Three years ago, China’s first comprehensive antitrust law, the hotly debated Anti-Monopoly Law of the People’s Republic of China (PRC), took effect. Late last month, China took another significant leap into the global arena of competition policy and enforcement when it signed a widely anticipated Memorandum of Understanding (MOU) on Antitrust and Anti-Monopoly Cooperation with the United States.

According to its stated objectives, the MOU arose from a mutual desire to “enhance the effective enforcement” of “competition laws and policies by creating a framework for long-term cooperation between U.S. antitrust agencies and the PRC anti-monopoly agencies.” This development is not surprising given that U.S. antitrust authorities were consulted by the PRC when drafting their first-ever antitrust law.

The MOU provides that, subject to “reasonably available resources,” the U.S. and PRC agencies intend to work together by: “(a) keeping each other informed of significant competition policy and enforcement developments in their respective jurisdictions; (b) enhancing each agency’s capabilities with appropriate activities related to competition policy and law such as training programs, workshops, study missions and internships; (c) exchanging experiences on competition law enforcement, when appropriate; (d) seeking information or advice from one another regarding matters of competition law enforcement and policy; (e) providing comments on proposed changes to competition laws, regulations, rules and guidelines; (f) exchanging views with respect to multilateral competition law and policy; and (g) exchanging experiences in raising companies’, other government agencies’ and the public’s awareness of competition policy and law.”

The MOU also states carefully that “when a U.S. antitrust and a PRC anti-monopoly agency are investigating related matters, it may be in those agencies’ common interest to cooperate in appropriate cases consistent with those agencies’ enforcement interests, legal constraints, and available resources.” One of the stated legal constraints is confidentiality. Specifically, the MOU provides that the agencies “do not intend to communicate information to the other if such communication is prohibited by the laws governing the agency possessing the information or would be incompatible with that agency’s interests.” At the same time, to the extent information is communicated between agencies, each side is expected to maintain its confidentiality.

Recognizing that the MOU is merely a broad framework of cooperation, the U.S. and PRC agencies also intend to develop in the future “detailed work plans of cooperative activities … , which may include law enforcement capacity building and other activities.” Although there is no stated time frame for producing these work plans, the “U.S. antitrust agencies and the PRC anti-monopoly agencies plan to evaluate the effectiveness” of the MOU’s stated objectives “on a regular basis to ensure that their expectations and needs are being met.”

Not surprisingly, reaction to the MOU has been mixed, with some critics focusing on what they see as China’s early track record in enforcing its highly touted Anti-Monopoly Law. Perhaps the most widely reported incident occurred in 2009, when Chinese regulators blocked Coca-Cola’s $2.4 billion bid to acquire Huiyuan Juice. In 2008, China also blocked the Carlyle Group’s plan to buy a majority stake in Xugong Group Construction Machinery Co. Ltd., which, at the time, was seen by some as a “step back” for China’s capital markets. Some have expressed outrage that the United States would allow China to have any say over antitrust laws that govern American citizens. Indeed, at least one commentator has stated that while Chinese anti-monopoly laws are developing quickly, they are far from mature.

Despite this criticism, U.S. Federal Trade Commission Chairman Jon Leibowitz has come forward in the past few weeks to quell criticism that China has been using competition laws to improperly block the expansion of global firms within that country. He stated that China’s anti-monopoly laws and their implementation have “shown a lot of promise” and that it “takes a while for any agency to hit the institutional sweet spot.”

Although refusing to comment on specific cases (such as the two blocked transactions noted above), Leibowitz stated that any “new agency, even one that shows great promise, may have a hiccup or two.” And while some may scoff at the notion of allowing China to provide input on U.S. antitrust law, others see the United States’ ability to comment on China’s anti-monopoly laws as a significant way to protect U.S. investments in China.

As explained by Assistant Attorney General Christine Varney in remarks delivered last month, the MOU serves as a recognition that in today’s global economy, it is increasingly important for competition agencies in different jurisdictions to cooperate in addressing and, where necessary, investigating complex international transactions and conduct. Varney also appeared to recognize, without specifically stating, how the MOU could build trust between the two nations and ease early skepticism regarding how China’s anti-monopoly laws have thus far been enforced. Specifically, Varney stated that, “as contemplated by [the MOU], our confidence and trust in one another should grow … whether we are discussing particular substantive or procedural issues … or working together on individual investigations.”

Continuing the theme of building trust, Varney stated that if the United States and China are going to cooperate effectively, “we must also build trust, not just between ourselves as competition law enforcement authorities, but also with the international business community. … One way to build this trust is to provide transparency in the rules that we are applying and the outcome of our enforcement actions, so that businesses can develop an understanding of the competition rules that apply to them generally” and how those rules are likely to be applied in specific cases.

Considering that the Chinese Anti-Monopoly Law is still a work in progress, any effort to explain or clarify the rules should be much appreciated by any foreign business that is considering expansion into China but may have some trepidation based on the recent experiences of Coca-Cola and the Carlyle Group. Moreover, entering into the MOU with China is consistent with the United States’ previous efforts to harmonize global antitrust policy.

This is not the first time that the United States has partnered with another nation to promote effective competition regulation. The United States has similar agreements with Russia, Japan, Israel and the European Union. It has also been reported that the United States is interested in partnering with additional countries to increase cooperation in the area of global competition enforcement and policy, including developing countries such as India, and create a seamless antitrust enforcement net worldwide.

Because the MOU was only signed last month, it remains to be seen whether this newly cemented relationship between the United States and China will produce cognizable benefits for U.S.-based businesses and consumers. This may come into better focus once the two nations develop the detailed working plans promised by the MOU or when we see affirmative evidence of substantial investigational cooperation, unhindered by confidentiality concerns.

At the very least, the MOU reaffirms China’s commitment to further developing its Anti-Monopoly Law and represents a good-faith effort that it wants to play a larger role in the expanding global community of agencies working together to better competition policy and enforcement and, in turn, provide some semblance of antitrust predictability for global businesses. Stay tuned. •

CARL W. HITTINGER is the chairman of DLA Piper’s litigation group in Philadelphia, where he concentrates his practice in complex commercial trial and appellate litigation with particular emphasis on antitrust and unfair competition matters. Hittinger is also a frequent lecturer and writer on antitrust issues and has extensive experience counseling clients on all aspects of civil and criminal antitrust law. He can be reached at 215-656-2449, or carl.hittinger@dlapiper.com.
 
MATTHEW A. GOLDBERG is an associate at the ?rm’s Philadelphia of?ce and his practice involves a variety of complex commercial, products liability and antitrust litigation matters.