations with the Chinese and say, look, you know, we helped 

defeat the Japanese in World War II to liberate your country, we’ve 

been good allies with you, we’ve helped build your economic miracle, but you have serious, serious problems in terms of dealing 

with the rest of the world and it’s in your interest, as Commissioner Ohlhausen said, to step up to the plate and recognize this 

if you want to go forward as a sound economic partner throughout 

the world. 

Mr. JOHNSON. All right. I thank you, Professor Horton. 

And I yield back. Thank you, Mr. Chairman. 

Mr. ISSA. Thank you. And I’ll be brief the second round. 

Mr. Cohen, you were shaking your head during quite a bit of that 

in a positive way, so I thought I’d follow up a little bit. 

There is a government in China that looks out for China. Is it 

fair to say that two of the challenges businesses face, one of them 

is a Chinese centric, how do the Chinese view intellectual property? 

How do the Chinese view competition? Which is sort of a businessto-business one. And then there is the government’s desire to, if 

you will, protect its progress. Used to be it’s 10 percent, but whatever number it happens to state that it can achieve that. Is that 

fair to say that we have two pots there to deal with? 

Mr. COHEN. I think that’s a fair assessment. In fact, in innovation we see state-driven innovation and private sector innovation. 

The type that Professor Horton has mentioned is another example 

of that, one coming from the top down and one from the bottom up. 

Mr. ISSA. So when we have, as Commissioner Ohlhausen is dealing with, government-to-government activity, I presume that we’re 

dealing then with two sets of problems. One is that which the government controls directly, which is their policy and procedures, 
97 

their execution of laws, and then that which really has more to do 

with the very strong provinces and more local authority that often 

it’s like pushing a string, in my own words, that you can’t necessarily expect the government to control, but they can attempt to 

make a difference. Is that sort of a fair assessment of the China 

that we are dealing with that which they control, that which they 

influence? 

Mr. COHEN. There is—I mean, China is not a unified state, it’s 

not a Federal system, but, you know, there is such a saying that 

the emperor is far and that in the provinces there’s a little bit less 

control. But people still roughly follow national guidelines and the 

structural weaknesses such as the intervention of the party is pervasive. The courts are no more or less independent than any part 

of China because the party is still very active there serving its interests. 

Mr. ISSA. Well, you know, there’s a lot of lawyers here at the 

table. So isn’t it true, as it was more than a decade ago when I was 

with the late Henry Hyde in China, that they have practically no 

lawyers educated in the sense that we think of members of the 

bar? 

Mr. COHEN. The legal community has been under a lot of attack 

in China. They have educated a lot more lawyers, but many of the 

human rights lawyers have been thrown in jail, many of the outspoken lawyers have suffered repercussions. But at the same time 

the courts are proceeding well in a technical sense. So you have a 

very interesting moment in time where the courts are under pressure, yet at the same time, technically, they’re improving their expertise in a range of areas. 

Mr. ISSA. When I was there with Henry Hyde who made a major 

address, the number at that time was barely into double digits, 

sort of 10 percent of judges actually were lawyers. The court system was being administered by people who had not been trained 

in the law. 

Mr. COHEN. I think that’s no longer the case. 

Mr. ISSA. So it’s risen? 

Mr. COHEN. It used to be the case that the judges were all former 

military officials. They since have had to take an exam and they’ve 

gotten legal training and in many cases they not only have basic 

law degrees but graduate—— 

Mr. ISSA. So that’s a good news statement. 

Mr. COHEN. Yes. 

Mr. ISSA. Last question. I started with you, Mr. Cohen, and I 

want to follow up one more time. We, the United States, lead the 

way toward most-favored Nations and then WTO assert—ascension 

for China in the hopes that they would, after receiving it, then 

comply better with what they were not complying with ahead of 

time. And we talked about antitrust laws getting mixed with other 

noncompetitive or foreign competition, just waiting. 

What kind of a grade would you give China on how well we 

achieve that goal by giving them WTO in hopes that they would 

live up to a standard you’re supposed to have before you become 

a WTO member? 
98 

Mr. COHEN. That standard was to have a rules-based trading 

system, a transparency, independent courts, at least that, I think, 

were the aspirations. That is still very much a work in progress. 

Mr. ISSA. Okay. 

Professor, as a Case Western graduate like my brother, who did 

get admitted, last question for the whole panel, for you, you see 

China and you have some serious doubts, and you were very outspoken in that. Is it fair to say, though, that disengagement would 

in fact, by definition, allow them to keep doing what they’re doing? 

Engagement with some of the caveats that you presented here 

today is ultimately the answer for how we have our largest trading 

partner do better. 

Mr. HORTON. I think the Chairman’s comments today have been 

quite astute. We have no choice but to engage the country that has 

approximately 18 to 20 percent of the world’s population. China is 

not going to go away any time, it’s going to increasingly influence 

what’s happening throughout Asia and the world. And we should 

not be afraid of engaging with China. 

We have a very strong, fundamentally sound democracy and 

economy. We have nothing to fear from strongly engaging the Chinese, and over time, perhaps head being them toward the course 

of democracy. You know, we remember when communist China— 

or communist Russia broke up. How did that happen, over night? 

No, I think it was decades of public pressure and subtle pressures 

and just the people there seeing that there’s a better way of life. 

And the Chinese are traveling all over the country. You can look 

here in this hearing today, they’re here by the dozens. And they see 

that United States open ideal of democracy and freedom of speech, 

freedom of religion. These are wonderful guideposts for the future. 

And let’s hope that, over the coming decades, the Chinese will 

slowly begin to realize that and move closer to a democracy. 

Mr. ISSA. Thank you. 

In closing, I guess I’ll own up to the fact that I made my first 

trip to Hong Kong as a buyer in 1982 and made several hundred 

trips before I retired to come to Congress. I have great respect for 

the Chinese people. I had great respect for the Hong Kong business 

model and the governance that they managed to turn into a world 

standard of best practices. I appreciate the fact that the Chinese 

think of things in 10,000 years. We think of things in our couple 

hundred years. And apparently, that’s one of the reasons they’re in 

less of a hurry than we are to achieve the goals. And I don’t say 

that to be pejorative. I have great respect for where China has 

come so far. 

But this concludes our hearing for today. I want to thank all of 

our witnesses. You were all incredibly good. I want to particularly 

thank the Chamber for representing so many companies who, by 

definition, would prefer to have the Chamber speak on their behalf 

than to speak individually. 

Without objection, all Members will have 5 legislative days to 

submit additional written questions for the witnesses and additional materials for the record. 

And with that, we stand adjourned. 

[Whereupon, at 5:25 p.m., the Subcommittee was adjourned.] 
(99) 

A P P E N D I X 

MATERIAL SUBMITTED FOR THE HEARING RECORD
100 

Response to Questions for the Record from the Honorable Maureen 

Ohlhausen, Commissioner, Federal Trade Commission 
101 

f 
102 

Response to Questions for the Record from Mark A. Cohen, Senior Counsel, 

United States Patent and Trademark Office 
103 

f 
104 

Response to Questions for the Record from Sean Heather, Vice President, 

Center for Global Regulatory Cooperation, U.S. Chamber of Commerce 
105 
106 
107 

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