AROUND THE WORLD WITH SEYMOUR MANSFIELD
Legal News with an International Perspective
Seymour J. Mansfield, Attorney at Law
This month's column notes the lost hopes and opportunities for a Pakistani turnaround with the tragic assassination of former Prime Minister Benazir Bhutto. We also highlight the significant advances made by China and India in laying the ground work for protecting consumers and businesses from unfair trade and competition. Largely model on U.S., United Kingdom and European Union laws, this recent legislation is seen by legal scholars as a good beginning. The proof will be in whether these laws are actually, effectively and impartially enforced to protect both national and foreign interests.
Things Take a Tragic Turn in Pakistan: Bhutto's Assassination
Last month I wrote about the historic display of support made by U.S. attorneys for their colleagues in Pakistan in the wake of Pakistani President Pervaiz Musharraf's declaration of a state of emergency and jailing of Pakistani lawyers and judges. At that time, I shared with others a sliver of guarded optimism that things might be moving in a positive direction for Pakistan.
Those hopes were shattered on December 27, 2007, when former Prime Minister Benazir Bhutto was assassinated after departing a Pakistan Peoples Party ("PPP") rally in Rawalpindi, two weeks before the scheduled Pakistani general election of 2008 where she was a leading opposition candidate.
Whatever view you may have of the controversies and intrigue that had swirled around Benazir Bhutto for the last two decades, her death was a huge setback in that region for the hopes for greater stability, democratic government and moderate Muslim influence. The fact that a western educated woman, with degrees from both Harvard and Oxford, who carried the marquis of the powerful Bhutto family and was a proponent of moderate secular Islam, had been and might again become Pakistan's top national leader was a tremendous inspiration to countless numbers of women in the Muslim (and non-Muslim) world, and her election would have signaled a resurgence of moderate secular Islam in a country ravaged by radical Jihadist Islam.
Bhutto's election and power sharing arrangement with the Pakistani military (still led by Musharraf) was viewed by many as forging a stronger ally in the fight against al Qaeda, regional and global terrorism. (Indeed, Bhutto had indicated that, if elected, she would be open to allowing NATO troops into Pakistan's northern region where Osama Bin Laden is believed to be hiding.)
This dramatic change was also viewed by many as planting the seeds for a viable moderate Muslim democracy which could better achieve a stable and lasting peace with India ending their long simmering hostilities over Kashmir and other issues (with both countries at or near the point of delivering nuclear weapons).
With Bhutto's death, despite her husband and son stepping in as the new Co-Chairs of the PPP, most pundits fear there is no opposition candidate who can win if and when the election takes place, nor popular enough to rally and unite moderate Muslim factions to take their country back from radical factions and military autocrats.
China and India Adopt Antitrust Laws
The two largest trade partners in Asia, China and India, have put out a much noted sign of their commitment to "free market capitalism." Both China and India enacted significant antitrust legislation in late 2007 which will take effect later this year. Whether these new laws on the books prove to be mere lip service or actually enforced antitrust protections is yet to be seen. Regardless, in creating a more sophisticated legal infrastructure, this is a significant step forward.
China Establishes Its Comprehensive Antitrust Regime.
On August 30, 2007, China's National People's Congress passed China's first antitrust law, to become effective August 1, 2008. The law prohibits restrictive agreements, abuses of dominant market positions and mergers and acquisitions with the effect of restricting or eliminating competition. The law also addresses anti-competitive administrative action (i.e., public officials abusing their power by taking steps to eliminate or restrict competition) and provides for significant penalties for violations. The new law also establishes a government enforcement authority, the Anti-Monopoly Enforcement Agency (AMEA).
Specifically, the law provides as follows:
- Horizontal agreements (such as price fixing, supply restriction, market sharing and collective boycotts) are prohibited, along with resale price maintenance. In addition, the AMEA has the authority to add further categories of prohibited conduct and grant exemptions from all prohibitions.
- Additionally, the law prohibits "dominant" companies from abusive actions such as imposing unfair prices or terms, selling below cost to drive out competitors, refusing to supply, exclusive dealing, discriminating between equivalent trading partners and tying. The AMEA can add additional categories of prohibited conduct.
With regard to the definition of "dominant", the law lists various indicia of dominance, such as market share, ability to control the sales market or raw materials purchasing market. The law establishes a presumption of dominance on the basis of certain defined market shares as prescribed within the law. For example, unless proven otherwise, a company with a 50% market share is assumed to be a "dominant company" under the new antitrust law.
- Certain mergers and acquisitions ("M&A") activity, which has the effect of restricting or eliminating competition, is prohibited under the new law, although a public interest exemption exists. An M&A antitrust review regime is created, and activity which reaches certain thresholds or concentrations (which are yet to be determined) must now be submitted to the AMEA for review and approval.
- Furthermore, foreign takeovers are subject to additional scrutiny consistent with the existing review regime for foreign investment under Chinese M&A regulations which were enacted in 2006.
- Public authorities are now prohibited from engaging in any of the following actions: (i) requiring persons to deal with particular companies; (ii) blocking the free flow of goods between regions within China; (iii) blocking businesses from establishing local operations where they come from other regions, and (iv) making regulations or taking other action to eliminate or restrict competition.
- The law also prohibits abuse of intellectual property rights which restrict or eliminate competition, although "abuse" is undefined.
- AMEA is granted extensive investigative powers and its decisions will be subject to administrative review as well as judicial review. With regard to penalties, the maximum fines for breaches of the antitrust law are 10% of a company's prior year sales revenue or a lesser amount for minor breaches or self-reported breaches. Remedies under the law include orders prohibiting certain activities, appropriation of a company's profit attributable to a breach of the antitrust law as well as cease and desist and divestiture orders.
India Clears the Way for Appointment of Commission.
Less than a month later, on September 10, 2007, India passed amendments to the Competition Act of 2002. The amendments provide the Competition Commission of India with statutory powers necessary to enforce previously-enacted consumer protection and anti-competition statutes. The original 2002 established the Commission but left the appointment of members to the government, prompting court action and objection to the government's appointment powers. The new law establishes a selection committee to appoint members to serve on the Commission.
The adoption and strengthening of antitrust and consumer protection laws by two significant members of the global economy (China and India ranked No. 2 and 3, respectively, in Gross Domestic Product (GDP) behind the United States in 2007)-if enforced by Indian and Chinese authorities-should incrementally raise the confidence of developed countries in investing, doing business in and with these two ever growing Asian giants. To belabor the obvious, the ultimate proof will be in whether these laws are actually, effectively and impartially enforced to protect both national and foreign interests.
Seymour J. Mansfield is a founding shareholder of Mansfield Tanick & Cohen, P.A. His practice includes complex and class action litigation (including antitrust and consumer protection cases), as well as many other concentrations. Mr. Mansfield is the Firm's representative for Lawyers Associated Worldwide (LAW), www.lawyersworldwide.com , an association of independent law firms located in over 100 major commercial centers in fifty countries. In keeping with the increasing globalization of business, LAW membership empowers our Firm to serve the legal needs of clients that are expanding their operations and relationships into new domestic and foreign markets. Mr. Mansfield has served on LAW's Executive Committee (governing board) since 2004. He can be reached at 612-339-4295 or via email at smansfield@mansfieldtanick.com.
