Top Stories
Top Stories

Western companies appear to push back against Chinese crackdown

Neil Gough
Getty Images

For months, foreign companies in China have been quietly enduring increased scrutiny from Chinese government anti-trust enforcers, issuing only occasional terse statements as they have been increasingly targeted by surprise raids on their offices, protracted investigations of their operations and escalating fines.

Now, tentatively but together, they appear to be pushing back.

On Wednesday, the U.S.-China Business Council, a group that lobbies on behalf of about 220 large American companies with operations in China, issued a report taking direct aim at China's recent enthusiastic application of its six-year-old anti-monopoly law and highlighting ways that it says enforcement could be improved.

Read MoreThis is what China's antitrust drive is really about

"For American businesses operating in China, China's A.M.L. regime is creating more questions than answers," John Frisbie, the president of the Washington-based council, said in a news release, referring to the anti-monopoly law. "Will China use the A.M.L. to protect its domestic industry rather than promote fair competition? Is the Chinese government using the A.M.L. to force lower prices, rather than letting the 'market play the decisive role' as enshrined in China's new economic reform program?"

"The answers are not fully determined yet, but in at least some cases so far," Mr. Frisbie said, the council "sees troubling reasons for concern."

China's anti-trust clampdown has already taken aim at scores of companies, both foreign and domestic, including recently against Microsoft, Qualcomm, Daimler, Volkswagen and a dozen Japanese manufacturers of auto parts and bearings. Actions against foreign companies tend to receive greater news media attention, but the companies themselves, which generally lack the political patronage networks that their Chinese counterparts enjoy, tend to lie low, once targeted. Experts say it is unheard-of for a foreign company to speak out against anti-trust action in China, let alone to try to file an administrative appeal.

Read MoreHow firms learn to live with China antitrust raids

But the council's report is only the latest distress signal from the foreign business community in China. On Tuesday, the American Chamber of Commerce in China published the results of a survey of members showing that 60 percent of the respondents felt foreign business was less welcome in China and 49 percent believed foreign firms were being singled out in recent pricing or anti-corruption campaigns.

Last month, the European Chamber of Commerce in China issued a statement on recent anti-monopoly enforcement actions, citing "numerous alarming anecdotal accounts from a number of sectors that administrative intimidation tactics are being used to impel companies to accept punishments and remedies without full hearings."

"Practices such as informing companies not to challenge the investigations, bring lawyers to hearings or involve their respective governments or chambers of commerce are contrary to best practices," the European chamber's statement said.

Tracking China's antitrust activism

The 48-page report by the U.S.-China Business Council highlights some similar worries, noting that 86 percent of the companies it surveyed expressed some concern about competition enforcement activities in China. Companies that have fallen under antitrust scrutiny in China complained about a lack of due process, unfair treatment, lengthy review periods for approving mergers and acquisitions and the lack of transparency in how rulings are reached and fines are set.

Examples include unidentified companies' being pressed by Chinese anti-trust enforcers to admit guilt without having a chance to see or respond to the evidence against them, or even to be informed about why they are under investigation, according to the council's report. Companies also reported being denied the chance to call their legal representatives before enforcers carried out surprise raids on their offices — a right that is generally afforded in the United States and Europe — and their lawyers' being excluded from the protracted negotiations that can ensue.

"Targeted or not, foreign companies have well-founded concerns about how investigations are conducted and decided," said Mr. Frisbie, the council's president. "Due process, transparency and the methodology for determining remedies and fines all need improvement."

Read MoreChina foreign investment pattern changes as challenges grow

So far, it is primarily foreign business lobbying groups that are sounding the alarm,although certain complaints about China's anti-monopoly law enforcement did figure in the most recent Strategic and Economic Dialogue. For that dialogue,Secretary of State John Kerry and Treasury Secretary Jacob J. Lew of the United States traveled to Beijing in July for annual bilateral talks with China's state councilor, Yang Jiechi, and vice premier, Wang Yang.

"The objective of competition policy is to promote consumer welfare and economic efficiency rather than promote individual competitors or industries, and that enforcement of their respective competition laws should be fair, objective, transparent, and nondiscriminatory," the two sides said in a news release after the talks.

More from the New York Times:

Bloomberg to Return to Lead Company He Founded
India's Education Act Aims to Lift the Poor
Grading Teachers, With Data From Class

If China's anti-trust actions are giving Western companies a chill, it comes against the backdrop of an already frosty investment environment.

Foreign direct investment into mainland China fell 17 percent in July compared with a year earlier, and fell 0.4 percent, to $71.1 billion, in the first seven months of the year. The figures, which exclude the financial sector, showed investment from Japan was down 45.4 percent in the first seven months, while American investment fell 17.4 percent and European investment fell 17.5 percent.

China's slowing economic growth and rising labor and other operating costs no doubt weighed on investment flows. But the country's antitrust actions are unlikely to help improve the situation.

Read MoreEuropean companies slam Chinese antitrust probes

In announcing the investment figures last month, Shen Danyang, a spokesman for China's Ministry of Commerce, was quick to reject any connection between declining investment and the energetic enforcement of the anti-monopoly law.

"Groundless speculation is completely unnecessary," Mr. Shen said, according to Xinhua, the official news agency. Investment flows may fluctuate as China readjusts its economy, he said, "but such fluctuations are not evidence for changing trends."