国际商法essay范文-Doing Business in China: The Latest Challenges-I

DoingBusiness in China: The Latest Challenges
Yee Wah is Senior Counsel in the Washington, D.C. office, practicing in the
Federal Section. She has extensive experience in antitrust matters, in additionto commercial litigation and transactional counseling.Yee Wah has been involved with global antitrust and competition-related
matters for multi-billion dollar companies. She provides antitrust counselingand analysis on all transactions, including acquisitions, divestitures and jointventures, and antitrust advice on relations with competitors, suppliers andcustomers, as well as on licenses and distribution relationships.
In addition, Yee Wah has represented clients in litigation, including antitrust,securities, commodities, intellectual property, contracts, insurance coverage,constitutional, consumer protection, bankruptcy and trusts and estates
disputes. She has also represented clients with regard to tender offers,acquisition agreements, patent and technology licensing, R&D collaborationsand trademark licenses.
Prior to joining the firm, Yee Wah was a partner at two New York City law
firms where she was responsible for providing advice on regulatory
compliance, marketing and all matters with potential antitrust exposure. Shewas also antitrust counsel in the law department of a Fortune 200 company.
指导法律essay Yee Wah is admitted to practice in New York and the District of Columbia. Sheearned her S.B. from the Massachusetts Institute of Technology, and wasawarded her J.D. from Columbia University Law School. She is an active bar
association leader and frequent writer and speaker on antitrust subjects. Yee
Wah is the Co-Chair of the 2005 Spring Meeting of the ABA Section of
International Law, and a member of the Section's Council. She is the immediate
past Co-Chair of the International Antitrust Law Committee of the ABA
Section of International Law, and the author of the chapter “Antitrust Issues in
the United States,” in A Practitioner’s Guide to the Acquisition of Companies in
the United States (City & Financial Publishing 2002). Yee Wah served on the
ABA task forces that drafted the 2003 and 2005 ABA Comments on the
proposed Anti-Monopoly Law of the People's Republic of China and the 2004
and 2005 ABA Section of International Law Comments to the Antitrust
Modernization Commission. She also participated in drafting the ABA
Comments on the European Commission Technology Transfer Block
Exemption in 2002 and 2003, and testified regarding those Comments at the
Joint Federal Trade Commission/ Department of Justice Hearings on
Competition and Intellectual Property Law and Policy in the Knowledge-Based
Economy in 2002. She is regular speaker at the Practising Law Institute on#p#分页标题#e#
antitrust issues in intellectual property. Yee Wah is a member of the OECD
Advisory Group on China Investment Policies and the U.S. Chamber of
Commerce China Industrial Policy Steering Committee.
Elizabeth Chien-Hale
钱德纯律師
学历 (Education):
LL.M. (“With Distinction”), Georgetown University Law Center, Washington DC, 1997
Concentration in international and comparative law
JD, University of Hawaii School of Law, Honolulu, HI, 1994
Articles Editor, University of Hawaii Law Review
Founding member of the Pacific Asia Law Journal
MA, University of California, Berkeley, CA, 1989
Concentration in artificial intelligence/computational linguistics
BSME, University of California, Berkeley, CA, 1983
Member of member of Pi Tau Sigma
专长 (Specialization):
Intellectual property law, international law
经历 (Experience):
Ms. Chien-Hale is a U.S. attorney specializing in patent and other forms of intellectual
property protection in the United States and abroad. She is also the founder of an
information-based non-profit organization Institute for Intellectual Property in Asia.
Prior to consulting, she headed the patent practice at Baker & McKenzie’s Hong Kong
office. She also worked for other law firms in Silicon Valley including Wilson Sonsini
Goodrich & Rosati, and Fish & Richardson.
Ms. Chien-Hale has substantial technical knowledge in a variety of electrical and electromechanical
arts, having drafted and prosecuted patent applications in telecommunication,
software, wireless and Internet-enabled devices, language-based data processing,
semiconductor processing and computer-related mechanical devices. She was also
involved in a number of intellectual property litigation cases, including cases in the
International Trade Commission and the U.S. District Court, relating to patent
infringements and trade secrets violation.
Ms. Chien-Hale has lectured and written, in both English and Chinese, on the topics of
international intellectual property protection and the Chinese constitutional structure. She
was a research scholar at the College of Law of the Peking University and taught at the
graduate school of the Chinese Academy of Social Sciences in 1995. She is a registered
patent attorney before the U.S. Patent and Trademark Office, and is licensed to practice in
the states of California, Hawaii, and the District of Columbia. She is also admitted to the
Bar of the U.S. Supreme Court. Her name has been included in the Who’s Who in
America, Who’s Who in American Law, and Who’s Who in American Women
Ms. Chien-Hale is also an active participant in the professional organizations. For the
American Bar Association, she currently co-chairs the Committee on International Patent
Treaties and Laws for the Intellectual Property Law Section, and co-chairs the Joint Task#p#分页标题#e#
Force between the Intellectual Property Law Section and the International Law Section
on PRC Intellectual Property Laws Amendments. She is also a co-chair of the
Intellectual Property Law Interest Group and the vice-chair of the Pacific Rim Interest
Group of the American Society of International Law.
Greg S. Slater, Senior Trade Counsel at Intel Corporation, provides legal and policy
advice on regulatory and trade issues affecting the Company’s products and
manufacturing sites worldwide. Mr. Slater also is responsible for the negotiation of all
the government agreements related to Intel’s multi billion dollar factory investments
located in various countries across the world.
Prior to joining Intel in 1997, Mr. Slater was in private practice at Steptoe & Johnson and
then at Latham & Watkins in Washington, D.C. While at those law firms, he engaged in
privatization work sponsored by the World Bank and specialized in administrative law
and environmental, health and safety by handling U.S. and international regulatory issues
for a number of Fortune 500 companies. Mr. Slater began his law career as a clerk for
former Chief Judge Albert Engel on the U.S. Court of Appeals, 6th Circuit, after
graduating summa cum laude from the J. Reuben Clark Law School at Brigham Young
University.
H. Stephen Harris, Jr., a partner with Alston & Bird, is Chair of the firm's
Antitrust Practice Group. Steve has litigated numerous complex cases in federal
courts throughout the United States, including the defense of numerous publiclyheld
corporations in civil and criminal antitrust matters, including class actions
and multidistrict litigation. He has also represented numerous U.S. and non-U.S.
companies before antitrust agencies of the U.S. and other jurisdictions, includingthe European Commission's DG COMP, the Japan Fair Trade Commission, andthe antitrust agencies of Brazil. Steve has arbitrated complex commercial
disputes under the rules of the International Chamber of Commerce (ICC), theJapan Commercial Arbitration Association (JCAA), and the American Arbitration
Association (AAA). Steve received a J.D. from Columbia University School of
Law in 1982, where he was a Harlan Fiske Stone Scholar and certified with
honors by the Parker School of Foreign and Comparative Law. Steve receivedan A.B., magna cum laude, from Cornell University in 1977, where he was a
Cornell University College Scholar of the College of Arts & Sciences. Steve is
admitted to the bars of the District of Columbia, Georgia, and New York. He
currently serves as a member of the Council of the American Bar Association's
Section of Antitrust Law, and a member of the Antitrust Committee of the
International Bar Association. Steve is co-author and Editor-in-Chief of the two
volume treatise, Competition Laws Outside the United States, published by the#p#分页标题#e#
ABA, and the author of the U.S. chapter in International Agency & Distribution
Law, published by the Center for International Law. Steve has been selected forlisting in The International Who’s Who of Competition Lawyers (antitrust), The
Best Lawyers in America (litigation and antitrust), and Chambers USA: America’s
Leading Business Lawyers (antitrust).
Judge of the Supreme People's Court (SPC) of the People’s Republic
of China:
Staff member since 1991, and appointed as a judge of the Intellectual
Property Division of the SPC in 1999.
Dealt with assorted intellectual property civil cases and partially
administrative cases, particularly patent and technology contract cases.Member of the Judicial Interpretations Panel of the Contract Law of theSPC, drafted out the Judicial Interpretations on Implementation of the
Contract Law with regard to Technology Contracts, and also wrote thedraft of the Judicial Interpretations on Criteria of Adjudicating uponPatent Infringement.
Legal researcher of many important IPR research programs, e.g.,Criminal Law Protection on IPRs, Compensation on CopyrightInfringements, and Improvement on the Judicial Protection Mechanism of
IPRs.
Education:
Juris Doctor candidate (IP law), China Academy of Social Science
(CASS, 2004)
Master of Arts (MA) in International & Comparative Legal Studies (IP
Law), School of Oriental and African Studies (SOAS), University of
London (UL, 2002)
Master of Laws, Peking University (PKU, 2000)
LL.B, China University of Politics & Law (CUPL, 1991).
Works:
Co-author or co-editor of books, e.g., Cases & Commentary on the
Contract Law, Judicial Guidelines & Reference for Intellectual Property
Trials.
Articles have been published in legal journals, e.g., People’s Judicature
(Ren Min Si Fa), National Judges College Law Journal (Fa Lv Shi Yong),
Intellectual Property（Zhi Shi Chan Quan），and Intellectual Property
Review of Spain.
1
Lectures and Speeches:
Giving regular lectures in the National Judges College (for senior IPR
judges’ training programs since 1999) and irregular lectures in local
Judges Colleges, universities and institutes
English lectures in:
University of Cambridge (2002), School of Oriental and African Studies
of the University of London (2002), Peking University (2003 - 2005)
English speeches:
Week-speeches on Intellectual Property Training Program for Vietnamese
Judges organized by USAID STAR-Vietnam (United State Agency for
International Development, Support for Trade Acceleration
Project-Vietnam, March 6-12, 2005, Bangkok）
Luncheon Speech on the ITL Forum: Patent Procurement, Licensing and
Litigation in China (Institute for Law and Technology, the Centre for
American and International Law, January 20, 2006, San Francisco)#p#分页标题#e#
Other Professional Activities:
Standing Director & Deputy Secretary-General of the China Intellectual
Property Society (CIPS)
Founder-Director of the United Kingdom Chinese Law Association
(UKCLA, 2001)
Contracts:
Address: No.27, Dongjiaominxiang, Beijing 100745, P. R. China
Email: [email protected]
2
Profiles > Faculty > Ronald C. Brown
Ronald C. Brown
BS, University of Toledo, 1965; JD, University of Toledo, 1968;
LLM, University of Michigan, 1970.
Formerly Professor of Law on the Faculty of William and Mary
School of Law, Professor Brown joined the faculty at Hawai'i in
1981 and has served as Associate Dean and as Director of the
Pacific-Asian Legal Studies Program. Presently, Professor
Brown also serves as the University's Director of the Center for
Chinese Studies. His experience includes working as an attorney
with the National Labor Relations Board, representing
management and labor in labor relations matters, acting as
private impartial arbitrator in labor-management disputes and
serving as state-appointed public fact-finder in Hawai'i public
sector disputes. Professor Brown's teaching specialties include
labor and employment law, employment discrimination law,
arbitration, Chinese law and Asia-Pacific comparative labor law.
He has authored numerous articles and recently published a book
entitled Understanding Chinese Courts and Legal Process: Law with Chinese
Characteristics. Professor Brown has worked in China under the USIA's professional-inresidence
program, has served as a Consultant with the World Bank, and has lectured
throughout Asia on comparative labor law topics. He has taught Comparative Labor Law
at Beijing University Law School and currently serves as a foreign advisor to BEIDA on
graduate law programs. He conducts legal exchange and international training programs
for Chinese lawyers, judges, law drafters, and prosecutors under arrangements with the
key government legal agencies. In 2004-2005, Professor Brown was in China as a
Fulbright Distinguished Scholar, teaching at both Peking University Law School and
Tsinghua University Law School.
Ronald C. Brown
Professor of Law
2515 Dole St.
Honolulu, HI 96822
Office 241
(808) 956-6549
[email protected]
Teaching Areas:
Chinese Law, Employment Discrimination Law, Labor Law, Employment Law, USChina
Comparative Labor Law
Recent and Forthcoming Publications:
Understanding Chinese Courts and Legal Process: Law with Chinese Characteristics
(Kluwer).
China's Collective Contract Provisions: Can Collective Negotiations Embody Collective
Bargaining? 16 Duke Journal of Comparative and International Law 35 (2005).
China's Employment Discrimination Laws During Economic Transition, 19.2 Columbia#p#分页标题#e#
J. of Asian Law 361 (2006).
U.S.-China Labor Mediation and Arbitration Compared, __ American L. Rev. __ (2006).
CHINA’S EMPLOYMENT
DISCRIMINATION LAWS DURING
ECONOMIC TRANSITION
RONALD C. BROWN∗
I. INTRODUCTION .............................................................................. 362
II. CHINA’S CURRENT CONDITIONS AFFECTING HUMAN
RESOURCES MANAGEMENT ..................................................... 363
A. ECONOMIC TRANSITION TO A SOCIALIST MARKET ECONOMY...... 363
B. HUMAN RIGHTS MANAGEMENT PRACTICES IN CHINA .................. 365
1. Regulation of Labor Market Management .............................. 365
2. Workplace Discrimination: Anecdotal Glimpses .................... 371
III. CHINA’S ANTI-DISCRIMINATION LAWS................................. 386
A. LAWS PROVIDING “PROTECTED STATUS”...................................... 386
1. The 1994 Labor Law ............................................................... 387
2. Other Anti-Discrimination Laws ............................................. 390
3. Local Government Discrimination Bans ................................. 401
B. LAW AND HRM PRACTICES ........................................................... 402
1. Recruitment ............................................................................. 402
2. Employment and Termination ................................................. 408
C. ENFORCEMENT ............................................................................... 410
1. Administrative Process ............................................................ 410
2. Proving Discrimination............................................................ 413
3. Remedies ................................................................................. 415
4. External Incentives .................................................................. 419
IV. CONCLUSION................................................................................... 420
A. CHALLENGES TO REMEDYING EMPLOYMENT DISCRIMINATION ... 421
B. CLARIFYING CHINA’S ANTI-DISCRIMINATION LAWS.................... 423
1. “Protected Classes” of Workers............................................... 424
2. “Labor Disputes” and Legislative Rights of “Applicants” ...... 425
∗ Professor of Law, University of Hawaii Law School; Director, Center for Chinese Studies,
University of Hawaii; 2004-2005 Fulbright Distinguished Lecturer, Peking University Law School
and Tsinghua University Law School.
362 COLUMBIA JOURNAL OF ASIAN LAW [19:2
3. Enhancing Enforcement: Remedies as
Deterrent and Incentive ........................................................... 426
I. INTRODUCTION
While working as a consultant to the World Bank on China’s
labor legislation in 1996, I was waiting outside the gate of the Ministry of#p#分页标题#e#
Labor, when I noticed a job advertisement posted on a pole. It read,
Seeking an office clerk. Female, decent height and
appearance. All five facial organs must be in the right
place (wu guan duan zheng).1
In 2005, job advertisements with identical facial requirements are
widely seen. That, of course, is but one frank articulation of what many
employers around the world take note of in the employment hiring
process. Other factors in considering applicants and employees in China
may include sex, ethnicity, social origin, health, disability, age, or migrant
status, some of which are considerations prohibited by Chinese labor
laws.2
This article describes the current status of the above factors as
used in human resource management (HRM) practices during China’s
current economic transition, and further examines China’s existing antidiscrimination
labor legislation. Some comparative references are made
to labor standards under International Labor Organization (ILO)
Conventions and U.S. legislative approaches. This article further
suggests areas for legal reform to both clarify coverage and enhance
enforcement and remedies, which would in turn arrest some of the more
1 Though the Chinese disagree on which organs constitute the “five sense organs,” they have been
defined as “ears, eyes, lips, nose, and tongue,” and mean “regular features; pleasant-looking face
with the five organs in normal shape and position.” THE ABC ENGLISH-CHINESE COMPREHENSIVE
DICTIONARY 1004 (John DeFrancis et al. eds., 2003).
2 See Jing Tao, Gender Discrimination in the Chinese Labor Market is Severe (Apr. 12, 2005)
(unpublished manuscript, on file with author); 酒店招工听口音, 未聘用只因方言不地道 [Hotel
Rejected Job Applicant For Speaking Tongue-Tied Dialect], 北京青年报[BEIJING YOUTH DAILY],
Feb. 11, 2004, at 6, available at http://edu.sina.com.cn/l/2004-02-12/60863.html [hereinafter
Tongue-Tied Dialect]; 尚水, 就业歧视案例聚焦 [Shang Shui, Cases on Employment
Discrimination], 人民日报[PEOPLE’S DAILY], June 15, 2005, at 15, available at http://legal.people.
com.cn/GB/42731/3469925.html [hereinafter Shang Shui]; 炒掉百名乙肝患者惹纠纷 [Dispute
Arises When Employer Fired Hundreds of Hepatitis B Carriers], 信息时报[INFO. CHRON.], Apr. 1,
2004, at D03 [hereinafter Dispute Arises].
2006] CHINA’S EMPLOYMENT DISCRIMINATION 363
pernicious illegal hiring and employment practices currently found in
China’s HRM.
In addition to obtaining justice for the victims of improper HRM
practices, there are several underlying inquiries for China to consider.
These include (1) the social and economic costs and consequences
resulting from a failure to address issues of employment discrimination,#p#分页标题#e#
inequality, and impediments to equal employment opportunity, and (2)
whether there is sufficient national commitment to simultaneously seek
alternatives to end these problems, while balancing and advancing
economic development interests.
II. CHINA’S CURRENT CONDITIONS AFFECTING HUMAN
RESOURCES MANAGEMENT
A. Economic Transition to a Socialist Market Economy
In the late 1980s, the economic developments following the Four
Modernizations of 1979 produced workplaces that were increasingly
regulated by labor contracts, displacing the “iron-rice bowl” model of
earlier years.3 The transition to a socialist market economy in the 1990s
coincided with a growing assumption of managerial control for
employers.4 Due to market forces, employers were forced to maximize
profits if they hoped to survive without government subsidies of the
former planned economy, and lawmakers responded by allowing greater
employer autonomy. This liberalization of employee management tended
to result in employers cutting labor costs, and, all too frequently, ignoring
labor laws. This trend was particularly prevalent among employers
outside of the state-owned enterprise (SOE) system.
This market transition has had both positive and negative
economic consequences. One bright side has been phenomenal economic
growth and development for the country as a whole; however, a dark side
has been its impact on individual workers, including layoffs,
unemployment, and emerging wage disparities. These disparities are
found in dramatic wage level differences between urban and rural
workers as well as between regions—especially between the Special
3 Jaeyoun Won, Withering Away of the Iron Rice Bowl? The Reemployment Project of Post-Socialist
China, 39 STUD. IN COMP. INT’L DEV. 71, 71 (2004). See also Randall Peerenboom, Globalization,
Path Dependency and the Limits of Law: Administrative Law Reform and Rule of Law in the
People's Republic of China, 19 BERKELEY J. INT'L L. 161, 208 (2001).
4 Victor Nee & Yang Cao, Market Transition and the Firm: Institutional Change and Income
Inequality in Urban China, 1 MGMT. & ORG. REV. 23 (2005). See also Jonathan P. Hiatt &
Deborah Greenfield, The Importance of Core Labor Rights in World Development, 26 MICH. J.
INT'L L. 39, 40 (2004).
364 COLUMBIA JOURNAL OF ASIAN LAW [19:2
Economic Zones (SEZs) in the coastal areas and the non-SEZs in the
Western inland provinces.5 Large wage disparities also exist, as they do
in many countries, between management officers and workers. 6
According to former World Bank President Wolfenson, these wage gaps
are increasing at an alarming rate, and he warns that history suggests such
gaps could lead to social unrest and protests.7
These economic disparities in China’s labor force affect certain#p#分页标题#e#
cohorts of workers more than others, both as a result of socio-economic
factors and because of illegal discrimination. This discrimination occurs
primarily against women, migrant workers, national ethnic minorities,
and workers perceived to have health problems or disabilities. For
example, women in China working at urban jobs earn only about 70% of
what men make for similar work, and female executive and senior
professionals earn about 58% and 68% of their male counterparts,
respectively. Further, professional fields are generally comprised of only
about 20% women, and female doctors earn about 63% of the amount
earned by male doctors.8
Women are not alone in their fight against employment
discrimination. Another group of citizens affected by the China’s
economic transition is its “floating population” of some 100 to 150
million migrant workers moving from poor rural areas to developed urban
areas seeking better job opportunities.9 Recently, much attention has
5 See generally Bjorn Gustafsson & Li Shi, The Anatomy of Rising Earnings Inequality in Urban
China, 29 J. COMP. ECON. 118 (2001). See also Cliff Waldman, The Labor Market in Post-Reform
China: History, Evidence, and Implications, 39 BUS. ECON. 50, 54-56 (2004).
6 国务院发展研究中心[The Development Research Center of the State Council], 中国企业人力资
源管理调查报告 [Report of Chinese Enterprises on Human Resource Management] (2004), cited
in老总员工收入差距最大超50 倍 [Manager Earns Fifty Times More than Staff], 广州日报
[GUANGZHOU DAILY] , Apr. 25, 2004, at A2, available at http://gzdaily.dayoo.com/gb/content/
2004-04/25/content_1517025.htm.
7 David Murphy, The Dangers of Too Much Success, 167 FAR E. ECON. REV. 28, 28-29 (2004). The
Chinese Government has taken notice of the increase in mass protests. It is reported that Zhou
Yongkang, the Public Security Chief and State Councilor, stated that the "'rising conflicts among
the people' had been triggered by domestic economic factors, the behaviour of cadres, and by a lack
of justice" with the number of mass protests increasing from about "10,000 in 1994 to more than
74,000 last year [2004]". Shi Ting, Acceptance of Rights Replacing Reflex Fear of Protests, S.
CHINA MORNING POST, July 7, 2005, at 1.
8 Margaret Maurer-Fazio & James Hughes, The Effect of Institutional Change on the Labor Market
Outcomes of Chinese Women: Traditional Values vs. Market Forces (1999) (unpublished paper),
cited in Elizabeth Brainerd, Women in Transition: Changes in Gender Wage Differentials in
Eastern Europe and the Former Soviet Union, 54 IND. & LAB. REL. REV. 138, 162 (2000). In the
U.S. the figure for relative wage disparity is 76% for blacks versus whites, and 64% for Hispanic
women. Id. at 146 (2000).#p#分页标题#e#
9 China’s Floating Population Exceeded 10% of Total Population, 中国新闻网 [CHINANEWS.CN],
Jan. 6, 2005, at http://www.chinanews.cn/news/2004/2005-01-06/772.shtml.
2006] CHINA’S EMPLOYMENT DISCRIMINATION 365
been given to their plight, as millions either go unpaid or are grossly
underpaid—in violation of labor laws—and are otherwise discriminated
against because of their migrant status.
Health discrimination for those with hepatitis B is another
common area of employment discrimination in China. It has been
reported that “up to 120 million Chinese people, a number equivalent to
the total population of France and Britain combined, are thought to be
carriers of the disease.” 10 It is also reported that some twenty-two
diseases, such as severe heart disease and high blood pressure, disqualify
people from being hired for public office. 11 There are also nearly one
million HIV/AIDS carriers in China against whom employers also
discriminate.12
Lastly, China has roughly 100 million citizens it classifies as
ethnic minorities, 13 whose economic status is often lower than other
Chinese. When they seek to migrate outside of their communities for
better jobs, they face possible discrimination not only for their minority
status, but also for their social status as rural citizens.14
B. Human Rights Management Practices in China
1. Regulation of Labor Market Management
As China relaxed its socialist planned economy and moved
toward a free market, the systems of government placement and
allocation of personnel from colleges and elsewhere were modified,
10 Liang Chao, Law Drafted to Fight Hep B Discrimination, CHINA DAILY, Aug. 11, 2004, at
http://www.china.org.cn/english/government/103598.htm.
11 Id.
12 Hong Kong Liaison Office of the International Trade Union, HIV/AIDS in China: A Workers
Issue, http://www.ihlo.org/LRC/SW/001004b.html (last visited Feb. 27, 2006).
13 中共中央统一战线工作部 [The United Front Work Department of CPC Central Committee], 中
国民族的基本特点 [Basic Characteristics of Chinese Nationalities], http://www.zytzb.org.cn/
ssmz/ziliao/ssmz12.htm (last visited Feb. 1, 2006).
14 Due to economic pressure, ethnical minorities from the remote countryside are migrating to big
cities to look for employment opportunities. This group of workers can be classified as both
minorities and migrants. It is likely they face further discrimination based on their status as
migrants, in addition to their ethnicity. For a general discussion, see 新疆区统计局 [Xinjiang
Bureau of Statistics], 转移农村劳动力是解决新疆“三农”问题的根本出路 [To Transfer Peasant
Labor Is The Fundamental Solution to Xinjiang’s Three Main Problems In Villages], 中国统计信
息网 [CHINA STAT. INFO.WEB], Aug. 31, 2005, http://www.stats.gov.cn/was40/#p#分页标题#e#
detail?record=286&channelid=33728.
366 COLUMBIA JOURNAL OF ASIAN LAW [19:2
giving way to current hiring practices based largely on self-selection.15
With the demise of the “iron-rice bowl,” children no longer “inherited”
their parents’ factory job, and workers no longer enjoyed job security; and
with that trend came the new practice of HRM, consisting of recruitment,
hiring, employment, and termination.16 The Chinese labor force soon
discovered that employment decisions were not always based on merit or
even political color (i.e. Chinese Communist Party membership). In
2005, employment discrimination under this new system of employer
autonomy came to the point where even a delegate to the National
People’s Congress (NPC) proclaimed,
A law on fair employment is an urgent need in China . . . .
A harmonious society should give adequate space to
talents competing on an equal footing and developing . . .
their capability to the full . . . waste of any human
resources does not facilitate economic and social
development.17
The current HRM hiring route is multi-faceted, and usually
involves advertising for positions (rather than having labor supplied
through labor bureaus), word of mouth, use of labor supply brokers
(including labor bureaus and employment agencies), and posting notices
on walls and the Internet. Special rules, however, still apply to foreigninvested
enterprises (FIEs), as will be discussed infra. With the exception
of civil service jobs and jobs needing certain proficiencies, recruitment
15 China's Employment Market Challenged by Two Million Graduates, PEOPLE’S DAILY, Jan. 10,
2003, http://english.people.com.cn/200301/10/eng20030110_109906.shtml. .
16 Won, supra note 3, at 71. See also Mary E. Gallagher, "Time is Money, Efficiency is Life": The
Transformation of Labor Relations in China, 39 STUD. IN COMP. INT’L DEV. 3, 11-44 (Summer
2004). See generally, Ying Zhu and Malcolm Warner, Changing Patterns of Human Resource
Management in Contemporary China: WTO Accession and Enterprise Responses, 35 INDUS. REL. J.
311, 311-28 (2004).
17 Deputy Wang Yuan’an from Tai’an City in East China’s Shandong Province, cited from NPC
Deputy Proposes Law against Employment Discrimination, 人民网 [PEOPLE’S DAILY ONLINE],
Mar. 4, 2005, http://english.people.com.cn/200503/04/eng20050304_175554.html. For other calls
for legislation, see 凌锋, 反对就业歧视, 法律不应沉默 [Ling Feng, Law Shall Not Be Silent
Against Employment Discrimination], 法制日报 [LEGAL DAILY], June 20, 2005, at 5. As of July
2005, there is consideration on an Employment Promotion Law that may contain anti-discrimination
provisions. 就业促进法[Employment Promotion Law] (Tentative Draft 2005) (P.R.C.) (on file#p#分页标题#e#
with author) [hereinafter Employment Promotion Law Draft].
2006] CHINA’S EMPLOYMENT DISCRIMINATION 367
does not usually require testing.18 Employment and working conditions
are usually governed by the employer and its rules, with the employer
authorized to make evaluative decisions. Both, however, are limited
somewhat by labor laws, labor contracts, and collective contracts. 19
Dismissals and other labor disputes are regulated by statutes and
generally are resolved intra-enterprise by mediation or by resort to
government labor arbitration commissions and tribunals, with de novo
review provided by the courts.20
In 2000, the Ministry of Labor and Social Security (MOLSS)
sought to regularize and bring more order to labor market management by
issuing its Regulations on Labor Market Management (hereinafter Labor
Market Regulations).21 Its stated purpose is to protect the legal interests
of employees and employers, to develop and standardize the labor market,
and to promote employment.22 The Labor Market Regulations apply to
the laborer’s job application and work, the employer’s recruiting process,
and to the “career introduction activities” of job centers. 23 The
Regulations are administered by the labor bureaus above the county
level.24
18 See 中华人民共和国公务员法 [Civil Service Law] arts. 21-32 (promulgated by the Standing
Comm. Nat’l People’s Cong., Apr. 27, 2005, effective Jan. 1, 2006) (P.R.C.), available at
http://www.chinacourt.org/flwk/show1.php?file_id=101410. See Robert Taylor, China’s Human
Resource Management Strategies: The Role of Enterprise and Government, 4 ASIAN BUS. &
MGMT. 5, 11-18 (2005).
Commercial services are available in China for pre-employment screening. See, e.g., Inquest Pre
Employment Screening Service, at http://www.inquestscreening.com/international_asia.asp (last
visited Feb. 28, 2006).
19 中华人民共和国劳动法 [Labor Law ] art. 19(2) (promulgated by Standing Comm. Nat’l
People’s Cong., July 5, 1994, effective Jan. 1, 1995) (P.R.C.), available at http://www.
chinacourt.org/flwk/show1.php?file_id=20195; 集体合同规定 [Provisions on Collective Contract]
art. 8 (promulgated by the Ministry of Labor and Social Security, Jan. 20, 2004, effective May 1,
2004) (P.R.C.), available at http://www.chinacourt.org/flwk/show1.php?file_id=91497.
20 劳动部关于实行劳动合同制度若干问题的规定 [Regulation of the Ministry of Labor on
Institution of Labor Contract System] art. 14 (promulgated by the Ministry of Labor, Oct. 31, 1996,
effective Oct. 31, 1996) (P.R.C.), available at http://www.chinacourt.org/flwk/show1.php?
file_id=26814; 浅谈民商仲裁与劳动仲裁的司法监督 [Some Opinions on the Judicial Review of
Commercial Arbitration and Labor Arbitration], 中国劳动[CHINA LABOR], May 2003, at 25#p#分页标题#e#
[hereinafter Some Opinions].
21 劳动力市场管理规定 [Regulations on Labor Market Management] (promulgated by the Ministry
of Labor and Social Security, Dec. 8, 2000, effective Dec. 8, 2000) (P.R.C.), available at
http://www.chinacourt.org/flwk/show1.php?file_id=36355 [hereinafter Regulations on Labor
Market Management].
22 Id. art. 1.
23 Id. art. 2.
24 Id. art. 4. The hired person also must register with the Labor Bureau within 30 days of being
hired. Id.
368 COLUMBIA JOURNAL OF ASIAN LAW [19:2
The regulations relating to recruitment25 provide for “public and
fair competition,”26 and states that employers can acquire employees in
numerous ways, including the use of job centers and advertising in the
mass media. 27 Interestingly, Article 9 requires employers placing ads for
vacancies in the mass media to first obtain the approval of the local labor
security administrative authorities. 28 The Regulations also prohibit a
number of well-documented employer abuses, including charging the
hired person a deposit fee or holding worker documents such as identity
papers.29
The most significant provision in Labor Market Regulations is
Article 11, which bans employment discrimination in recruitment. It
reads: “[w]hile hiring a person, the employer shall not refuse to hire or
enhance the hiring standard on the basis of gender, nationality, race, or
religion, except those provided by state laws concerning unsuitable types
of work or positions.”30
The Labor Market Regulations also cover “career
recommendation organs,” or employment services and agencies, both
non-profit and for-profit.31 Article 21 is of significance, as it prohibits
career recommendation agencies from certain activities including
“recommending jobs prevented by laws and regulations”.32 This would
seem to ban recommendation of a job advertised by an employer as “for
men only,” where there is no legal basis for a sex-specific limitation.33
Sanctions for violations of these regulations provide for general
fines of ¥1,000 (for violations of Article 10 or 14), and fines ranging from
¥10,000 to ¥30,000 for a violation of several enumerated articles,
including Article 21. 34 Penalties may also include revocation of the
25 Id. arts. 7-14.
26 Id. art. 7.
27 Id. art. 8. These ways include (1) entrusting a job center; (2) participating in labor exchanging
activities; (3) publishing advertisements for employers in mass media; (4) recruiting on the Internet;
and (5) other means stipulated by laws and regulations. Id.
28 Id. art. 9.
29 Id. art. 10(4)-(5).
30 Id. art. 11.
31 Id. arts. 15-25.
32 Id. art. 21.
33 See 中华人民共和国广告法 [Advertisements Law] art. 7(7) (promulgated by the Standing#p#分页标题#e#
Comm. of the Nat’l People’s Cong., Oct. 27, 1994, effective Feb. 1, 1995), 1994 全国人民代表大
会常务委员会公报[STANDING COMM. NAT'L PEOPLE'S CONG. GAZ.] (P.R.C.), available at
http://www.chinacourt.org/flwk/show1.php?file_id=20976 (banning discriminatory advertising by
stipulating the ad shall not contain any racial, ethnic, gender, or religious discrimination language).
34 The Regulations on Labor Market Management, supra note 21, at arts. 34-38. Article 10 prohibits
false information etc., and article 14 requires registration of employees. Id. arts. 10, 14.
2006] CHINA’S EMPLOYMENT DISCRIMINATION 369
employer’s business license.35 Of greatest significance, however, is the
absence of sanction for violations of Article 11 prohibitions on
employment discrimination.
In 2001, the Ministry of Personnel and the State Administration
for Industry and Commerce issued the Rules on the Administration of
Human Resources Markets (hereinafter Rules on HRM).36 These rules
apply to the administration of labor agency services, including the general
hiring activities of employers and the treatment of individual job
applications.37 Article 3 mandates that “human resource market activities
must abide by the laws, regulations, and policies of this country, persist in
the principles of openness, equality, competition, and selection of the best
. . . .”38
The agencies are required to have the “capacity to independently
bear civil liabilities; and sanctions are provided for violations, ranging
from ¥10,000 to ¥30,000. 39 Of greatest significance is Article 39, which
provides
Any employing unit that, in violation of these Rules,
refuses to recruit talents or heightens the qualifications
for these talents by such reason as nationality, sex, and
religion or recruits personnel who should not be
recruited . . . shall be ordered to make corrections by
the administrative department in charge of personnel of
the people’s government . . . if the circumstances are
serious, there shall be imposed a fine of less than
¥10,000.40
FIEs 41 have special requirements that apply to all employees,
including expatriates and personnel from Taiwan, Hong Kong, and
35 Id. art. 37.
36人才市场管理规定 [Rules on the Administration of Human Resources Market] (promulgated by
the Ministry of Personnel, Sept. 11, 2001, effective Oct. 1, 2001, revised Mar. 22, 2005) (P.R.C),
available at http://www.chinacourt.org/flwk/show1.php?file_id=101542.
37 Id. art. 2.
38 Id. art. 3.
39 Id. arts. 6(4) and 35.
40 Id. art. 39 (emphasis added).
41 These include China-foreign joint equity ventures, China-foreign cooperative ventures, wholly
foreign-owned enterprises, and China-foreign joint stock limited companies. 外商投资企业劳动管#p#分页标题#e#
理规定 [Provisions on the Labor Administration in Enterprises with Foreign Investment] art. 2
(promulgated by the Ministry of Labor & the Ministry of Foreign Trade & Econ. Coop., Aug. 11,
1994, effective Aug. 11, 1994), 14 P.R.C. LAWS & REGS V-05-00-303, available at
http://www.chinacourt.org/flwk/show1.php?file_id=20454 .
370 COLUMBIA JOURNAL OF ASIAN LAW [19:2
Macao.42 Additionally, there are special rules on the employment of
foreigners in China, including the requirement that their employer must
obtain employment permission.43
Since Chinese labor laws apply to FIE employees,44 many FIEs
have developed a practice whereby foreign employees sign employment
contracts that stipulate that the law of the enterprises’ home country will
govern. 45 In 2003, new provisions were issued regulating the
management of intermediary employment agencies servicing FIEs. 46
These provisions require any FIE using intermediary services to conduct
its “activities through a specialized job intermediary agency jointly
established with a Chinese company, enterprise or other economic
organization for offering job intermediary services.”47 These agencies are
authorized to collect data about the employment market, provide job
recommendations, conduct recruitment activities, job testing and
appraising, and provide training courses. 48 They must abide by “the
principles of voluntary participation, equity and good faith.” 49 Sanctions
are outlined, ranging from fines of ¥10,000 to ¥30,000, to loss of business
license.50
Other HRM policies for FIEs fall under the 1994 Regulations.
