China Probes Broadband Providers Over Suspected Monopoly

The Chinese government has launched antitrust investigations of two large state-owned telecommunications companies over alleged monopolistic activity in the market for broadband Internet services. China's National Development and Reform Commission (NDRC) is leading the probe of China Telecom Corp. Ltd. and China Unicom (Hong Kong) Ltd., who together control two-thirds of the Chinese broadband market. According to China's official Xinhua news agency, the NDRC, a state agency whose duties vary from monitoring the performance of national economy to examining and approving major construction projects, suspects the companies have used their market dominance to charge consumers higher prices. According to Bloomberg, both companies have said they will cooperate with the investigation. Xinhua reports that the investigation marks China's first national case involving large state-owned enterprises (SOEs) under a new 2008 anti-monopoly law. Anti-monopoly cases so far have all been related to foreign companies and their mergers and acquisitions of domestic companies in China, the highest profile being that of The Coca-Cola Co.'s unsuccessful $2.4 billion bid for China Huiyuan Juice Group Ltd. in 2009. China's largest companies are mostly SOEs, including banks like Bank of China and Industrial and Commercial Bank of China Ltd. (ICBC), and oil companies like China Petroleum and Chemical Corp. Ltd., better known as Sinopec. The New York Times reports that analysts see the move by the government as an attempt to placate consumers who are increasingly angry about the high prices being charged for basic services by SOEs, which are effectively monopolies in several sectors. If the NDRC's findings are upheld, both companies face fines of up to 10 percent of their revenue last year. China Telecom, China's top fixed-line operator, posted $34.5 billion in revenue last year while China Unicom, the second-largest mobile telecommunications company after China Mobile, posted $27 billion. Neither China Telecom nor China Unicom responded to enquiries about whether they had retained counsel. Foreign firms would be barred from directly representing a client in a Chinese government investigation, though many have sought to play a less formal role in anti-monopoly cases involving multinational companies. In August, The Asian Lawyer looked at how Chinese firms have rapidly built antitrust practices.