Is China Investigating Microsoft For Antitrust Violations?

Both the English and the Chinese web have been rife with news of a Chinese government antitrust investigation regarding Microsoft’s pricing of its software products.

The reports initially stated the PRC State IP Office was investigating foreign software companies for selling software at higher prices in China than in their home jurisdictions. This has been a common complaint in China and many foreign software companies have been concerned China’s new Anti-Monopoly Law would be used to attack legal IP monopolies obtained through copyright, patent and trademark law.

However, to use the anti-monopoly law to attack high prices would undermine the foundations of IP protection.

The news of such an investigation therefore raises serious concerns.

It appears however that these reports are false. Microsoft has stated it is unaware of any such investigation and the PRC State IP Office has issued a statement to the effect that it was not conducting any investigation and such reports were “seriously untrue.”

This reported denial makes perfect sense, for the following reasons:

1. The Anti-Monopoly Law has not yet come into force. That will not occur until August 1, 2008.

2. Regulations have not yet been issued.

3. The State Intellectual Property Office has the duty to conduct anti-piracy investigations. It does not have authority in the anti-monopoly area and there is no proposal to grant it such authority.

4. Copyright, patent and trademark are legal monopolies. Article 55 of the Anti-Monopoly law is consistent with the law of most developed countries in that it grants an anti-monopoly exemption for such legally obtained IP monopolies. As in most such laws, the exemption does not apply if the holder of the right abuses its monopoly power in a manner that harms competition. Note that this provision does not protect consumers. The only protection is for competition. High prices do not harm competition, they help competition. This is because they encourage others to enter into the market for the same product. There have been no indications China intends to act against this basic principle of anti-monopoly law.

We will have to wait and see on the truth of this report. Right now though, we are betting there is no such investigation.

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