For recruitment, FIEs, including representative offices, are allowed to use
the labor services of an intermediary agency to hire Chinese employees.51
These policies also regulate wage equities between Chinese and foreign
personnel and embrace the requirement of equal pay for equal work.52
42 劳动部关于贯彻外商投资企业劳动管理规定有关问题的复函 [Reply of the Ministry of Labor
on Relevant Issues Regarding the Implementation of Provisions on Labor Administration in
Enterprises with Foreign Investment] art. 1 (promulgated by the Ministry of Labor, July 14, 1995,
effective July 14,1995) (P.R.C), available at http://www.chinacourt.org/flwkshow1.php?file_id
=23070.
43 外国人在中国就业管理规定 [Regulations on the Management of Employment of Foreigners in
China], art. 5 (promulgated by the Ministry of Labor and Pub. Sec., Jan. 22, 1996, effective May 1,
1996) (P.R.C.), available at http://www.chinacourt.org/flwk/show1.php?file_id=24485 (available
by subscription only).
44 Jeremy B. Fox et al., Beyond the Image of Foreign Direct Investment in China: Where Ethics
Meets Public Relations, 56 J. BUS. ETHICS 317, 317 (2005).
45 More Foreign Employees Working in Shanghai, CHINA STAFF, Jan. 2005, at 34.#p#分页标题#e#
46 中外合资人才中介机构管理暂行规定 [Interim Provisions Concerning the Management of
Chinese-foreign Joint Job Intermediary Agencies] (promulgated by the Ministry of Personnel, the
Ministry of Commerce and State Administration for Industry & Commerce, Sept. 4, 2003, effective
Nov. 11, 2003) (P.R.C.), available at http://www.chinacourt.org/flwk/show1.php?file_id=89004.
47 Id. art. 3. Wholly foreign-owned job intermediary agencies are prohibited. Id.
48 Id. art. 11.
49 Id. art. 12.
50 Id. arts. 16-18.
51 Provisions on the Administration of Labor in Foreign-Invested Enterprises, supra note 41, at art.
5.
52 Id. art. 14.
2006] CHINA’S EMPLOYMENT DISCRIMINATION 371
Two regulations related to this area were promulgated in 1997 by the
Ministry of Labor: the Measures for the Trial Enforcement of the
Guidelines for Wage Level System in Pilot Areas and the Provisional
Measures for the Administration of Wage Income in Foreign-Invested
Enterprises.53
In sum, the Chinese government is seeking to regularize and
standardize HRM practices in China through labor market regulation.
However, the government is still struggling to respond to persistent
claims of inequality and inadequate legislative remedies.
2. Workplace Discrimination: Anecdotal Glimpses
Inequality and discrimination against different categories of
employees occur in every society. China is interesting both because of
the diversity of workers reportedly facing obstacles to equal employment
opportunities, and because of the sheer size of its labor force. That size
makes the number of workers within each category economically
significant in terms of the potential waste of capable and employable
human resources. Categories of reported victims of discrimination
include gender, race, ethnicity, health, disability, religious belief, age,
height, and migrant status.54
While it is true that anecdotal incidents of employment
discrimination can be isolated and atypical, they also may represent wider
patterns of practice; the question of which it actually is should be left for
further study by government and social scientists. This study attempts to
show only that there are winds of activity blowing, ringing a bell of
concern. That concern, raised by the anecdotal glimpses which follow
below, should prompt discussion and analysis as to the current status of
China’s anti-discrimination employment laws.
a. Gender
In 1955, Mao Zedong said,
53 试点地区工资指导线制度试行办法 [Measures for the Trial Enforcement of the Guidelines for
Wage Level System in Pilot Areas] (promulgated by the Ministry of Labor, Jan. 30, 1997, effective
Jan. 30, 1997) (P.R.C), available at http://www.molss.gov.cn/correlate/lbf199727.htm; 外商投资企
业工资收入管理暂行办法 [Provisional Measures for the Administration of Wage income in#p#分页标题#e#
Foreign-Invested Enterprises] (promulgated by the Ministry of Labor, Feb. 14, 1997, effective Feb.
14, 1997) (P.R.C.), available at http://www.molss.gov.cn/correlate/lbf199746.htm.
54 See Tao, supra note 2; Tongue-Tied Dialect, supra note 2; Shang Shui, supra note 2; and Dispute
Arises, supra note 2.
372 COLUMBIA JOURNAL OF ASIAN LAW [19:2
Enable every woman who can work to take her place on
the labor front under the principle of equal pay for
equal work. This should be done as soon as possible.55
In 1990, China ratified the ILO Convention on Equal
Remuneration for Equal Work56 and, with subsequent legislation and
government policies discussed below, sought to curb gender
discrimination in many areas of society, including education, political
office and economic opportunity. 57 Nonetheless, wage disparities
between men and women remain, with urban women earning about
seventy cents for every dollar earned by men for similar work and rural
women earning less than sixty cents per dollar earned by their male
peers.58 The MOLSS reported that an investigation of sixty-two selected
cities “clearly shows that 67% of the work units set gender limits and
expressly stipulate in writing that females must not become pregnant or
bear children during the term of their employment.”59
55 JOHN DEFRANCIS, ANNOTATED QUOTATIONS FROM CHAIRMAN MAO 136 (1975); and see
Equality Called for Women, CHINA DAILY, July 2, 2004, available at http://www.china.org.cn/
english/China/100112.htm.
56 International Labour Organization, Convention Concerning Equal Remuneration for Men and
Women Workers for Work of Equal Value, 165 U.N.T.S. 32 (1951). For ratification status, see
http://www.ilo.org/ilolex/cgi-lex/ratifce.pl?C100.
57 U.N. Committee on the Elimination of Discrimination against Women, 20th Sess., Third and
Fourth Periodic Reports of States Parties, 2-9, U.N. Doc. CEDAW/C/CHN/3-4 (1997). In a recent
report by the United Nations Committee on Economic, Social and Cultural Rights reviewing China's
report on its implementation of Articles 16 and 17 of the International Covenant on Economic,
Social and Cultural Rights, G.A. Res. 2200, U.N. GAOR, 21st Sess., Supp. No. 16, at 64, U.N. Doc.
A/6316 (1966), the Committee, in its Concluding Observations, included as one of its “Principles of
Concerns,” “the persistence of gender inequalities in practice in the State party, particularly with
regard to employment and participation in decision-making. Article 16 of the Covenant requires
State Parties of the Convention to submit periodical reports to the Secretary-General of the United
Nations, on the measures which they have adopted and the progress made in achieving the
observance of the rights recognized under the Convention. Article 17 further requires that reports
may indicate factors and difficulties affecting the degree of fulfillment rights recognized under the#p#分页标题#e#
Convention, and reports shall have a precise reference of information. International Covenant on
Economic, Social and Cultural Rights, arts. 16-17, G.A. Res. 2200, U.N. GAOR, 21st Sess., Supp.
No. 16, at 64, U.N. Doc. A/6316 (1966). The Committee regrets that it has not received sufficient
information from the State party regarding affirmative action to promote gender equality and
measures to prevent sexual harassment in the workplace.” U.N. Committee on Economic, Social
and Cultural Rights, 34th Sess., Concluding Observations of the Committee on Economic, Social
and Cultural Rights People’s Republic of China, at 3, U.N. Doc. E/C.12/1/Add.107 (2005)
[Hereinafter U.N. Concluding Observations]. It recommends “the State party to undertake effective
measures to ensure the equal right of men and women to enjoy economic, social and cultural rights
as provided for in Article 3 of the Covenant, including through implementing the principle of equal
pay for work of equal value, the elimination of wage gaps between men and women, and providing
equal opportunities for both men and women.” Id. at 7.
58 U.S. DEPT. OF STATE, COUNTRY REPORTS ON HUMAN RIGHTS PRACTICES (2004), available at
http://www.state.gov/g/drl/rls/hrrpt/2004/41640.htm (last visited Feb. 27, 2006) [hereinafter State
Dept. Rpt.].
59 Tao, supra note 2.
2006] CHINA’S EMPLOYMENT DISCRIMINATION 373
The All China Federation of Trade Unions (ACFTU) has reported
some of the stark conditions women face in the workplace. 60 The
ACFTU compiled information gathered between 1978 and 2002, and
found reforms and transition to a market economy were less kind to
women workers and, among other findings, noted that the layoff of
women occurs at a significantly higher percentage than men. 61 In
addition, women were reported to find reemployment at only a 39% rate,
compared with men at 63.9%.62 The study found that between 1990 and
2000—the early years of market transition—the wage gap between
female and male workers dropped from 77.5% to 70.1%. 63 In 2002,
“there were twice as many women [as men] in jobs below the ¥500
(approximately US$60) monthly income level, with 1.5 times as many
men holding ¥2,000 (approximately US$240) jobs as women.” In
addition, women were said to hold only 1.3% of management posts in all
organizations during 2002. 64 The ACFTU Report concluded that
“problems faced by female employees result from the influence of [a]
market economy and society.”65 Of course, there are in fact many factors
that cause inequality in society, including education level, experience,
qualifications, and an employers’ intention to discriminate.
Recent female college graduates have indicated their frustration
while looking for jobs. It is said to be “an open secret in China that#p#分页标题#e#
female college graduates suffer discrimination from employers when
applying for jobs, with the inequality known to almost all college
students, including graduate students.” 66 Some graduates have even
60 The report, cited in CHINA DAILY, was compiled after studying information gathered between
1978 and 2002, on the working lives of female workers in Shanghai, Chongqing and provinces such
as Liaoning, Jiangsu, Zhejiang, Guangdong and Gansu. It found that as reforms have been
implemented in the transition to a market economy, industries such as the textile sector and some
other female-dominated areas have sustained large-scale layoffs. Not surprisingly, a
disproportionate number of women were laid off. See Equality Called for Women, supra note 55.
61 Id.
62 Id. The All China Federation of Women (ACFW) confirmed these findings in its own report,
cited in Equality Called for Women, supra note 60.
63 Id.
64 Id.
65 Id.
66 Xing Zhigang, Job Hunt a Battle for Female Grads, CHINA DAILY, Apr. 3, 2004, available at
http://www.chinadaily.com.cn/english/doc/2004-04/02/content_320244.htm..
374 COLUMBIA JOURNAL OF ASIAN LAW [19:2
opted to include revealing photos—some wearing bikinis or short skirts—
on their resumes.67
The ACFTU Report showed that many employers, in clear
violation of labor laws, refused to issue labor contracts to women
workers, especially younger women. These employers often required
them to work long overtime hours, ranging from seventy-six to ninety
hours per week, and assigned female workers to hazardous jobs in
violation of labor laws.68 The Report stated,
Non-SOEs very rarely provide maternity benefits, nor
do they accommodate the special needs of women
during menstrual periods, pregnancy, or after the birth
of a child. Some female employees still work high
above the ground or in low temperatures, or carry out
hard physical labor while menstruating. Women who
are seven months pregnant are scheduled to work night
shifts in some factories.69
The ACFTU Report concludes by noting that “sex discrimination
is the norm in today’s workplace. The progress made in the early decades
of the PRC has in many cases been abandoned in the years since
economic reform began.”70
An increasing number of sexual harassment cases are now being
brought before the courts in China.71 With some 86% of women in a
recent survey by the Beijing-based China Times newspaper identifying
themselves as “victims of sexual harassment” in the workplace, in public
transportation, and in hospitals, a draft amendment to outlaw sexual
67 Id. Xiaqqo Yu, a female undergraduate at Beijing Normal University reports that her job searches
at job fairs and elsewhere were often met with “[I]f only you were a boy.” Reportedly, it is not#p#分页标题#e#
uncommon for employers to openly state their requirement or preference for male applicants and
this attitude is enhanced by the usual age of a female college graduate, which, at 22, is thought by
some employers to be entering their time for marriage and family. A personnel manager at a
Beijing electronics firm reportedly stated his view that “employing more women will push up our
production cost because female workers have to be given pregnancy and maternity benefits in line
with labour laws.” Id.
68 Wang Zhiyong, Women in the Workplace: A Great Leap Backward, 中国网 [CHINA.ORG.CN],
(Mar. 22, 2004), available at http://www.china.org.cn/english/2004/Mar/90950.htm. This source,
China Internet Information, is under the auspices of China International Publishing Group and State
Council Information Office.
69 Id.
70 Id.
71 Wang Ying, Women to Get Protection From Harassment, CHINA DAILY, Mar. 5, 2005, available
at http://www.chinadaily.com.cn/english/doc/2005-03/05/content_421943.htm.
2006] CHINA’S EMPLOYMENT DISCRIMINATION 375
harassment was introduced to the NPC Standing Committee in June 2005,
and was enacted into law on August 28, 2005.72
b. Migrant Workers
Appearing to urbanites as aimless and ominous as
errant waters, China’s sojourning peasant transients in
the cities are outsiders, out of place. In their millions,
they seem to city folk and their supervisors to be
streaming in, as if incessantly, out of control. In the
minds of their metropolitan detractors, they are aptly
labeled: they are unrooted noncitizens, wanderers; they
are the elements of the “floating population.” 73
The number of migrant workers flowing between the rural and
urban locations of China is estimated to be at least 130 million,74 and
some project that this number will reach 300 million by 2010.75 The
2000 census figures reported that 65% of the flow was intra-province,
with young and middle-aged people between fifteen and thirty-five years
of age constituting more than 70% of all migrant workers.76 Much of the
movement is a result of China’s transition to a market economy and its
relaxation of the household registration (hukou) system which prior to the
reforms had restricted citizen movement.77
Migrant workers eager for better wages travel to urban areas to
find jobs better than those available near home. Urban centers have many
such jobs and the labor of migrant workers contributes to China’s
economic development and its transition to a market economy. Despite
this economic contribution, many stories have emerged that highlight how
migrant workers are often taken advantage of in the workplace: migrant
72 Id.; An Epic Struggle Against Sexual Harassment, CHINA DAILY, Aug. 29, 2005, at 5, available at
http://www.china.org.cn/english/China/140117.htm; Liu Li, Revised Law Aims to Protect Women’s#p#分页标题#e#
Rights, CHINA DAILY, June 27, 2005, at 1, available at available at http://www.chinadaily.com.cn/
english/doc/2005-08/29/content_472897.htm.
73 DOROTHY J. SOLINGER, CONTESTING CITIZENSHIP IN URBAN CHINA: PEASANT MIGRANTS, THE
STATE AND THE LOGIC OF THE MARKET 1 (1999) (footnotes omitted).
74 Reforms of China’s Household Registration System Underway, 中 国 网 [CHINA.ORG.CN],
available at http://www.china.org.cn/baodao/english/newsandreport/2002sep1/18-4.htm (last visited
Feb. 23, 2006). See also, China’s Floating Population Exceeded 10% of Total Population, supra
note 9. Other estimates put the figure at 140 million in 2003, rising from 70 million in 1993. Id.
75 David Lague, The Human Tide Sweeps into Cities, 166 FAR E. ECON. REV. 24, 25 (2003).
76 Id.
77 For discussion of the hukou system, see FEI-LING WANG, ORGANIZING THROUGH DIVISION AND
EXCLUSION: CHINA’S HUKOU SYSTEM (2005). For more information on the early uses of hukou
and its ties to employment, housing, education, and social security, see Reform of China’s
Household Registration System Underway, supra note 74.
376 COLUMBIA JOURNAL OF ASIAN LAW [19:2
workers are often given dirty, difficult, and dangerous jobs, made to work
under sub-standard working conditions, or sometimes not paid for months
at a time.78
Many hardships exist for such workers who are far from home
and in need of money.79 Certainly, migrant workers’ lack of awareness of
their legal rights combined with urban employers’ HRM methods, illegal
practices of withholding wages, overtime pay, and long working hour
requirements, all contribute to workplace discrimination against migrant
workers. This migrant status can arguably be associated with one’s
“social origin,” a topic discussed later in the section dealing with worker
definitions under international covenants.80
Gender also often blends with migrant worker discrimination in
the workplace as female migrant workers (dagong mei) are often
preferred to work in certain factory jobs.81 The connection has been
described as follows.
More than 10 million migrant laborers work in
Guangdong Province according to China’s 2000
national census, and the Guangdong Statistical Bureau
estimates that more than 60% of these are women.
Migrant workers tend to staff wholly-foreign-owned
enterprises, joint ventures, township and village
enterprises, and private enterprises that produce toys,
clothing, footwear, electronics, and other consumer
goods. Female workers usually come to Guangdong
from poorer provinces along the Yangzi River such as
Hubei, Hunan, Jiangsu, Jiangxi, and Sichuan. They
find jobs in Guangdong factories through labor bureaus,
78 See Zhiqiang Liu, Institution and Inequality: The Hukou System in China, 33 J. COMP. ECON. 133,#p#分页标题#e#
137 (2005). Vice-Premier Zeng Peiyan revealed in a 2004 national conference that more than ¥360
billion (US$43 billion) in unpaid wages remain owed to migrant workers at thousands of real estate
projects. See Zeng: Pay All Owned Wages to Migrants, CHINA DAILY, Aug. 24, 2004, available at
2004 WLNR 11949200; see also, AM. CTR. FOR INT’L LABOR SOLIDARITY, JUSTICE FOR ALL: THE
STRUGGLE FOR WORKER RIGHTS IN CHINA 39-40 (2004).
79 See Pun Ngai, Women Workers and Precarious Employment in Shenzhen Special Economic Zone,
China, 12 GENDER & DEV. 29, 30 (July 2004).
80 It is argued that the use of “social origin” in ILO Convention No. 111 covers China’s internal
migrant workers. U.S. Dept. of Labor, International Labor Standards: Discrimination and
Equality, available at http://www.dol.gov/ilab/webmils/intllaborstandards/discrimination.html (last
visited Feb. 27, 2006) [hereinafter International Labor Standards]; see infra notes 163 and 164
under IIIA.2.b.
81 Zhang Ye et al., Hope for China's Migrant Women Workers, THE CHINA BUS. REV., May/June
2002, at 30, 31; see also Xiao-Yuan Dong et al., Gender Segmentation at Work in China's
Privatized Rural Industry: Some Evidence from Shandong and Jiangsu, 32 WORLD DEV. 979,
(2004). Pun Ngai, supra note 79, at 29.
2006] CHINA’S EMPLOYMENT DISCRIMINATION 377
from relatives and friends, or by word of month.
Guangdong’s economy has grown more than 14% per
year on average during the last decade, and the province
has accounted for about half of the country’s total GDP
growth. Guangdong alone generates more than 40% of
China’s foreign trade in terms of value. While both the
central and local governments have recognized the
indispensable contribution of migrant labor, so far
government policy [as of 2002] has provided migrant
laborers few protections.82
This situation is confirmed by other sources:
In 2003, some 70% of the 5.5 million migrant workers
in the Shenzhen special economic zone were women.
In Shenzhen’s industrial district of Nanshan, 80% of the
half-million workers were women; their average age
was 23.83
Thus, the cheap cost of labor provided by migrant workers forms
a very large segment of China’s workforce, and seems to be a significant
part of China’s economic development during its economic transition.
Whether migrant status should or will be designated as a protected class
similar to gender, however, remains uncertain. But the continuing
presence and growth of this “floating population” of migrant workers will
certainly impact China’s labor and social security laws significantly,
especially in the areas of labor contracts, worker injuries, and
82 Ye et al., supra note 81, at 31. New protections under the labor laws were issued by the central#p#分页标题#e#
government in 2003 and 2004, discussed infra in IIIA.2.b.
83 AM. CTR. FOR INT’L LABOR SOLIDARITY, supra note 78, at 39 (original footnote omitted). See
also Yuchao Zhu, Workers, Unions and the State: Migrant Workers in China's Labour-intensive
Foreign Enterprises, 35 DEV. & CHANGE,1011(Nov. 2004).
378 COLUMBIA JOURNAL OF ASIAN LAW [19:2
unemployment.84 If illegal employment discrimination is present because
of the worker’s migrant status, the remaining question is whether and how
China’s anti-discrimination laws will address it.
c. Race / Ethnicity
Though China has a relatively homogeneous population as 92
percent of its people are of the Han ethnicity, the remaining 8% includes
over 100 million Chinese of fifty-five different ethnic minorities. 85
Therefore, “race” in China is often considered in the context of ethnicity.
Defining “race” can be a complex undertaking in China, or any other
country. For example, the U.S. Supreme Court defined “race” under an
1800s civil rights law as being “genetically part of an ethnically and
physiognomically distinctive subgrouping of homo sapiens.”86
The Chinese government in its report under the International
Convention on the Elimination of All Forms of Racial Discrimination
(ICERD) (agreed to since 1981) has defined “race” as “race, colour,
descent, or national or ethnic origin.”87 According to the International
Committee's comments, this report urges China to:
84 Ingrid Nielsen et. al., Unemployment within China 's Floating Population: Empirical evidence
from Jiangsu Survey Data, CHINESE ECON. (forthcoming 2006), manuscript available at
http://www.buseco.monash.edu.au/units/aberu/papers/unemployment-china-floating-population.pdf
(last visited July 4, 2005). In a recent report by the United Nations' Committee on Economic, Social
and Cultural Rights reviewing China's report on its implementation of Articles 16 and 17 of the
International Covenant on Economic, Social and Cultural Rights, the Committee, in its Concluding
Observations, stated as one of its "Principles of Concern", “the de facto discrimination against
internal migrants in the fields of employment, social security, health service, housing and education
that indirectly result, inter alia, from the restrictive national household registration system (hukou)
which continues to be in place despite official announcements regarding reforms;” and the
Committee is “deeply concerned about the insufficient implementation of existing labour legislation
in the State party that has resulted in generally poor conditions of work, including excessive
working hours, lack of sufficient rest breaks and hazardous working conditions.” U.N. Concluding
Observations, supra note 57.#p#分页标题#e#
85 U.N. Committee on the Elimination of Racial Discrimination, 59th Sess., Ninth Periodic Reports
Submitted by States Parties, at 3, U.N. Doc. CERD/C/357 Add. 4 (Part I) (2001).
86 St. Francis College v. Al-Khazraji, 481 U.S. 604, 613 (1987). Justice Brennan, in a concurring
opinion noted, “I write separately only to point out the line between discrimination based on
‘ancestry or ethnic characteristics’ and discrimination based on place of origin—the country ‘where
a person was born, or more broadly, the country from which his or her ancestors came.’ [internal
citations omitted] Often, the two are identical as a factual matter.” Id. at 614. National origin
discrimination then can include “place of origin, physical, culture or linguistic characteristics of that
group.” Id.
87 International Convention on the Elimination of All Forms of Racial Discrimination, art.1, opened
for signature Dec. 21, 1965, 660 U.N.T.S. 195 (entered into force Jan. 4, 1969) [Hereinafter
ICERD]; see also summary in Ninth Periodic Reports Submitted by States Parties, supra note 85, at
5-7.
2006] CHINA’S EMPLOYMENT DISCRIMINATION 379
consider giving full effect to the provisions in the
Convention in its domestic legal order and that it ensure
the penalization of racial discrimination; and also, that
it ensure access to effective protection and remedies
through the competent national tribunals or other state
institutions, against all acts of racial discrimination. It
should be noted that the structural inadequacies in
respect of anti-discrimination laws are in violation of
Article 4 of ICERD.88
This Report clearly calls for prohibitions on all acts of racial
discrimination. It therefore promotes the elimination of any
discrimination based on ethnicity, including that of national ethnic
minorities.
While China must be credited with great success for the economic
progress of regions with substantial racial minority populations, the
ICERD Report makes the point “that economic development in minority
regions does not ipso facto entail the equal enjoyment of economic,
social, and cultural rights in accordance with Article 5(e) of the
Convention.”89 Anecdotal information about hiring practices in China
suggests that some employers continue to show racial prejudice against
outsiders (those not of the local area), migrants, ethnic minorities, those
speaking a different language, and those “looking different”.90 Whether
these purported instances of racial discrimination in employment reflect a
pattern or are isolated instances is best left to further scientific inquiry.
Of course, even if China were to enact and enforce a plethora of antidiscrimination
laws, as has been done in the United State, such would not#p#分页标题#e#
guarantee the eradication of racial discrimination.91
88 U.N. Committee on the Elimination of Racial Discrimination, 59th Sess., 1648th & 1649th mtg.
at 3-5, U.N. Doc. CERD.C.59.Misc.16.Rev.3 (2001) [emphasis added].
89 See Report of the Committee on the Elimination of Racial Discrimination, U.N. GAOR, 59th
Sess., Supp. No. 18, at 48, U.N. Doc. A/56/18 (2001); see also Information Office of the State
Council of the People's Republic of China (Beijing), Regional Autonomy for Ethnic Minorities in
China, available at http://www.china.org.cn/e-white/20050301 (last visited Feb. 27, 2006).
90 In a reported case, a Hangzhou-based hotel refused to hire a job applicant, simply because the
applicant spoke in a non-local dialect. See Tongue-Tied Dialect, supra note 2. Whether some or all
of these categories may fall under “social origin” is discussed in III.2.b, infra.
91 HAROLD S. LEWIS, JR. & ELIZABETH J. NORMAN, LEWIS AND NORMAN'S HORNBOOK ON
EMPLOYMENT DISCRIMINATION LAW AND PRACTICE 215-25 (2d ed. 2004) [Hereinafter LEWIS &
NORMAN]. During fiscal year 2004, The U.S. Equal Employment Opportunity Commission
(EEOC) received 27,696 charges of race discrimination. The EEOC has observed an increasing
number of color/race discrimination charges. Color/race bias filings have increased by 125% since
the mid-1990s. U.S. EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, RACE/COLOR
DISCRIMINATION, http://www.eeoc.gov/types/race.html (last visited Feb. 27, 2006).
380 COLUMBIA JOURNAL OF ASIAN LAW [19:2
Ethnicity is another category of worker status, and can be closely
associated with race, as discussed above.92 In China, the population of
ethnic national minorities exceeds 106 million (about 8.4% of
population), and it is argued that there continues to be job discrimination
at the hands of the majority Han, particularly in border areas near the
minority-dominated autonomous regions.93 There have been anecdotal
reports of preference for Hans over minorities for new construction jobs
in Xinjiang, Inner Mongolia, and Tibet.94 These reported incidents may
merely reflect preference for education and technical skills, such as would
be required in some of the new projects on oil and gas pipelines. In the
mid-1990s, some reports by foreign advocates claimed discriminatory
treatment was occurring in Tibet as to wages and preference for
proficiency in Mandarin, the national language, over the local language of
Tibetan. 95 It is reported that in Hangzhou, the capital of Zhejiang
Province, bus drivers and attendants must speak standard Mandarin
(Putonghua) during working hours, and face employer-imposed fines if
caught speaking local dialects.96
In the United States, employment discrimination based on
“physical, cultural, or linguistic characteristics of a national group” is#p#分页标题#e#
prohibited by law where it is not shown to be a “bona fide occupational
qualification” or “business necessity.” 97 Discrimination based on
language has been categorized as both “race” and “national origin”
discrimination, as there is often a clear connection between ethnicity and
92 Merriam-Webster's Collegiate Dictionary defines ethnicity as particular affiliation of “large
groups of people classed according to common racial, national, tribal, religious, linguistic, or
cultural origin or background.” MERRIAM-WEBSTER'S COLLEGIATE DICTIONARY 326 (11th ed.
2003). The U.S. Supreme Court defined “race” as being “genetically part of an ethnically and
physiognomically distinctive subgrouping of home sapiens.” St. Francis College v. Al-Khazraji,
481 U.S. 604, 607 (1987).
93 State Dept. Rpt., supra note 58. In a recent report by the United Nations' Committee on
Economic, Social and Cultural Rights reviewing China's report on its implementation of Articles 16
and 17 of the International Covenant on Economic, Social and Cultural Rights, the Committee, in its
Concluding Observations, stated as one of its "Principles of Concern", “the reports regarding the
discrimination of ethnic minorities in the State party, in particular in the field of employment,
adequate standard of living, health, education and culture.” U.N. Concluding Observation, supra
note 57, at 5.
94 State Dept. Rpt., supra note 58.
95 It is reported that a minimum wage has been introduces everywhere in China except for the Tibet
Autonomous Region. Tibetan Centre for Human Rights And Democracy, 1997 Annual Report:
Human Rights Violations In Tibet (on file with author). See also Osman Chuah, Muslims in China:
The Social and Economic Situation of the Hui Chinese, 24 J. MUSLIM MINORITY AFF.155, 155,
(Apr. 2004).
96 Bus Personnel Must Speak Putonghua Or Else, CHINA DAILY, June 4, 2005, http://www.
chinadaily.com.cn/english/doc/2005-06/04/content_448499.htm.
97 See 29 C.F.R. § 1606.1 (2005); 42 U.S.C. § 2000e-2(e)(i) (2005); 42 U.S.C. §§ 2000e-
2(k)(1)(A)(i) (2005).
2006] CHINA’S EMPLOYMENT DISCRIMINATION 381
language.98 Employer policies of speak-English-only still generate legal
controversy.99
d. Disability / Health
The term “disability” potentially includes many areas, including a
person’s physical or mental limitations (such as blindness, deafness, etc.)
or health status (such as having SARS, hepatitis B, or HIV/AIDS, injured
workers, etc.).100 Protecting against improper disability discrimination in
the workplace is usually balanced against an employer’s desire to have an
otherwise qualified worker. China has an estimated sixty million disabled
people (about 5% of the population), with about 80% residing in rural#p#分页标题#e#
areas.101 In 2000 it was estimated that 75% of disabled people had some
type of employment.102 In 1990, China passed a law titled the Protection
of Disabled Persons,103 the primary emphasis of which was prohibiting
98 Hernandez v. N.Y., 500 U.S. 352, 364 (1991) (in the context of a community with substantial
foreign-speaking ethnic population, classification based on language can purposeful discrimination
against ethnicity).
99 See Garcia v. Spun Steak Co., 998 F.2d 1480 (9th Cir. 1993), cert. denied, 512 U.S. 1228 (1994);
for general discussion, see AMERICAN CIVIL LIBERTIES UNION OF NORTH CALIFORNIA, LANGUAGE
RIGHTS, http://www.aclunc.org/language/lang-report.html (last visited Feb. 27, 2006).
100 BLACK'S LAW DICTIONARY 474 (8th ed. 2004).
101 CENTER FOR INTERNATIONAL REHABILITATION, PEOPLE’S REPUBLIC OF CHINA RIGHTS OF
PEOPLE WITH DISABILITIES, available at http://www.cirnetwork.org/idrm/reports/compendium/
china.cfm (last visited Feb. 27, 2006). In May, 2005 it was reported that of “China’s 25 million
disabled job seekers . . . 1 million live in urban areas with Beijing home to over half their number,
according to China’s Disabled Persons Federation (CDPF). The employment rate of the disabled in
Beijing, those of working age and capable of employment, is around 85%.” The Federation
reported though many have jobs, “their general employment situation remains grave and they are
facing increasing pressure and difficulty in finding a job.” Liu Li & Wu Chong, Nation to Create
More Jobs for Disabled, CHINA DAILY, May 16, 2005 at 2, available at http://www.chinadaily.
com.cn/english/doc/2005-05/16/content_442328.htm.
102 Center for International Rehabilitation, supra note 101.
103 中华人民共和国残疾人保障法 [Law on the Protection of Disabled Persons] (promulgated by
the Standing Comm. Nat’l People’s Cong., Dec. 28, 1990, effective May 15, 1991) 14 P.R.C. LAWS
& REGS V-03-00-101, available at http://www.chinacourt.org/flwk/show1.php?file_id=11967
[hereinafter Law on Protection of Disabled Persons]. “Disability” is defined as “one who suffers
from abnormalities or loss of a certain organ or function, psychologically, physiologically or in
anatomical structure, and who has lost wholly or in part the ability to engage in activities in a
normal way.” Id. art. 2.
382 COLUMBIA JOURNAL OF ASIAN LAW [19:2
discrimination in general,104 and this law covers employment situations in
prohibiting disability-based discrimination.105
On the international level, while participating in a United Nations
Working Group on the Convention on Rights of Persons with Disabilities,
China proposed a draft “[aimed] at recognizing and protecting the rights
of persons with disabilities,” eliminating discrimination, and promoting#p#分页标题#e#
equal opportunity.106
Whether employment discrimination based on disability exists or
is widespread in the Chinese workplace depends somewhat upon the legal
interpretation of disability, discussed in greater detail in a later section.
The number of Chinese workers screened out from equal employment
opportunities by an appearances requirement (“five facial organs in the
right place”), mental or physical condition, or health consideration awaits
further research and discovery by social scientists.107
Worker health is another factor commonly scrutinized in the
employment of workers and is closely associated with disabilities.
Chinese employers have broad discretion in the selection of employees,
and often screen out those whom they feel may be a problem, including
those with certain health ailments such as hepatitis B and HIV/AIDS.
The number of Chinese citizens afflicted by these two diseases number
120 million (approximately 10% of the population) and 840,000,
respectively.108
104 Center for International Rehabilitation, supra note 101. In a recent report by the United Nations'
Committee on Economic, Social and Cultural Rights reviewing China's report on its implementation
of Articles 16 and 17 of the International Covenant on Economic, Social and Cultural Rights, the
Committee, in its Concluding Observations, stated as one of its “Principles of Concern,” the
“reported persistence of discrimination against persons with physical and mental disabilities,
especially in the fields of work, social security, education and health.” UN Concluding
Observations, supra note 57, at 3.
105 Law on Protection of Disabled Persons provides that “[g]overnmental departments concerned
shall, in determining the quota for employing and engaging workers and staff members, allot a
certain proportion of the quota to disabled persons.” Law on Protection of Disabled Persons, supra
note 103, at art. 33.
106 See Proposed Draft by China on U.N. Ad Hoc Committee Convention on Rights of Persons with
Disabilities, §§ 1-3 (2003), art. 1, available at http://www.un.org/esa/socdev/enable/rights/
wgcontrib-china.htm (last visited Feb. 27, 2006). The Convention, in Article 8, dealing with
employment, recognizes the right to employment under equal conditions and “equal pay for equal
work by eradicating any discriminatory regulations and practices that restrict or deny persons with
disabilities in job-seeking, job retention and professional promotion.” Id. art. 8.
107 Examples of anecdotal incidents of disability discrimination reported in newspaper accounts
include disfigurement on a hand, “ugly appearance,” and being too short by 5 millimeters. See
Shang Shui, supra note 2.
108 Statistics Released by Ministry of Health (May 1, 2005) (on file with author); YE JINGYI &WEI#p#分页标题#e#
QIAN, LEGAL PROBLEMS CONCERNING HEALTH DISCRIMINATION IN EMPLOYMENT,
http://www.humanrights.cn/zt/magazine/200402004921170301.htm (last visited Feb. 27, 2006); see
also Liang Chao, supra note 10.
2006] CHINA’S EMPLOYMENT DISCRIMINATION 383
A survey conducted by Britain’s Synovate Healthcare reported
that 52% of 425 hepatitis patients said they once lost a job or educational
chance because of their disease; further, about 47% were concerned that
employers would terminate them if the disease were discovered.109 One
Guangdong machinery and electronics company compelled 107 hepatitis
B carriers to quit because of their condition.110
In April 2003, one university student in his senior year applied for
a government position in Zhejiang Province and passed both the
examination and the interview. However, he was rejected once the
employer discovered he was a hepatitis B carrier. Distressed, the student,
Zhou Yichao, retaliated by stabbing two officials, killing one. Zhou was
later tried and sentenced to death.111 His case aroused public attention
and stirred national pressure for protective legislation.112
Another student who was also rejected for a government job after
testing positive for hepatitis B chose to file a law suit against the
government, challenging the rejection.113 The People’s Court in Xinwu
District of Wuhu City in Anhui Province accepted the case, China’s first
hepatitis B discrimination case. In April, 2004 the court ruled in the
student’s favor upon a finding of improper discrimination.114 However,
the court did not order the government to provide a job for the student.115
Some local governments, including the government of Hunan
Province in central China, have reportedly dropped bans on hiring
Hepatitis B carriers, perhaps in anticipation of new legislation regulating
disability and health qualifications for jobs in government service. 116
However, as late as 2004, health/disability requirements for government
jobs seemed to persist. For example, in Guangdong any applicant who
manifests listed diseases or physiological deficiencies is deemed to be
unqualified for a position in the Guangdong public service. A partial list
includes, an obvious squint (xie shi), cleft lip, torticollis (wry neck),
pigmentation moles, curvature of the spine, certain incomplete fingers,
109 Hep B Carriers Allowed to Join Public Service, CHINA DAILY, Jan. 21, 2005, http://www.
chinadaily.com.cn/english/doc/2005-01/21/content_411013.htm.
110 Dispute Arises, supra note 2.
111 See Liang Chao, supra note 10.
112 曹林, 周一超悲剧的肝炎歧视成本 [Cao Lin, See the Cost of Discrimination against HBV
Carriers from the Zhou Yichao Murder Case], 新闻周刊[CHINA NEWS WK.], Sep. 15, 2003, at 8,
available at http://www.chinanewsweek.com.cn/2003-09-22/1/2262.html; See also Ye & Wei,#p#分页标题#e#
supra note 108.
113 See Liang Chao, supra note 10.
114 Court Confirms Right of Hepatitis B Carrier, CHINA DAILY, Apr. 3, 2004, http://www.
chinadaily.com.cn/english/doc/2004-04/02/content_320351.htm; Government Loses Hep. B
Discrimination Case, SHENZHEN DAILY, June 1, 2004, at 4.
