International Standards of Procedural Fairness and Transparency in Chinese Investigations

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Fay Zhou, John Eichlin, Xi Liao, Feb 12, 2015

Written with co-authors John Eichlin & Xi Liao

Recent years have witnessed intensified enforcement activities by Chinese enforcement authorities targeting a broad range of alleged anticompetitive conduct under the Anti-Monopoly Law. The National Development and Reform Commission and the State Administration for Industry and Commerce, together with their regional offices, have firmly established their position in the international spotlight with a series of high-profile enforcement actions against domestic and foreign companies. Headline cases in recent years involving multinational companies include fines related to the global auto parts cartel investigation, probes of resale price maintenance by foreign auto manufacturers, and high-profile investigations into Qualcomm and Microsoft reportedly focused on abuse of dominance and patent incensing practices.

With the attention raised by these high-profile investigations, these authorities have drawn international scrutiny for both the substance of the investigations and how they have been conducted. Procedurally, critics have argued that these investigations have lacked transparency and that the targets were not afforded sufficient protections under international norms of procedural fairness. In particular, they have argued that many investigations have been characterized by limited opportunity for companies to prepare potential defenses. Anecdotal accounts have also circulated that parties under investigation have been denied legal representation and subject to intimidation tactics by the authorities seeking confessions or price concessions. While these concerns may be overstated in certain areas and do not necessarily reflect current enforcement practices, they serve as a valuable framework for assessing international perceptions of procedural fairness and transparency in China.

This article provides an overview of some of the areas of investigation procedure in China that have drawn criticism under international procedural fairness and transparency standards, including a meaningful opportunity to prepare a defense, the right to the protections of legal counsel, and transparency in decision-making.

The article also provides insight into the Chinese authorities’ reaction to the international criticism and how they have sought to provide companies with greater comfort on procedural protections. These efforts have included measures to further develop their best practices as well as to clarify existing enforcement practices where there may be a misunderstanding in the international business community.

Finally, the article discusses how certain important procedural protections can be further improved and developed. Overall, the Chinese enforcement authorities should be recognized for their receptiveness to external comments in developing their enforcement practices and for their willingness to promote further improvements to address international concerns about procedural fairness and transparency.