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August 24, 2006

New China antitrust laws: should Microsoft worry?

Posted by Kristi Heim at 11:08 AM

As the Chinese government develops a system of antitrust law to regulate its booming market, large foreign companies like Microsoft could face pressure for their dominant positions, says this story from Bloomberg.

Microsoft Windows has long held more than 90 percent market share worldwide. The software giant has run afoul of antitrust regulators in Korea, Japan and Europe, but so far not in China. Competing unfairly in the market would seem to require that people are actually buying its product rather than copying it.

This story says companies with more than 50 percent market share in China will be investigated, and those using their position to set unfair prices will be fined up to 10 percent of annual sales.

The 50 percent market share figure seems to be somewhere between the U.S. and European standards, although in those cases market share isn't the only factor used to determine whether a company is the dominant player.

The draft law is enough to strike fear into the hearts of corporate executives overseas, some claim. But others say such worries are exaggerated.

"China has been on the verge of enacting antitrust laws for many years now," says Dan Harris, founder of Seattle law firm Harris & Moure and a former antitrust lawyer. "I will believe it when I see it."

China's new rules won't necessarily deter foreign investment, he said, "they will just make companies have to deal with antitrust laws like everywhere else."

Another question is how China is going to enforce such laws, when so few lawyers there understand antitrust law well, Harris said.

In China, there's often a great difference between the law itself and how it's used.

"The law can be great, but if enforcement is bad or disproportionate, that is really the big fear," he said.

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Tricia Duryee
Tricia Duryee
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