115 Liang Chao, supra note 10.
116 Hep B Carriers Allowed to Join Public Service, supra note 109.
384 COLUMBIA JOURNAL OF ASIAN LAW [19:2
vision tests lower than 4.9, hearing deficiencies, stuttering, a history of
enuresis (bed-wetting), signs of heart disease, hypertension,
bronchiectasis, diabetes, hepatitis, too many fillings in their teeth, or
lower jaw arthritis.117 Certain tests are available to allow an applicant to
show that his or her past history of disease is fully under control.118 This
list may need to be revisited after a review of China’s recent laws and
regulations.119
e. Religious Belief
While discrimination based on religious beliefs is expressly
prohibited by the Labor Law, there are also other laws pertaining to
religion and religious discrimination that could, on a limited basis, be
used to limit employment discrimination.120 However, there seems to be
a paucity of reported incidents involving employment discrimination
under any of the laws relating to religious belief.
f. Other Categories: Age and Height
i. Age
117 广东省国家公务员录用体检实施细则(试行) [Regulations of Guangdong Province for Physical
Examination on Hiring Public Servants (provisional)] art. 11 (Apr. 29, 2002), available at
http://www.rsj.sz.gov.cn/gzdt/200511/t8107.htm [hereinafter Guangdong Regulations].
118 Id. art. 12.
119 中华人民共和国传染病防治法 [Law on Prevention and Treatment of Contagious Disease]
(promulgated by the Standing Comm. of the Nat’l People’s Cong., Feb. 21, 1989, effective Sept. 1,
1989, amended Aug. 28, 2004) (P.R.C.), available at http://www.chinacourt.org/flwk/
show1.php?file_id=96086 [hereinafter Contagious Disease Law]; 公务员录用体检通用标准(试行)
[Health Qualifications for Hiring Civil Servants (provisional)] (promulgated by the Ministries of
Health and the Ministry of Personnel, Jan. 17, 2005) (P.R.C.), available at http://www.dffy.com/
faguixiazai/xzf/200501/20050123163654.htm [hereinafter Health Qualifications for Hiring Civil
Servants].
120 Any public official interfering with the exercise of protected religious activities will face
criminal penalties. 中华人民共和国刑法 [Criminal Law] art. 251 (promulgated by the Standing
Comm. of the Nat’l People’s Cong., Mar. 14, 1997, effective Oct. 1, 1997, revised Feb. 28, 2005)
03/1997 全国人民代表大会常务委员会公报[STANDING COMM. NAT'L PEOPLE'S CONG. GAZ.]
138 (P.R.C.), available at http://www.chinacourt.org/flwk/show1.php?file_id=27762 [hereinafter#p#分页标题#e#
Criminal Law]. Local government has the obligation to protect the religious freedom in ethnic
minority regions. 中华人民共和国民族区域自治法 [Law on Regional National Autonomy] art. 11
(promulgated by the Standing Comm. of the Nat’l People’s Cong., May 31, 1984, effective Oct. 1,
1984, revised Feb. 28, 2001) (P.R.C.), available at http://www.chinacourt.org/flwk/show1.php?
file_id=36850 [hereinafter Law on Regional National Autonomy].
2006] CHINA’S EMPLOYMENT DISCRIMINATION 385
In China, there are reported to be many job advertisements
requiring applicants to be, for example, “below 35-years old.”121 Though
old age is generally revered in China, ads like this underscore the
attitudes of many employers who hold stereotypes about the abilities of
older people to work. But as the average age in China rises and as labor
shortages appear from time to time, some employers have turned to
employing “older” workers with satisfactory results.122
The age of retirement in China for some years has been set at fifty
for female workers, fifty-five for female cadres, and sixty for male
workers and cadres.123 Such policies may need to be adjusted in view of
the increasing age of the population and the demands placed on pensions
during long years of retirement.124 It seems the government must chose
between eliminating this form of employment discrimination, or paying
enormous amounts in unemployment and pension insurance.
ii. Height
Though the Constitutions of both the United States and China
provide that all citizens are equal,125 neither country’s anti-discrimination
labor legislation explicitly identify height as a protected status in the same
way that other characteristics such as race and gender are. Interestingly,
history teaches that short people can become great leaders of countries as
well as companies.126
121 白天亮, 招聘有歧视,依法促公平 [Bai Tianliang, Discrimination Exists in Hiring Process;
Equality To Be Achieved Through Law], 人民日报[PEOPLES’ DAILY], Feb 11, 2003, at E1,
available at http://past.people.com.cn/GB/shenghuo/78/116/20030211/920873.html.
122 Dali L. Yang, China’s Looming Labor Shortage, 168 FAR E. ECON. REV. 19, 20 (2005).
123 See 劳动和社会保障部办公厅关于企业职工”法定退休年龄”涵义的复函 [Reply by the
Ministry of Labor and Social Security on the Meaning of “Legal Retirement Age” of the Workers in
State-Owned Enterprises] (May 11, 2001), http://www.chinacourt.org/flwk/show1.php?
file_id=37327 [hereinafter Reply on Legal Retirement Age]; certain female teachers, doctors, and
scientific and technical personnel can retire at age sixty, but men in the same positions may work
until age sixty-five. Christine M. Bulger, Note, Fighting Gender Discrimination in the Chinese#p#分页标题#e#
Workplace, 20 B.C. THIRD WORLD L.J. 345, 358 (2000). Labor Law states that employees can
enjoy social security benefits only after legal retirement. Labor Law, supra note 19, at art. 73(1).
124 This issue will continue to grow as the rapidly aging population in China of persons aged sixtyfive
and over will have grown in 2000 to 2007 from 100 million to 200 million (which will
constitute 14% of China’s total population) increasing more than 14 million per year. Fu Jing, Huge
Sum to Be Put Into Social Security, CHINA DAILY, Sep. 18, 2004, http://www.chinadaily.com.cn/
english/doc/2004-09/18/content_375540.htm.
125 U.S. CONST. amend. XIV, § 1; 宪法 [CONST.] art. 33 (2004) (P.R.C.).
126 For example, Deng Xiaoping’s height was 4 feet 11 inches and the shortest U.S. President, James
Madison, was 5 feet 4 inches. See Dan Harbord, Famous People Height List, http://members.
shaw.ca/harbord/heights3.html (last visited Feb. 27, 2006). For an essay on being short, see
Jonathan Rauch, Short Guys Finish Last, ECONOMIST, Dec. 23, 1995, at 19.
386 COLUMBIA JOURNAL OF ASIAN LAW [19:2
In the United States, the anti-discrimination laws do not protect
height itself, but do so indirectly through other protected statuses, such as
gender or national origin.127 An employer’s use of non-job-related height
requirements for job applicants (e.g., prison guards) which
disproportionately disqualified large numbers of potential women and
applicants of Asian descent was held to be in violation of the law.128
Despite finding no discriminatory intent to the policy, the court ruled its
indirect effect (“disparate impact”) of denying jobs to many qualified
persons violated anti-discrimination protections.
While height limitations are often spelled out in government job
qualifications in China,129 they are less likely to be found in the job
requirements of private employers. Government limitations on height
may often be found in the physical requirements for government
positions. For example, in the Physical Examination Regulations for
Hiring Public Servants in Guangdong Province, Clause 11 of Article 12
states, “[M]en must be above 1.6 meters [five feet, three inches] and
forty-eight kilograms [105.8 pounds]; females must be above 1.5 meters
[four feet, eleven inches] and forty-two kilograms [92.59 pounds]”;
whereas, Article 14 says, “police must be taller and have better
eyesight.”130 Such height restrictions may well eliminate women and
certain ethnic groups from the applicant pool without consideration of
their merits.
III. CHINA’S ANTI-DISCRIMINATION LAWS
A. Laws Providing “Protected Status”
At the end of 2004, China reported having 752 million people in
its workforce, including 264.8 million urban workers.131 Among that#p#分页标题#e#
group, 45.5% were women, of whom 97.3 million were employed as
urban workers. 132 Among the 100-150 million migrant workers,
127 16B AM. JUR. 2D Constitutional Law §§ 808-17; and see, statutory interpretation of Title VII
dealing with height in Dothard v. Rawlinson 433 U.S. 321 (1977).
128 Dothard v. Rawlinson, 433 U.S. 321 (1977).
129 Guangdong Regulations, supra note 117. See also Joseph Kahn, Chinese People's Republic Is
Unfair to Its Short People, N. Y. TIMES, May 21, 2004, at A13.
130 Guangdong Regulations, supra note 117.
131 劳动及社会保障部, 国家统计局, 2004 年度劳动和社会保障事业发展统计 [MINISTRY OF
LABOR AND SOCIAL SECURITY & NATIONAL BUREAU OF STATISTICS, 2004 STATISTICS ON THE
LABOR AND SOCIAL SECURITY ACHIEVEMENTS] (Feb. 1, 2005) [hereinafter 2004 STATISTICS] (on
file with author).
132 INFORMATION OFFICE OF THE STATE COUNCIL OF THE PEOPLE'S REPUBLIC OF CHINA,
PROGRESS IN CHINA’S HUMAN RIGHTS CAUSE IN 2003, http://news.xinhuanet.com/zhengfu/2004-
04/01/content_1396172.htm (last visited Feb. 28, 2006).
2006] CHINA’S EMPLOYMENT DISCRIMINATION 387
approximately 70% were reportedly in the urban workforce.133 However,
the number of urban workers with disabilities, hepatitis B or HIV/AIDS is
uncertain.134
1. The 1994 Labor Law
a. Race, Ethnicity, Sex, and Religious Belief
Applicable current legislation prohibiting employment
discrimination comes from various sources, not just labor laws.135 Article
12 of the 1994 Labor Law states that “laborers, regardless of their ethnic
groups, race, sex, or religious belief, shall not be discriminated against in
employment.” 136 However, Article 14 exempts “people of minority
ethnic groups,” along with the disabled and demobilized army men where
“special stipulations in laws, rules and regulations” apply.137
Race does not appear to be a much-used category in employment
discrimination, except to the degree it is intertwined with ethnicity or one
of its indirect manifestations such as language, dress, or customs. The
question concerning ethnicity is whether or not it is exempted by Article
14 of the Labor Law (discussed below), leaving race as a protected status
133 China’s Floating Population Exceeded 10% of Total Population, supra note 9. Kenneth
Roberts, Female Labor Migrants to Shanghai: Temporary "Floaters" or Potential Settlers?, 36
INT’L MIGRATION REV. 492, 496 (2002).
134 Daniel Goodkind & Loraine A. West, China's Floating Population: Definitions, Data and Recent
Findings, 39 URB. STUD. 2237, 2238 (2002); see also Center for International Rehabilitation, supra
note 101.
135 For example, special legislations on women’s rights partially override the application of
workplace anti-discrimination laws. 中华人民共和国妇女权益保障法 [Law on Protection of#p#分页标题#e#
Women’s Rights and Interests] arts. 23-27 (promulgated by the Standing Comm. of the Nat’l
People’s Cong., Apr. 3, 1992, effective Oct. 1, 1992, revised Aug. 28, 2005) (P.R.C.), available at
http://www.chinacourt.org/flwk/show1.php?file_id=14697 [hereinafter Women’s Rights Law].
136 Labor Law, supra note 19, at art. 12.
137 Id. art. 14.
388 COLUMBIA JOURNAL OF ASIAN LAW [19:2
vacant of use, except perhaps as it overlaps with ethnicity and as it is
applied to either foreigners or Chinese citizens of non-Chinese descent.138
Gender is a protected status under Article 12 of the Labor Law
and several other laws. Women are also covered by Article 13 of the
Labor Law, which provides,
[W]omen shall enjoy the equal employment right with
men. With exception of the special types of work or
posts unsuitable to women as prescribed by the State
[Articles 59-63], no unit may, in employing staff and
workers, refuse to employ women by reason of sex or
raise the employment standards for women.139
The “unsuitable work” exceptions apply to work in mine pits,140
work on high ground, low temperatures, in cold water, in Grade III
physical labor during a woman’s menstrual cycle, 141 work during
pregnancy, 142 and provide entitlement to maternity leave for child
birth. 143 The exceptions further limit work during periods of breastfeeding
for children less than one-year old.144
Religious belief is another protected status insulated against
employment discrimination under the Labor Law. 145 As in many
countries, religious beliefs are often intertwined with other protected
statuses, such as ethnic background and race.146
138 A person can obtain Chinese citizenship by blood or by birth. The law says “When the parents,
who have no nationality or whose nationality is uncertain, reside in China, and the child was born in
China, then the child automatically obtains Chinese citizenship.” 中华人民共和国国籍法
[Nationality Law] art. 6 (promulgated by the Standing Comm. of the Nat’l People’s Cong., Sept. 10,
1980, effective Sept. 10, 1980) (P.R.C.), available at http://www.chinacourt.org/flwk/
show1.php?file_id=1543.
It was a dead provision for years because it was extremely difficult to get permanent residence in
China. However, as of recent China allows a foreigner and his/her spouse to become permanent
residents, if, among other conditions, the foreigner invests at least US $ 500,000. 外国人在中国永
久居留审批管理办法 [Provisions For the Administration of Examination and Approval of
Foreigners’ Permanent Residence in China] art. 7 (promulgated by the St. Council, Ministry of
Foreign Affairs, and Ministry of Pub. Sec., Aug. 15, 2004, effective Aug. 15, 2004) (P.R.C.),
available at http://www.bjqb.gov.cn/data/news/fgtl/2004830113528.htm. Other ways to obtain#p#分页标题#e#
Chinese permanent residence include employment and teaching. Id. art. 8.
139 See Labor Law, supra note 19, at art. 13.
140 Id. art. 59
141 Id. art. 60
142 Id. art. 61
143 Id. art. 62.
144 Id. art. 63
145 Id. art. 12.
146 Under U.S. discrimination law, language, accents, and customs can be categorized as race,
religion, or national origin. See LEWIS & NORMAN, supra note 91, at 45-48.
2006] CHINA’S EMPLOYMENT DISCRIMINATION 389
b. “Exemption” for Ethnic Minorities
Article 14 of the Labor Law exempts ethnic minorities and the
disabled from coverage where “special stipulations” that otherwise
provide protection exist. If special stipulations for the disabled and
people of minority ethnic groups do exist, ethnic minorities would be
exempted from the coverage and protection of the Labor Law per Article
14. The exemption for the disabled, however, appears meaningless since
disability was not covered by Article 12 in the first instance.147
As to the possible Article 14 exemption of “people of minority
ethnic groups,” some laws protect national ethnic minorities148 but do not
include a specific prohibition on employment discrimination. 149
Therefore, in the author’s judgment, it would seem that this group would
not be exempted from coverage under the Labor Law.
Pursuant to international conventions, China has agreed to treat
the issues of welfare and employment discrimination against ethnic
groups under the category of “race.”150 Therefore, there appears to be a
dual legislative avenue of relief for those claiming employment
discrimination based on ethnic minority status through either “race” or
“ethnic minority” status. In China, it is difficult to discuss race (except as
to “foreigners”) as apart from ethnicity.
147 “[S]pecial stipulations in laws, rules and regulations” do exist for the “disabled” and therefore, at
any rate, those laws control discrimination against disabled workers. The 1990 Law on the
Protection of Disabled Persons prohibits discrimination, in society generally, against the disabled.
Law on Protection of Disabled Persons, supra note 102, at art. 3. It also specifically bans
discrimination in job “recruitment, employment, obtainment of permanent status, promotion” and
other areas discussed more fully in a subsequent section. Id. art. 34. See also安徽省按比例安排残
疾人就业办法 [Regulations of Anhui Province on Arranging Employment for the Disabled Persons
According to Employment Quota], art. 7 (promulgated by the People’s Government of Anhui
Province, May 30, 2004, effective July 1, 2004) (P.R.C.), available at http://www.chinacourt.
org/flwk/show1.php?file_id=95143.
148 For example, Law on Regional National Autonomy prohibits discrimination against minority#p#分页标题#e#
ethnic groups. Law on Regional National Autonomy, supra note 120, at art. 9; 中华人民共和国工
会法 [Trade Union Law] art. 3 (promulgated by the Standing Comm. of the Nat’l People’s Cong.,
Apr. 3, 1992, effective Apr. 3, 1992, revised Oct. 27, 2001) (P.R.C.), available at
http://people.com.cn/GB/shizheng/8198/29614/29642/2071559.html (prohibiting racial
discrimination on Union benefits). See also the Law on Regional National Autonomy, supra note
120, at art. 23 (requiring enterprises in national autonomous areas to give priority to minority
groups when recruiting personnel).
149 See Labor Law, supra note 19, at art. 14. In the author’s judgment, the Labor Law defers to
other regulations on ethnic minority employment issues, only if there are job discrimination
provisions that would include the full employment status.
150 ICERD, supra note 87, at art. 14.
390 COLUMBIA JOURNAL OF ASIAN LAW [19:2
2. Other Anti-Discrimination Laws
In addition to China’s Labor Law, there are other sources of antidiscrimination
laws in the employment context that cover gender, migrant
worker status, ethnic minority status, disability/health conditions, and
religious beliefs.151
a. Gender
China faces major challenges in achieving gender equity. The
World Bank issued a report describing those challenges as follows:
As in many other countries, China is having some
difficulty monitoring and enforcing its own Labor Law,
especially in the private sector—let alone the informal
sector. State affirmative action policies have receded
while traditional gender stereotypes and values have reemerged,
including gender discrimination in the labor
market. Women are often employed in lower status,
lower paid jobs. During the transition, women have had
a harder time than men obtaining and keeping jobs . . . .
Women appear to be disproportionately represented
among laid-off workers, suffer from a higher
unemployment rate and have greater difficulty finding
alternate employment.152
China’s Constitution guarantees women equal rights with men,
protects the rights and interests of women, and provides that there shall be
equal pay for equal work.153 However, China’s Constitution is non-selfexecuting,
or in other words, it is aspirational and cannot by itself be
151 For example, any public official interfering with exercise of protected religion activities will face
criminal penalties. Criminal Law, supra note 120, at art. 251. See also国务院办公厅关于进一步
做好改善农民进城就业环境的通知 [NOTICE FROM THE STATE COUNCIL ON FURTHER
IMPROVING WORKING CONDITIONS FOR MIGRANT WORKERS] (Dec, 27, 2004), available at
http://www.gov.cn/zwgk/2005-08/15/content_23262.htm [hereinafter Notice on Improving Working
Conditions for Migrant Workers].#p#分页标题#e#
152 E. ASIA ENV’T & SOC. DEV. UNIT, WORLD BANK, CHINA COUNTRY GENDER REVIEW 14-18
(2002), available at http://info.worldbank.org/etools/library/view_p.asp?152361 (last visited Feb.
27, 2006) [hereinafter CHINA COUNTRY GENDER REVIEW].
153 宪法 [CONST.] art. 48 (2004) (P.R.C.); see also Bulger, supra note 123, at 352.
2006] CHINA’S EMPLOYMENT DISCRIMINATION 391
enforced in Chinese courts; constitutional doctrines must be incorporated
into laws promulgated by the government.154
Other possible sources of government obligation to protect against
gender discrimination in the workplace are international agreements.
China has ratified the United Nation’s Convention on the Elimination of
All Forms of Discrimination Against Women (CEDAW) and submitted
reports on its progress under this Convention.155 China also has ratified
the International Covenant on Economic, Social, and Cultural Rights
(ICESCR), which obligates the government to work toward the
elimination of discrimination against women in a variety of areas,
including employment.156
Other international commitments undertaken by China include its
ratification of ILO Convention No. 100 concerning equal pay for equal
work.157 However, it has not yet ratified ILO Convention 111, which
bans discrimination based on race, color, sex, religion, political opinion,
national extraction, and social origin.158
Domestically, China’s Law on Protection of Women’s Rights and
Interests (hereinafter “Women’s Rights Law”) provides legal prohibitions
against employment discrimination based on gender.159 Under this law,
women and men enjoy equal employment rights.160 The law prohibits
any hiring discrimination against women, and, unless the job position is
unsuitable for females, the hiring standard for men and women must be
the same.161 For promotions as well, under the equality principle men
and women are to be treated equally.162 Likewise, women and men shall
154 宪法 [CONST.] arts. 58, 62(2), 89(1) (2004) (P.R.C.).
155 United Nations Convention on the Elimination of All Forms of Discrimination against Women,
G.A. Res. 34/180, 34 U.N. GAOR Supp. (No. 46) at 193, U.N. Doc. A/34/46 (1980) (States Parties
agree to take all appropriate measures, including legislation, to ensure full development and
advancement of women in political, social, economic, and cultural fields, in order to guarantee them
the exercise and enjoyment of human rights and fundamental freedoms on basis equal to that of
men) [hereinafter CEDAW]. For China’s periodic reports, see U.N. Committee on the Elimination
of Discrimination against Women, 20th Sess., Third and Fourth Periodic Reports of States Parties,
at 1-27, U.N.Doc.CEDAW/C/CHN/3-4 (1997); U.N. Committee on the Elimination of
Discrimination against Women, Combined Fifth and Sixth Periodic Reports of States Parties at 1-#p#分页标题#e#
129, U.N.Doc.CEDAW/C/CHN/5-6/Add.1 (2004).
156 U.N. Committee on Economic, Social and Cultural Rights, 33d Sess., Initial Reported Submitted
by the People’s Republic of China at 1-128, U.N. Doc. E/1990/5/Add.59 (2003).
157 International Labour Organization Convention (No. 100) Concerns Equal Remuneration for Men
and Women Workers for Work of Equal Value, June 29, 1951 165 U.N.T.S. 32.
158 International Labour Organization Convention (No. 111) Concerning Discrimination in Respect
of Employment and Occupation, June 25, 1958, 362 U.N.T.S. 31.
159 Women’s Rights Law, supra note 135, at arts. 23-27.
160 Id. art. 22. It appears therefore, that in most situations, the ban on gender discrimination is
equally available to male victims.
161 Id. art. 23.
162 Id. art. 25.
392 COLUMBIA JOURNAL OF ASIAN LAW [19:2
be paid the same rate when they are working on the same job,163 and the
employer may not terminate any female employee on the grounds of
marriage, pregnancy, maternity leave, or nursing.164
Currently in China, the law fixes different retirement ages for men
and women.165 As a result, women receive substantially smaller pensions
than men do, even though other employee benefits are equal.
Correspondingly, men are discriminated against by not having the same
early retirement age as women. Though this difference is based on
gender and is thus perhaps in conflict with China’s Constitution, it does
not appear to violate any employment discrimination laws, and is in fact
authorized by law. Interestingly, a gender discrimination case was
recently reported in Jinjiang District Court in Chengdu, Sichuan, where
the court held an employer illegally discriminated against women workers
when it did not provide them the same retirement options as men.166
A newly-emerging right for women is protection against sexual
harassment in the workplace. Though as of yet there is no clear legal
definition of this right, it is based upon gender discrimination and is still
being developed in court litigation. Such a right would arguably fall
under either or both of the Labor Law and the Women’s Rights Law.167
The All China Women’s Federation had recommended an amendment to
the Women’s Rights Law to explicitly prohibit sexual harassment and
require employers to take measures to prevent it. The NPC Standing
163 Id. art. 24.
164 Id. art. 27.
165 The retirement age is 60 for men, 50 for female workers, and 55 for women cadres. See Reply
on Legal Retirement Age, supra note 123. See also Bulger, supra note 123, at 358. See generally
the Ninth Women’s National Congress, http://www.cctv.com/lm/124/41/90118.html (last visited
Mar. 31, 2006).
166 Huang Zhiling, Women Win Sexual Discrimination Case, CHINA DAILY, June 20, 2005, at 3,#p#分页标题#e#
available at http://www.chinadaily.com.cn/english/doc/2005-06/20/content_452706.htm. The
seven women plaintiffs’ case had been denied by the Chengdu Municipal Labor Arbitration
Committee before they brought the suit to the court. The legal basis of the claim is gender, but it is
unclear whether the court’s finding was based on the Labor Law, the Women’s Rights Law, the
Constitution, or some other basis. Article 27 of the new amendments to the Women’s Rights Law
states “(a)ny unit shall not discriminate against women by reason of gender when implementing the
national retirement system.” This amendment became effective December 1, 2005. See Women’s
Rights Law, supra note 135, at art. 27.
167 Women’s Rights Law, supra note 135, at arts. 40, 58; Labor Law, supra note 19, at arts. 12, 13.
2006] CHINA’S EMPLOYMENT DISCRIMINATION 393
Committee on August 28, 2005 passed the amendment outlawing the
former, but it did not go so far as to require the latter.168
The most common forms of sexual harassment are reported to be
body touching and verbal harassment, as well as emails and cell phone
text messages. 169 Though there have been only a few court cases,
plaintiffs have prevailed in at least two instances. In Beijing, a male
employee was awarded ¥2000 (US$242) for harassment by a middle-aged
woman who would not stop seeking his sexual favors.170 In a second
successful lawsuit, a female teacher in Wuhan proved her superior had
sexually harassed her.171 The court verdict provided only for a public
apology and denied her request of ¥2000 (US$242) compensation for
psychological suffering because, as the court determined, “the harassment
did not have any serious effect on the accuser.” 172 In other cases,
plaintiffs have been denied relief due to insufficient evidence.173
168 Zhongpeng Zhao, Legislative Recommendation by the All China Women’s Federation Puts Forth
Concept of “Sexual Harassment” for the First Time, BEIJING MORNING DAILY, Mar. 4, 2005,
http://www.chinalawdigest.com/article.php?aid=123 (accessible by free registration).
[T]he changes proposed by the ACWF include stopping discrimination
against women in the workplace. For the first time in China, the very
concept of sexual harassment will enter the national legal system. The
proposed amendment requires all employers to try to stop harassment at
work. And there will also be new clauses that insist on gender equality in
retirement terms. Once the ACWF's definition is accepted by the NPC,
sexual harassment is likely to be made a criminal offence.
The Yin and Yang of a Harmonious Society, CHINA DAILY, Mar. 8, 2005, http://english.people.
com.cn/200503/08/eng20050308_176060.html.
The NPC standing committee declined to include the clauses imposing mandatory duties on#p#分页标题#e#
employers to prevent sexual harassment in work places, on the grounds that it could not formulate a
national standard of such duty and such duty would rather limit the effort of anti-harassment to
narrowly defined workplace settings. 新妇女权益保障法: 我国法律首此对性骚扰说不 [A New
Law on Protection of Women’s Rights and Interests: Law Says No to Sexual Harassment for the
First Time], 新华网 [XINHUA NEWS AGENCY], Aug. 28, 2005, http://news.xinhuanet.com/
legal/2005-08/28/content_3414548.htm; see also 全国人大常委会关于修改中华人民共和国妇女
权益保障法的决定[Decision of the Standing Committee of the National People’s Congress about
Amending the Law on Protection of Women’s Rights and Interests] (promulgated by Standing
Comm. of the Nat’l People’s Cong., Aug. 28, 2005, effective Dec. 1, 2005) (P.R.C.), available at
http://www.legaldaily.com.cn/misc/2005-11/08/content_216846.htm.
169 Zhao, supra note 168.
170 Manager Wins Harassment Case, CHINA DAILY, Sept. 18, 2003, http://www.chinadaily.com.cn/
en/doc/2003-09/18/content_265337.htm.
171 Judgment was granted on Nov. 6, 2003. See City’s 1st Sex Harassment Case Heard, PEOPLE’S
DAILY, Nov. 7, 2003, http://english.people.com.cn/200311/07/eng20031107_127778.shtml. China
Daily has reported the lawsuit. See In Brief, CHINA DAILY, Oct. 30, 2003, at 3, and Stalemate in
Sex Lawsuit, CHINA DAILY, June 1, 2003, available at http://www1.chinadaily.com.cn/en/doc/2003-
07/01/content_242114.htm.
172 In Brief, supra note 171.
173 Id.
394 COLUMBIA JOURNAL OF ASIAN LAW [19:2
b. Migrant Workers
Discrimination based on “social origin,” as would seem to be the
proper classification of biases against Chinese migrant workers, is
recognized by the United Nation’s Universal Declaration of Human
Rights and the International Covenant on Civil and Political Rights
(ICCPR), both of which China has ratified. 174 Additionally, ILO
Convention 111, which China has not ratified, eliminates all forms of
discrimination, including “social origin.”175 However, since Convention
111 is a “core labor standard,” nations are thought to be bound to the
principle of providing equal employment opportunity, including the
prevention of discrimination due to “social origin.”176
Impediments to equal employment opportunities for migrant
workers exist in China’s historic use of the hukou system, which restricts
the ability of migrating workers to obtain residential status, as well as
their eligibility for social insurance and social benefits in geographic
174 Universal Declaration of Human Rights, art. 2, G.A. Res. 217A (III), U.N. Doc A/810 at 71
(1948), International Covenant on Civil and Political Rights, art. 2, G.A. Res. 2200A (XXI), 21#p#分页标题#e#
U.N. GAOR Supp. (No. 16) at 52, U.N. Doc. A/6316 (1966), 999 U.N.T.S. 171, entered into force
Mar. 23, 1976. China ratified ICCPR on Oct. 5, 1998. See also Constance Thomas & Yuki Horii,
FUNDAMENTAL RIGHTS AT WORK AND INTERNATIONAL LABOUR STANDARDS 62 (2003) (“Social
origin” is frequently used in major international human rights treaties without a precise definition in
the treaties themselves). The ILO in its Convention No. 111 uses “social origin” as a status
protected against employment discrimination. International Labour Organization Convention (No.
111) Concerning Discrimination in Respect of Employment and Occupation, June 25, 1958, 362
U.N.T.S. 31. “Social origin” has been defined as “[t]his criterion refers to situations in which an
individual’s membership of a class, socio-occupational category or caste determines his or her
occupational future, either because he or she is denied access to certain jobs or activities, or because
he or she is only assigned certain jobs. Even in societies with considerable social mobility, a
number of obstacles continue to prevent perfect equality of opportunity for the various social
categories.” Id. at art. 1.
175 International Labour Organization Convention (No. 111) Concerning Discrimination in Respect
of Employment and Occupation, June 25, 1958, 362 U.N.T.S. 31. In a document prepared by an
ILO Committee of Experts, “[c]ertain principles relating to the application of the Conventions,
which are not explicitly set out in the instruments” but have been “developed in the comments of
the Committee of Experts.” Thomas & Horii, supra note 174, at 72. Regarding “social origin,” the
Experts commented, “[p]rejudices and preferences based on social origin may persist when a rigid
division of society into classes determines an individual’s opportunities in employment and
occupation, or when certain ‘castes’ are considered to be inferior and are therefore confined to the
most menial jobs.” Id. at 73. Moreover, the U.S. Department of Labor in a report on international
labor standards, noted that “in response to concerns that internal migrant workers in China are not
covered by Convention 111, an ILO official noted that they are considered to be covered by the
prohibition on discrimination on the basis of social origin.” International Labor Standards, supra
note 80.
176 Harry Arthurs, Reinventing Labor Law for the Global Economy, 22 BERKELEY J. EMP.&LAB. L.
271, 294 n.46 (2001).
2006] CHINA’S EMPLOYMENT DISCRIMINATION 395
areas other than that of their original employment.177 Notwithstanding
these residential restrictions, some changes, both legal and de facto, are
taking place. For example, in response to wide-spread reports of labor#p#分页标题#e#
exploitation, discrimination and abuse by employers of migrant
workers,178 China’s central government has issued new regulations to
protect the labor rights of migrant workers. In December 2004, the State
Council issued its Notice on Migrant Worker’s Employment. 179 It
provides that migrant workers enjoy all of the rights provided by the
Labor Law,180 and that for hiring purposes they must be treated equally
with urban residents. 181 The State Council also sought to stop local
government use of administration detention against migrant workers,
177 For detailed description of the history, development, functions, impact and operational
mechanisms of China’s hukou system, see generally FEI-LING WANG, supra note 77. For a brief
summary, see CANADA IMMIGRATION AND REFUGEE BOARD, CHINA: REFORMS OF THE
HOUSEHOLD REGISTRATION SYSTEM (HUKOU) (1998-2004), http://www.irb-cisr.gc.ca/en/
research/publications/index_e.htm?docid=279&cid=50 (last visited Feb. 27, 2006); People on the
Move, Old Residence Registration System in Being Unified, BEIJING REV., Jan. 1, 2004, at 32.
178 Let’s Protect Migrant Workers, CHINA DAILY, Apr. 4, 2005, http://news.xinhuanet.com/
english/2005-04/04/content_2783301.htm; Ensure Equal Payment, CHINA DAILY, Mar. 29, 2005,
http://www.chinadaily.com.cn/english/doc/2005-03/29/content_428901.htm; City Job Hurdles
Cleared for Migrants, CHINA DAILY, Feb. 21, 2005, http://www.chinadaily.com.cn/english/doc/
2005-02/21/content_417890.htm. John Knight & Linda Yueh, Job Mobility of Residents and
Migrants in Urban China, 32(4) J. COMP. ECON. 637, 642 (2004).
A legal notice provides that migrant workers have equal rights to participate in worker’s
compensation. See 关于农民工参加工伤保险有关的通知 [Notice on Migrant Workers’ Right to
Work-related Social Insurance] (promulgated by the Ministry of Labor & Soc. Sec., June 1, 2004)
(P.R.C.), available at http://news.xinhuanet.com/zhengfu/2004-06/18/content_1533078.htm. In
2003, the State Council issued a legal opinion on migrant labor which added that the government
shall eliminate all the discriminatory, restrictive regulations aimed at migrant labor. See 关于做好
农民进城务工就业管理和服务工作的通知 [Notice on Managing and Servicing Migrant Workers]
(promulgated by the General Office of the State Council, Jan. 5, 2003, effective Jan. 5, 2003)
(P.R.C.), available at http://www.molss.gov.cn/correlate/gbf200301.htm.. The Agriculture Law
standardizes procedures for recruiting rural laborers. This provides additional assistance to migrant
workers, though not necessarily protecting against job discrimination. See 中华人民共和国农业法
[Agriculture Law] art. 82 (promulgated by the Standing Comm. of the Nat’l People’s Cong., July 2,
1993, effective July 2, 1993, revised Mar. 1, 2003) (P.R.C.), available at#p#分页标题#e#
http://www.chinacourt.org/flwk/show1.php?file_id=81931.
179 Notice on Improving Working Conditions for Migrant Workers provides that “in every field of
industry, migrant workers shall enjoy the equal treatment of job qualification requirement with
fellow urban resident workers.” Notice on Improving Working Conditions for Migrant Workers,
supra note 151, at art. 1. Local government shall “vigorously [enforce] the law to crack down
over-time, default payment, child labor and other violations of migrant workers’ legal rights.” Id.
art. 2(2). Local government shall “support and encourage labor unions’ activities under the Labor
Union Law and protect migrant workers’ legal rights.” Id. art. 2(4).
180 Notice on Managing and Servicing Migrant Workers, supra note 178, at art. 3.
181 Id. art. 2
396 COLUMBIA JOURNAL OF ASIAN LAW [19:2
declaring that local governments shall not restrict migrant workers’
employment opportunities by such methods.182
c. Race / Ethnicity
Both race and ethnicity statuses are explicitly protected by the
1994 Labor Law against employment discrimination.183 Other than this
example, there appears to be no additional anti-discrimination laws in
place184 but for those which subsume race under ethnicity.185
As for ethnic minorities, there are several laws relating to their
well-being, but no substantive provisions directly prohibiting employment
discrimination in the workplace except for the ethnicity provision in the
Labor Law. 186 Therefore, employment discrimination against ethnic
minorities is controlled by the Labor Law.
d. Disability / Health
Neither discrimination according to “disability” nor “health”
status is prohibited by the Labor Law. 187 But, as stated earlier, the
Disability Law prohibits employment discrimination against disabled
persons.188 Law on Protection of Disabled Persons was promulgated in
182 Id. art. 2. This notice also requires employers in certain construction projects to provide decent
living conditions whenever the job requires migrant workers to live on the project premises. Id. art.
4.
183 Labor Law, supra note 19, at art. 12.
184 See discussion supra on III-A-1.
185 For example, though not reflected in domestic laws, China appears to combine race and ethnicity
when reporting its progress under the International Convention on the Elimination of All Forms of
Racial Discrimination, G.A. Res. 2106, Annex, U.N. GAOR 20th Sess., Supp. No. 14, U.N. Doc
A/6014 (Dec. 20, 1965). See Ninth Periodic Reports Submitted by States Parties, supra note 85, at
6. See also, Bai Guimei, The International Covenant on Civil and Political Rights and the Chinese
Law on the Protection of the Rights of Minority Nationalities, 3 CHINESE J. INT’L L. 2, 441 (2004).#p#分页标题#e#
186 The State Council suggested that local governments of the autonomous ethnic minority regions
may organize and export their surplus labor to more developed cities, but they shall be “fairly
treated” in the new workplace. 实施中华人民共和国民族区域自治法若干规定 [Implementing
Measures on Autonomous Ethnic Region Law] art. 18 (promulgated by the St. Council, May 19,
2005, effective May 31, 2005) (P.R.C.), available at http://www.chinacourt.org/flwk/show1.php?
file_id=101946 (available by subscription only). However, the regulation contained no provision
about the available remedies, when an employer violates Article 18. There are also general
protections. See also Law on Regional National Autonomy, supra note 120, at art. 23 (requiring
enterprises to have preferential treatment of minority group in recruitment). See generally, Shuping
Wang, The People's Republic Of China's Policy on Minorities and International Approaches to
Ethnic Groups: A Comparative Study, 11 INT’L J. ON MINORITY & GROUP RTS. 159 (2004).
