China desperately needs anti-monopoly legislation, says a report released after a year-long investigation.

The report focuses on the behavior of multinationals to avoid competition. It was completed by the fair trade bureau of the State Administration for Industry and Commerce.

The report, the first of its kind in the country, says some multinational companies command obviously dominant positions in their industries in China and use their advantageous position to curb competition.

For example, Microsoft's operating system software and Tetra Pac's packaging materials have what amounts to absolute monopolies, each with a 95 percent share of the Chinese market.

Eastman Kodak, which formerly held a more than 50 percent of China's film market, is expected to further consolidate its market dominance after taking another 20 percent from its only Chinese rival Lucky Film Corp.

According to the report, some multinational companies use unfair pricing and unfair deals to safeguard their monopolies.

Some sell products below cost to squeeze out Chinese competitors.

On the opposite end of the spectrum, some multinational set prices in China higher than that in other countries for unreasonable profits.

Others buy the exclusive promotion rights of supermarkets during busy seasons, telling them to sideline other brands or face losing deals.

Some multinationals even have agreements in place to curb competition, a practice known as hardcore cartel, the report said.

For example, some international liners unilaterally have been collecting terminal handling charges as well as freight charges since January 15, 2002, despite strong objections from Chinese companies, according to the report.

At the same time, mergers and acquisitions, which sometimes help multinationals consolidate monopoly positions meet with few legal limits in China.

Lu Fu, a professor from the China University of Political Science and Law, said the report shows that a complete legal system against abuse of monopoly and unfair competition is immediately needed in China.

While continuing to welcome their investment, China is learning about the potentially negative effects of multinational giants, he said.

Some attempts to curb competition and create monopolies are seldom seen in foreign countries, Lu said.

He said anti-monopoly legislation and revising the existing unfair competition law are necessary steps to curb anti-competition acts of multinational companies.

Existing laws lack provisions against certain acts that curb competition, such as selling tie-in goods, setting unfair prices to subdue competitors and price discrimination, he said.

There is no law regulating monopoly practices. Drafting of a law started in 1994, but it has yet to be put in place.

China's anti-monopoly provisions are scattered in many laws and regulations. And the main ones are the 1993 Law Against Unfair Competition, the 1998 Price Law and the 2000 Bid and Tender Law.

(China Daily May 25, 2004)