The penal action against Samsung and LG, and four Taiwan companies, earlier this month for manipulating the prices of LCD panels on the Chinese mainland sent another signal to multinational companies to abide by China's Anti-Monopoly Law.

Slapping fines on the companies for price-fixing on the mainland is in line with the extraterritorial jurisdiction of the Anti-Monopoly Law, which is an international practice.

Many countries and regions have included mergers and acquisitions (M&As) between "real" overseas-funded enterprises that have their headquarters abroad in the list of antitrust review.

The Anti-Monopoly Law states that the law will apply to enterprises' conducts outside the People's Republic of China if they have restrictive effects on or eliminate competition in the domestic market of the PRC. In other words, the extraterritorial jurisdiction system of the law also pursues the principle of effect, though it is not explicitly stated.

China, as the world's largest home appliance producing country, largest exporter of home appliances and largest home appliance sales market, is also the biggest victim of price-fixing by Samsung, LG and other companies. Thus the penalties imposed on the companies are more than justified.

Overseas companies that want to expand their operations on the mainland should understand that their actions, even if taken outside China, fall within the purview of Chinese economic laws if they have a large enough impact on the Chinese market.

Today, China can use the extraterritorial jurisdiction of the Anti-Monopoly Law because it is the world's second largest economy and the second largest importing country. And the huge potential of the Chinese market means that no company can afford to lose.

The extraterritorial jurisdiction system of the Anti-Monopoly Law applies not only to price manipulation, but also to concentration of business operators, that is, M&As.

The Ministry of Commerce has taken the first step in implementing the extraterritorial jurisdiction system of the Anti-Monopoly Law in M&As. Since giving the conditional green light to InBev's acquisition of Anheuser-Busch, the ministry has reviewed more than 10 anti-monopoly extraterritorial jurisdiction cases on M&As that include Google's acquisition of Motorola Mobility, Western Digital's acquisition of Hitachi Global Storage Technologies and Pfizer's acquisition of Wyeth.

Because many foreigners are ignorant of China's laws, it is important to emphasize the importance of the extraterritorial jurisdiction of the Anti-Monopoly Law. On June 5, 2009, BHP Billiton and Rio Tinto announced plans to set up a joint venture to operate their iron ore business in Western Australia. On the same day, Colin Barnett, premier of Western Australia, told the media that he wanted Chinalco to invest capital in Rio Tinto instead of seeing an alliance between Rio Tinto and BHP Billiton, because he feared the iron ore in Pilbara would be controlled by one company.

Barnett said a successful alliance of the two giants needs the approval and support of Australian Foreign Investment Review Board, Australian Competition and Consumer Commission, Western Australia state government and parliament. Internationally, he said, it needs the approval of the European Union and the US Department of Justice. But he did not mention the extraterritorial jurisdiction of China and other big Asian steel-producing countries over the joint venture of the two iron ore giants.

China, Japan, and the Republic of Korea are the world's major steel producing and iron ore importing countries, and according to the principle of effect they are more qualified than the US and the EU to use their extraterritorial jurisdiction over the case. China bought 70 percent of the 270 million tons of iron ore that BHP Billiton and Rio Tinto exported in 2009. As the largest buyer of the two iron ore giants, China's authority to examine and approve the case was greater than that of the US and the EU.

To apply the extraterritorial jurisdiction of the Anti-Monopoly Law is not to deteriorate the business environment in China. In fact, the aim is just the opposite. In the LCD panel price-fixing case, the companies involved have been ordered to pay 144 million yuan ($22.8 million) in fines and return 172 million yuan of extra payment to mainland buyers. The government has confiscated 36.75 million yuan of the companies' illegal gains, too.

Though this is the severest fine imposed by the mainland on overseas companies, it is much less than that of the US, the EU or the ROK because the Anti-Monopoly Law was enacted only in 2008 and cannot be applied with retrospective effect.

Although violations of the law must be investigated and dealt with accordingly, the goal of the Anti-Monopoly Law is not to hound one or some enterprises to death. On the contrary, it is to establish a normal market order, because China is not in favor of punishing any company beyond the purview of the law.

Moreover, the astronomical fines imposed by the US and the EU in anti-monopoly cases are usually based on the global sales of the enterprises involved, which tantamount to plundering other countries' wealth. Such unfair practices are undesirable for China and fated to meet with growing opposition.

Seen in the light of fairness, the Anti-Monopoly Law makes the business environment in China better than that in the US and the EU.

The author is a researcher at the International Trade and Economic Cooperation Institute of the Ministry of Commerce.

(China Daily 01/10/2013 page9)