187 Labor Law, supra note 19, at art.12.
188 Law on Protection of Disabled Persons, supra note 103, at art. 34; see also, INTERNATIONAL
DISABILITY RIGHTS MONITOR, PEOPLE’S REPUBLIC OF CHINA: RIGHTS OF PEOPLE WITH
DISABILITIES, http://www.cirnetwork.org/idrm/reports/compendium/china.cfm (last visited Feb. 28,
2006).
2006] CHINA’S EMPLOYMENT DISCRIMINATION 397
1990, when the role of the private sector was yet to be recognized by the
Chinese Communist Party. Therefore, the entire Law on Protection of
Disabled Persons does not specifically refer to private employers.
However, it is arguable that the law now appears to apply to all types of
employers, including the newly-recognized group of private employers.
The Disability Law prohibits “discrimination against, insult of
and infringement upon disabled persons,” and provides “equal rights with
other citizens in political, economic, cultural and social fields, in family
life and other aspects.”189 It describes a “disabled person” as one with
“visual, hearing, speech or physical disabilities, mental retardation,
mental disorder, multiple disabilities and/or other disabilities.” 190
Another clause provides that “disabled person refers to one who suffers
from abnormalities or loss of a certain organ or function, psychologically
or physiologically, or in an anatomical structure and has lost wholly or in
part the ability to perform an activity in the way considered normal.”191
Chapter IV of the Law deals with employment and Section 27
protects the “disabled person’s right to work,” combining it with “guiding
principles” to promote and establish preferential hiring by state organs,
nongovernmental organizations, enterprises, institutions, and urban and#p#分页标题#e#
rural collective economic organizations.192 Section 34 clarifies that “no
discrimination shall be practiced against disabled persons in recruitment,
employment, obtainment of permanent status, promotion, determining
technical or professional titles, payment, welfare, labor insurance or in
other aspects.”193 While arguably this law aims to promote and protect
the rights of disabled persons working in “protected industries or jobs,”
the language may clearly be read as broadly prohibiting employment
discrimination based on disability by all employers throughout China.194
189 Law on the Protection of Disabled Persons, supra note 103, at art. 3.
190 Id. art. 2.
191 Id.
192 Id. arts. 27-34.
193 Id. art. 34.
194 In 2003, a case of employment discrimination based on disability was decided in favor of the
victims. Three long-term employees, who were handicapped were terminated, but prevailed in
arbitration and subsequent court processes based on the Law on the Protection of Disabled Persons.
Though they did not have labor contracts, the Beijing Intermediate Level People’s Court determined
they had de facto contracts and were entitled to a remedy. See北京市法律援助中心, 2003 年北京
市法律援助十大案例之八——法律援助为残疾职工撑起一片蓝天 [Legal Aid Center of Beijing
Municipality, The Eighth of Ten Typical Legal Aid Cases in Beijing—Legal Aid Helped Disabled
Workers (on file with author).
398 COLUMBIA JOURNAL OF ASIAN LAW [19:2
The Disability Law, which predated the 1994 Labor Law, targets
the needs of the sixty million disabled persons in China.195 It prohibits
discrimination based on a disability, and thus would seem to fit under the
Labor Law’s Article 14 exemption, removing it from the Labor Law.196
If that is the case, it should be noted that there is an administrative
enforcement mechanism built into the law at the national level. 197
Therefore, absent such mechanisms at the local level, in their detailed
implementing regulations local regulators could resort to the national
enforcement mechanism and to the usual dispute resolution processes in
resolving actual labor disputes.198
Since definitions of “disability” include many health-related
qualifications,199 there would seem to be an overlapping relationship, and
perhaps additional protections, provided to health discrimination under
the disability laws. The Disability Law defines “disability” as including
physical disabilities, physiological disabilities or other disabilities.200 An
employer’s use of medical examinations to ascertain health information,
such as hepatitis B or HIV/AIDS, might run afoul of protections where
the information pertains to an enumerated physical disability or to some#p#分页标题#e#
“other disabilities.” 201 That being so, there appears to be legislation
addressing employment discrimination based on those diseases, as
discussed below.202
The broadest health law regulating the entire public health system
is the Contagious Disease Law, which was passed in 2004 in the wake of
SARS.203 Under Article 16 of this law, any person suspected of being a
195 中华人民共和国国家统计局 [NATIONAL BUREAU OF STATISTICS OF CHINA], 2004 中国统计年
鉴[2004 STAT. Y.B. CHINA] § 23-41, http://www.stats.gov.cn/tjsj/ndsj/yb2004-c/html/indexch.htm
(last visited Mar. 4, 2006) [hereinafter 2004 STAT. Y.B. CHINA].
196 Law on the Protection of Disabled Persons, supra note 103, at arts. 3, 34; Labor Law, supra note
19, at art. 14.
197 Where the lawful rights and interests of disabled persons are violated, victims or their relatives
“shall have the right to appeal to the competent authorities for disposition, or institute lawsuits at
people's courts in accordance with the law.” Law on the Protection of Disabled Persons, supra note
103, at art. 49. In other words, victims can either petition the relevant local government agency to
obtain an administrative decision, or file a civil action in the court for injunctive remedies.
198 In addition to the remedy of labor arbitration, victims of discrimination can directly bring the suit
to People’s Court. Id. art. 49.
199 See 残疾人实用评定标准(试用) [Interim Rules on the Qualification for Disability] (P.R.C) (on
file with author).
200 Id. art. 2.
201 Id.
202 Civil Service Law also covers health/disability issues in public employment. Civil Service Law,
supra note 18, at arts. 11-29. For example, qualification is defined under art. 11(5); mandatory
disqualification is defined under art. 24; and the standards for physical exams are governed by the
relevant rules from the Ministry of Health. Id. art. 29.
203 Contagious Disease Law, supra note 119.
2006] CHINA’S EMPLOYMENT DISCRIMINATION 399
carrier of a contagious disease, including HIV/AIDS or hepatitis B, must
be allowed to work unless there is a statutory provision explicitly
prohibiting persons with those conditions from working.204 Therefore,
there can be no employment discrimination against workers with
HIV/AIDS or hepatitis B unless and except required by statute.
Unfortunately, the law itself does not seem to contain any penalties or
remedies for victims of such discrimination.205
In addition to the above law, the Ministry of Health has issued
new regulations clarifying which types of medical conditions, including
certain types of hepatitis B and HIV/AIDS, disqualify applicants from
being hired in the public service.206 These regulations are limited in that
they apply only to civil servant positions and not to positions in other#p#分页标题#e#
sectors.207 Furthermore, the regulations appear to be limited to the just
hiring process. 208 Incumbent government employees are not directly
covered by this regulation, but perhaps will benefit indirectly from the
clarification since they are otherwise protected by the Contagious Disease
Law.209
In sum, China has legal protections against health and disability
discrimination, including the specific diseases of HIV/AIDS and hepatitis
B, and despite some limitations, the protection from discrimination itself
is rather significant. 210 Since the Contagious Disease Law forbids
HIV/AIDS or hepatitis to be a basis for denying employment except
204 Id. art. 16. The law provides that any person who has a contagious disease carries a contagious
disease, or is suspected of being a carrier of a contagious disease shall not be allowed work in
positions that are susceptible to their spreading, as prohibited by the law, administrative rulings or
regulations from the State Council. Contagious disease is defined by Article 3. Id. art. 3.
205 Id. art. 16. The new laws may soon be tested; it is reported that a new case has been brought in a
Beijing court by an applicant denied a job with Shenzhen Airlines because he had suffered
Hepatitis-B in the past. Hep B Discrimination Case Hits Court, CHINA DAILY, July 8, 2005, at 5.
206 Health Qualifications for Hiring Civil Servants, supra note 119.
207 Id. art. 2.
208 Id.
209 However, the new Health Qualifications for Hiring Public Servants, while banning some forms
of employment discrimination, address and disqualify applicants who may have a number of health
risks, including serious heart disease and other heart conditions (Id. art. 1), elevated blood pressure
(Id. art. 2), TB positive status (Id. art. 4), Hepatitis A, B, C positive status (Id. art. 7), kidney disease
(Id. art. 9), STD and HIV positive status (Id. art. 8), diabetes (Id. art. 10), severe vision/hearing
impairment(Id. arts. 19-20), and other medical conditions that effect satisfactory job performance
(Id. art. 21).
Further detailed analysis of numbers of legal issues (such as privacy) related to health
discrimination can be found in Ye & Wei, supra note 108; and see Civil Service Law, supra note
18, at arts. 24 and 29, which appear to extend the coverage to all applicants in civil service required
to take a physical exam.
210 There is at least one successful law suit against discrimination based on Hepatitis B which
occurred in 2004. See, Liang Chao, supra note 10.
400 COLUMBIA JOURNAL OF ASIAN LAW [19:2
where statutes so require,211 Article 16 indirectly functions as a protection
against employment discrimination by public and private sector
employers (except for civil servant applicants) where no statutory
exceptions exist.212
e. Religious Belief
The Labor Law prohibits workplace discrimination for religious#p#分页标题#e#
belief,213 and other laws and regulations relating to religious activities do
not include employment discrimination in the workplace.214 There seems
to be little anecdotal evidence that employment discrimination based on
religious belief occurs, except as where discrimination based on religious
beliefs might be combined with discrimination based on race or ethnic
minority status. In one case involving a Muslim member of the Hui
nationality, a job as a cook was first offered but then later withdrawn
upon the employer discovering the Muslim’s religious beliefs would not
allow him to cook pork for the customers of the employer.215 The case
was taken to the labor arbitration committee which decided in favor of the
employer.216
f. Other Categories: Age and Height
211 Contagious Disease Law, supra note 119, at art. 16. The original text is “疑似传染病病人，在
治愈前或者在排除传染病嫌疑前，不得从事法律、行政法规和国务院卫生行政部门规定禁止
从事的易使该传染病扩散的工作 [Infectious disease patients, pathogen carriers and suspected
infectious disease patients shall, before they are cured or cleared of suspicion, be barred from jobs
which the health administration department under the State Council prohibits them from doing
because of the likelihood of causing the spread of infectious diseases].” Id.
212 With the addition of China’s 2005 Civil Service Law which also addresses health issues,
discussed infra, that statutory prohibition appears limited to contagious “carriers” of hepatitis B, etc.
Civil Service Law, supra note 18, at art. 29.
213 Labor Law, supra note 19, at art. 12.
214 Arguably criminal prosecution could be used in an employment context against violators. See
Criminal Law, supra note 120, at art. 251 (imposing 2-year imprisonment for violation of religious
rights committed by public officials). For a discussion of religious freedom in China, see generally,
Anne S.Y. Cheung, In Search of a Theory of Cult and Freedom of Religion in China: the Case of
Falun Gong, 13 PAC. RIM L. & POL'Y J. 1 (2004).
215 劳动法新类型案例精析 [DISCUSSIONS ON THE NEW TYPES OF LABOR LAW CASES] 123-24 (张
步洪、张吕好 [Zhang Buhong & Zhang Luhao] eds., 人民法院出版社 [ People’s Court Press],
1997) [hereinafter DISCUSSIONS ON THE NEW TYPES OF LABOR LAW CASES]. See also劳动法新释
与例解 [NEW ANNOTATED LABOR LAW AND CASES] 58-59 (黄成建 [Huang Chengjian] ed.,同心出
版社 [Tongxin Press], 2001).
216 DISCUSSIONS ON THE NEW TYPES OF LABOR LAW CASES, supra note 215, at 124.
2006] CHINA’S EMPLOYMENT DISCRIMINATION 401
i. Age
Age discrimination is not prohibited in employment. In fact, it is
embedded in the legal retirement ages, in the requirements of some#p#分页标题#e#
government positions, as well as in the practice by many employers.217
ii. Height
Height discrimination has been litigated in at least one case.218
Part of the claim was based upon the Constitution, which states “all
citizens of the People’s Republic of China are equal before the law.”219
In December 2001, Jing Tao brought a law suit in Wuhou District Court
after the Chengdu Branch of the People’s Bank of China denied him a job
because of his height.220 The advertisement for the job, among other
qualifications, required male applicants to be over 168 centimeters, which
was estimated to exclude 40% of the men in Sichuan. His case was first
accepted, but later dismissed as non-justiciable because during the interim
the bank had dropped the height requirement, and because such personnel
decisions were determined to be exempt from the Administrative
Litigation Law. 221
3. Local Government Discrimination Bans
Since China’s legal system produces very general and often
undefined legislation at the national level, “local detailed implementing
regulations” are necessary for the local enforcement of labor laws through
217 See discussion in Cai Shangyao, Age Discrimination’s High Cost to Society, SHANGHAI STAR,
Dec. 16, 2004, at 4, available at http://www.shanghai-star.com.cn/2004/1216/vo2-1.html.
218 See Michael C. Dorf, What a Chinese Height Discrimination Case says about Chinese and
American Constitutional Law, FINDLAW, May 26, 2004, at
219 宪法 [CONST.] art. 33 (2004) (P.R.C.).
220 Plaintiff argued the local limitations were in conflict with China’s Constitution, See 宪法
[CONST.] art. 100 (2004) (P.R.C.); 中华人民共和国立法法 [Legislation Law] arts. 63-64
(promulgated by the Standing Comm. of the Nat’l People’s Cong., Mar. 15, 2000, effective July 1,
2000) 03/2000 全国人民代表大会常务委员会公报[STANDING COMM. NAT'L PEOPLE'S CONG.
GAZ.] 112 (P.R.C.), available at http://www.chinacourt.org/flwk/show1.php?file_id=34719
[hereinafter Legislation Law]; Kahn, supra note 129; see also, Dorf, supra note 218.
221 Dorf, supra note 218.
402 COLUMBIA JOURNAL OF ASIAN LAW [19:2
the local labor bureaus and their labor arbitration commissions.222 In
general, most provinces have incorporated anti-discrimination provisions
into their local labor regulations. For example, the Tianjin Employment
Regulation states that an “employee shall enjoy equal protection of the
law when seeking employment opportunities; [an] employee shall have
the freedom to choose his occupation; [an] employee shall not be
discriminated against on the grounds of gender, race, ethnicity and
religion.” 223
B. Law and HRM Practices
1. Recruitment
Current labor market regulations covering the recruitment of#p#分页标题#e#
employees provide both flexibility and limitations for employers in their
search for employees. These include allowing job centers, employment
agencies, media advertising, the use of the Internet, job fairs, etc.224 In
addition to the regulatory requirements and procedures discussed earlier,
an additional legal limit on the use of media advertisements is found in
222 宪法 [CONST.] art. 100 (2004) (P.R.C.). Legislation Law, supra note 220, at arts. 63-64.
223 天津市劳动就业管理条例 [Regulation of Tianjin Municipality on the Management of Labor
and Employment] art. 10 (promulgated by the Standing Comm. of Tianjin Municipal People’s
Cong., Sept. 14, 2000, effective Nov. 1, 2000, revised Mar. 24, 2005) (P.R.C.), available at
http://www.chinacourt.org/flwk/show1.php?file_id=100951 [hereinafter Tianjin Employment
Regulation]; see also江苏省劳动力市场管理条例 [Regulation of Jiangsu Province on the
Management of Labor Market] art. 7 (promulgated by the Standing Comm. of Jiangsu Province
People’s Cong., Aug. 20, 2004, effective Sept. 1, 2004) (P.R.C.), available at
http://www.chinacourt.org/flwk/show1.php?file_id=97370 [hereinafter Jiangsu Labor Market
Regulation]; 湖北省劳动合同规定 [Regulation of Hubei Province on Labor Contract] art. 8
(promulgated by the Standing Comm. of Hubei Province People’s Cong., Mar. 1, 2005, effective
Mar. 1, 2005) (P.R.C.), available at http://www.chinacourt.org/flwk/show1.php?file_id=100171
[hereinafter Hubei Labor Contract Regulation]. Similar protections for women also exist at the
local levels. See, e.g., 江苏省实施《中华人民共和国妇女权益保障法》办法 [Provisions of
Jiangsu Province on Implementing the Law on Protection of Women’s Rights and Interests]
(promulgated by the Standing Comm. of the Jiangsu People’s Cong., July 31, 1997, effective Mar.
1, 1995), available at http://www.chinacourt.org/flwk/show1.php?file_id=52219 [hereinafter
Jiangsu Women’s Rights Provisions].
224 Regulations on Labor Market Management, supra note 21, at art. 8.
2006] CHINA’S EMPLOYMENT DISCRIMINATION 403
the Advertisement Law, which states the ad shall not contain any racial,
ethnic, or religious discriminatory language.225
American human resource managers and employers commonly
use screening techniques, such as minimum qualifications, written
applications and examinations, interviews, reference checks, lie detector
tests, and medical tests that limit the number of applicants to a more
manageable number.226 However, most of these do not appear to be used
to any noticeable extent in China, except occasionally by some of the
FIEs. 227 In the United States, a recent report stated that “[o]ver the past
few years personality assessment tests have moved from the realm of
experiment to standard practice at many of the nation’s largest companies#p#分页标题#e#
. . . . A recent survey showed that about 30% of all companies use
personality tests in hiring. To many companies, the tests are as important,
if not more important, than applicants’ education, experience and
recommendations.”228 It would appear China has not yet taken this path.
One serious issue in China is the question of whether job
applicants are afforded meaningful protection against discrimination. The
Labor Law grants labor rights only to “laborers who form a labor
relationship” and “laborers who form a labor contract relationship.”229
225 Advertisement Law, supra note 33, at art. 7(7). The Regulation of Labor Market Management
also has this same ban on discrimination, and adds, “except for those provided by state laws
concerning unsuitable types of work or positions.” The Regulations on Labor Market Management,
supra note 21, at art. 11. Under the Labor Market Regulation’s ban on use of discriminatory
language, the ad first needs approval from the Labor Bureaus which would screen out improper ads,
though practical experience (and reading newspapers) belies that either a request or a ban occurs
with any frequency. Id. art. 9. In contrast, in the United States, ads containing discriminatory
language or suggestive language, such as gender or age preferences (e.g., “boys or girls,” students,
or recent graduates), while not prohibited, may be used as evidence in proving discriminatory intent.
29 C.F.R. § 1625.4(a) (2000). The U.S. Supreme Court has found such limitation does not infringe
on the free speech guarantees of the First Amendment. Pittsburgh Press Co. v. Pittsburgh Comm’n
on Human Relations, 413 U.S. 376 (1973).
226 David Pollitt, Recruiting for Success: Challenges and Solutions, 12 HUM. RESOURCE MGMT.
INT’L DIG. 24, 24, Dec. 2004.
227 See Taylor, supra note 18, at 11-18. Commercial services are available in China for preemployment
screening. See, e.g., Inquest Pre Employment Screening Service, supra note 18.
228 Ariana Eunjung Cha, Employers Relying on Personality Tests to Screen Applicants, WASH.
POST, Mar. 27, 2005, at A01. Meanwhile, in China recruiting practices seem to be developing,
though not always in an understandable way. For example, in Guangzhou, a job ad asked for at
least a B.A. degree for a driver’s position. Other recruiting agencies admit that there are really no
fixed guidelines to determine the qualification, or even if there is, the actual screening process may
disregard those stated qualifications. See 木工电工一起招大 学 生 招 聘 门槛低惹非议
[Controversy Arises on the Low Job Requirement of College Graduates], 南方日报[S. DAILY],
Dec, 27, 2004, http://gd.dayoo.com/gb/content/2004-12/07/content_1841929.htm.
229 Labor Law, supra note 19, at art. 2. Though there can be an “implied” labor contract#p#分页标题#e#
relationship, these have arisen where a worker has actually been hired and is working without a
labor contract. Regulation of the Ministry of labor on Institution of Labor Contract System, supra
note 20, at art. 14.
404 COLUMBIA JOURNAL OF ASIAN LAW [19:2
Therefore, the Labor Law seems inapplicable to applicants, who, without
an employment relationship, have no “labor dispute.”230
The Labor Market Regulation prohibits employers from
discriminating in hiring and requires employment agencies to recruit and
promote the employment of job seekers through fair competition. 231
While neither the Regulation nor the Rules on HRM provide a right with
remedy for individuals, the Rules provide for fines of ¥10,000 to ¥30,000
for violations, to be administered by the labor bureaus.232 Most local
government regulations follow the national law in not clearly providing
relief for applicants in cases of employment discrimination. 233 For
example, Hubei Province includes applicants in its prohibition of
discrimination, however, the article that does so lacks any apparent
enforcement provision.234
The 1990 Disability Law protects disabled workers from
discrimination in hiring, in addition to its guarantees of ordinary working
conditions, equal pay, promotion, and termination.235 Migrant workers
are protected by new anti-discrimination provisions which state the hiring
requirement shall be the same for migrant workers as for local
residents.236 These same provisions grant migrant workers “access to
labor arbitration.”237
In sum, though protective labor laws seem to cover applicants
who are victims of employment discrimination, enforcement remains
problematic. Victims of employment discrimination normally must bring
a labor dispute to the Labor Bureau’s Labor Arbitration Commission,
which sets up an ad hoc labor arbitration tribunal to resolve the dispute.238
A remedy for such applicants is likely unavailable, however, because they
lack a true labor dispute. The Labor Law describes a “labor dispute” as
230 By contrast, the Women’s Rights Law explicitly purports to protect women applicants with its
provision against discrimination in hiring. Women’s Rights Law, supra note 135, at art. 22. From
the wording of the law, this remedy would arguably appear to be available to male applicants as
well. Id. art. 21 (stating that men and women are to enjoy equal employment rights).
231 Regulations on Labor Market Management, supra note 21, at arts. 7, 11.
232 Rules on the Administration of Human Resources Market, supra note 36, at art. 39. By contrast,
the Regulations only provide sanctions for violations by employment agencies, such as “jobs for
men only” or for jobs for which women are ineligible due to “protective” legislation can result in#p#分页标题#e#
fines. Regulations on Labor Market Management, supra note 21, at art. 37.
233 See, e.g., Jiangsu Labor Market Regulation, supra note 223, at art. 7, and Tianjin Employment
Regulation, supra note 223, at art. 10, both of which parallel art. 12 of the Labor Law. Labor Law,
supra note 19, at art.12.
234 Hubei Labor Contract Regulation, supra note 223, at art. 8.
235 Law on Protection of Disabled Persons, supra note 103, at art. 34.
236 Notice on Improving Working Conditions for Migrant Workers, supra note 151, at art. 1(1). It
might be noted the provisions target only hiring and not other employment conditions; also, local
resident “applicants” are without a labor contract and not covered by the Labor Law.
237 Id. art. 2-3.
238 Some Opinions, supra note 20.
2006] CHINA’S EMPLOYMENT DISCRIMINATION 405
being between the employing unit and a laborer.”239 Parties may only
apply to mediation or arbitration, or take legal proceedings “according to
law.”240
For trials of labor disputes following arbitration, in 2001 the
Supreme People’s Court added an interpretation on labor disputes.241 The
legal issue for the Court was whether a job applicant has a justiciable
claim, and the Court ruled that in cases not involving employment
discrimination applicants do not have a claim, the applicant must first go
to labor arbitration. 242 However, since applicants do not qualify as
having labor disputes, they are ineligible to litigate.243
In the case of gender discrimination, the Women’s Rights Law
purports to provide additional arguments and possible alternatives to the
applicant. When a female applicant is discriminated against in
employment decisions,244 she can bring a complaint to the local women’s
239 Labor Law, supra note 19, at art. 77.
240 Id. “According to law” would seem to encompass Article 79 and require labor arbitrations. Id.
art. 79. The parties are also authorized to “directly apply to the labor dispute arbitration committee,”
and, if the party is not satisfied with the decision of arbitration, it may bring a lawsuit in the
people’s court. Id. The regulations on settlement of labor disputes in arbitration are applicable to
“labor disputes between the enterprise and employees in China.” (emphasis supplied) 中华人民共
和国企业劳动争议处理条例 [Regulations on Settlement of Labor Disputes in Enterprises] art. 2
(promulgated by the St. Council, July 6, 1993, effective Aug. 1, 1993) (P.R.C.), available at
http://www.chinacourt.org/flwk/show1.php?file_id=17631. . “Labor disputes” can arise from HRM
decisions in employment, labor contracts, and “implementation of relevant state regulations on . . .
labor protection.” Id. art. 2(2). The right to interpret these Regulations is vested in the#p#分页标题#e#
administrative department of labor under the State Council. Id. art. 4(2).
241 最高人民法院关于审理劳动争议案件适用法律若干问题的解释 [Interpretation of the
Supreme People’s Court Concerning Several Issues Regarding the Application of Law to the Trial
of Labor Dispute Cases] (promulgated by the Sup. People’s Ct., Apr. 16, 2001, effective Apr. 30,
2001) 01/2001(3) 最高人民法院公报 [SUP. PEOPLE’S CT. GAZ.] 88 (P.R.C.), available at
http://www.chinacourt.org/flwk/show1.php?file_id=37160 [hereinafter Interpretation on Labor
Arbitration].
The Interpretation states the Court shall accept and hear the case where, (1) Disputes
occurred between the employee and the employing work unit in the course of performing a labor
contract; and (2) disputes occurred whereby the employee and his employing work unit fail to
conclude a written labor contract between them but the labor relationship has existed. Id. art.
1(1)(2). Article 2 stipulates where a Labor Dispute Arbitration Commission decides not to accept
the case on the ground it is not a “labor dispute”, but the party nevertheless files a lawsuit, the court
shall thereafter decide that issue. Id. art. 2.
242 Id. art. 2.
243 Remedies in this situation appear to be limited since access to labor arbitration is not authorized.
There seems to be a strong consensus that the enforcement mechanism in dealing with hiring
discrimination is rather weak. 就业歧视凸显法律空白 [The Blank Point of Employment
Discrimination], 新华网 [XINHUA NEWS AGENCY], Feb. 19, 2005, http://news.xinhuanet.com/
focus/2005-02/19/content_2547515.htm.
244 The scenario is in violation of Article 23 of Women’s Rights Law. Women’s Rights Law, supra
note 135, at art. 23.
406 COLUMBIA JOURNAL OF ASIAN LAW [19:2
organization to request administrative sanctions, file for arbitration, or file
a lawsuit.245 The open question then is whether the complainant, when
attempting to go to court, must “in accordance with the law” have first
gone to labor arbitration over this “labor dispute,” and, if so, whether an
applicant’s lack of an employment relationship will in practical terms
foreclose access to the arbitration process and thereafter possibly the
court.246 If the case is not a proper labor dispute, then whether it falls
under the other cases within the jurisdiction of the People’s Courts
allowing a court to hear the case, or whether it is possibly channeled
directly to labor arbitration, remains unclear.247
In sum, applicants who have been improperly discriminated
against may lack meaningful enforcement procedures and effective
remedies under current Chinese laws. While U.S. labor laws usually
provide labor rights to employees, federal Equal Employment#p#分页标题#e#
Opportunity laws protect all individuals against discrimination, including
applicants.248
Applicants for government jobs fall under China’s civil service
system, and thus have a distinct administrative avenue not available for
245 Women’s Rights Law, supra note 135, at arts. 52-53. 邵晓寅,私营企业劳资冲突的现状和对
策 [Shao Xiaoyin, Study on Labor Relations in Private Enterprises], 晋阳学刊[JINYANG J.], Feb.
2003, at 56. Some local labor laws offer similar remedial approaches. For example, in Jiangsu
Province the government can impose administrative penalties for gender discrimination, including
in “hiring”. Jiangsu Women’s Rights Provisions, supra note 223, at art. 33. Also, it appears some
provinces are considering using additional remedies against discriminatory policies, including use
of fines. 辽宁省促进就业规定 [Regulation of Liaoning Province on Promoting Employment] arts.
16, 37, 41 (promulgated by the Liaoning Province People’s Government, July 1, 2005, effective
Aug. 15, 2005) (P.R.C.), available at http://www.ln.gov.cn/communique/govfiles/govorder/
36_47831.htm.
246专家学者悉数劳动法十大缺陷 [Experts and Scholars Name the Ten Deficiencies of Labor
Law], 法制日报[LEGAL DAILY], Oct. 13, 2004, at 10, available at http://www.legaldaily.com.cn/
bm/2004-10/13/content_140106.htm.
247 Interpretation on Labor Arbitration, supra note 241, at art. 2(2). Victims of disability
discrimination also can “directly access” the court after similar analysis. Law on the Protection of
Disabled Persons, supra note 103, at art. 49.
248 For example, under Title VII of the Civil Rights Act, it shall be unlawful to refuse to hire any
individual or otherwise to discriminate against any individual with respect to his compensation,
terms, conditions, or privileges of employment, because of such individual's race, color, religion,
sex, or national origin. Civil Rights Act of 1964, § 703(a)(1), 42 U.S.C. § 2002e (a)(1) (2005).
Under the National Labor Relations Act, it is unlawful to discharge or otherwise discriminate
against an employee because he has filed charges or given testimony. National Labor Relations Act
(NLRA), § 8(4), 29 U.S.C. § 158(4) (2005). The NLRA though defining and protecting
“employees” also has been interpreted to include applicants who are, for example, denied jobs
because of their views or activities on unions. See NLRB v. Town & County Electric Inc., 516 U.S.
85 (1995) (holding that job applicants are statutory employees). Where legislation is unclear, the
court will look to common-law definitions of employee. Clackamas Gastroenterology Associates,
P.C. v. Wells, 538 U.S. 440, 447 (2002).
2006] CHINA’S EMPLOYMENT DISCRIMINATION 407
private sector applicants.249 For example, in Beijing, any dissatisfied#p#分页标题#e#
applicant for a civil service position may submit a request for an
administrative review to the local personnel bureau.250 Where there is a
legal source prohibiting employment discrimination, an applicant may
argue there has been an “abuse of discretion.”251 However, for nonapplicants
(i.e. employees) the Supreme People’s Court has issued
provisions prescribed “in accordance with the Labor Law,” which declare
that “cases over personnel disputes [labor disputes in government service]
between public institutions and their staff members” that relate to
“resignation, dismissal and implementation of employment contracts,”
will be resolved through a “personnel dispute arbitration institution.”252
However, arbitration must be sought before bringing a personnel dispute
suit in court. The 2005 national Civil Service Law provides for fair and
open recruitment. 253 Under that law, “employment disputes” shall be
submitted for administrative review established by the employer254 with
judicial review governed by the administrative laws (i.e. departing from
ordinary court procedures). 255 The 2005 Civil Service Law limits
arbitration to those disputes arising out of the labor contract.256
249 Job applicants can obtain administrative re-considerations from local personnel bureau for any
hiring irregularity. Civil Service Law, supra note 18, at art. 101(1). In China, the Labor Law
excludes civil servants from coverage. 关于《中华人民共和国劳动法》若干条文的说明
[Guidance on Certain Provisions of the Labor Law], art. 4 (promulgated by the Ministry of Labor,
Sept. 5, 1994, effective Sept. 5, 1994) (P.R.C.), available at http://www.chinacourt.org/flwk/
show1.php?file_id=20633.
250 北京市人事争议仲裁办法 [Measures of Beijing Municipality for Arbitration of Personnel
Disputes] art. 2 (promulgated by Beijing People’s Government, Mar. 7, 2003, effective May 1,
2003) (P.R.C.), available at http://www.chinacourt.org/flwk/show1.php?file_id=84147 [hereinafter
Beijing Arbitration Measures].
251 Under the new Civil Service Law, a victim of discriminatory employment policy can file a
complaint for administrative reconsideration of personnel decisions. Civil Service Law, supra note
18, at art. 90. If the reviewing agency finds sufficient evidence to show any abuse of discretion, the
law requires reversal of the discretionary decision. 中华人民共和国行政复议法 [Administrative
Reconsideration Law] art. 28 (promulgated by the Standing Comm. of the Nat’l People’s Cong.,
Apr. 29, 1999, effective Oct. 1, 1999) 05/1999 全国人民代表大会常务委员会公报[STANDING
COMM. NAT'L PEOPLE'S CONG. GAZ.] 225 (P.R.C.), available at http://www.chinacourt.org/flwk/
show1.php?file_id=32741.#p#分页标题#e#
252 最高人民法院关于人民法院审理事业单位人事争议案件若干问题的规定 [Provisions of the
Supreme People’s Court on Issues Related to the People’s Courts’ Trial of Personnel Dispute Cases
Occurred in Institutions] art.1 (promulgated by the Sup. People’s Ct., Aug. 27, 2003, effective Sept.
5, 2003) 01/2003(5) 最高人民法院公报 [SUP. PEOPLE’S CT. GAZ.] 5 (P.R.C.), available at
http://www.chinacourt.org/flwk/show1.php?file_id=88232; see also, Beijing Arbitration Measures,
supra note 250, at art. 2.
253 Civil Service Law, supra note 18, at art. 21.
254 Id. art. 90.
255 Id.
256 Id. art.100.
408 COLUMBIA JOURNAL OF ASIAN LAW [19:2
Administrative review may thus be possible if some provision
prohibiting employment discrimination applies. In the alternative, there
may be an “abuse of discretion” where there is fair and open recruitment.
However, review is only possible if applicants are indeed eligible for
review, which, given the nature of the civil service process, seems likely.
The remedy for a violation under such process should at least include
sending the application back for proper reconsideration.257 Therefore, in
the civil service personnel dispute process involving labor arbitration, the
procedures for review appear to parallel those in the private sector, with
the same issues relating to the eligibility of applicants and justiciability in
courts.
2. Employment and Termination
Illegal discrimination in the workplace involving terms and
conditions of employment can be found in many employment contexts,
including job descriptions, positions, hours, overtime, wages, promotions,
evaluations, benefits, layoffs, recalls, discipline, and termination.258
Overall, disputes were mostly economic in nature, with welfare
and social insurance payments being the most common.259 However,
occasional reports suggest the presence of a significant number of cases
involving employment discrimination. Zhang Zheng, an official of the
arbitration service of the Xicheng District of Beijing, commenting on
arbitration cases involving discrimination against women because of
marriage, pregnancy, or maternity leave claimed that “[t]he arbitration
service [in his district] last year received 80 cases involving violation of
women workers’ rights . . . and the number of such cases is rising.”260
Though the actual number of discrimination-related labor dispute cases
may be difficult to ascertain, there seems to be abundant documentation
257 Id. art. 92.
258 In the United States, there is a wide variety of discriminatory practices and laws seeking to
prohibit them. See LEWIS & NORMAN, supra note 91 and FRED S. STEINGOLD, THE EMPLOYER’S
LEGAL HANDBOOK §§ 8.3-8.18 (5th ed. 2002).#p#分页标题#e#
259 Jeremy B. Fox et al., The Arbitration of Labor Disputes in China Today: Definition and
Implications, 17 EMP. RESP. & RTS. J. 19, 27 (2005).
260 Mother or Worker: Chinese Women Face New Challenges, PEOPLE’S DAILY, Aug. 15, 2003,
http://english.people.com.cn/200308/24/eng20030824_122955.shtml.
2006] CHINA’S EMPLOYMENT DISCRIMINATION 409
of incidents in the workplace. 261 It is the terms and conditions of
employment, created by statute and contract, which, if granted or denied
for discriminatory reasons, create the basis for a labor dispute. In
addition to compensation claims, the next largest categories of labor
contract violations in labor arbitration cases are the rescinding and
terminating of labor contracts. 262 In view of the earlier-described
anecdotal incidents of discrimination involving layoffs and terminations
of employees, it is reasonable to predict that a number of these cases
involve illegal employment discrimination.
Gender discrimination in the Chinese workplace receives the most
attention.263 In a 2002 report, the World Bank concluded “traditional
gender stereotypes and values have re-emerged, including increasing
gender discrimination in the labor market. Women are often employed in
lower status, lower paid jobs. During the transition, women have had a
harder time than men in obtaining and keeping jobs.” 264 Studies of
Chinese government statistics show women tend to be employed in
occupations where average earnings are lowest and in collectively-owned
or privately owned sectors which are on average smaller and with lower
pay and less welfare.265
Termination based on discriminatory reasons is not
comprehensively dealt with in the labor contract provisions of the Labor
Law. Instead, these provisions merely mandate that certain termination
provisions that limit the employer and the employee in the exercise of
ending an employment relationship are included in the contract. 266
However, it is noteworthy that these provisions prohibit termination based
261 Chinese scholars have conducted their own empirical studies on issues of employment
discrimination. For example, in 2002 年人口与劳动问题报告 – 城乡就业问题与对策 [A REPORT
ON POPULATION AND LABOR PROBLEMS IN CHINA IN 2002: EMPLOYMENT PROBLEMS AND
COUNTERMEASURES IN CITIES AND COUNTY] (蔡昉 [Cai Fang] et al. eds., 社会科学文献出版社
[Social Sciences Documents Publishing Co.] 2002), the authors applied the demand-supply of the
labor market to analyze workplace discrimination. See also, AM. CTR. FOR INT’L LABOR
SOLIDARITY, supra note 78, at 38-58.
