PRC’s Anti-Monopoly Law: Well-known Trademarks and Traditional Chinese Brands Are Part of National Security

Mr Steve Dickinson of the China Law Blog wrote an insightful article about Anti -Monopoly Law of the People’s Republic of China that became effective August 1, 2008.

Article 31 Anti-Monopoly Law: Where national security is involved in the case of acquisition of domestic enterprises by foreign capital or the participation by foreign capital in the concentration of undertakings by other means, in addition to a review on the concentration in accordance with this Law, a review on national security shall also be conducted in accordance with the relevant laws and regulations.

Mr Dickinson wrote: “The national security provision in the AML is taken from the 2006 Merger Guidelines. The AML provision is intended to follow the Guidelines, which provide for national security review at Article 12. Transactions that trigger review are those that affect “key industrial sectors,” the “national economy,” or that involve “well known trademarks or traditional brands.” “ Read more here.

Mr Jonathan Palmer and Ms Susan Finder of Heller Ehrman agree on this point with Mr Dickinson: “The Guidelines are likely designed as an interim measure pending the promulgation of China’s first comprehensive competition legislation, currently titled the Anti-Monopoly Law (ALM).“ Read more here.

Kalley Chen and Zhao Menghan of Kingwood PRC Lawyers wrote also about the merger & acquisition guidelines: “According to article 12 of M & A Regulation, “when foreign investors obtain an actual controlling equity interest through merger with or acquisition of a domestic enterprise which involves a key industry, involves factors which my impact State economic security or results in the possession of a well-known trademark or traditional Chinese brand of the domestic enterprise and the actual controlling rights of such equity interest and trademarks are transferred, then the parties shall report such information to MOFCOM (Ministry of Commerce IP Dragon).” Read more here.

UPDATE:
The EU Chamber of Commerce in China and the American Chamber of Commerce People’s Republic of China have welcomed the anti-monopoly law. However, the American Chamber is anxious how abuses of intellectual property will be defined before it will be considered a danger to the national security.

“There is a concern,” Bush (Nathan Bush, an antitrust lawyer with O’Melveny & Myers in Beijing IP Dragon) said, “that compulsory licensing as a remedy for anticompetitive conduct or commitments to licensing as a term of approving mergers may be used as a back door to reinforce broader industrial policies aimed at promoting indigenous innovation or the emergence of Chinese national champions.”

“Gregory Louvel, a lawyer with Norton Rose in Beijing, pointed to additional questions about merger reviews: whether authorities will do them quickly enough, and whether they will guard the confidential information that companies will need to hand over.

“The European chamber urged authorities to publish implementing guidelines soon. It said in a statement that its members were concerned among other things about how provisions related to intellectual property rights would be applied.
“Its current wording leaves room for unfair application of provisions against IP rights holders,” it said. “The chamber hopes that the above uncertainties will be clarified by the implementing guidelines to be issued as soon as possible.”“
Read Mr Subler’s article for Reuters via the International Herald Tribune here.