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Antitrust lawyers are gearing up for a new law in one of the world’s largest and fastest-growing economies.

China’s first anti-monopoly law goes into effect on Aug. 1, and attorneys at global firms are trying to figure out how it will affect their clients, particularly multinational corporations with significant market share there. There are also concerns about whether politics will play a role in the implementation of the new law.

"If the third-largest economy in the world makes a dramatic move in its position … then every antitrust lawyer in the world sits up and listens," said Hanno Kaiser, an antitrust partner in Latham & Watkins’ San Francisco office.

The law will add the country to a short list of key jurisdictions to notify of prospective mergers, Kaiser said. The locations currently on the short list — the "grand tour," as Kaiser put it — are Washington, D.C., and Brussels, the seats of antitrust-related regulatory bodies in the United States and the European Union. It’ll also create investigative work as enforcement actions arise.

In the short term, large multinationals and companies whose business hinges on intellectual property should be most concerned, lawyers said. IP rights to some technologies may be viewed as damaging to fair competition by Chinese regulators.

"This is going to be an area of extreme importance to Silicon Valley clients," said David Lisi, a partner in Howrey’s East Palo Alto office.

Attorneys say multinational clients with a strong presence in China are anxious, too.

"For sure, it’s making them nervous," said Peter Wang, the Shanghai-based co-head of Jones Day’s international litigation practice. Larger companies, he said, risk being characterized as "dominant" within a market. That label carries restrictions under the new law.

Despite some concerns over whether the law will be enforced fairly, lawyers said it and the inherent promise of predictability are being met mostly with open arms.

"I think many American companies are quite happy that there’s going to be a more regularized antitrust regime in China," said Stephen Bomse, the San Francisco-based chairman of Heller Ehrman’s global competition practice. "It’s always a good thing if you know what the rules are," he said.

MORE BUSINESS, AND NERVES

Wang said that in recent years he has spent between 5 and 10 percent of his time on antitrust matters in China. But that may soon change. "I think it could go beyond 50 percent," he said.

For years, firms have steadily rushed into China — recently, Heller Ehrman opened in Shanghai in December, and Nixon Peabody placed two Bay Area lawyers there in March — and lately antitrust lawyers have begun the migration, too.

"We’ve noticed a lot of firms sending out [European] antitrust practitioners to Asia," said Peter Alexiadis, an antitrust partner in Gibson, Dunn & Crutcher’s Brussels office. European lawyers might be better prepared to represent clients than U.S. lawyers, he said, because views on competition in China are more similar to those in Europe.

"The mindset that has gone behind this legislation is clearly European," Alexiadis said.

Lawyers said they are reading up on the new law, attending conferences and discussing the legislation with clients and partners in China.

"We’re trying to collect as much wisdom as we can," Lisi said.

The new law will apply to companies with significant market share in China. Wang estimates that there are hundreds of foreign businesses that might fit that description, and lawyers said even defining a market can be contentious.

The law not only empowers Chinese regulators, Alexiadis pointed out, it also empowers businesses. A provision allowing companies to file civil suits against rivals is another significant cause for concern, he said.

"People are very, very scared about these damages actions being used as a means of really hobbling a multinational company doing operations in China," he said.

But it’s not just the ability to do business in China that’s of concern, Alexiadis said. Under the new law, regulators could decide to level a competitive playing field at the expense of intellectual property protections.

"You’ve got to be a little bit worried that somebody’s going to bring an action to ransack your IP rights," he said. Such actions can only be brought against companies with abusive practices regarding IP rights, he said, but "you’re not going to know what that’s going to mean in practice."

The anti-monopoly law may also be, in part, a response to foreign regulatory regimes, said Lisi, who attended an April seminar on how the new law relates to intellectual property.

"I was surprised at the intensity and unanimity of the belief that this monopoly law was intended to address what they viewed to be abuses — that was the word we heard over and over — of the intellectual property laws of a number of Western countries, primarily the U.S.," he said.

Those perceived abuses include the prosecution of Chinese companies in foreign venues such as the International Trade Commission, a fast-acting and relatively prolific agency in Washington, D.C., tasked in part with protecting domestic IP holders from infringing imports.

There is some concern among the Chinese, Lisi said, that intellectual property enforcement in other countries creates IP "monopolies" that might limit China’s ability to fully use its intellectual power and labor force.

Some attorneys said the law seems to be an attempt to protect local companies in China against the flood of overseas goods into the country as its economic strength develops.

"There’s a strong current that this law is meant to push back and it is meant to provide a level playing field in China," Lisi said.

Wang agreed. "There has been some sort of criticism in the media, on the Internet and even some unofficial kind of government reports complaining about the dominance of some foreign brands in China," he said.

AN ABSTRACT SWORD

Preparing for the actual application of the law is difficult, lawyers said. While the text of the law is fairly similar to European and U.S. regulations, there’s a lot of room for interpretation, especially without precedent as a guide.

"That’s the problem here," Alexiadis said. "There’s a lot of leeway that the authorities have in interpreting this stuff, which would make a few people a bit queasy."

"Competition statutes are almost inherently, by their very nature, abstract," said Nathan Bush, a counsel in O’Melveny & Myers’ Beijing office.

As a result, there is some concern over whether enforcement of the law, which carries exceptions for some state-run businesses, will be motivated by politics.

"It’s a fairly large sword that’s still in its scabbard," Bush said.

Despite the concerns, several lawyers were optimistic about the law, which they viewed as modern and relatively fair, and said it marks another step toward a more liberal Chinese economy.

"China has been on its cautious, but very deliberate, path to gradually move toward a more market-oriented economy," as opposed to a state-controlled one, Kaiser said.

"This anti-monopoly law is a piece in the puzzle."

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