262 In 2004, there were a reported 76,744 compensation cases, 40,017 rescission cases, and 12,043
wrongful termination cases, and 1,540 arbitrations over layoffs. 2004 STAT. Y.B. CHINA, supra#p#分页标题#e#
note 195, at § 23-5.
263 苏敏, 全国总工会调查: 现行法规难保女职工劳动权益 [Su Min, ACFTU Reports: Current
Law Can’t Protect Women Workers’ Rights], 中国青年报[CHINA YOUTH DAILY], Feb. 27, 2004, at
2.
264 CHINA COUNTRY GENDER REVIEW, supra note 152, at 14.
265 Fang Lee Cooke, Equal Opportunity? The Role of Legislation and Public Policies in Women’s
Employment in China, 16 WOMEN IN MGMT. REV. 334, 340 (2002); see also, Charles J. Ogletree &
Rangita de Silva-de Alwis, When Gender Difference Become a Trap: The Impact of China’s Labor
Law on Women, 14 YALE J.L. & FEMINISM 69 (2002). See generally, Xiao-Yuan Dong et al., supra
note 81, at 979.
266 Labor Law, supra note 19, at arts. 19(6), 24-27, 29(3).
410 COLUMBIA JOURNAL OF ASIAN LAW [19:2
on being female, during pregnancy, or while nursing, but are silent in
protecting employees against being terminated generally on a
discriminatory basis. Instead, they rely upon the general antidiscrimination
provisions of the Labor Law and other labor laws, as
discussed above.267
C. Enforcement
1. Administrative Process
China’s current system for enforcing individual labor rights is to
first channel them into intra-enterprise mediation, and then into
arbitration under labor bureaus vertically connected with the MOLSS and
horizontally connected with local governments.268 These labor bureaus
set up labor arbitration commissions and establish tribunals to resolve
labor disputes as individual cases arise.269 The tribunals are staffed with
arbitrators who are usually from the labor bureau, but also include
arbitrators from outside of the labor bureau who meet certain qualification
standards.270
The labor tribunals mediate and arbitrate the labor rights issues
that arise from both contracts and statutes.271 These include individual
and collective labor contracts, as well as labor rights under the Labor
Law, the Women’s Rights Law, etc.272 Parties to the arbitration may be
represented by lawyers at the hearing during the preliminary gathering of
evidence, which is conducted by the arbitrator to elicit the facts and
267 Id. art. 12.
268 Id. arts. 77-84; Regulations on Settlement of Labor Disputes in Enterprises, supra note 240, at
arts 7, 12.
269 Labor Law, supra note 19, at art. 77.
270 For example, the arbitration committee can include some outside arbitrators working on a parttime
schedule. See 广州市劳动争议仲裁办法 [Regulation on Labor Arbitration of Guangzhou
Municipality] art. 14 (promulgated by the Guangzhou Municipality, Aug. 24, 1998, effective Sept.
15, 1998) (P.R.C.), available at http://www.chinacourt.org/flwk/show1.php?file_id=64492.
271 For jurisdiction over contract claim, see Interpretation on Labor Arbitration, supra note 241, at#p#分页标题#e#
art. 1(1). For jurisdiction over statutory claim, such as workers’ com, see劳动和社会保障部办公厅
关于处理工伤争议有关问题的复函 [Reply Letter on Labor Dispute over Workplace Injuries] art.
2 (promulgated by the Labor & Soc. Sec., Apr. 11, 2000, effective Apr. 11, 2000) (P.R.C.),
available at http://www.chinacourt.org/flwk/show1.php?file_id=34897.
272 Some Opinions, supra note 20.
2006] CHINA’S EMPLOYMENT DISCRIMINATION 411
arguments so as to allow for the application of the laws and
regulations.273
Judicial review is available only after a labor arbitration decision
is made, and, being a de novo procedure, it greatly nullifies the arbitration
process and decision but for the experience of preparation.274 The time
and expense of this second procedure is especially burdensome to the
claimants, who are often workers of very modest means. On the other
hand, the judicial proceeding provides supervision for local labor
arbitration committees.
The administrative process to access mediation or arbitration or
take legal proceedings according to law is the requirement that there be a
labor dispute arising out of a labor contract relationship.275 The 1993
Regulation on Labor Disputes applies to the following categories of labor
disputes:
(1) disputes arising out of expulsion, discharge or lay-off of
employees by enterprises, resignation by employees, or
employees voluntarily leaving their posts;
(2) disputes arising out of the implementation of relevant state
regulation on wages, insurance, welfare, training, and labor
protection;
(3) disputes arising out of performance of labor contracts; and
(4) other labor disputes that shall be handled according to these
Regulations as prescribed by laws or other regulations.276
273 企业劳动争议调解委员会组织及工作规则 [Guidelines on the Organization and Work of the
Committee of Arbitration on Labor Disputes in Enterprises] art. 9 (promulgated by the Ministry of
Labor, Nov. 5, 1993, effective Nov. 5, 1993) (P.R.C.), available at http://www.chinacourt.org/flwk/
show1.php?file_id=18356 [hereinafter Arbitration Guidelines].
274 The standard of review is de novo. See Interpretation on Labor Arbitration, supra note 241, at
art. 21(2).
275 Id. art. 77. In fact all provisions in the Labor Law relating to arbitration require a labor dispute.
Id. arts 78-84.
276 Regulations on Settlement of Labor Disputes in Enterprises, supra note 240, at art. 2.
Presumably, applicable discrimination prohibitions in the Labor Law and other anti-discrimination
laws are included in these categories. The Supreme People’s Court in an interpretation further
confirmed the requirement of a “labor dispute” in order to have the case heard by the courts.
Interpretation on Labor Arbitration, supra note 241, at art. 1. It also provides these disputes must#p#分页标题#e#
occur “in the course of performing a labor contract” or where a labor relationship had existed. Id.
art. 1(1)(2). Judicial review of a labor arbitration commission decision finding no labor dispute will
be “accepted” by the court only if the court disagrees or, finds it “falls under other cases within the
jurisdiction of the people’s court.” Id. art. 2(1)(2).
412 COLUMBIA JOURNAL OF ASIAN LAW [19:2
In 2004, the MOLSS reported there were nearly 260,000 labor
disputes nationwide, affecting some 760,000 workers, 277 marking a
15.2% increase in the number of disputes over the prior year.278 Of these,
93.2% (259,000) were reported to have been resolved: 26% by mediation
(67,765), 37% by arbitration (95,774), and 26% (67,340) by other
means.279 The question for purposes of this article is how many of the
above cases, if any, involved elements of illegal employment
discrimination. 280
In the United States, the administrative agency which primarily
enforces most anti-discrimination laws is the Equal Employment
Opportunity Commission (EEOC), created under Title Seven of the Civil
Rights Act (CRA).281 The administrative procedure requires that a charge
must first be filed with the EEOC prior to litigation,282 and the law calls
for an EEOC investigation, an attempted conciliation where a purported
violation is found, a right to a hearing after an EEOC complaint is filed,
and the right to litigate notwithstanding the agency’s action or inaction.283
In 2004, the EEOC dealt with 79,432 charges, settling 8,865 disputes and
litigating 414 cases itself.284
277 2004 STATISTICS, supra note 131; see also State Dept. Rpt., supra note 58.
278 2004 STATISTICS, supra note 131.
279 Id. In 2004, it was recorded that 19,000 cases were labor rights disputes arising under collective
contracts, which is a remarkable 72.7% increase from the previous year. Id. The detailed 2004
statistical breakdown of labor arbitration cases by nature of dispute is as follows:
Total Private
Enterprise
FIE Public Enterprise Others
Compensation 76,774 42,069 7,775 22,805 4,125
Contract
Modification
5,494 2,153 480 2,480 381
Rescind Contract 40,017 17,019 5,090 15,646 2,262
Wrongful
Termination
12,043 4,245 1,608 5,589 601
Lay-off 1,540 388 49 1,008 95
Source: 2004 STAT. Y.B. CHINA, supra note 195, at § 23-5.
280 Cases appear to fall under the substantive issue raised by a claim of discrimination. For example,
wage discrimination would be categorized as a wage claim. It was reported that in 2003 in Xicheng
District of Beijing, the Arbitration Commission had 80 cases involving violation of women
workers’ rights (“in their special physiological periods”). Mother or Worker: Chinese Women Face#p#分页标题#e#
New Challenges, supra note 260.
281 Civil Rights Act of 1964, § 705, 42 U.S.C. § 2002e-4 (2005).
282 29 C.F.R. 1601.28(a)(3)-(4).
283 LEWIS & NORMAN, supra note 91, at 199-252.
284 THE U.S. EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, ENFORCEMENT STATISTICS AND
LITIGATION, http://www.eeoc.gov/stats/enforcement.html (last visited Feb. 28, 2006). Most cases
are litigated by the parties.
2006] CHINA’S EMPLOYMENT DISCRIMINATION 413
2. Proving Discrimination
Proving discrimination in China does not involve the complex
burdens of proof and production, and the rules of evidence it does in the
United States.285 In China, labor disputes brought into labor arbitration
proceedings require an initial application for arbitration, including a
submission of any evidence and the names and addresses of witnesses.286
Mediation and an arbitration hearing then follow, and the arbitration
tribunal follows the opinion of the majority.287 Under working rules
issued by MOLSS, the parties present their own cases, but the regulation
is silent as to proof requirements.288 Local arbitration regulations seem to
parallel this approach; for example, Beijing regulations require that each
party “provide evidence for his own contentions” and “an award shall be
made according to the opinions of the majority of arbitrators.”289
In China, the courts hear labor dispute cases de novo following an
appeal from the decision of the labor arbitrator, and the usual rules of
civil procedure apply.290 Most of China’s employment discrimination
cases are brought under the arbitration regulations and Civil Procedure
Law (CPL), and the Supreme People’s Court has issued an interpretation
that in certain labor disputes the employer has the burden of production:
In the event of labor disputes arising from the decision
made by the employing work unit to discharge, expulse,
dismiss, cancel the labor contract, reduce the labor
remuneration or to calculate the length of service, the
employing unit shall be liable for the burden of
producing evidence.291
Recent guidance from the Supreme People’s Court further provides that
in civil cases generally, certain rules of evidence and procedure regulate
285 For a detailed explanation of the U.S. approach, see LEWIS & NORMAN, supra note 91, at 114-
197.
286 Regulations on Settlement of Labor Disputes in Enterprises, supra note 240, at art. 24(3).
287 Id. arts. 27-29.
288 Arbitration Guidelines, supra note 273, at art. 27.
289 Beijing Arbitration Measures, supra note 250, at arts. 19, 22.
290中华人民共和国民事诉讼法 [Civil Procedure Law] art. 153 (promulgated by the Standing
Comm. Of Nat’l People’s Cong., Apr. 9, 1991, effective Apr. 9, 1991) (P.R.C.), available at#p#分页标题#e#
http://www.chinacourt.org/flwk/show1.php?file_id=12610.
291 Interpretation on Labor Arbitration, supra note 241, at art. 13.
414 COLUMBIA JOURNAL OF ASIAN LAW [19:2
proofs and burdens.292 Under China’s CPL, the claimant must prove his
or her case by what some might liken to a “sufficiency of the evidence”
standard, 293 with labor arbitration tribunals employing a similar
standard.294 Evidence in court proceedings comes in many forms and is
organized under the CPL into seven different categories. 295
In sum, to pursue an employment discrimination case in China,
one must first have a labor dispute arising from an employment
relationship in order to even access arbitration or the courts. In addition,
guidance is sparse as to proving discrimination.296 The results, however,
are straightforward: in most cases the parties present their evidence, the
tribunal rules unanimously or by a majority, presumably (though not
explicitly) basing its ruling on a standard akin to a sufficiency of the
evidence standard. In cases where the employer has the burden of
producing evidence, the employer may lose due to a failure of
production.297
In the United States, illegal discrimination under antidiscrimination
laws may generally be proven as intentional or direct
(shown by “disparate treatment”), or as unintentional or indirect (shown
292 Generally, plaintiff has the burden of proof to present evidence, and the court shall not consider
any evidence unless it is cross-examined in court proceedings. See最高人民法院关于民事诉讼证
据的若干规定 [Regulations of Supreme People’s Court on Civil Trial Evidence] arts. 2, 47
(promulgated by the Sup. People’s Ct., Dec. 21, 2001, effective Apr. 1, 2002) 01/2002(1) 最高人民
法院公报 [SUP. PEOPLE’S CTS GAZ.] 19 (P.R.C.), available at http://www.chinacourt.org/
flwk/show1.php?file_id=38863 [hereinafter Regulation on Civil Trial Evidence].
293 Claimant has the obligation to produce evidence. Civil Procedure Law, supra note 290, at art. 64
(1991). For the standard of proof, the People’s Supreme Court ruled that “evidence should be
sufficient to establish undisputed facts.” Regulation on Civil Trial Evidence, supra note 292, at art.
63. Under the Administrative Procedure Act, the court may rule on the “adequacy of essential
evidence.” 中华人民共和国行政诉讼法 [Administrative Procedure Law] art. 54 (promulgated by
the Standing Comm. of Nat’l People’s Cong., Apr. 4, 1989, effective Oct. 1, 1990) (P.R.C.),
available at http://www.chinacourt.org/flwk/show1.php?file_id=8970.
294 Beijing Arbitration Measures, supra note 250, at arts. 19-20.
295 Civil Procedure Law, supra note 290, at art. 63. These categories are (1) documentary; (2)
material; (3) audio-visual; (4) testimony of witnesses; (5) statements of the parties; (6) expert#p#分页标题#e#
conclusions; (7) records of inspection. Id.
296 The use of evidentiary and procedural devices to prove discrimination, such as prima facie,
disparate treatment, disparate impact, mixed motives, affirmative defenses, and burdens of proof, all
seem possible to use, though there is little legislative guidance.
297 Administrative Procedure Law, supra note 293, at art. 6. It appears sufficient for the plaintiff to
prevail where the government has failed its burden of production, arguably, even without a prima
facie case. It should be noted that the shift of burden of proof applies to civil litigation in people’s
court. Id. art. 1. It is silent as to whether the rule also applies to other administrative hearings.
2006] CHINA’S EMPLOYMENT DISCRIMINATION 415
by a “disparate impact). 298 In proving discrimination under either
standard, complainants usually must present a prima facie case, and case
law has developed various burdens of production in terms of evidence
and the weight of proof, the latter burden resting on the claimant and
requiring a preponderance of the evidence.299
Besides the procedural issues mentioned above, in China, other
practical issues remain before discrimination is proved, such as
identifying the basis of the discrimination. For example, while invidious
discrimination might be readily evident, differentiation based on migrant
worker status may be less apparent. If migrant workers are not paid
wages for three months and the employer, though in violation of wage
laws, justifies its action by using the non-payment as a means of
financing his construction project, what is the basis of discrimination? Is
their complaint based on a potential protected status such as ethnicity,
race, social origin, or, is it based upon the employer-stated business
justification?300 Of course, if non-migrant workers are paid and migrant
workers are not paid, or if a more qualified migrant worker is not
promoted, the basis is more clearly based on their status, either migrant
worker or social origin.301
3. Remedies
Though China’s labor laws provide numerous remedies for
violations, there are none specifically for employment discrimination
based on race, ethnicity, or religious belief. The Labor Law authorizes
compensation for “any harm done to female staff and workers,”302 and
also provides remedies for other labor law violations, such as nonpayment
of wages for overtime, and presumably the same remedy would
298 An example of intentional discrimination is shown by giving a man higher wages than a woman
for equal work. An example of the second is shown by a height minimum for applicants that
screens a disproportionate number of applicants of a “protected status”, such as women and Asian-
Americans who statistically tend to be shorter. LEWIS & NORMAN, supra note 91, at 164-259.#p#分页标题#e#
299 Id. at 128-56.
300 Of course, under all scenarios a worker who is not paid for whatever reason is entitled to be paid
under a wage claim.
301 The difficulty with protecting non-invidious categories of workers, such as social origins, is that
society and social statuses (e.g., migrant workers) change over time. If they are to be protected,
labor reformers must be vigilant to remove the protection at the point it is no longer viable.
302 Labor Law, supra note 19, at art. 95. For harm done to female workers, the maximum penalty is
¥3000 ($365) per incidence. See违反《中华人民共和国劳动法》行政处罚办法 [Administrative
Penalties for Violations of Labor Law] art. 13, (promulgated by the Ministry of Labor., Dec. 26,
1994, effective Jan. 1, 1995) (P.R.C.), available at http://www.chinacourt.org/flwk/show1.php?
file_id=21469.
416 COLUMBIA JOURNAL OF ASIAN LAW [19:2
apply if the violation was based on a protected status such as gender.303
Additionally, where an employer’s rules and regulations violate the law,
the Labor Bureau shall enforce the laws and the employer shall be liable
for compensation. 304 For other HRM decisions, such as the
discriminatory denial of promotions or layoffs, it seems the arbitrator or
judge must fashion an appropriate remedy.
Provisions dealing with China’s individual labor contracts,
contained in the Labor Law, provide damages for the employer’s nonperformance
of duties, such as the failure to pay wages or other work
conditions promised in the contract.305 The contract provisions of the
Labor Law do not contain separate anti-discrimination provisions, though
they do limit the employer’s ability to terminate an employee during a
pregnancy or nursing period, or for being female generally.306
Remedies under the Women’s Rights Law for discriminatory
hiring, 307 wages, 308 or promotion practices 309 include administrative
sanctions 310 and damages if its action harmed the woman’s property
interests.311
China’s 2004 Labor Inspection Regulations require labor bureaus
to supervise employer compliance with labor laws, regulations and rules,
303 Labor Law, supra note 19, at arts. 12, 13, 91; Administrative Penalties for Violations of Labor
Law, supra note 302, at arts. 12-14. The administrative penalties apply to all the “employment
units” defined under the labor law. For certain types of gender discrimination, penalties apply in
addition to an order to correct the violation. Id. arts. 12-14. For violations of the labor contract, an
order to correct it is provided. Id. art. 16.
304 Labor Law, supra note 19, at art. 89.
305 违反《劳动法》有关劳动合同规定的赔偿办法 [Measures Governing Compensation for
Losses Resulting From Violation of Labor Contract] art. 3 (promulgated by the Ministry of Labor,#p#分页标题#e#
May 10, 1995, effective May 10, 1995) (P.R.C.), available at http://www.chinacourt.org/flwk/
show1.php?file_id=22531; 上海市劳动合同条例 [Shanghai Labor Contract Regulation] art. 55
(promulgated by the Standing Comm. of the Shanghai Municipality People’s Cong., Nov. 15, 2001,
effective May 1, 2001) (P.R.C.), available http://www.chinacourt.org/flwk/show1.php?
file_id=51174.
306 Labor Law, supra note 19, at arts. 19, 29(3). Where violations of the Labor Law occur and
punishment is provided by other laws or administrative rules or regulations, those provisions “shall
apply.” Id. art. 105. Whether the other remedies are supplemental or preemptive would appear to
require an interpretation.
307 Women’s Rights Law, supra note 135, at art. 22.
308 Id. art. 23.
309 Id. art. 24.
310 Id. art. 50. Violations of Articles 59-63 of the Labor Law are covered by Administrative
Penalties for Violations of Labor Law, supra note 303, at art. 12, and by 劳动保障监察条例
[Regulations on Labor Security Supervision] art. 11(4) (promulgated by the Standing Comm. of the
Nat’l People’s Cong., Nov. 1, 2004, effective Dec. 1, 2004) (P.R.C.), available at http://www.
chinacourt.org/flwk/show1.php?file_id=97457. These stipulations are silent regarding violations of
Article 12 of the Labor Law.
311 Women’s Rights Law, supra notes 135, at art. 56 (now also including sexual harassment, id. art.
40).
2006] CHINA’S EMPLOYMENT DISCRIMINATION 417
and contain administrative and monetary penalties to be administered
against violators.312 These regulations do not include a general antidiscrimination
requirement, but do include specific provisions relating to
female employees. In this regard, the Labor Inspection Regulations have
the authority to ensure “the employing entities’ obedience of provisions
on special labor protection of female employees and underage
laborers.”313
Attorney fee costs in China are normally borne by the parties
themselves.314 Some have claimed that there are relatively few labor
lawyers in China primarily due to the inability to recover fees in labor
cases.315 Interestingly, the number of attorneys representing employers
on labor and employment issues, though higher than those for employees,
is still low. This is likely not because of an inability to be paid for legal
counsel, but because many employers do not sense the relevancy of labor
laws nor fear their enforcement.316
Remedies for violations of anti-discrimination prohibitions appear
to be rather mild in China when compared with those in the United States,
which include compensatory and punitive damages, back pay, front pay,
restored benefits, attorney’s fees, reasonable accommodation,
reinstatement, and job offers.317 In the United States, punitive damages#p#分页标题#e#
may also be included, wherein victims are awarded sums deemed
sufficient to punish and deter employers determined to have intentionally
violated labor laws.318
The award of attorney fees to the prevailing party is built into
anti-discrimination legislation in the United States, and is used both as an
incentive to claimant’s lawyers to take discrimination cases and to
substitute them as a “private attorney general,” to more efficiently enforce
the nation’s labor laws in conjunction with often over-burdened
312 Regulation on Labor Security Supervision, supra note 310, at arts. 23-32. There is no right to
compensation or other remedy provided to complainants.
313 Id. art. 11(4).
314律师服务收费管理暂行办法 [Interim Regulation on Attorneys’ Fee] art. 3 (promulgated by the
State Planning Comm. & the Ministry of Justice, Mar. 1, 1997, effective Mar. 1, 1997) (P.R.C.),
available at http://www.chinacourt.org/flwk/show1.php?file_id=27660 (available by subscription
only).
315 Interview with Junlu Jiang, Chair, Labor Committee of All China Lawyer’s Association
(ACLA), in Beijing, P.R.C. (June 1, 2005) (on file with author).
316 Id.
317 Such remedies may also be applied against labor unions and employment agencies. LEWIS &
NORMAN, supra note 91, at 519, 525-54.
318 Id. at 256-298. For example, the Eleventh Circuit upheld a jury verdict of $17 million on racial
discrimination claims of seven Caucasian librarians. Bogle v. McClure, 332 F.3d 1347 (11th Cir.
2003), cert. dismissed, McClure v. Bogle, 540 U.S. 1158 (2004).
418 COLUMBIA JOURNAL OF ASIAN LAW [19:2
government enforcement agencies.319 As a general rule, attorneys’ fees
may be awarded to the prevailing plaintiff under a variety of antidiscrimination
laws.320 Attorneys in the United States also can use a
contingency fee arrangement as means of compensation, allowing them to
receive a percentage of the plaintiff’s remedy.321 The U.S. Supreme
Court has held that the provision for the statutory award of fees does not
invalidate a contingent fee agreement that would require a prevailing
plaintiff to pay attorney fees more than those awarded under the
statute.322
In the United States, it is believed that such strong remedies and
the awarding of attorney fees provide meaningful incentives to enforce
anti-discrimination laws, even above and beyond what the government
supervision and enforcement can deliver.323 China has not yet created
these types of incentives for employers, employees, or labor law
319 Award of Attorney Fees in Job Discrimination Cases, 45C AM. JUR. 2D Job Discrimination §
2768 (2003). In civil rights action, the U.S. District Court for the Southern District of New York
awarded plaintiffs attorney fees of totaling $118,968, consisting of $79,312 based on some 809#p#分页标题#e#
hours of work at rates varying from $95 to $105 per hour, plus a 50% "bonus" of $39,656 to
compensate for the complexity of the case, the novelty of the issues, and the "great benefit"
achieved. The Second Circuit affirmed. The Supreme Court affirmed the attorney fee award,
holding that court is authorized, in its discretion, to allow a prevailing party an upward adjustment
in attorney fees in cases of exceptional success. Blum v. Stenson, 465 U.S. 886, 897 (1984). In a
recent example, a California Court of Appeals affirmed a $470,000 attorney fee award when
employee prevailed in a racial discrimination suit in which she obtained a $400,000 judgment.
Jonathan Vo v. Las Virgenes Municipal Water District, 79 Cal.App.4th 440 (2000).
320 For example, Title VII of the Civil Rights Act of 1964, §§ 701-718, 42 U.S.C. §§ 2000e-
2000e(17) (2005); the Civil Rights Attorney's Fees Awards Act, 42 U.S.C. § 1988 (2005); the Equal
Pay Act, 29 U.S.C. § 206 (2005); the Americans with Disabilities Act, 42 U.S.C. §§ 12101-12213
(2005); the Immigration Reform Control Act, 8 U.S.C. §§ 1324a-1365 (2005); the Employee
Polygraph Protection Act, 29 U.S.C. §§ 2001-2009 (2005); the Family Medical Leave Act of 1993,
29 U.S.C. §§ 2601-2619, 2631-2654 5 U.S.C. §§ 6381-6387 (2005); and the Equal Access to Justice
Act, 5 U.S.C. § 504 (2005).
Under the Civil Rights Attorney's Fees Award Act, federal district court judges have discretion to
award attorney fees. The Civil Rights Attorney's Fees Awards Act, 42 U.S.C. § 1988 (2005); see
also, e.g., Vocca v Playboy Hotel of Chicago, Inc., 686 F.2d 605, 606 (7th Cir. 1982). The fee may
be awarded even where a complainant prevails through settlement rather than litigation. Maher v.
Gagne, 448 U.S. 122 (1980). Litigation costs may also be awarded to a prevailing party under Civil
Procedure Rule 54(d)(1). FED. R. CIV. P. 54(d)(1); this includes frivolous litigation. It's worth
noting that in the United States, even prevailing defendants may occasionally be awarded attorney
fees under the Civil Rights Attorney Fees Awards Act. 42 U.S.C. § 1988(b) (2005). Also, the
Federal Rules of Civil Procedure authorizes sanctions, principally in the form of fee awards, against
responsible persons, if the court determines that legal documents are not "well grounded in fact and
. . . warranted by existing law or a good faith argument for the extension, modification, or reversal
of existing law." FED. R. CIV. P. 11.
321 WILLIAM BURNHAM, INTRODUCTION TO THE LAW OF THE UNITED STATES 142 (3d ed. 2002).
322 The Court has distinguished payment of fees to the prevailing party under 42 U.S.C. §1988 from
payment to the attorney under a contingent fee agreement. Venegas v. Mitchell, 495 U.S. 82
(1990).#p#分页标题#e#
323 45C AM. JUR. 2D Job Discrimination § 2692.
2006] CHINA’S EMPLOYMENT DISCRIMINATION 419
attorneys. Some argue that without such incentives or sufficient remedies
it will remain difficult to enforce labor laws.324
4. External Incentives
The possibility of losing business opportunities because of labor
practices below many international standards is proving an incentive to
comply with the labor laws to some Chinese businesses.325 For example,
Social Accountability (SA8000) is a voluntary set of labor standards used
to ensure just and decent working conditions in the workplace, and is
monitored by Social Accountability International (SAI),326 a New Yorkbased
institution which is now on location in thirty-six countries and in
five industries. 327 Pursuant to the SA8000 certification procedure,
Chinese companies can have their factories certified by certification
bodies accredited by SAI; certifications remain valid for three years and
subject the company to surveillance audits either every six months or
once a year.328 The standards used are based on ILO labor standards and
the United Nations’ Declarations and Covenants.329 Reportedly, many
major companies in China now use SA8000, including Toys R’ Us,
Timberlake, and Avon.330 As of 2004, “fifty-four Chinese companies
[have been] certified out of 400 companies worldwide which have the
324 姜涛, 性别歧视：就业路上一道坎 [Jiang Tao, Gender Discrimination: Obstacle to Female
Workers], 中国教育报 [CHINESE EDUC. NEWS], Apr. 12, 2005, at 1, available at http://www.jyb.
com.cn/gb/2005/04/12/zy/jryw/7.htm.
325 Chua Chin Hon, China Comes to Grips with New Labour Standards, STRAITS TIMES
(Singapore), July 17, 2004, available at Lexis, News, The Straits Times.
326 SOCIAL ACCOUNTABILITY INTERNATIONAL, SOCIAL ACCOUNTABILITY 8000, § V (2001),
available at http://www.sa-intl.org/index.cfm?fuseaction=document.showDocumentByID&nodeID
=1&DocumentID=136 (last visited Feb. 28, 2006).
Social Accountability 8000 (SA8000), designed as a labor standard, is premised on existing
International Standardisation Organisation (ISO) quality standards. The ISO is a non-governmental
organization, but composed of national standards institutes. It has developed more than 11,000
international uniform standards to facilitate international exchange of goods and services, but has
recently developed ISO 9000 (quality assurance systems management) and ISO 14000 (an
environmental systems management), both of which constitute generic standards applicable to a
wide range of industries and services.
Ilias Bantekas, Corporate Social Responsibility in International Law, 22 B.U. INT’L L.J. 309, 338 n.
133 (2004).
327 Hon, supra note 325.
328 See SOCIAL ACCOUNTABILITY INTERNATIONAL, GUIDANCE ON PURSUING SA8000#p#分页标题#e#
CERTIFICATION OF FACILITIES, available at http://www.sa-intl.org/index.cfm?fuseaction
=page.viewPage&PageID=617&What%20does%20SA8000%20certifcation%20mean?&stopRedire
ct=1 (last visited Feb. 28, 2006).
329 Id.
330 Hon, supra note 325.
420 COLUMBIA JOURNAL OF ASIAN LAW [19:2
certification.”331 The business incentive is the expectation that certified
companies will be first in line for business opportunities, most likely from
U.S. investors.332
SA8000’s Social Accountability Requirements Section IV on
discrimination reads as follows:
5.1 The company shall not engage in or support
discrimination in hiring, remuneration, access to
training, promotion, termination or retirement based on
race, caste, national origin, religion, disability, gender,
sexual orientation, union membership, political
affiliation, or age.
5.2 The company shall not interfere with the exercise of
the rights of personnel to observe tenets or practices, or
to meet needs relating to race, caste, national origin,
religion, disability, gender, sexual orientation, union
membership, or political affiliation.
5.3 The company shall not allow behavior, including
gestures, language and physical contact, that is sexually
coercive, threatening, abusive or exploitive.333
Other provisions require the certified company to control suppliers,
subcontractors, and sub-suppliers. 334 The sanction for non-compliance
presumably would be ineligibility and loss of business with any U.S.
company requiring certification. Whether these external standards and
market-imposed sanctions will prove effective in lessening illegal
discrimination, or prove to be mere public relations window dressing
remains to be seen.
IV. CONCLUSION
331 Id. Others report forty-nine companies in China. SPARKICE INC. (BEIJING), THE COSTLY
SA8000 IN CHINA(2), Sept. 22, 2004, http://www.sparkice.com/sparkiceApp/spcontrol/
ecIDPViewNewsDetails?newsId=364.
332 China Daily estimated the cost for first time accreditation and subsequent reviews for three years
for a Chinese company with 1500 employees would be about ¥230,000 (US$27,811), which is
about US$19 per employee. SA8000 Requires Positive Attitude, CHINA DAILY, July 6, 2004,
http://english.people.com.cn/200407/06/eng20040706_148628.html.
333 SOCIAL ACCOUNTABILITY 8000, supra note 326, at § IV.5.
334 Id. § III.9.6.
2006] CHINA’S EMPLOYMENT DISCRIMINATION 421
A. Challenges to Remedying Employment Discrimination
There are currently at least three immediate challenges to
addressing the problem of employment discrimination in China.
First, there is a need to educate society in general about the
problems of discrimination. Every society has problems with some
citizens excluding others from opportunities for education, housing,#p#分页标题#e#
welfare and jobs, and such exclusion may be for invidious or other
reasons. Discrimination takes a large social and economic toll. It is
estimated that in the United States, gender and racial job discrimination
wastes the talents of many, causes social divisions and disharmony, and
costs US$194 billion a year.335 The battle against discrimination takes
place in many forums, but perhaps none are as important as education,
where citizens must be provided information to combat the exclusionary
stereotypes that women are inferior to men, that age determines ability,
and that race and ethnicity determine competency. However, as
important as education is in the United States, it was determined that
employment needed significant legal protection, and the EEOC was
established to protect equal economic opportunity. Without a sufficient
“living wage,” other opportunities such as housing and education become
even more distant.
China’s employment discrimination comes from historical and
cultural mores which are exacerbated by the country’s present economic
transition to a market economy. Economic development, privatization,
and the need to be profitable all argue for cutting costs (often labor costs)
and pulling away from the welfare state’s iron-rice bowl approach.
Therefore, one of the main challenges facing China is the long-term
education of the population regarding the fallacies of discrimination, as
335 The 194 billion dollars reflects the cost of discrimination in terms of employee’s lost income.
The actual number is calculated by: (1) projecting a percentage of earning differentiations by race
and by gender, (2) applying the percentage to aggregate national earnings, and (3) adjusting the
combined cost of sexual and racial discrimination in 1987 dollars. RALPH ESTES, STAKEHOLDER
ALLIANCE, THE COST OF DISCRIMINATION, http://www.stakeholderalliance.org/discrimination.html
(last visited Feb. 28, 2006).
In China, costs to society in terms of government costs and legal aid services to
recuperate ¥100 billion (US$12 billion) in migrant worker claims for back wages have been put at
¥300 billion (US$36 billion). 崔丽, 追讨1000 亿元欠薪，需支付3000 亿元成本 [Cui Li, It
Costs 300 Billion to Collect Back Wages of 100 Billion], 中国青年报 [CHINA YOUTH DAILY]，
June 9, 2005, http://zqb.cyol.com/gb/zqb/2005-06/09/content_15960.htm [hereinafter Cui Li].
422 COLUMBIA JOURNAL OF ASIAN LAW [19:2
well as its costs and dangers to society.336 This must be combined with
strongly-enforced anti-discrimination laws, which “educate” employers
by making them pay for their violations.
Education and easy access to information about labor rights and
remedies is essential and must be provided to employees. The easiest and#p#分页标题#e#
most logical place for this information is at the workplace. Posters
outlining rights, remedies and government contracts must be made
available to workers for meaningful access to labor rights to exist, as
required by SA8000.337 Special training sessions can also be provided by
trade unions,338 by governments, or by NGOs. For example, in Shanghai,
it is reported that migrant construction workers must pass classes on how
to protect their legal rights in order to get a certificate allowing them to
work in the city.339 The need for the government to intervene to bring
about changes in society cannot be understated.340
A second challenge arises from China’s transition to a market
economy and the resulting inequities. The societal disruption brought
about by economic transition, causing discrimination, must be managed
by the government’s guiding hand through legislation allowing all
citizens to participate more equally in the economic benefits brought on
by the transition. This requires more than policy pronouncements—it
requires enforceable anti-discrimination laws and procedures that are able
to stop law violators and provide effective remedies for the victims.
A third challenge is the inconsistency too often found in law
enforcement. Part of the difficulty is systemic of China’s political legal
system wherein national legislation is general in nature, leaving the task
of passing detailed implementing regulations to local governments. 341
These local laws tend to be slow in coming, too often are as general as the
national law, are not always consistent, and too frequently lack
336 For example, the Law School of Beijing University has created a working group on protection of
women’s labor rights, dedicated to the general public for long term education regarding job
discrimination. More information on the working group is available at http://www.womanlegalaid.
org.cn/group/index.php (last visited Feb. 24, 2006). Also, for the costs to the victims in
seeking redress, it has been estimated that "for some migrants, it requires hundreds, even thousands
of RMB in transportation, food, lodging, and other costs just to report a case." Cui Li, supra note
335.
337 SOCIAL ACCOUNTABILITY 8000, supra note 326, at § IV.9.12.
338 Id. § IV.9.5.b.
339 Yang Lifei, Migrants Learn About Legal Rights, SHANGHAI DAILY, Apr. 19, 2005, at 3,
available at http://www.china.org.cn/english/null/126305.htm.
340 For discussion on the influence of the role governments, there is some evidence of different
treatment in China and Vietnam of workers under Taiwanese-managed factories that arguably is
attributable to the different roles played by the governments. See Anita Chan & Hong-Zen Wang,
The Impact of the State on Workers' Conditions-Comparing Taiwanese Factories in China and#p#分页标题#e#
Vietnam, 77 PACIFIC AFFAIRS 629 (2004).
