China to Tighten Anti-Monopoly Law Targeting S. Korean Chip, Auto Makers

As the relations between South Korea and China are getting tenser over the planned deployment of a U.S. Terminal High Altitude Area Defense (THAAD) anti-ballistic missile system on the Korean Peninsula, China is accelerating the improvement of its anti-monopoly law. Since the revised law is targeting items including automobiles and semiconductors, which are South Korea’s leading exports, South Korean companies can be hard hit.

According to the KOTRA Beijing Trade Center on Feb. 5, the Chinese government has recently set up its new detailed regulations or amend old regulations on the anti-monopoly law, and will reveal and implement the 6th anti-monopoly guidelines, which guide the procedure of anti-monopoly investigations, soon.

The 6th anti-monopoly guidelines consist of the anti-trust guideline for cars, the anti-trust guideline for the abuse of intellectual property rights, the management’s guarantee guideline in anti-trust cases, penalty reduction system guideline for price-fixing cases, the general condition and procedure for exemption of monopoly agreement, and the guideline for illegal income and penalty. The guidelines will also include a calculation method for illegal income when violating the anti-trust law, imposition of penalty surcharge, penalty reduction when cooperating with investigative authorities.

China’s anti-monopoly law was set up in September 2007 and came into effect from August 2008. The amendment and new guidelines are coming up in nine years after it first took effect. The anti-monopoly law is designed to induce a fair market competition in principle but it is allegedly distorted as “economic jingoism” means that drag foreign companies in order to promote the domestic industry as the blade of an investigative knife targets multinational companies.

In fact, many global businesses, such as Samsung, LG, Qualcomm, Google, Coca-Cola, Mitsubishi Electric and Panasonic have faced sanctions after the anti-trust law put into effect.

Six South Korean and Taiwanese companies, including Samsung Display and LG Display, were fined 350 million Yuan (US$51.33 million or 61.5 billion won) for price-fixing. In April last year, Shanghai Hankook Tires was also fined 2.18 million Yuan (US$319,023 or 380 million won) for price-fixing related to tire sales.

In particular, investigations into foreign firms are focused on automobiles and semiconductors, which are main export items in South Korea. Therefore, the stricter anti-monopoly law can serve as a factor limiting business activities of South Korean companies.

For example, global chip maker Qualcomm was imposed the largest fine ever of 6.09 billion Yuan (US$892.89 million or 1.06 trillion won) for abusing the patent rights in February 2015.