341 DANIEL C. CHOW, THE LEGAL SYSTEM OF THE PEOPLE’S REPUBLIC OF CHINA 153 (2003).
2006] CHINA’S EMPLOYMENT DISCRIMINATION 423
meaningful government enforcement. 342 The 2004 Labor Inspection
Regulation empowers the government to supervise employer compliance
with labor law requirements,343 however, the Regulation’s pertinent part
delegates enforcement:
The labor security administration of a local people’s
government at the county level or at any level above
shall be in charge of the labor security supervision work
within its own administrative area.344
Thus, it would seem that the enforcement approach is somewhat
circular, with local governments given responsibility to pass
implementing legislation against their local business constituents and to
provide meaningful processes and penalties against those businesses that
violate anti-discrimination laws. Many local governments pass
regulations, but those regulations are often no more enforced than the
national regulation.345
Related to these challenges is the relative unavailability of legal
assistance. Chinese labor lawyers, unlike their commercial lawyer
counterparts, have little incentive to take on the cases of victims of illegal
employment discrimination.346 The lawyer fees for such cases are low,
victims are often without financial means increasing the likelihood that
the lawyers may not be paid at all, the cases can be complex, and the
employer always has the right to appeal to the court for a de novo trial
following an arbitration decision them. All these factors present
formidable challenges to the meaningful enforcement of antidiscrimination
laws in China.
B. Clarifying China’s Anti-Discrimination Laws
342 See Legislation Law, which is established to deal with the central-local inconsistencies, but there
is little evidence of its widespread use in formal procedures.
343 Regulation on Labor Security Supervision, supra note 310.
344 Id. art. 3.
345 M. Ulric Killion, Post-WTO China: Quest for Human Right Safeguards in Sexual Harassment
Against Working Women, 12 TUL. J. INT'L & COMP. L. 201, 234 (2004).
346 It is reported that lawyers charge substantially less in representing employees in labor rights
litigations than they do in representing the employers. See 韦蔡红, 上海律师薪酬调查 [Wei
Caihong, Survey on Attorneys’ Income in Shanghai], 新闻晨报 [MORNING DAILY NEWS], June 17,
2004
424 COLUMBIA JOURNAL OF ASIAN LAW [19:2
Some reforms to China’s anti-discrimination labor laws are in
order. Suggested clarifications to existing anti-discrimination laws are
made below, and seek to address some of the legal inefficiencies in
China’s current attempt to combat discrimination in the workplace, as#p#分页标题#e#
well as satisfy its commitments to meet and maintain international labor
standards.
1. “Protected Classes” of Workers
The definitions of protected classes of workers should be more
clearly stated. Currently, those workers protected by some type of antidiscrimination
law must look to a variety of laws and institutions to
determine their rights. Further, the rights of some groups are more clearly
protected than those of others. For example, while race, ethnicity, gender,
and religious belief are protected by the Labor Law, for workers who are
disabled or have hepatitis B or other medical ailments, a search to other
laws (that often provide even less protection) is required. Race carries
with it some question as to whether it stands alone, or de facto includes
national minorities, social origin, etc. In its reports to the United Nations,
China often discusses all three of these categories and its progress therein
under the broad category of race, yet there seems to be a scarcity of labor
disputes reported dealing with race specifically.
The scope of the coverage for protected classes also should be
clarified. For example, the Women’s Rights Law purports to protect
female applicants, while Labor Law only protects female employees.347
Disabled workers have varying rights in public and private employment,
and those with certain medical ailments may be protected differently as
civil servants than elsewhere. The individual labor contract provisions
found in the Labor Law do not expressly mandate provisions prohibiting
illegal discrimination except as to women.
Though China might consider expanding its categories of
protected classes to better fall in line with international standards, the
breadth of coverage—that is, whether to include age, health, and migrant
workers, etc.—is a discretionary matter left to the national legislature.
And legislative coverage varies widely among countries. 348 While
lawyers in China can successfully search the anti-discrimination laws and
determine protected status, it is doubtful whether average citizens or
employers can easily find access or answers to the necessary information
347 Women’s Rights Law, supra note 135, at art. 22; Labor Law, supra note 19, at art. 2.
348 CATHERINE F. HALVORSEN & DIANA C. JAQUE, KEEPING UP WITH NEW LEGAL TITLES: BELL,
MARK, ANTI-DISCRIMINATION LAW AND THE EUROPEAN UNION 2-15 (2002).
2006] CHINA’S EMPLOYMENT DISCRIMINATION 425
regarding coverage and application of these legal rights and duties, and,
more importantly, whether victims can therefore have adequate redress.349
2. “Labor Disputes” and Legislative Rights of
“Applicants”
Chinese law requires a labor dispute arising out of an employment
relationship before a remedy for discrimination can be requested from the#p#分页标题#e#
arbitration commission or the courts. 350 By definition, therefore, job
applicants are not employees and are thus excluded from meaningful
enforcement.
The courts also require the claim to arise from a labor dispute
unless otherwise authorized in accordance with law.351 There are three
anti-discrimination provisions which arguably could qualify for a court
hearing because they are “otherwise authorized.” The first comes from
the Regulation of Labor Market Management which prohibits
discrimination in recruitment, but provides only administrative penalties
without specific remedies to the victim of such a violation.352 The second
comes from the Women’s Rights Law which authorizes direct court
access in accordance with the law under Articles 48-49.353 The third is
the Disability Law, which provides for a lawsuit in court.354 The question
here is two-fold: does the phrase “in accordance with the law” require the
victim in a hiring discrimination case to first have a “labor dispute” (that
could only possibly arise from an actual employment relationship), or
does it mean the court will accept the direct appeal, thus bypassing labor
arbitration? Further, if the court allows for direct appeals, what remedies
349 In the United States, protected classes also arise from a variety of laws, but in recent years there
has been a general (but not fully inclusive) coalescence of enforcement under one national
administrative agency (the EEOC) responsible for investigation of claims under many of these laws
and for prosecution. LEWIS & NORMAN, supra note 91, at 199-252. States are permitted to pass
similar legislation that must be substantially similar or broader, but it may not undercut rights and
duties under the national law, a principle enforced under the courts. By contrast, China uses one
agency (labor bureaus) to enforce all labor disputes, including employment discrimination.
350 The People’s Supreme Court explains that arbitration committees can only take the cases
involving disputes arising from “labor relationship defined under Article 2 of Labor Law”.
Interpretation on Labor Arbitration, supra note 241, at art. 1. Labor Law defines labor relationship
as “all enterprises, individual economic organizations (hereinafter referred to as “employers”), and
workers bound up by contractual employment.” Labor Law, supra note 19, at art. 2.
351 Labor Law, supra note 19, at arts. 77 and 79.
352 Regulations on Labor Market Management, supra note 21, at arts. 34-38.
353 Women’s Rights Law, supra note 135, at arts. 48-49.
354 Law on the Protection of Disabled Persons, supra note 103, at art. 49.
426 COLUMBIA JOURNAL OF ASIAN LAW [19:2
will be granted?355 There appears to be little legal guidance on this issue#p#分页标题#e#
of justiciability.356
More specifically, China might clarify its labor laws by
legislatively extending the rights against unlawful discrimination to
include applicants, perhaps in the Labor Law or by supplementary
regulations. A second technique for clarification on this issue could be to
interpret the anti-discrimination laws to apply to individuals, which would
thereby include applicants for jobs. A third way to approach the lack of
access to remedies for applicants under anti-discrimination laws is to
clarify “labor dispute” to include applicants, even though such cases do
not arise out of an existing employment relationship.
3. Enhancing Enforcement: Remedies as Deterrent
and Incentive
Certain self-help remedies are available to workers. First, through
their trade unions, non-discrimination clauses can be negotiated into
collective contract terms. These terms can also provide for a greater
number of protected classes—including disability, health and migrant
status—than do current statutes. These contract protections create rights
that are supplemental to those within labor statutes and provide labor
rights that can be enforced by the labor arbitration commission.
Consideration could be given to creating grievance procedures
internal to the enterprise, utilizing a private third-party arbitrator (or
“outside” mediator) to expeditiously resolve claims of employment
discrimination. This method would lessen potential liabilities and bring a
355 Article 56 of Women’s Rights and Interests Protection Law mandates that perpetrator shall be
liable for “property or other damages” as a consequence of his discriminatory conduct. Women’s
Rights Law, supra note 135, at art. 56. However, the law is silent on the types, amount, and
payment of those damages. Furthermore, Article 56 allows the victim to look to other laws to
determine the amount of damages, if the situation is explicitly covered by other law or regulations.
Id. Therefore, local labor regulations or other administrative rules may be dispositive in a
discrimination case.
Under the Administrative Penalties for Violations of Labor Law, fines of ¥3,000
(US$365) may be levied for violation of enumerated women’s rights (not other areas of
employment discrimination). See Administrative Penalties for Violations of Labor Law, supra note
302, at arts 12-14. But there is no compensation for the victim, except in wage claims. Id. art. 6).
All fines are kept by the government. Id. art. 20.
356 U.S. anti-discrimination laws avoid this lack of clarity by extending protection to any
“individual,” rather than to “employees,” which protects applicants as well as former employees
who have suffered discrimination. Civil Rights Act of 1964, § 703, 42 U.S.C. § 2002e (2005). See#p#分页标题#e#
also discussion in LEWIS & NORMAN, supra note 91, at 14-17. Other labor statutes usually interpret
the law’s application to “employees” to be extended to applicants, such as in the case of employer
discrimination against an applicant because of his or her union beliefs, membership or activities
(protected under the statute). See discussion in LEWIS & NORMAN, supra note 91, at 14-17.
2006] CHINA’S EMPLOYMENT DISCRIMINATION 427
conclusion that is quicker, less expensive, and more accessible than the
use of either labor arbitration commissions or courts.357
Enforcement can be enhanced by strong legislative remedies,
which generally serves as both a deterrent to law violators and an
incentive to enforce the labor laws. As to the deterrent aspect, profitmotivated
employers naturally pay better attention to labor laws when the
possibility of large monetary liability exists. Under U.S. antidiscrimination
laws this occurs with regularity, and many corporate giants
have been held liable for millions-of-dollars in monetary penalties for
violations.358 These liabilities, coming in the form of back pay, front pay,
compensatory damages, and even punitive damages are thought to act as a
deterrent to law-violators. 359 It is assumed that a profit-motivated
employer will seek to avoid such losses through compliance with the
labor laws.
A second function of legislative remedies is to enhance
enforcement of anti-discrimination laws by providing incentives through
the remedies awarded to victims and their lawyers who prevail in the
discrimination complaint. In the United States, one such incentive is to
require the law-violator (i.e. the employer) to pay for both the court costs
and attorney fees of the prevailing party.360 American court judgments,
for example, may award all of the court costs incurred by the prevailing
party, including fees for clerks, marshals, witnesses, and filing fees.361
Absent specific statutory authorization such as that provided by antidiscrimination
labor laws, these costs do not normally include the
attorney fees of the prevailing party.362 The awarding of attorney fees
can serve two purposes. First, it enables a complainant who may be
357 Article 77 of the Labor Law permits “settlements,” as well as mediation, arbitration, and
litigation. Labor Law, supra note 19, at art. 77. In the United States, private arbitration of
collective labor contract claims is the norm; and in recent years there has been judicial acceptance
of and deferral to arbitration of certain statutory labor rights, including claims of discrimination,
where such arbitration is genuine and not burdensome on the complainant. See Gilmer v.
Interstate/Johnson Lane Corp., 500 U.S. 20 (1991).
358 A federal jury awarded a former Boeing engineer more than $2.5 million in an agediscrimination#p#分页标题#e#
lawsuit against the corporate giant of Boeing Company. The award included $1.5
million in punitive damages, $31,000 for back pay, $625,000 for pain and suffering, and $370,000
as lost salary as a test pilot. See Goico v. Boeing Co., 347 F. Supp. 2d 986 (D.Kan. 2004).
359 LEWIS & NORMAN, supra note 91, at 256-96.
360 Id. at 521-47.
361 28 U.S.C. § 1920 (2005).
362 BURNHAM, supra note 321, at 239-40. Additionally, there are court rules on offers of judgment
by plaintiffs which can promote settlement. The rule is “[I]f a party offers to settle the suit by entry
of judgment in a particular amount, the offeree rejects the offer and the result at trial is not at least
as favorable as the offer, the rejecting offeree is liable for the actual costs incurred by the offeror
after the date of the offer. Thus, if a prompt realistic offer is made early in the suit, successful
parties can recover almost all their attorney fees.” Id. at 240. The rule does not apply if the
defendant offeror prevails. Delta Air Lines v. August, 450 U.S. 346 (1981).
428 COLUMBIA JOURNAL OF ASIAN LAW [19:2
without sufficient funds to find an attorney willing to take their case, and
second, it has the effect of monetarily inducing the lawyers to serve as
“private attorneys general” in enforcing the labor laws. In the United
States, this supplements the government’s use of administrative agencies
in enforcing anti-discrimination laws, as well as the self-help methods of
private arbitration.
It has been said by some employers in China that labor laws are
irrelevant due to the unlikely prospect that employees will complain to
the authorities or that the laws will be enforced.363 Further, there is little
evidence to suggest that either the promise of remedies or the threat of
penalties enhance enforcement.364 Statutory remedies generally provide
compensatory relief with the aim of partially restoring the worker to the
economic position he or she would have been in but for the violation,365
and interest on the amount owed the worker generally is due.366 Such
situations do not effectively deter most employers, however, as they tend
to view such awards merely as a cost of doing business.
Further, labor law remedies provide little or no incentive to
promote or enhance the enforcement of the anti-discrimination
requirements. There is generally no award of attorney fees to prevailing
363 In 2004, there were only 260,000 cases in labor arbitration, and a mere 4,047 arbitration cases
were appealed and accepted by the People’s Court. Fewer yet likely involved discrimination
claims. 2004 STATISTICS, supra note 131. See also, 2004 STAT. Y.B. CHINA, supra note 195, at §
23-25.
364 For example, in an alleged workplace sexual harassment suit, the People’s Court ordered the#p#分页标题#e#
wrongdoer to pay ¥2,000 (US$243) damages for physical and emotional harm. Both parties
appealed and the case was affirmed. 四川首例性骚扰案终审施害人道歉并赔偿2000 元 [Final
Judgment of the First Sexual Harassment Case in Sichuan: the Wrongdoer Apologizes and Pays
¥2000 ], 新华网[XINHUA NEWS AGENCY], Aug. 9, 2003, http://news.xinhuanet.com/newscenter/
2003-08/09/content_1018164.htm.
365 Administrative Penalties for Violations of Labor Law, supra note 302, at arts. 12, 13, and 16.
For “repeat violators” of the Labor Law, heavier penalties are authorized (two to five times the
original amount). Id. art. 19. But there is little evidence of the use of heavier penalties.
366 Id. art. 6.
2006] CHINA’S EMPLOYMENT DISCRIMINATION 429
plaintiffs under the Chinese legal system, 367 and fees for worker
complainants must be negotiated with attorneys on an individual basis
and within regulatory fee guidelines.368 Reforms in this area would likely
require modifications of anti-discrimination legislation, attorney fee
regulations, and, possibly, in-court procedures.
Finally, it is clear that effective laws and their meaningful
enforcement still do not always bring a complete end to illegal
discrimination in the workplace. This complex problem must be dealt
with at many levels of society. But even while that war is being waged, it
is certainly comforting to the victims of discrimination to know that they
can receive some predictable measure of justice when violations of equal
employment occur.369
367 赵矗, 民工讨薪欠薪公司应支付律师费 [Zhao Chu, When Workers Collect Default Wage,
Default Employers Shall Pay the Attorney Fees], 法制早报 [MORNING LEGAL NEWS], Feb. 13,
2006, at 9, available at http://www.chinalegalnews.com.cn/legaltimes/20060213/0901.htm. In a
typical civil case, an experienced Chinese attorney will charge a contingent fee around 5%, plus the
hourly billing of ¥2000 (US$243) per hour. When the judgment is rather small, the attorney will
charge a minimum fee of ¥5000 (US$603). For details, see王媛律师服务收费标准 [Attorney
Wang Yuan’s Fee Schedule] (on file with author). Though fees for employers in labor cases are
usually based on an hourly basis, such fees for plaintiffs would clearly preclude most victims of
discrimination from obtaining legal assistance. For many attorneys that represent plaintiffs, little
remuneration is expected or paid, as the legal representation is often pro bono or practically so.
Interview with Junlu Jiang, supra note 315. In Guangzhou, the “going rate” to charge migrant
workers who can pay for legal services is about ¥3,000 per case. Interview with Qiaoyan Huang,
lawyer and faculty member, Law Clinic of Sun Yat-sen University Law School, in Guangzhou,#p#分页标题#e#
P.R.C. (June 3, 2005).
368 See Interim Regulation on Attorneys’ Fee, supra note 314; see also CHOW, supra note 341, at
236-39. The rules governing the collection of attorneys fee are covered under the recently
promulgated 律师事务所收费程序规则 [Procedures for Law Firms Collecting Attorneys Fee]
(promulgated by the Ministry of Justice, Mar. 19, 2004, effective May 1, 2004) (P.R.C.), available
at http://www.chinacourt.org/flwk/show1.php?file_id=92696.
369 As of July 2005, there is consideration being given to a draft law on Employment Promotion
which could include anti-discrimination provisions. Draft provisions could include a clarification of
“discrimination” (differentiate, exclude, favor), a broadened scope of protected classes (including
resident status, age, and marital status), an extension of rights to applicants, and provisions for
compensatory remedies for victims. Employment Promotion Law Draft, supra note 17.
Judicial Protection of Intellectual Property in China1
HE Zhonglin2
Due to historical reasons, China had no written intellectual property (IP)
statutes until the first decade of the twentieth century. However, as for a
modern IP legal system which is constantly and effectively implemented,
China has no more than thirty years’ history, much shorter than many
developed countries. In response to new policies geared towards
modernizing science and technology, developing a market economy and
attracting foreign investments, and in order to enhance the position of
intellectuals in China after the Cultural Revolution, since the early 1980s,
China has taken active and continuous measures to develop a comprehensive
IP legal framework governing trademarks, patents, copyright, etc. So far,
China has acceded to most IP-related international conventions and treaties
(including the TRIPs Agreement) and incorporated basic requirements of
these conventions and treaties into its domestic laws, and provides a quite
broad range of protection of intellectual property rights (IPRs). To accede to
the two WIPO’s Internet copyright treaties (WCT & WPPT in 1996), the
State Council, which is the central government of China, promulgated the
1 This paper is prepared for the American Bar Association (ABA) Annual Meeting in Honolulu, Hawaii, on August 4-5,
2006.
2 Mr. HE Zhonglin is a judge of the Intellectual Property Division of the Supreme People’s Court of the P.R. China.
1
Regulations on the Protection of the Right of Communication through
Information Networks, on May 29, 2006.
In a broad sense, the IP legal system comprises two major aspects. One is
the procurement of IPRs, namely, the recognition, 3 granting and
maintenance (or revocation) of IPRs. And the other is the enforcement of
IPRs, i.e., mainly dealing with infringements.#p#分页标题#e#
As far as the procurement of IPRs is concerned, it is a common practice in
the world that the central government rather than local authorities exercises
the power of granting IPRs (industrial property rights). In China, all disputes
concerning the validity of industrial property rights should initially go to the
corresponding re-examination boards, before being brought as
administrative lawsuits before a specific court - the No.1 or No.2
Intermediate People’s Court of Beijing, and may be finally concluded in the
Beijing High People’s Court which is acting as a court of appeal.
In terms of the enforcement of IPRs, unlike most jurisdictions where civil
cases are normally dealt with by courts, arbitrators and mediators, China has
set up a quite unique model by which, besides the judicial approach, IP
infringement cases can also be proactively or passively dealt with by
designated IP administrations. Such unique device is called “The Way of
Two Legs” （“两条腿走路”） which is a Chinese idiom.
3 I use "recognition of IPR" here referring to those IPRs such as copyright and neighbouring rights which generally
need not formalities of grant or registration which are generally required for acquisition of industrial property rights
such as patents, trademarks.
2
According to the relevant IP laws, the designated administrations should,
without request of the IPR owners, actively investigate and decide on
administrative punishments (imposing administrative liabilities) against
serious IP infringements including those involving piracy, counterfeiting or
with other nature which harm the public order. On the other hand, except for
copyright, the IP owners can initially choose to where they will bring an
action - court or IP administration. The IP administration has the power to
order the infringer to stop infringing act immediately. If the party concerned
is not satisfied with the decision, it may, within fifteen days from the receipt
of the notification of the order, institute legal proceedings to the court
against the IP administration, according to the Administrative Procedure
Law. However, the administration has no power of making decision on
damages, but may mediate on damages, upon the request of the parties
concerned. If the mediation does not work, the parties may lodge an
infringement civil lawsuit with the court according to the Civil Procedure
Law. The administrative and civil lawsuits can be concurrently brought to
courts.
This special model was firstly set up for patent cases in 1985 when the
Patent Law came into force. Eventually it has covered all kinds of IP case.4
Why China adopts such an approach? In China, traditionally the
administrative power could interfere deeply in civil affairs. However, the#p#分页标题#e#
initial reason for establishing such a unique device was lack of competent IP
judges to deal with patent cases when the patent system was introduced into
China in early 1980s. After twenty years development of the IP system and
4 Such solution only exists in IP civil cases rather than other civil cases. The other civil cases should generally be
brought to the courts.
3
with the improvement of judicial competence, many scholars and
practitioners have urged handing over the whole jurisdiction to the courts.
However, the latest amendments of the three IP laws (in 2000 and 2001) not
only refuse such suggestion, but extend and unify such approach to all IP
fields. The new reason has been explained as that the administrative
intervention has been proved quite effective for crackdown on piracy and
counterfeiting in a so-called "special period".
The administrative approach is commonly regarded as cost effective and less
time consuming comparing to court actions. However, it is not always the
situation and really depends on case by case. As mentioned above, the IP
administration can only decide whether there is an infringement in existence
rather than to decide the compensation simultaneously, the dispute may
therefore not be completely resolved in the same proceedings. Assuming that
the administrative decision will be appealed to the court, two contentious
procedures (civil and administrative) might process at the same time in one
or two courts, which might lead to contradictory decisions between the
administrative litigation and the civil litigation. In such situation, the parties
may have to spend much more time and costs for resolving the dispute,
comparing with directly bringing the whole case to court.
China has made great efforts in developing a more strong and transparent IP
judicial enforcement system. Courts certainly play a vital role in IP
protection and hold the power of final decision-making for all cases.
The hierarchy of the Chinese general court system consists of four tiers of
courts and the structure looks exactly like a pyramid. The Supreme People's
4
Court (SPC) is the sole highest judiciary of the state. Each provincial level
has only one High People’s Court (currently 31 high courts in total). The
Intermediate People’s Courts are set up in big cities and regions in provinces
(currently more than 300 such courts). At the lowest level of the Chinese
court system, there are more than 3000 Primary People’s Courts which are
located in each counties and districts of cities.
Generally speaking, most cases should be started the proceedings of first
instance in the primary courts. However, the cases concerning important
issues or involving a big sum of disputed property can be directly brought to
the intermediate courts. All general cases can be appealed to its#p#分页标题#e#
corresponding appellate courts, in which the judgements or decisions of the
second instance should be final. Nevertheless, after the second instance and
within the term of two years, the parties can still apply for instituting the
retrial procedure, which is, to some extent, similar to the proceedings of
certiorari in the US Federal Supreme Court.
China does not have independent Patent Court or IP Court exclusively
dealing with all patent or IP civil cases. However, within the Chinese court
system, specialized tribunals (i.e., so-called Intellectual Property Division)
handling IP cases have been established in all High People’s Courts of
provinces and most Intermediate People’s Courts in provincial capital cities
and economically advanced cities. The Intellectual Property Division of the
SPC was founded in October, 1996.
The jurisdiction of the courts over IP infringement cases is relatively
centralized and generally limited to intermediate courts. More strictly, cases
5
in relation to patent, new varieties of plant and layout-designs of integrated
circuits are limited to those experienced and specifically designated
intermediate courts.5
In China, IP judges are specialized in dealing with patent cases and other IP
cases. Generally speaking, their routine work is exclusively to try IP case
rather than to try general cases that ordinary judges do. All IP judges should
be trained in the national or provincial Judges Colleges in regular or
irregular bases. Many IP judges are not very old as the IP system in China is
also young compared with that in Western countries.
Generally speaking, the Chinese IP legal system is quite similar to the civil
law system, as a result that the Chinese modern legal system has been
essentially influenced by the Continental Law theories and legislative
models. For example, the German Patent Law has huge impact on the
Chinese Patent Law. Nevertheless, the judicial practice, to some extent,
differs from the European continental countries.
The doctrine of precedent does not exist in the Chinese judicial system.
However, under the Constitution, the SPC is authorized to interpret laws
when it is needed and the interpretations themselves are applied as laws (i.e.,
having binding force to all courts across the country). The Judicial
Interpretations have a special position in the legal framework for IP
protection. Up to the end of 2005, the SPC has issued around fifty judicial
5 Up to now, there are totally 404 intermediate courts in China and only 56 hold such jurisdiction over patent cases,
namely intermediate courts in all provincial capitals, 4 special economic zones and 18 other big cities. As for cases of
new plant varieties and layout-designs of integrated circuits, 38 and 43 intermediate courts are exclusively entitled to#p#分页标题#e#
try, respectively.
6
interpretations or opinions as to the trial of IP cases, most of which remain in
force.
At present, the SPC is drafting five new Judicial Interpretations on issues
concerning unfair competition, new varieties of plants, MTV, conflicts of
IPRs and criteria of adjudicating upon patent infringement. The former four
JI drafts have been published seeking for public comments in last November.
These four drafts should be formally promulgated in near future. The SPC
will take into account all comments and opinions for refining the drafts. Due
to many complicated technical and legal issues involved, the patent JI draft
will be conducted a further research by the SPC in this year and probably
will be issued in series.
A wider range of legal remedies for IP violations is now available, including
increased fines, statutory damages, injunctive orders and prison sentences of
up to seven years for egregious counterfeiters.
The Criminal Law provides seven kinds of IP crimes, covering acts of
counterfeiting registered trademark, patent and infringing copyright and
trade secret. In addition to the IP crimes, some other names of crime may
also be concerning IP infringements. For examples, the crime of
manufacturing and selling fake products are generally related to trademark
infringements, and many serious copyright piracy cases are punished in the
name of crime for illegal business, in which infringers can be sentenced
more than seven years imprisonment.
7
In the end of 2004, the SPC and the Supreme People’s Procuratorate jointly
issued a remarkable judicial interpretation on the matter of IP crimes to
significantly lower down the threshold of punitive sanctions. Now it is much
easier to put IP infringers in jail than before and tougher penalties for IP
crimes will be imposed. In recent years, the IP criminal cases courts
accepted and concluded increased rapidly. In 2005, the courts throughout the
country accepted total 3567 IP criminal cases of first instance, an increase of
28.36% over the previous year. In which, 524 cases related to criminal
infringing intellectual property, an increase of 35.4%, 1117 were fake
products sales cases, an increase of 16.48%, 1926 were illegal business
cases, an increase of 34.4%. The courts totally concluded 3529 IP criminal
cases in 2005, an increase of 28.28% over the previous year.
As far as IP civil actions are concerned, one special issue should be
emphasized, i.e., pre-trial provisional measures, which generally is one of
the most concerned issues by parties, in addition to preventing an alleged
infringement to continue and calculating compensation. To accord with the
Article 50 of the TRIPs Agreement, three kinds of provisional measures
were introduced into the latest amendments of the Chinese intellectual#p#分页标题#e#
property laws in 2000 and 2001, namely, preliminary injunction (also called
pre-trial cessation of infringement in Chinese, which equals to the
interlocutory injunction in the UK), pre-trial preservation of evidence
(equals to the search order or Anton Piller order in the UK) and pre-trial
preservation of property (equals to the freezing injunction or Mareva
injunction in the UK).
8
The courts pay great attentions on the adoption of provisional measures, to
timely prevent infringements and effectively protect the interests of the
rightholders. According to a statistics, since 2001 to October 2005, local
courts of the country accepted 301 preliminary injunction applications and
concluded 299 of them, the actual upholding rate reached 88.06% among
cases insisted on by the applicants; accepted 470 applications concerning
pre-trial preservation of evidence and concluded 445 of them, the actual
upholding rate reached 95.02% among cases insisted on by the applicants;
accepted 147 applications concerning pre-trial preservation of property and
concluded 142 of them, the actual upholding rate reached 96.64% among
cases insisted on by the applicants.
Notably, according to the Article 134.3 of the General Principles of Civil
Code, when hearing civil cases, in addition to imposing civil liabilities upon
infringers, the court may also take civil penalty measures, such as serving
admonitions, ordering the offender to sign a pledge of repentance, and
confiscating the property used in carrying out illegal activities and the illegal
income obtained therefrom. It may also impose fines or detentions as
stipulated by law. The SPC now encourage the local courts to apply such
civil penalty measures to serious IP infringements.
In past twenty years, IP cases received by courts are continuously and
rapidly increasing (as shown on slides). In recent years, the annual number
of IP civil cases has increased steadily by 20-30% or so. In 2005, the courts
totally accepted 16583 IP civil cases of first instance, second instance and
retrial procedure, an increase of 20.66% over the previous year; concluded
16453 of them, an increase of 29.6% over the previous year. The new cases
9
of first instance reached 13424, an increase of 26%, in which, 6096 were
copyright cases, an increase of 42.96%; 2947 were patent cases, an increase
of 15.61%; 1782 were trademark cases, an increase of 34.49%; 1303 were
unfair competition cases, a decrease of 2.1%; 636 were technology contract
cases, up 0.95%; 156 were new variety of plant cases, a decrease of 10.26%;
other intellectual property cases reached 504, up 31.59%.
The time and cost spending in litigation is the prevalent problems faced by
courts worldwide. In reality, the time and cost of IP litigation required in the
Chinese courts are relatively less than in many other countries. Statistics#p#分页标题#e#
show that most civil cases in China were concluded within statutory period6
and cases exceeding the prescribed period just cover a very small
percentage. In practice, the trials of most IP cases can be finished within 6
months in first instance and 3 months in second instance, respectively. As
for cases involving foreign factors, such as involving foreign parties or
disputed assets located outside China, there is no such time limitation
explicitly stipulated in laws. However, the courts do their best to treat those
cases same as domestic case in practice, most of them can be concluded
within a reasonable term. In this regard, compared with many countries, the
efficiency of IP litigation in China is relatively higher or at least, not very
low. It does not seem to demonstrate the story that some people complained
about the long and tedious legal proceedings in China.
One of the hot topics is patent enforcement. The trial of patent infringements
may go beyond a modest time period, since a number of defendants may
6 Under the Civil Procedure Law, PRC domestic cases at first instance should generally be concluded within 6 months
from the date of filing, but may be extended another 6 months under special circumstances. Cases at second instance
should generally be finalized within 3 months but the time limit may also be deferred under special circumstances.
10
lodge a counterclaim against the validity of the disputed patent, which may
lead to a suspension of the civil court proceedings till the invalidation claim
is concluded. The SPC has taken some measures to resolve the problem with
the issuance of Judicial Interpretations in 2001 regulating the discontinuation
of action.
Now, the Chinese people are more aware of the famous words of the US
President Abraham Lincoln, “The patent system has added the fuel of
interest to the fire of genius" (专利制度为智慧之火添加利益之油). It is
definitely impossible for innovation or creation without the IP protection.
Protection for IPR is not only the need for China to build up the international
credit and expanding the international co-operation, but more essentially, the
domestic demand to inspire with independent innovation. In January, 2006,
the Chinese President Hu Jintao called on turning China into an innovationoriented
country in 15 years at a landmark national conference on science
and technology. He urged the government to reinforce the strength of IP
protection, to improve the national IP system, to enhance the IP judicial and
administrative enforcement, to severely punish all IP infringements. This is
certainly a strong signal that China will continuously add the more powerful
fuel of legal resources to the IP protection.
The Chinese government is now making further efforts in enhancing the#p#分页标题#e#
enforcement of law and the public is more aware of the importance of IP
protection. The Nationwide Special Campaign for IP Protection was
launched by the central government in August, 2004, to crack down piracy
and counterfeiting in some areas and such a scheme will be continued in
11
future. The State Council set up a standing working organ - the National
Working Group for IP Protection - in 2004, to coordinate the various IP
administrations and to lay down annual nationwide working plan. To
fundamentally strengthen the IP system, the National Strategy of IP is under
drafting and is predicted to be issued in near future.
The SPC is also working very hard to further strengthen the judicial system
for IP protection. In early this year, the Grand Chief-Justice and President of
the SPC, Mr. Xiao Yang reaffirmed that the courts across the country must
try their best to intensify IP judicial protection. An important research
project on improvement of the judicial system for IP protection is currently
undertaken by the SPC. Many important issues are fallen into this research
project, such as, the mechanism for resolving disputes over patent and
trademark invalidation, the coordination of IP civil, administrative and
criminal procedures, the application of IP provisional measures, and the
calculation of damages for IP infringements. In November, 2005, at a
national courts conference, the SPC announced that the courts would take
steps to make a more transparent and powerful IP judicial protection. For
example, the SPC required that all IP judgements and decisions should be
fully published in time. Since 2000, all SPC’s IP judgements, decisions and
opinions can be found from the Internet. Some local courts, e.g. courts in
Beijing, Shanghai, Shandong and Guangxi, etc., have done the same thing in
past years. Remarkably, on March 10, 2006, the SPC formally set up an
unified official website, http://ipr.chinacourt.org(中国知识产权裁判文书
网), to publish all final IP judgements and decisions made by all courts at
various levels.
12
All in all, it can be foreseen that the IP protection in China will definitely be
a prosperous future.
13
DRAFT 6/23/2006
-1-
For China and Other Transitional Economies:
Competition Law Lessons Learned in 115 Years∗
Yee Wah Chin
This paper surveys some of the lessons learned in several major areas of
competition law, primarily from the perspective of the experience in the United States in
the over 115 years since the Sherman Act was enacted, and also from observations of
experiences in other jurisdictions, primarily the European Union. It reviews how the
analysis and law have evolved in seven areas: (1) the goals of competition law; (2) key
concepts in competition law; (3) analytic approach; (4) exemptions; (5) enforcement; (6)#p#分页标题#e#
remedies; and (7) language and infrastructure. Hopefully, these lessons will be helpful as
the People’s Republic of China implements an Anti-Monopoly Law, and increasing
numbers of other transitional economies embrace competition law as a component of the
legal infrastructure of a market economy.
As at least one commentator has found, “[f]ree and fair competition sounds
simple to achieve. Nothing is further from the truth: competition upsets intellectuals who
glory in the notion of state benevolence, bureaucrats who administer government
programmes, businesses that receive state favours and, in short, all those who gain,
directly or indirectly, from distortions. Competition benefits often-despised outsiders
against those who are well-connected and entrenched. It also requires the courts and
government to work honestly. The surprise may rather be that some countries became
rich than that so many are poor.”1
1. The Goals of Competition Law
When competition laws are first enacted, there is often a sense that the law should
and can help achieve several goals. These goals often include such diverse aims as the
promotion of economic efficiency and consumer welfare, the promotion of industrial
policy such as the fostering of key industries and national champions, and the promotion
of social policies such as the support of small or medium sized businesses and the
increase of employment.2
∗ This paper is adapted from a presentation at the “Seminar on Antitrust Law in Transnational M&A,”
hosted by School of Law & Competition Law Center, University of International Business & Economics;
and T&D Associates, in Beijing, China on November 20, 2005. The author is most grateful for comments
on a draft of this paper by Darrell Prescott of Baker & McKenzie, and Prof. Wang Xiaoye of the Institute of
Law, Chinese Academy of Social Sciences. All errors are, of course, solely the author’s.
1 Martin Wolf, “Tyranny of Vested Interests,” Financial Times, January 17, 2006, citing William Lewis,
“The Power of Productivity: Wealth, Poverty and the Threat to Global Stability” (University of Chicago
Press, 2004).
2 In fact, the proposed Anti-Monopoly Law expressly includes such considerations in determining whether
conduct violates the law.
DRAFT 6/23/2006
-2-
Over time, in most cases, and particularly in the case of the U.S., with its history
of competition law that is among the longest in the world, the recognition is reached that
competition law is best suited for one goal, that of promoting economic efficiency and
consumer welfare. There remains debate over whether the efficiency and welfare to be
promoted should be aggregate economic welfare that takes into consideration the welfare
of producers and not just consumers, but the fundamental premise that efficiency is the#p#分页标题#e#
goal is accepted.
In many cases, the attempts to use competition law to pursue a multitude of goals
that are often inconsistent if not conflicting, led to unsatisfactory results for all the goals.3
It became clear that it was not practical to use competition law to promote inconsistent
goals. Other values are better achieved by other laws that are dedicated to promoting
those values. For example, labor laws can promote employment and worker safety.
Sector laws can provide sector subsidies and regulations. Such dedicated laws can more
directly promote those values and make clearer the costs of pursuing these values. In that
way, societal choices and actions can be taken with greater clarity regarding the benefits
and costs involved. Society can make more informed decisions on whether, and to what
extent, to pursue these goals.
One example in the U.S. of this evolving viewpoint regarding goals is the goal of
promoting small and medium sized businesses. The Robinson-Patman Act, enacted
during the Great Depression, was intended to prevent larger businesses from gaining
advantage over smaller ones by obtaining more favorable trading terms from suppliers
because of greater buying power. After many years, the U.S. federal antitrust
enforcement agencies have concluded that this law is not core to their competition
enforcement mission and do not enforce this law.4
2. Key Concepts in Competition Law
2.a. Market
It is now generally accepted that, with a few exceptions, the impact of the
particular conduct on competition in a specific market must be considered before
concluding whether there has been a violation of the competition laws. The exceptions
3 In law, as in other areas, it may be true that, as the saying goes, to be a Jack-of-all-trades, is to be the
master of none.
4 Nonetheless, so long as the law is not repealed, private parties have the right under the law to sue for
damages suffered as a result of violations of the law, and the courts must enforce the law. This may have
contributed to the recent decision by the Supreme Court in Volvo Trucks North America, Inc. v. Reeder-
Simco GMC, Inc., No. 04-905, ___ U.S. ___ (2006) http://www.supremecourtus.gov/opinions/05pdf/04-
905.pdf http://caselaw.lp.findlaw.com/scripts/getcase.pl?court=us&vol=000&invol=04-905, which some
commentators feel was a strenuous effort by the Court to lessen the effect of the Robinson-Patman Act with
respect to protecting competitors and to reconcile the law with the other antitrust laws.
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are situations involving types of conduct which, after repeated review, are now presumed
to have anticompetitive effect that violates the law, such as agreements among
competitors on the prices to charge customers.
Therefore, a crucial part of the analysis is determining the market that is affected#p#分页标题#e#
by the challenged conduct, which requires identifying the products or services, and the
geographic areas, involved. Nonetheless, in the U.S., it was not until the mid 1900s that
there was substantial discussion in court decisions of what is a market and how to
determine the relevant market in a particular situation. In significant part, that
phenomenon may have been because many of the early cases involved conduct that we
generally, even now, presume to be violations of law, so that it was not necessary to
identify a relevant market. In other cases, there were assumptions made as to what was
the relevant market, without significant analysis.
Eventually, the Supreme Court, in cases such as Brown Shoe5 in the mid-1900s,
discussed the economic factors that must be considered in determining the relevant
market. Nonetheless, as recently as 1966, the Supreme Court accepted as a relevant
market what two dissenting justices characterized as a “strange red-haired, bearded, oneeyed
man-with-a-limp classification.”6 In that case, the Court essentially accepted the
scope of the defendant’s business to be the relevant market.
The two federal antitrust enforcement agencies began to develop guidelines that
they published to provide undertakings with some understanding of how the agencies
consider these issues. The history of these guidelines reflects the evolution of U.S.
thinking in this fundamental area of antitrust law. The Merger Guidelines is an example
of how guidelines promulgated by enforcement authorities may fill an important role in
the interpretation and implementation of antitrust statutes.
The first guidelines, issued by the Department of Justice, were published in 1968,
relating to mergers.7 It was an innovation that generated much discussion.8 Later
developments in legal and economics thinking about the competitive impact of mergers
led to the abandonment of those early Guidelines. In 1982, the Department issued new
Merger Guidelines,9 while the Federal Trade Commission issued a Statement Concerning
Horizontal Mergers.10 These 1982 Merger Guidelines reflected how the agencies’
5 Brown Shoe Co. v. U.S., 370 U.S. 294 (1962).
6 U.S. v. Grinnell Corp., 384 U.S. 563, 591 (1966) (Fortas, J., dissenting).
7 Department of Justice Merger Guidelines, 4 Trade Reg. Rep. (CCH) ¶13,101 (1968).
8 See, e.g., W. Blumenthal, “Clear Agency Guidelines: Lessons from 1982”, 68 Antitrust L.J. 5 (2000).
9 Department of Justice Merger Guidelines, 4 Trade Reg. Rep. (CCH) ¶13,102 (1982).
10 Federal Trade Commission Statement Concerning Horizontal Mergers, 4 Trade Reg. Rep. (CCH)
¶13,200 (1982).
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practices had evolved since 1968, and therefore were quite different from the 1968
Guidelines. For example, the 1982 Guidelines make no reference to conglomerate#p#分页标题#e#
mergers, while the 1968 Guidelines included a significant discussion of the Department’s
approach to such mergers. The Department in 1984 released another set of Merger
Guidelines,11 which reflected refinements of the 1982 Guidelines in light of two years’
experience. In 1992, the Department and the Commission issued Joint Horizontal Merger
Guidelines,12 that reflected the Department’s experience under the 1982 and 1984
Guidelines and the Commission’s experience under its 1982 Statement, as well as
advances in legal and economic thinking. The 1992 Guidelines did not reflect any
dramatic departure from the 1984 Guidelines. In 1997, the two agencies clarified the
1992 Horizontal Merger Guidelines with respect to the analysis of efficiencies that may
result from a merger.13 Therefore, merger review by the federal antitrust enforcement
agencies are now guided by the 1992 Guidelines along with the 1997 revisions regarding
efficiencies analysis in the context of horizontal mergers, and by the 1984 Guidelines in
the context of vertical mergers. The current enforcement approach still follows in
essential outline the analytic framework first set forth in the 1984 Merger Guidelines,
more than 20 years ago.14
These guidelines describe how the enforcers apply the economic concepts of
product and geographic market to real life situations. The crucial test is how buyers react
when prices increase. Do buyers have alternative services or products that they can buy
if prices go up, as a practical matter? If there are alternatives, then those alternatives are
in the same products/services market. Would buyers realistically go farther
geographically to obtain the same goods/services if prices rise locally? If yes, these more
distant locations are in the same geographic market as the local area.
2.b. Monopoly & Monopolistic Power
There was a similar evolution in the thinking about what is a monopoly and what
is monopolistic power. In many early cases, whether a monopoly existed was either not a
crucial factor, or it was presumed that there was a monopoly.
The most graphic example of this evolution may be the evolution of the approach
of U.S. antitrust law to intellectual property rights. The evolution in the IPR area was
11 Department of Justice Merger Guidelines, 4 Trade Reg. Rep. (CCH) ¶13,103 (1984).
12 Department of Justice & Federal Trade Commission Horizontal Merger Guidelines, 4 Trade Reg. Rep.
(CCH) ¶13,104 (1992); http://www.usdoj.gov/atr/public/guidelines/hmg.htm
13 Id.
14 In a further evolution, in March 2006 the agencies released their “Commentary on the Horizontal Merger
Guidelines 2006,” which clarified how they are actually applying the Guidelines.
http://www.usdoj.gov/atr/public/guidelines/215247.pdf The Commentary described dozens of actual#p#分页标题#e#
transactions and the agencies’ analysis of them under the Merger Guidelines.
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from presumptions to a fact-based inquiry.
For decades, the assumption was that a patent created a monopoly. This was the
assumption even in the 1970s, when the Department of Justice followed what became
known as “the 9 no-nos”.15 These “9 no-nos” were included in the principles stated in the
Antitrust Division’s 1977 Antitrust Guide for International Operations.16 The “9 no-nos”
identified nine major types of common conduct involving IPR as presumptively antitrust
violations.
In the 1980s, the Department’s view regarding the market power of intellectual
property rights evolved, and it no longer viewed the existence of IPR as a basis for
presuming the presence of market power.17 By 1988, the Department declared that it
“recognizes that intellectual property -- even a patent -- does not necessarily confer a
monopoly or market power in any relevant market.”18 This is the current view of the
U.S. antitrust enforcement authorities and most U.S. courts.19
There is the recognition that a patent is a form of personal property that does not
15 See, e.g., Bruce B. Wilson, Patent and Know-How License Agreements: Field of Use, Territorial, Price
and Quantity Restrictions, in ANTITRUST PRIMER: PATENTS, FRANCHISING, TREBLE DAMAGE
SUITS 11, 12-14 (1970); Bruce B. Wilson, Deputy Assistant Attorney General, Antitrust Division, U.S.
Department of Justice, Remarks to Joint Meeting of Antitrust Law Section and Patent Trademark &
Copyright Law Section, Michigan State Bar (Detroit, Michigan, September 21, 1972), 4 Trade Reg. Rep.
¶13,126; Bruce B. Wilson, Deputy Assistant Attorney General, Antitrust Division, U.S. Department of
Justice, Straight Talk from “Alice in Wonderland”, before the American Patent Law Association
(Washington, D.C., January 21, 1975).
16 Part II Cases D - I, 4 Trade Reg. Rep. (CCH) ¶13,110 at 20,649-4 - 20.649-12 (1977).
17 See, e.g., Ky P. Ewing, Jr., Deputy Assistant Attorney General, Antitrust Division, U.S. Department of
Justice, Patent-Antitrust Enforcement, 4 Trade Reg. Rep. (CCH) ¶13,128 at n.14 (San Francisco Patent
Law Association, Pebble Beach, California, May 5, 1979); [1969-1983 Transfer Binder] Trade Reg. Rep.
(CCH) ¶50,398 at 55,883, 55,887 at n. 34 (May 5, 1979).
18 Antitrust Enforcement Guidelines for International Operations Part I §3.6, 4 Trade Reg. Rep. ¶13,109.10
at 20,605 (1988). See also, id. at Part II Cases 6, 10, 11, 12, 4 Trade Reg. Rep. ¶¶ 13,109.85, 13,109.89,
13,109.90, 13,109.91. These 1988 Guidelines were superseded by two sets of guidelines jointly issued by
the Department of Justice and the Federal Trade Commission in 1995, one of which focused on the#p#分页标题#e#
jurisdictional issues in the agencies’ decisions regarding enforcement in the international context and the
other addressing intellectual property licenses. Antitrust Enforcement Guidelines for International
Operations, April 5, 1996 http://www.usdoj.gov/atr/public/guidelines/internat.htm ; Antitrust Guidelines for
the Licensing of Intellectual Property, April 6, 1995 http://www.usdoj.gov/atr/public/guidelines/0558.htm
The IP Guidelines reaffirmed the position set forth in the 1988 International Guidelines regarding the
nature of intellectual property.
19 As a reflection of the deliberate and evolutionary nature of the process, it was only in 2006 that the U.S.
Supreme Court expressly concluded that a patent does not create a presumption of monopoly power, so that
a tie of the patented product with another product is not automatically a violation of the antitrust laws. The
actual effect on competition must be considered. Illinois Tool Works Inc. v. Independent Ink, Inc., ___ U.S.
___ (2006) http://www.supremecourtus.gov/opinions/05pdf/04-1329.pdf.
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automatically confer market power. A patent conveys the right to exclude others from a
particular area. However, if no one else wishes to enter that area, the right to exclude
them from the area is not very powerful. In fact, most patents are never commercialized,
or, if they are, do not have much impact on the market. For example, there have been
over 1000 patents issued in the U.S. on the design of a paper clip. While the first paper
clip patent may have been quite powerful, the 1000th paper clip patent represented little
market power at all. The U.S. antitrust enforcement agencies recognized this in their
1995 Joint Antitrust Guidelines for the Licensing of Intellectual Property,20 which set
forth a fact-based approach to analyzing how various types of conduct involving IPR may
reflect market power and abuse of market power.21
This fact-based approach extends to all determinations of the existence of
monopoly or monopolist power. While in the early days, there was commonly a
presumption that a monopoly existed where there is a large market share, the approach
today in the U.S. is to take market share only as the starting point of the analysis,22 and to
consider whether there is, in fact, the ability to raise prices in the market or lower total
output.23
20 http://www.usdoj.gov/atr/public/guidelines/0558.htm
21 A similar evolution may be seen in the different generations of block exemptions that the European
Union adopted over the last 20 years regarding technology transfers. Compare, e.g., Commission Reg.
(EC) No. 240/96 of 31 January 1996 on the application of Article 85(3) of the Treaty to certain categories
of technology transfer agreements, Official Journal L. 031, 09/02/1996, P. 0002-013
http://europa.eu.int/eur-lex/lex/LexUriServ/LexUriServ.do?uri=CELEX:31996R0240:EN:HTML (no#p#分页标题#e#
longer in force); with Commission Regulation (EC) No 772/2004 of 27 April 2004 on the application of
Article 81(3) of the Treaty to categories of technology transfer agreements, Official Journal L 123,
27.04.2004, pages 11-17 http://europa.eu.int/eurlex/
pri/en/oj/dat/2004/l_123/l_12320040427en00110017.pdf; Guidelines on the application of Article 81 of
the EC Treaty to technology transfer agreements, Official Journal C 101, 27.04.2004, pages 2-42
http://europa.eu.int/eur-lex/pri/en/oj/dat/2004/c_101/c_10120040427en00020042.pdf
22 The European Union has also come to the conclusion that market share is only one factor in the analysis.
See, e.g., Neelie Kroes, “Preliminary Thoughts on Policy Review of Article 82,” Fordham Corporate Law
Institute (New York, New York, September 23, 2005) at 2-3
http://europa.eu.int/rapid/pressReleasesAction.do?reference=SPEECH/05/537&format=HTML&aged=0&l
anguage=EN&guiLanguage=en The proposed Anti-Monopoly Law appears to be ambiguous as to
whether market share is only one factor or is the dispositive factor in the analysis.
23 Neither does the U.S. recognize the concept of “shared monopoly” which is reflected in drafts of the
Anti-Monopoly Law. See, e.g., Timothy J. Muris, “Looking Forward: The Federal Trade Commission and
the Future Development of U.S. Competition Policy,” Milton Handler Annual Antitrust Review (New
York, New York, December 10, 2002) at nn. 68, 69, http://www.ftc.gov/speeches/muris/handler.htm;
Charles A. James, “Antitrust in the Early 21st Century: Core Values and Convergence,” Antitrust Policy in
the 21st Century (Brussels, Belgium, May 15, 2002), at III.B.1.a,
http://www.usdoj.gov/atr/public/speeches/11148.htm The EU concept of “collective dominance” is
considerably narrower and requires concerted action by the undertakings involved, as does the U.S. concept
of “conspiracy to monopolize.” This contrasts with the proposed Anti-Monopoly Act, which expressly
includes the concept of shared monopoly as a suspect condition.
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2.c. Abuse of Market Power
In the area of abuse of monopoly power, it was not until almost the mid 1900s
that the courts expressly said that it is not an abuse of monopoly power to sell better
products or services at prices buyers are willing to pay and to become a monopolist as a
result.24 Until then, there were prosecutions inspiring a poem that described the
prevailing antitrust rules as:
You’re gouging on your prices if
You charge more than the rest.
But it’s unfair competition if
You think you can charge less!
A second point that we would make
To help avoid confusion:
Don’t try to charge the same amount!
That would be collusion.
You must compete -- but not too much.#p#分页标题#e#
For, if you do, you see
Then the market would be yours --
And that would be monopoly!25
In contrast, the courts did earlier recognize that an individual undertaking has
more flexibility in its conduct than a group of undertakings acting in agreement, even if
the individual undertaking has market power.26 Therefore, in general, an individual
undertaking, regardless of market power, may refuse to do business with another
undertaking.27 While the Supreme Court in Aspen Skiing28 did find an antitrust violation
when a party changed long-standing practice and refused to deal with a competitor for no
reason other than to disadvantage the competitor, the “essential facilities” doctrine is one
24 U.S. v. Grinnell Corp., 384 U.S. 563, 571 (1966) (not abuse of dominant market position if it is the result
of “a superior product, business acumen, or historic accident.”).
25 R.W. Grant, Tom Smith and His Incredible Bread Machine 32-37 (Competitive Enter. Inst. 1998) (1964);
R.W. Grant, The Incredible Bread Machine: A Study of Capitalism, Freedom, & the State (2d Rev. Ed. Fox
& Wilkes 1999) (Mr. Smith invented a machine that would bake, slice, and wrap bread for under a penny,
and enabled him to dominate the bread business). Some
provisions of the proposed Anti-Monopoly Law would suggest that such an approach to competitive
conduct may be adopted, leading the enforcement authority to become a price regulator instead of a
promoter of competition.
26 Compare U.S. v. Colgate & Co., 250 U.S. 300 (1919), with Klor’s v. Broadway-Hale Stores, 359 U.S.
207 (1959). Therefore, unlike under the proposed Anti-Monopoly Law, individual undertakings are free to
charge any price regardless of their market power under U.S. competition law.
27 U.S. v. Colgate & Co., 250 U.S. 300 (1919).
28 Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985).
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the U.S. has come to view with some skepticism.29 Even in standards development
contexts, where a participant in the development process holding intellectual property
essential to the standard that is developed is generally required under the rules of the
standards development group to fully disclose that fact and agree to license the IP on
reasonable and non-discriminatory terms to those who wishes to comply with the
standard, a non-participant in the standard development process holding IP essential to
the standard is not under any obligation to license its IP to enable compliance with the
standard. On the other hand, a group of competitors may not agree not to do business
with another undertaking or group of undertakings.30
This is an area of great ferment in the U.S. The question of how to determine
when abuse of market power has occurred, is one that is the subject of much debate in#p#分页标题#e#
both the U.S. and EU. Different tests have been proposed, such as profit sacrifice, lack of
economic rationale (other than to disadvantage a competitor), less restrictive alternatives
than the challenged conduct and a balancing of the pro- and anti-competitive effects of
the conduct. No consensus has been reached, except perhaps a sense that the current state
of affairs is less than satisfactory. The Antitrust Modernization Commission has included
exclusionary conduct as one of its topics of study, and the European Commission has
recently released its Green Paper on Article 82 relating to abuse of dominant market
position. On June 20, 2006, the Antitrust Division and the Federal Trade Commission
opened hearings on Single-Firm Conduct and Antitrust Law, which will hear testimony
from leading scholars and practitioners.31
2.d. Anticompetitive Agreements
In earlier years, there was often no significant difference in the antitrust rules
applied to agreements between competitors and agreements between sellers and buyers.
Thus, it was (and is) illegal for competitors to agree on their sales prices to third parties
or to divide among themselves groups of customers or geographic areas,32 and it was also
29 Verizon Communications Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 408 (2004). This
may be contrasted with the proposed Anti-Monopoly Law, at least some drafts of which include provisions
that indicate adoption of the essential facilities doctrine.
30 Klor’s, Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207 (1959).
31 See, Thomas O. Barnett, Assistant Attorney General, Antitrust Division, “The Gales of Creative
Destruction: The Need for Clear and Objective Standards for Enforcing Section 2 of the Sherman Act”,
Opening Remarks for the Antitrust Division and Federal Trade Commission Hearings Regarding Section 2
of the Sherman Act (Washington, D.C., June 20, 2006)
http://www.usdoj.gov/atr/public/speeches/216738.pdf
http://ftc.gov/os/sectiontwohearings/docs/BarnettPPTSection2ShermanAct.pdf
http://ftc.gov/os/sectiontwohearings/index.htm
http://www.usdoj.gov/atr/public/hearings/single_firm/sfchearing.htm
32 See, e.g., Palmer v. BRG of Georgia, Inc., 498 U.S. 46 (1990) (pre curiam); Arizona v. Maricopa County
Medical Society, 457 U.S. 332 (1982); Catalano, Inc. v. Target Sales, Inc., 446 U.S. 643 (1980) (per
curiam); U.S. v. Sealy, Inc., 388 U.S. 350 (1967); U.S. v. Topco Associates, 405 U.S. 596 (1972); Timken
Roller Bearing Co. v. U.S., 341 U.S. 593 (1951); Kiefer-Stewart Co. v. Joseph E. Seagram & Sons, 340
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illegal for a seller to agree with its buyers what the buyers’ resale prices to third parties
will be or to agree on where buyers may resell the products purchased from the seller.33
It was not until 1977, in the GTE Sylvania34 case, that the U.S. Supreme Court#p#分页标题#e#
differentiated clearly between horizontal agreements (or agreements among competitors)
and vertical agreements (or agreements between sellers and buyers) to the extent of ruling
that, except for agreements relating to resale prices, vertical agreements will be
considered under the rule of reason. In the areas of vertical agreements on resale prices,
the government actually brought a criminal prosecution in the 1980s.35 It was not until
1997 that the Supreme Court concluded that agreements on maximum resale prices would
be judged under the rule of reason while minimum resale price agreements between
sellers and buyers remain subject to the per se rule.36
In the area of concentrations, there was concern that big concentrations, simply by
involving undertakings that are large, are anticompetitive. Therefore, there was concern
over conglomerate mergers, which involved undertakings that were not competitors or
actual or potential competitors, and not in seller-buyer relationships, but were very large.
These concerns were reflected in the first set of Merger Guidelines issued by the
Department of Justice in 1968, which contained an entire section addressing
conglomerate mergers.37 Since then, there has been recognition that size alone is not an
indicator of likelihood of anticompetitive impact. In fact, the current set of Merger
Guidelines does not refer to absolute size at all, but only to relative shares of a relevant
market.38 Conglomerate mergers are not mentioned in these Guidelines. In contrast,
small transactions that may have anticompetitive effect in a relevant market may violate
the U.S. antitrust laws.39
U.S. 211 (1951); FTC v. Cement Institute, 333 U.S. 683 (1948); U.S. v. Socony-Vacuum Oil, Co., 310 U.S.
150 (1940); Sugar Institute v. U.S., 297 U.S. 553 (1936); U.S. v. Trenton Potteries Co., 273 U.S. 392
(1927); Addyston Pipe & Steel Co. v. U.S., 175 U.S. 211 (1899).
33 See, e.g., Business Electronics Corp. v. Sharp Electronics Corp., 485 U.S. 717 (1988); Dr. Miles Medical
Co. v. John D. Park & Sons, Co., 220 U.S. 373 (1911); Albrecht v. Herald Co., 390 U.S. 145 (1968); U.S.
v. Arnold, Schwinn & Co., 388 U.S. 365 (1967).
34 Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36 (1977).
35 U.S. v. Cuisinarts, Inc., 1981-1 Trade Cas. (CCH) ¶63,979 (D. Conn. 1981) (consent decree).
36 State Oil Co. v. Khan, 522 U.S. 3 (1997).
37 Department of Justice Merger Guidelines Part III, 4 Trade Reg. Rep. (CCH) ¶13,101 at 20,526 - 20,528.
38 Department of Justice & Federal Trade Commission Horizontal Merger Guidelines §1, 4 Trade Reg. Rep.
(CCH) ¶13,104 at 20,571 - 20,573-6 (1992); http://www.usdoj.gov/atr/public/guidelines/hmg.htm
39 One recent example of how market analysis by the U.S. enforcement agencies is not guided by absolute
size is the case of In the Matter of Teva Pharmaceutical Industries Ltd. and IVAX Corporation, FTC File#p#分页标题#e#
No. 0521-0214 (2006), http://www.ftc.gov/os/caselist/0510214/0510214.htm, in which the Federal Trade
Commission reached a consent agreement to approve Teva’s acquisition of IVAX, on condition of
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3. Analytic Approach
The U.S. antitrust statutes -- Sherman Act, Clayton Act, Robinson-Patman Act,
Federal Trade Commission Act -- primarily set forth general principles. The courts and
enforcement agencies have developed the specifics in light of evolving economic
conditions and analytic capability. This system has allowed for greater flexibility and
nuance in the evolution and enforcement of the law, because the courts and enforcers
often can react to developments in the economy and analysis more quickly and in ways
more tailored to the specific situation than a legislature can.
Section 1 of the Sherman Act, 15 U.S.C. §1,40 is a blanket prohibition against
contract, combinations and conspiracies in restraint of trade, and sets out criminal
sanctions. In the early days, the enforcement approach was straightforward; most cases
were per se cases, without regard to actual market effects of the conduct involved. It was
not until the Supreme Court’s 1911 decision in Standard Oil Co. of New Jersey v. U.S.,41
over 20 years after the passage of the Sherman Act, that it became clear that only
“unreasonable” restraints on trade are prohibited. And it was not until several years later,
in Chicago Board of Trade v. U.S.,42 that the Supreme Court articulated the general
approach in a rule of reason analysis. From those beginnings, fact-specific analysis
evolved, where the actual effects of conduct on competition in a market must be
considered. The present approach is that only a small group of activity is presumed to be
“unreasonable” and that all other types of activities will be found to be unreasonable and
a violation of the antitrust laws only if they are found to be unreasonable under the
specific facts.
This evolution of a complex and detailed body of law from statutes of very
general nature exemplifies the common law approach of evolving law on a case-by-case
basis from general principles. Nonetheless, in the competition law area, civil law might
be able to approximate the common law approach. Article 81(1) of the European
divestitures in 15 markets, including the market for nicardipine hydrochloride capsules that has annual sales
of $674,000. Analysis of Agreement Containing Consent Orders to Aid Public Comment In the Matter of
Teva Pharmaceutical Industries Ltd. and IVAX Corporation at 3;
http://www.ftc.gov/os/caselist/0510214/0510214analysis.pdf This should be distinguished from the U.S.
premerger notification requirement, which establishes absolute size criteria for notification. That is
because such objective criteria make the notification regime easier to administer. Undertakings can easily#p#分页标题#e#
determine by such objective criteria when they must notify. Whether a transaction must be notified in the
U.S. is irrelevant to whether it may be investigated and found to be a violation of the antitrust laws.
40 http://www.law.cornell.edu/uscode/html/uscode15/usc_sec_15_00000001----000-.html
41 221 U.S. 1 (1911).
42 246 U.S. 231, 238 (1918),
http://caselaw.lp.findlaw.com/scripts/getcase.pl?navby=case&court=us&vol=246&page=231
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Community Treaty43 sets forth the general prohibition against “all agreements…which
have as their object or effect the prevention, restriction or distortion of competition within
the common market,” including five broad categories of such agreements. Article 81(3)
provides for exemptions to that sweeping prohibition. The EU has evolved its block
exemptions to converge towards the rule of reason, by providing in the latest generation
of block exemptions that only certain activities will be presumed “unreasonable” and
therefore prohibited (the “black” list), while all other activity will be either always
exempt from the prohibitions of Article 81(1) (the “white” list) or will be exempt under
certain fact-specific circumstances (the “gray” list).44 The EU provides guidance, both in
the block exemption and in guidelines,45 as to how “gray” list situations will be analyzed.
The earlier block exemptions, which were formalistic, may have been greater straitjackets
on business conduct and had a chilling effect on enterprise.
The lessons learned overall regarding the analytic approach to competition law
enforcement are that it is both possible and more flexible, in terms of the development of
both enforcement approaches and business conduct, to have only a general statement of
principles, with few presumptions of illegality, and to analyze everything outside the
presumptions under the general principles, by methods that the enforcement authority
develops over time with experience of business situations and practices, and in reaction to
changing conditions and developing economic analysis.
3.a. Facts v. Rules
The evolution toward the predominantly rule of reason approach means moving
away from a reliance on presumptions and rules and towards analyses of the specific facts
in the situation. This has led to increasing use of economic analysis and therefore to
consideration of the efficiency aspects of business conduct. The discussion has advanced
in many cases to debates over which types of efficiencies are the important ones and how
they should be considered.
Another result is increasing recognition that the analysis should be a dynamic one,
not a static one. This was made clear by the Supreme Court in 1974 in the General
Dynamics46 case, in which the Court found that it is not enough to consider market shares#p#分页标题#e#
today; we need to consider whether these market shares reflect actual market power or
likely market power in the future. In General Dynamics, market shares, which reflect
43 http://europa.eu.int/comm/competition/legislation/treaties/ec/art81_en.html
44 See, e.g., Commission Regulation (EC) No. 772/2004 on the Application of Article 81(3) of the Treaty to
Categories of Technology Transfer Agreements (“TTBER”),
http://europa.eu.int/comm/competition/legislation/treaties/ec/art81_en.html
45 Id.; Guidelines on the Application of Article 81 of the Treaty to Technology Transfer Agreements
(“TTBER Guidelines”), http://europa.eu.int/comm/competition/legislation/treaties/ec/art81_en.html
46 U.S. v. General Dynamics Corp., 415 U.S. 486 (1974).
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current revenues, did not reflect actual future market power, because the defendant’s
reserves indicated that in the future it would not be able to sell as much product as before.
4. Exemptions
The U.S. accumulated many exemptions to its antitrust laws. Exemptions are one
area of U.S. antitrust law which may be most burdened by history. Each exemption, or
each type of exemption, arose in different contexts. Many were created when antitrust
and the economy were viewed differently than they are today. Once created, exemptions
are difficult to change or repeal. This is one area where new competition law regimes,
starting with a cleaner slate, may leapfrog over the errors of established competition law
regimes.
4.a. Statutory and Judicially Created Exemptions
The industry or sector exemptions created by statute often resulted from the belief
that competition is not beneficial in that particular area or that antitrust law is not the best
method to promote competition there, and that regulation may be more effective in
achieving efficiency in that context. Thus, there are statutory exemptions for insurance,47
baseball,48 newspapers,49 agriculture,50 fishing,51 and transportation.52 The experience
has been that, once an exemption has been created, it either creates or perpetuates special
constituencies with strong vested interests in the exemption’s continuing existence.53
Nonetheless, over the years, often over great opposition by those benefiting from the
exemptions, the number of sectoral exemptions has decreased, or their scope greatly
curtailed, especially as sectors are de-regulated. Two prominent examples are the
47 McCarran-Ferguson Act, 15 U.S.C. §§ 1011-15.
48 Curt Flood Act, Pub. L. No. 105-297, §2, 112 Stat. 2824 (1998). See also, e.g., Fed. Baseball Club of
Baltimore, Inc. v. Nat’l League of Prof’l Baseball Clubs, 259 U.S. 200 (1922); Toolson v. New York
Yankees, Inc., 346 U.S. 356 (1953); Flood v. Kuhn, 407 U.S. 258 (1972).
49 Newspaper Preservation Act, 15 U.S.C. §§ 1801-04.#p#分页标题#e#
50 Capper-Volstead Act, 7 U.S.C. §§ 291-92; non-profit agricultural cooperatives exemption, 15 U.S.C.
§17; Agricultural Marketing Agreement Act, 7 U.S.C. §§ 608b, 608c.
51 Fishermen’s Collective Marketing Act, 15 U.S.C. §§ 512-22.
52 Shipping Act, 46 U.S.C. App. §§ 1701 et seq.; airline flight schedule exemption, 49 U.S.C. §40129; air
transportation exemption, 49 U.S.C. §§ 41308-09; motor transportation exemption, 49 U.S.C. §13703;
railroad transportation exemption, 49 U.S.C. §10706.
53 One reflection of this phenomenon is the comments that have been submitted to the Antitrust
Modernization Commission. The AMC, tasked with the mission of studying what changes should be made
in the U.S. law, invited comments from the public on 11 topics. Most topics received less than 15
comments. Over 50 comments were submitted on the topic of exemptions and immunities, many from
specific industry groups defending a particular industry exemption.
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dissolutions of the Civil Aeronautics Board beginning in 198154 and the Interstate
Commerce Commission in 1995,55 concomitant with the deregulation of the airline and
trucking businesses.
Conduct exemptions developed from the view that certain types of conduct should
not be considered anticompetitive. A major example is the statutory and judicially
created exemptions for certain types of collective bargaining and other activities by labor
unions.56 Other conduct exemptions include the Webb-Pomerene Act,57 the Export
Trading Company Act,58 National Cooperative Research & Production Act,59 the
Standard Setting Development Organization Act,60 and the Small Business Act.61
4.b. Constitutionally Based Exemptions
One exemption that may be distinctive to the U.S. is the state action doctrine,
which is based on the federal system of the U.S. and the residual sovereignty of the
states.62 This exemption excludes from the U.S. antitrust laws conduct in areas in which
a state has acted to limit competition or to enable a lack of competition, and in which the
state actively monitors competitive activity.63 In addition, under the Local Government
Antitrust Act of 1984,64 local governments have immunity from lawsuits for damages,
but no immunity from lawsuits for injunctive relief and attorneys’ fees for successful
plaintiffs, if state governments enact statutes authorizing the local governmental units to
act in a particular area.65 States have taken advantage of the state action doctrine,
54 Public Law 95-504.
55 Public Law No. 104-88, Title 1, § 102(a), 109 Stat. 807 (1995).
56 15 U.S.C. §17; 29 U.S.C. §§ 52, 101-110, 113-115; Connell Construction Co. v. Plumbers &
Steamfitters, 421 U.S. 616 (1975).
57 15 U.S.C. §§ 61-66.#p#分页标题#e#
58 15 U.S.C. §§ 4001-21.
59 15 U.S.C. §§ 4301-06.
60 15 U.S.C. §§ 4301-05, 4301 note.
61 15 U.S.C. §§ 638(d), 640.
62 Parker v. Brown, 317 U.S. 341, 351 (1943); Cantor v. Detroit Edison Co., 428 U.S. 579 (1976).
63 California Liquor Dealers v. Midcal Aluminum, 445 U.S. 97, 105 (1980); Southern Motor Carriers Rate
Conference, Inc. v. United States, 471 U.S. 48 (1985).
64 15 U.S.C. §§ 34-36.
65 See also, Town of Hallie v. City of Eau Claire, 471 U.S. 34 (1985); City of Columbia v. Omni Outdoor
Advertising, Inc., 499 U.S. 365 (1991).
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sometimes from a misunderstanding of competition in a marketplace or from a belief that
certain industries or constituencies should not be subject to competition.66
One important limit on the state action doctrine is the counterbalancing
prohibition in the U.S. Constitution against states imposing burdens on interstate
commerce, or seeking to advantage local businesses at the expense of out-of-state
competitors.67 Therefore, even though states, and local authorities under express
permission from the states, may limit competition if they actively monitor the activity,
they cannot engage in local protectionism.68
Another major exemption that is based on the constitutional structure of the U.S.
is the Noerr-Pennington doctrine,69 which is based on the First Amendment right of free
66 For example, under the exemptions granted by Congress in the 1937 Miller-Tydings Amendment to the
Sherman Act and the 1952 McGuire Amendment to the FTC Act, 46 states enacted laws that enforced
minimum resale price agreements, both between the parties and against third parties. These laws were
effective until Congress repealed this “fair trade” exemption with the enactment of the Consumer Goods
Pricing Act of 1975, Pub L. No. 94-145, 89 Stat. 801.
67 “Congress shall have power…to regulate commerce with foreign nations, and among the several states.”
U.S. Constitution, Art. I, §8. The Supreme Court has interpreted this Commerce Clause of the Constitution
to prohibit individual states from regulating commerce with other states, and imposing burdens on nonlocal
undertakings that local undertakings do not have. Willson v. Black Bird Creek Marsh Co., 27 U.S. (2
Pet.) 245, 252 (1829); Cooley v. Board of Wardens of Port of Philadelphia, 53 U.S. (12 How.) 299 (1851);
Reading Railroad v. Pennsylvania, 82 U.S. (15 Wall.) 232 (1873); Seaboard Air Line Ry. v. Blackwell, 244
U.S. 310 (1917); South Carolina State Highway Dept v. Barnwell Bros., 303 U.S. 177 (1938); Baldwin v.
J.E. Dilworth Co., 322 U.S. 327 (1944); H.P. Hood & Sons v. DuMond, 336 U.S. 525 (1949); Dean Milk v.
City of Madison, 340 U.S. 349 (1951); Polar Ice Cream & Creamery Co. v. Andrews, 375 U.S. 361 (1964);#p#分页标题#e#
Pike v. Bruce Church, 397 U.S. 137 (1970); Associated Indus. of Missouri v. Lohman, 511 U.S. 641 (1994);
Fulton Corp. v. Faulkner, 516 U.S. 325 (1996); Camps Newfound/Owatonna v. Town of Harrison, 520
U.S. 564 (1997); South Central Bell Tel. Co. v. Alabama, 526 U.S. 160 (1999). In addition, the
Constitution also states that “no state shall, without the consent of the Congress, lay any imposts or duties
on imports or exports…and the net produce of all duties and imposts, laid by any state on imports or
exports, shall be for the use of the Treasury of the United States; and all such laws shall be subject to the
revision and control of the Congress…” Art. I, §10. Furthermore, the Constitution provides that “the
citizens of each State shall be entitled to all privileges and immunities of citizens in the several States.”
Art. IV, §2. Other clauses of the Constitution have also been invoked to defeat state action that fostered
anti-competitive activities or effects. For example, the First Amendment right of free speech has been held
to prohibit certain types of regulations that inhibited competition. See, e.g., Virginia State Board of
Pharmacy v. Virginia Citizens Consumer Council, 412 U.S. 748 (1976); Bates v. State Bar of Arizona, 433
U.S. 350 (1977); Board of Trustees of State University of New York v. Fox, 492 U.S. 469 (1989). Similarly,
the Due Process and Equal Protection clauses of the Fourteenth Amendment have been applied to limit
state action that was anticompetitive. See, e.g., Gibson v. Berryhill, 411 U.S. 564 (1973).
68 These Constitutional limitations against local protectionism were specifically established as a result of
the rampant local protectionism that proliferated among the original 13 states under the Articles of
Confederation that preceded the Constitution, to ensure the development of an integrated national economy.
H.P. Hood & Sons v. DuMond, 336 U.S. 525 (1949). The prohibitions against administrative monopolies,
which were included in some drafts of the proposed Anti-Monopoly Law, would serve the same salutary
purpose of promoting an integrated national economy under China’s unitary political system.
69 Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961); United Mine
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speech and to petition. That doctrine protects lobbying or litigation conducted to achieve
a competitive advantage. In the case of litigation, the conduct is protected unless the
lawsuit is sham, and brought with the goal of using the process of litigation to gain a
competitive advantage, regardless of the outcome of the lawsuit.
4.c. Lessons Learned
The experience in the U.S. with exemptions indicates that they generally not only
protect a sector or class of conduct from the antitrust laws, they also tend to freeze in#p#分页标题#e#
place the development of antitrust analysis in that area. Even when only certain activity
is exempt, the exemption may facilitate activity that is not exempt and make it more
difficult to prove the presence of the non-exempt activity that violates the law.
Therefore, it is desirable to have as few exemptions as possible, to create fewer
opportunities for distortions of the market and losses in allocative efficiency.
Exemptions should not be justified on the grounds that they are needed to foster
competition in a sector or that competition should be avoided in a sector. The goal of
competition law is to foster competition; exemptions to competition laws are contrary to
that goal. There may be situations where competition may conflict with other, more
important values. Such important values include national security, free speech and the
federal system under which the U.S. was founded. In those situations, competition may
be limited to accommodate these other values, but not because competition is not
desirable in a sector.
In creating exemptions, there should be consideration of the costs and benefits.
The loss of consumer welfare and allocative efficiency that may result from an exemption
should be weighed against the extent that the value that is to be promoted by the
exemption will gain. An exemption should be narrowly drawn, and not provide blanket
protection. It should be the most limited exemption that can achieve the benefit sought.
Therefore, an exemption should not provide blanket protection from liability, but merely
limit the remedies available to injured parties. Finally, the conduct that is exempt should
be subject to competition authority oversight to further ensure that the exemption is not
abused.
To ensure that exemptions do not outlive their usefulness, and impose costs
greater than benefits, the legislation creating them should include a “sunset” clause, to
provide that the exemption will expire after a specified period unless it is expressly
renewed. This will create the opportunity for periodic review of the continuing need for
an exemption in light of changed circumstances. Even for such fundamental sectors as
agriculture, it is still wise to include in any exemption for activities in the sector a
requirement for periodic review before continuation of the exemption. Especially where
Workers v. Pennington, 381 U.S. 657 (1965); California Motor Transport Co. v. Trucking Unlimited, 404
U.S. 508 (1972); City of Columbus v. Omni Outdoor Advertising, Inc., 499 U.S. 365 (1991); Professional
Real Estate Investors, Inc. v. Columbia Pictures Industries, 508 U.S. 49 (1993).
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the economy is undergoing fundamental changes, what may seem helpful at one stage of
economic evolution may become a burden at another stage.
In the U.S., the more recent statutory exemptions have reflected some of the#p#分页标题#e#
lessons learned. They are far more narrowly drafted than earlier exemptions, and provide
less protection from the antitrust laws. For example, the exemption for standards
development organizations70 protects the organizations, but not their members. At least
one exemption, that for activities relating to providing financial assistance to university
students, has a sunset provision.71 These later exemptions generally protect only
指导essay activities that are subject to the rule of reason, that often create efficiencies. They
generally provide only that, if the activity is structured in certain ways, and is notified to
the enforcement authorities, then, even if it is found eventually to have an actual anticompetitive
effect, plaintiffs may recover only single damages, not treble damages. Even
long-standing exemptions have been narrowed over time as the sense developed that the
original rationales for them are no longer valid. For example, amendments to the
Shipping Act have successively limited the exemption granted to shipping cartels and
have provided more scope for competitive and less for collusive activity.72
With the existence of sectoral regulation, and under the federal system in which
states may restrict competition, the federal competition authorities found that an
important part of their mission was to advocate competition principles to states and other
governmental authorities. With authorization and budgets provided by Congress, the
federal competition authorities have regularly provided input to other federal agencies
and state legislatures and regulatory agencies regarding the competition implications of
proposed actions. This has been most common in recent years in areas such as real estate
brokerage, title insurance, and the practice of law and medicine, where legal licensing
and other requirements are often used as means to disadvantage potential competitors.
5. Enforcement
5.a. Federal Enforcement
Since its establishment in 1914, the Federal Trade Commission has shared
concurrent jurisdiction with the Department of Justice over antitrust enforcement. In
addition, in certain sectors, such as telecommunications, financial services and
transportation, sectoral regulators share or have primary jurisdiction over antitrust
enforcement.
The concurrent jurisdiction of the FTC and the DOJ has been generally effective.
70 15 U.S.C. §§ 4301-05, 4301 note.
71 Need-Based Educational Aid Act, 15 U.S.C. § 1 note.
72 46 U.S.C. app. §§ 1701 et seq.
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Nonetheless, it is doubtful that such an enforcement structure would have been created if
the U.S. were to start anew. There are costs in simply coordinating between the two
agencies, to avoid costly duplication of efforts. The most prominent and continuing#p#分页标题#e#
example is in the area of merger control. The two agencies have developed a “clearance”
process under which they determine which of them will exercise jurisdiction to review a
transaction. That process itself of course entails cost. Moreover, occasionally the
clearance process is derailed by a dispute between the two agencies over which of them
will exercise jurisdiction. On those occasions, the dispute may not be resolved until very
late in the 30-day initial waiting period of the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, which leaves the investigating agency little choice but to issue a “second
request,” a request for additional information, in order to extend the waiting period and
obtain time to review the transaction, unless the parties withdraw their notifications and
re-file them to re-start the waiting period. Such a situation imposes costs on the
government and the parties that are unrelated to the merits of the transaction being
investigated and is not an efficient use of resources. In addition, even where there is no
dispute over which agency will exercise jurisdiction, the fact that each agency follows
different procedures that may result in different standards being applied means that the
outcome for a particular matter may vary depending on which agency is the investigating
entity.
From the experience with overlapping jurisdiction with sectoral regulators, we
learn the importance of having a clear hierarchy of laws in such contexts. These issues
are similar to those arising in the interaction between competition and intellectual
property rights laws.
5.b. State Enforcement
The states also have jurisdiction over competition matters, under both the federal
antitrust laws and the states’ own antitrust laws. Under the federal laws, states may seek
injunctive relief against violations and damages for injuries suffered as the result of
violations of federal antitrust laws, both in their proprietary capacity as market
participants and on behalf of consumers within their jurisdiction. The ability of the states
to enact their own competition laws stems from the U.S.’s federal system. The state laws
also provide a range of remedies and penalties.
These overlapping layers of jurisdiction present opportunities for complications in
enforcement. The prosecution and settlement of antitrust claims by the federal
government and several states against Microsoft73 is an example of some of the
complexities arising from this system. Another recent example is the treatment of the
combination of Federated Department Stores and May Department Stores, two large
73 U.S. v. Microsoft Corp., 253 F.3d 34 (D.C. Cir), cert. denied, 534 U.S. 952 (2001); U.S. v. Microsoft
Corp., 2002-2 Trade Cas. (CCH) ¶73,860 (D.D.C. 2002); State of New York v. Microsoft Corp., 2002-2#p#分页标题#e#
Trade Cas. (CCH) ¶73,854 (D.D.C. 2002); Commonwealth of Massachusetts v. Microsoft Corp., 373 F.3d
1199 (D.D. Cir. 2004).
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department store chains.74 The federal government investigated and found no
competition issues while several states required divestitures.
There are significant added costs, delay and duplicated effort in such overlapping
jurisdiction. This added burden may not result in greater furtherance of competition
policy goals, such as increased competition in a marketplace. While the federal agencies
have on rare occasions been accused of acting for political and not competition policy
reasons, it is more common for states to act under the antitrust laws to pursue goals that
are not competition goals. Federal enforcement has largely focused on market power and
consumer welfare, while the states frequently consider other goals, including the
fostering of small businesses. For example, in the case of Pennsylvania v. Russell Stover
Candies,75 the Commonwealth of Pennsylvania challenged the acquisition of a chocolate
company. The court found that there was insufficient evidence that the transaction would
result in higher chocolate prices for Pennsylvania consumers or local chocolatiers going
out of business.76 Nonetheless, the Pennsylvania attorney general obtained a settlement
in which the parties paid $45,000, of which $25,000 was to be dedicated to displaced
workers, $10,000 to fund business development near the chocolate plant that was bought,
and $10,000 to support state antitrust enforcement.77 The clear motivation for the state’s
action was to protect jobs, more than competition or consumer welfare.78
5.c. Private Enforcement
Private enforcement has been and continues to be a major factor in the U.S.
competition law regime. Private parties injured by an antitrust violation may seek
injunctions against the violation, and generally treble the damages caused by the
violation. There have been concerns over the burden of treble damages and the
proliferation of class action lawsuits. Often the cost of defending against such actions is
74 Federated Department Stores, Inc./May Dept. Stores Co., FTC File No. 051-0111 (August 30, 2005)
(statement of the Commission) http://www.ftc.gov/os/caselist/0510001/050830stmt0510001.pdf ; Press
Release, Cal. Attorney General (August 30, 2005) http://www.ag.ca.gov/newsalerts/release.php?id=1209;
Pres Release, Mass. Attorney General (August 30, 2005)
http://www.ago.state.ma.us/sp.cfm?pageid=986&id=1466 ; Press Release, N.Y. Attorney General (August
30, 2005) http://www.oag.state.ny.us/press//2005/aug/aug30b_05.html
75 1993-1 Trade Cas. (CCH) ¶70.224 (E.D. Pa. 1993).
76 Id. at 70,090-91.
77 Id. (settlement agreement filed April 15, 1993)
78 It is perhaps a reflection of how the lessons of mixing goals are not uniformly learned, that many states in#p#分页标题#e#
the U.S., which under the federal system retain residual sovereignty and therefore have enacted their own
competition laws and have established independent enforcement authorities, still view the goals of
competition law to encompass a variety of values, including the protection of employment and of
opportunities of small and regional businesses to survive. See, e.g., Me. Rev. Stat. Ann. Tit. 10, §1176
(automobile retail dealers); Wis. Stat. §110.30 (below cost pricing; gas, cigarettes, liquor, wine industries);
Ca. Bus. & Prof. Code, § 17200 et seq. (discriminatory treatment).
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so great that, regardless of the merits, defendants settle.79 The Class Action Fairness Act
of 200580 was enacted to decrease the opportunities for plaintiffs to impose burdens on
defendants that are disproportionate to the claims, by requiring many claims that may
otherwise be brought in different states simultaneously, to be brought in one federal
court.
Over the years, U.S. courts developed criteria that limited the types of parties that
may bring lawsuits to recover damages under the antitrust laws. As a result, only those
plaintiffs who are directly harmed by the anti-competitive effects of defendants’ conduct
may recover damages. Moreover, the more recent statutory exemptions, that generally
apply only to conduct judged under the rule of reason that often creates efficiencies, limit
antitrust exposure to single, not treble, damages.
Nonetheless, regardless of how relief may be limited under federal antitrust law,
the states can, and do counteract those limitations by enacting state statutes that enable
plaintiffs to recover in situations where they could not recover under federal law. A
major example of such state laws is the “Illinois Brick repealer” statutes that were
enacted to bypass the Supreme Court’s ruling in Illinois Brick Co. v. Illinois,81 that, in
price fixing cases, only the direct purchaser from the alleged antitrust violator may
recover damages. The Illinois Brick repealers granted indirect purchasers the right to
seek damages under state antitrust laws.82 However, the Class Action Fairness Act
requires many of these cases to be brought in federal court, so that the Supreme Court’s
goal in Illinois Brick of barring such indirect purchaser claims from the federal courts has
been circumvented.
6. Remedies
Although the Sherman Act provides that violations are criminal offenses,
historically there have been few types of violations subject to criminal penalties. Price
fixing has been the primary offense subject to criminal prosecution. Criminal offenses
are the targets of the Department of Justice’s leniency program to foster compliance and
79 Of course, in many instances, the costly discovery process in U.S.-style litigation also leads the parties to#p#分页标题#e#
develop a complete understanding of the merits of the case that leads them to reach a settlement reflecting
the merits without trial.
80 28 U.S.C. §1332; Fed. R. Civ. P. 23.
81 431 U.S. 720 (1977).
82 See, e.g., Ala. Code §6-5-60(a); Cal. Bus. & Prof. Code §16750(a); D.C. Code Ann. §28-4509(A); Haw.
Rev. Stat. §480-3; Idaho Code §48-108; 740 Ill. Comp. Stat. Ann. 10/7(2); Kan. Stat. Ann. §50-161; Me.
Rev. Stat. Ann. Tit. 10, §1104(1); Md. Code. Ann. Com. Law II §11-209(b)(2); Mich. Comp. Laws Ann.
§445.778; Minn. Stat. Ann. §325D.57; Miss. Code Ann. §75-21-9; Nev. Rev. Stat. §§ 598A.160,
598A.210; N.M. Stat. Ann. §57-1-3; N.Y. Gen. Bus. Law §340(6); Or. Rev. Stat. §646.775; R.I. Gen. Laws
§6-36-12(g); S.D. Codified Laws Ann. §37-1-33; Vt. Stat. Ann. Tit. 9, §2465; Wis. Stat. Ann.
§133.18(1)(a).
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facilitate enforcement. Under the current program, undertakings or individuals who are
the first to confess to the government about a violation and enter a plea agreement, may
get not only leniency from criminal penalties, but also exposure to private damages
limited to single damages.83 In the past, conspirators have sometimes been hesitant to
take advantage of the leniency programs because of the exposure to treble damages from
private lawsuits when the violation becomes public knowledge. Recently, there has been
a trend by prosecutors to accept, instead, deferred prosecution agreements, under which
undertakings agree to establish antitrust compliance programs and accept a government
monitor of its business conduct for a period of years, in exchange for an agreement by the
government not to prosecute.
Outside of criminal offenses, the use of consent agreements is common. They
may be less costly and allow more flexibility than might be the case if the matters were
fully litigated. The agencies have found through experience that structural remedies are
more effective and less administratively burdensome than conduct remedies. Therefore,
the preference is to require divestitures rather than to specify that undertakings conduct
business in particular ways. The AT&T divestiture of 1982 may be a prime example of
the relative strengths and weaknesses of structural versus conduct relief, because it
involved not only divestiture by AT&T of its operating and equipment manufacturing
subsidiaries, but also very detailed requirements over how the businesses were to conduct
themselves following divestiture. Judge Greene, the federal judge overseeing the case,
essentially spent much of the remainder of his career on the bench adjudicating disputes
over compliance with the conduct remedies. It was a common comment during that time,
until the enactment of the Telecommunications Act of 1996, that one judge regulated the#p#分页标题#e#
entire telecommunications industry in the U.S.
In general, consistent with the view that only a few types of conduct are per se
violations requiring criminal penalties, and that all other conduct should be judged by the
rule of reason, and consistent with the goal of the law to foster competition, the U.S.
enforcers generally seek remedies that try to restore competition, rather than only punish
the perpetrators.84
7. Language & Infrastructure
In considering the lessons learned in the areas of competition law discussed
above, we may draw the following additional lessons regarding the actual drafting of a
competition law and its implementation.
83 See, Antitrust Criminal Penalty Enhancements and Reform Act of 2004, Pub. L. No. 108-237, §§ 211-14,
118 Stat. 61, 666-67 (2004); U.S. Department of Justice, Leniency Policy for Individuals,
http://www.usdoj.gov/atr/public/guidelines/0092.htm ; U.S. Department of Justice Corporate Leniency
Policy, http://www.usdoj.gov/atr/public/guidelines/0091.htm .
84 In contrast, the proposed Anti-Monopoly Law appears to favor punishment more than restoration of
competition, in its remedies provisions.
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In both civil law and common law jurisdictions, in the competition law area, it is
possible to enact statutes that set forth basic, general principles, without too much detail,
and still have the flexibility of the rule of reason and be practical. In common law
countries, the precise details of the law are developed by the courts in applying the
statute’s principles to specific fact situations. The U.S. enforcement agencies have also
developed the method of issuing guidelines regarding how they analyze situations under
the law. In civil law countries, the experience of the EU indicates that a combination of
block exemptions and guidelines can be developed, setting forth a small black list of
activities that are always prohibited -- the per se violations -- along with a white list of
activities that will always be permitted, while providing for a gray list of all other
activities that will be judged according to criteria set forth in the block exemption and
guidelines. With this approach, the EU has moved toward a competition law that
increasingly applies the rule of reason rather than the per se rule.
This review of the lessons of the past 115 years also highlights the importance of
building sound foundations for the enforcement of a competition law. In both the U.S.
and EU, it took decades before substantial levels of enforcement were reached. It was
not until 1911, over 20 years after the enactment of the Sherman Act, that the Supreme
Court heard arguments in Standard Oil Co. of New Jersey v. U.S.,85 and affirmed the
dissolution of the oil trust, building on several lower profile cases that established basic#p#分页标题#e#
principles under the law.86
In hindsight, it is clearly important to develop enforcement agencies with
adequate resources and quality of staff. The agencies may not need thousands of
personnel, but they do need at least several dozens of well-trained personnel who are
adequately educated in competition law and economics. It is also important to develop
strong internal processes to ensure that investigations and prosecutions are conducted in a
rigorous way.
Externally, it is important that the enforcement authority develop a solid
reputation. The way the agency is established and staffed will affect its reputation. In the
U.S., the different ways the leaders of the two federal enforcement agencies are appointed
have affected their reputation. The Assistant Attorney General in charge of Antitrust, as
a senior official of the Executive Branch, has, rightly or wrongly, been subject to
occasional speculation of political control by the President. On the other hand, the
Federal Trade Commission was established to be an independent agency, with five
commissioners, no more than three of whom may be members of the same political party.
In theory, the Commission is therefore less subject to political control.
85 221 U.S. 1 (1911).
86 See, e.g., U.S. v. E.C. Knight Co., 156 U.S. 1 (1895); U.S. v. Trans-Missouri Freight Assn, 166 U.S. 290
(1897); U.S. v. Joint Traffic Assn, 171 U.S. 505 (1898); Addyston Pipe & Steel Co. v. U.S., 175 U.S. 211
(1899); Northern Securities Co. v. U.S., 193 U.S. 197 (1904).
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Moreover, if the enforcement authority initially develops a poor reputation for
reckless activity, it may be very difficult to recover from that first impression. Therefore,
a key function of an enforcement authority is to advocate competition policy, both to the
public and within the government, to develop and strengthen support and understanding
of the principles of competition policy and the competition authority’s actions. A second
crucial focus is the wise use of prosecutorial discretion, to choose enforcement actions
well, pursuing cases that will help develop competition policy in a positive direction and
build upon the framework of the law, and that will, together with strong competition
advocacy, have broad support. The enforcement authority must be strong enough to
recognize that non-action does not mean weakness or that the law is inadequate. For
example, in the last 10 years, under both Democratic and Republican adminstrations,
although thousands of concentrations are notified annually to the U.S. government, only
in one year were more than 4% of the concentrations investigated to the extent of an
additional request for information. The overwhelming majority of concentrations were
notified without any action by the enforcement authorities.#p#分页标题#e#
Conclusion
The experience under the Sherman Act demonstrates that, while it is important to
have a well-drafted statute, it is the development of a sound infrastructure for analysis
and enforcement based on the statute that ultimately determines the success of a
competition law regime. A well-drafted statute should establish clear goals, sound
principles, and rigorous fact-based analytic approach. Exemptions to the law should be
created very sparingly, to minimize the distortions in the marketplace that may be
introduced. The enforcement mechanism should be structurally resistant to political
influence. The remedies provided should be crafted with the goal of restoring
competition, and not just punishing offenders. A statute that has these attributes should
prove to be a solid foundation for a competition law regime, upon which a sound
infrastructure of analysis and enforcement may be built.
July 24, 2006
1
Thoughts on Some Challenges in Implementing China’s Anti-Monopoly Law
Yee Wah Chin
As the National People’s Congress considers the proposed Anti-Monopoly Law,
thoughts turn to implementing the law. Implementation presents many challenges,
especially in China’s unique circumstances as a transition economy. This paper
considers two challenges particularly from the perspective of the U.S. experience over
more than 100 years with competition law enforcement: (1) developing an effective
enforcement infrastructure; and (2) addressing the local protectionism that may be the
greatest threat to the development of a competitive economy.
The development of the enforcement infrastructure for an entirely new law
presents both substantive and procedural challenges. The substantive rules that the
enforcement agencies develop, in implementing the principles set forth in the AML, will
significantly determine what will be the actual impact of the law. The process for
developing these rules and for enforcing the law will have a major influence on both the
substantive rules and the law’s effectiveness.
The AML, as proposed, prohibits administrative monopolies. The need for such a
prohibition is generally supported by observations of Chinese commentators regarding
the situation in China; the controversy appears to center more on the appropriate solution.
The experience of the U.S. under the Articles of Confederation in the late 1700s, during
which there was rampant local protectionism, before the Constitution became effective in
1789, indicates that it is important to have fundamental laws prohibiting local
protectionism in order to develop a strong integrated national economy.
Enforcement Infrastructure
The importance of building sound foundations for the enforcement of a
competition law cannot be overstated. First, the enforcement agencies must have#p#分页标题#e#
adequate resources and high quality staff. The agencies may not need thousands of
personnel, but they do need at least several dozens of personnel who are well-educated in
competition policy and economics. It is also important to develop strong internal
processes to ensure that investigations and prosecutions are conducted in a rigorous way.
If there is an independent enforcement agency that is adequately staffed and provided
with resources, crucial factors determining the impact of the law will be the processes
and implementing regulations adopted by the agency.
Externally, it is important that the enforcement authority develop a strong positive
reputation. The way the agency is established and staffed will affect its reputation. In the
U.S., the different ways the leaders of the two federal enforcement agencies are appointed
have affected their reputations. The Assistant Attorney General in charge of Antitrust, as
a senior official of the Executive Branch, has, rightly or wrongly, been subject to
occasional speculation of political control by the President. On the other hand, the
July 24, 2006
2
Federal Trade Commission was established to be an independent agency, with five
commissioners, no more than three of whom may be members of the same political party.
In theory, the Commission is therefore less subject to political influence. These
perceptions, of course, may have little basis in reality, yet may affect the agencies’
credibility and therefore effectiveness.
Moreover, if the enforcement authority initially develops a reputation for reckless
activity, it may be very difficult to recover from that first impression. Therefore, a key
function of an enforcement authority is to advocate competition policy, both to the public
and within the government, to develop and strengthen understanding of and support for
the principles of competition policy and the competition authority’s actions.
Also crucial is the wise use of prosecutorial discretion, to choose enforcement
actions well, pursuing cases that will help develop competition policy positively and
build upon the framework of the law, and that will have, with strong competition
advocacy, broad support. In both the U.S. and European Union, decades passed before
substantial levels of enforcement were reached. In the U.S., it was not until 1911, over
20 years after enactment of the Sherman Act, that the Supreme Court decided Standard
Oil Co. of New Jersey v. U.S.,1 and affirmed the dissolution of the oil trust, building on
several lower profile cases that established basic principles under the law.2
The enforcement authority must be strong enough to recognize that non-action
does not mean weakness or that the law is inadequate. For example, in the last 10 years,
under both Democratic and Republican administrations, although thousands of#p#分页标题#e#
concentrations are notified annually to the U.S. government, only in one year were more
than 4% of the concentrations investigated to the extent of an additional request for
information. The overwhelming majority of concentrations were notified without any
action by the enforcement authorities.
When the agency does act, it must do so in ways that reinforces its reputation for
sound enforcement. In order to do so, the enforcement agency must develop strong
internal processes to ensure that standards are rigorous and clear to interested parties, and
investigations and prosecutions are conducted in an appropriate way. The effectiveness,
integrity and credibility of procedures may be greatly enhanced by regulations
demonstrating the agency’s intention to maintain the fairness and objectivity of its
procedures and activities. The clarity and transparency that such procedural rules provide
may be especially important if the enforcement structure is a novel one and/or one which
may be considered susceptible to political influence.
1 221 U.S. 1 (1911).
2 See, e.g., U.S. v. E.C. Knight Co., 156 U.S. 1 (1895); U.S. v. Trans-Missouri Freight Assn, 166 U.S. 290
(1897); U.S. v. Joint Traffic Assn, 171 U.S. 505 (1898); Addyston Pipe & Steel Co. v. U.S., 175 U.S. 211
(1899); Northern Securities Co. v. U.S., 193 U.S. 197 (1904).
July 24, 2006
3
In the U.S., such procedural rules include those that establish the procedures
under which future regulations will be proposed, considered and issued. For example, the
rules of the Federal Trade Commission contain detailed provisions on its procedures for
rulemaking.3 With transparent, clear and equitable procedures for rulemaking, there is
greater assurance that the resulting rules, both procedural and substantive, will fully
reflect all relevant factors and be equitable.
The rules of procedure by which the principles of the law are implemented, and
the law is enforced, are crucial. Regulations that expressly allow parties to submit
evidence and arguments and to examine and test the evidence submitted by adverse
parties, and require officials who participate in the process to be free of external or
special influences, consider all relevant evidence and explain the reasoning of decisions,
can be vital in establishing the credibility of the law and the process, and in facilitating
compliance and enforcement. For example, the Department of Justice must conduct its
enforcement actions through the federal courts, where the federal judiciary rules of
procedure, evidence, and appeal apply. Nevertheless, the Antitrust Division publishes a
variety of materials describing how it conducts specific types of investigations and how it
initiates and conducts proceedings before the courts.4
Beyond the fundamental procedural rules regarding how future rules will be#p#分页标题#e#
developed and how the agencies will conduct investigations, one area in which detailed
procedural rules have proven invaluable is in the area of merger control. The detailed
regulations issued by the U.S. enforcement agencies under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976,5 setting forth the requirements on the timing, form
and schedule for agency consideration of notifications, have been crucial in facilitating
and ensuring compliance. The International Competition Network has recognized the
value of procedural regulations in the merger control context in its Guiding Principles for
Merger Notification and Review Procedures, and Recommended Practices for Merger
Notification and Review Procedures.6
3 16. C.F.R. §§ 1.7 - 1.26. http://ecfr.gpoaccess.gov/cgi/t/text/textidx?
c=ecfr&sid=7a8c8ce4d432393eb793b6399d46a5bd&tpl=/ecfrbrowse/Title16/16cfr1_main_02.tpl
4 See, for example, http://www.usdoj.gov/atr/foia/divisionmanual/ch4.htm, the portion of the Antitrust
Division Manual that applies to the conduct of civil investigations. Links to the rules governing
proceedings of the U.S. Federal Trade Commission may be found at
http://ecfr.gpoaccess.gov/cgi/t/text/textidx?
sid=3ad5b48a02eb1707974872e00175bbb5&c=ecfr&tpl=/ecfrbrowse/Title16/16cfrv1_02.tpl,
especially the links accessed under the heading “Part 1”, “Part 2”, and “Part 3”.
5 16 C.F.R. Parts 801 - 803. http://ecfr.gpoaccess.gov/cgi/t/text/textidx?
c=ecfr&sid=7a8c8ce4d432393eb793b6399d46a5bd&tpl=/ecfrbrowse/Title16/16cfr801_main_02.tpl ,
http://ecfr.gpoaccess.gov/cgi/t/text/textidx?
c=ecfr&sid=7a8c8ce4d432393eb793b6399d46a5bd&tpl=/ecfrbrowse/Title16/16cfr802_main_02.tpl
and http://ecfr.gpoaccess.gov/cgi/t/text/textidx?
c=ecfr&sid=7a8c8ce4d432393eb793b6399d46a5bd&tpl=/ecfrbrowse/Title16/16cfr803_main_02.tpl
6 http://www.internationalcompetitionnetwork.org/guidingprinciples.html
July 24, 2006
4
As to the substantive aspects of the law, those who are subject to it must
understand what it requires in order to comply with it. At a minimum, they (or their legal
advisers) should be able to read the law itself and the decisions that are adopted by the
enforcement authority in specific cases. If the rules are incomprehensible or not
available, then both the law and the enforcement authority will lack legitimacy and
credibility in the eyes of the public.
The results are mixed with detailed regulations that establish substantive rules
governing marketplace conduct. For example, the EU individual notification system was
abandoned during the “modernization” culminating in Council Regulation 1/20037 that
became effective on May 1, 2004. The resulting approach is analogous to that in the
U.S., where the legality of an agreement under the antitrust laws is not determined until it#p#分页标题#e#
is challenged. In the meantime, in every major substantive area under Article 81 of the
European Community Treaty – vertical agreements, horizontal agreements, technology
transfer agreements – older block exemption regulations were abandoned in favor of
more flexible block exemptions and guidelines that generally attempt to incorporate
greater reliance on economic analysis of conduct.8 Thus, in Europe, where the regulatory
approach was embraced most enthusiastically at first, detailed formalistic regulations
have significantly been abandoned in favor of incorporation of microeconomic analysis
and the statement of analytic principles.
The United States has not generally relied on regulations in the implementation of
its most basic substantive antitrust rules. Guidelines have been used more frequently,
with mixed results. While regulations have the force of law, guidelines typically do not;
they are intended to accommodate a need for discretion and flexibility. Guidelines may
provide only a description of the methods of competitive analysis and principles of
interpretation of key elements that determine an enforcement agency’s approach to
particular situations and issues. They are useful to the extent that they provide an
accurate reflection of the agency’s actual practice. They may also play a critical role in
explaining how enforcement decisions that are likely to be made by the agency in certain
types of cases relate to and support the broader policy objectives of the law and the
priorities of the agency’s current enforcement program.
Some U.S. guidelines have provided negative experiences and one set of
guidelines was withdrawn. Other U.S. guidelines are widely regarded as very successful
in facilitating understanding of and compliance with U.S. antitrust law.
Perhaps the most successful U.S. guidelines are those applicable to
concentrations. Merger Guidelines were first adopted in the United States by the
Department of Justice in 1968. They were widely regarded as a major innovation at the
7 Links to the Regulation in all official Community languages may be found at
http://europa.eu.int/comm/competition/antitrust/legislation/regulation.html
8 To complement its latest Technology Transfer Block Exemption Regulation, the EU also promulgated
Guidelines on the application of Article 81 of the EC Treaty to technology transfer agreements. The latest
TTBER and Technology Transfer Guidelines likewise reflect the evolution of antitrust analysis in the EU.
July 24, 2006
5
time and were controversial.9 Later developments in legal and economics thinking led to
the abandonment of those early Guidelines. In 1982, the Department issued new Merger
Guidelines,10 while the Federal Trade Commission issued a Statement Concerning
Horizontal Mergers.11 The current enforcement approach still follows in essential outline#p#分页标题#e#
the analytic framework set forth in the 1984 Merger Guidelines,12 more than 20 years
ago. The United States’ 1982 Merger Guidelines and subsequent revisions13 are widely
regarded as a successful effort to provide guidance to the business community and its
legal advisers in order to aid understanding and compliance.
The guidelines describe how the enforcers apply the economic concepts of
product and geographic market to actual situations. They do not specify a set of rules to
be mechanically applied. Rather, by clarifying the analytic methods and the types of
evidence regarded as likely to be persuasive, the enforcement agencies have enabled
well-advised parties to understand with some precision how any particular transaction is
likely to be analyzed, and to some extent to foresee the likely enforcement outcomes.
Thus, the agencies have facilitated voluntary compliance. Parties are less likely to
propose transactions that seem likely to be challenged, or they will voluntarily alter their
proposed transaction to conform to the likely enforcement approach. These Guidelines
have also limited the “chilling effect” of enforcement uncertainty – the tendency of
parties to avoid transactions that could be viewed unfavorably, even though they would
likely be permitted if examined by the agencies.14 In March 2006, the FTC and the
9 See, e.g., W. Blumenthal, “Clear Agency Guidelines: Lessons from 1982”, 68 Antitrust L.J. 5 (2000).
10 Department of Justice Merger Guidelines, 4 Trade Reg. Rep. (CCH) ¶13,102 (1982). These 1982 Merger
Guidelines reflected how the agencies’ practices had evolved since 1968, and therefore were quite different
from the 1968 Guidelines. For example, the 1982 Guidelines make no reference to conglomerate mergers,
while the 1968 Guidelines included a significant discussion of the Department’s approach to such mergers.
11 Federal Trade Commission Statement Concerning Horizontal Mergers, 4 Trade Reg. Rep. (CCH)
¶13,200 (1982).
12 The 1984 Merger Guidelines reflected refinements of the 1982 Guidelines in light of two years’
experience. Department of Justice Merger Guidelines, 4 Trade Reg. Rep. (CCH) ¶13,103 (1984).
13 In 1992, the Department and the Commission issued Joint Horizontal Merger Guidelines, that reflected
the Department’s experience under the 1982 and 1984 Guidelines and the Commission’s experience under
its 1982 Statement, as well as advances in legal and economic thinking. Department of Justice & Federal
Trade Commission Horizontal Merger Guidelines, 4 Trade Reg. Rep. (CCH) ¶13,104 (1992);
http://www.usdoj.gov/atr/public/guidelines/hmg.htm The 1992 Guidelines did not reflect any dramatic
departure from the 1984 Guidelines. In 1997, the two agencies clarified the 1992 Horizontal Merger
Guidelines with respect to the analysis of efficiencies that may result from a merger. Id. Therefore, merger#p#分页标题#e#
review by the federal antitrust enforcement agencies are now guided by the 1992 Guidelines along with the
1997 revisions regarding efficiencies analysis in the context of horizontal mergers, and by the 1984
Guidelines in the context of vertical mergers.
14 The United States has also adopted successive sets of guidelines relating to international operations (that
reflected the evolution in antitrust analysis as the successive Merger Guidelines do), as well as Antitrust
Guidelines for the Licensing of Intellectual Property (April, 1995), available at
http://www.usdoj.gov/atr/public/guidelines/0558.htm (“IP Guidelines”). The more recent of the Antitrust
Enforcement Guidelines for International Operations (April, 1995), available at
July 24, 2006
6
Department of Justice jointly issued a Commentary on the Horizontal Merger Guidelines,
that clarified how they are actually applying the Guidelines.15 The Commentary
described dozens of actual transactions and the agencies’ analysis of them under the
Merger Guidelines. The Commentary offers even greater transparency and deeper
understanding of the agencies’ decision-making process.
In contrast, guidelines for antitrust remedies raise complex and often difficult
issues, because different aspects of competition law often have distinct remedy
requirements. Illegal agreements and abuse of dominant market position can arise in
ways that defy categorization. It is almost impossible to specify except in the most
abstract way how and where anticompetitive conduct will arise, and therefore the task of
specifying in advance how such conduct would be remedied in any particular case would
be a giant exercise in speculation. In the U.S., the efficacy and utility of sentencing
guidelines – both as a general matter and in antitrust cartel cases – are a matter of intense
current debate. This experience may be compared with that of the U.S., EU and other
jurisdictions with leniency programs with regard to both criminal and civil competition
law violations. These programs have provided undertakings with clarity regarding their
risks and rewards of cooperating when an offense is detected, and have substantially
facilitated competition authorities’ enforcement of the law.16
http://www.usdoj.gov/atr/public/guidelines/internat.htm, and the IP Guidelines have also enjoyed a degree
of success and a considerable amount of emulation in other jurisdictions. For example, in both the U.S. and
the EU, the recognition has developed that IP does not automatically confer a monopoly on its holder, and
is but a form of personal property that may confer market power. On the other hand, a set of Guidelines for
Vertical Restraints adopted in the U.S. in 1986 was withdrawn after several years.
15 http://www.usdoj.gov/atr/public/guidelines/215247.pdf ;#p#分页标题#e#
http://www.ftc.gov/os/2006/03/CommentaryontheHorizontalMergerGuidelinesMarch2006.pdf.
16 See, e.g., U.S. Department of Justice, Leniency Policy for Individuals,
http://www.usdoj.gov/atr/public/guidelines/0092.htm ; U.S. Department of Justice Corporate Leniency
Policy, http://www.usdoj.gov/atr/public/guidelines/0091.htm ; Commission notice on immunity from fines
and reduction of fines in cartel cases, OJ C 45, 19.2.2002, http://www.europa.eu.int/eurlex/
pri/en/oj/dat/2002/c_045/c_04520020219en00030005.pdf; Amended 2002 Commission Notice on
Immunity from fines and reduction of fines in cartel cases, http://www.europa.eu.int/eurlex/
pri/en/oj/dat/2002/c_045/c_04520020219en00030005.pdf; Immunity Program under the Canadian
Competition Act, http://www.competitionbureau.gc.ca/internet/index.cfm?itemID=1389&lg=e ; R. Hewitt
Pate, Assistant Attorney General, Antitrust Division, U.S. Department of Justice, “International Anti-Cartel
Enforcement,” Remarks presented at 2004 ICN Cartels Workshop, Sydney, Australia, November 21, 2004,
http://www.usdoj.gov/atr/public/speeches/206428.htm ; Scott D. Hammond, Director of Criminal
Enforcement, Antitrust Division, U.S. Department of Justice, “Cornerstones of an Effective Leniency
Program,” Remarks presented before the ICN Workshop on Leniency Programs, Sydney, Australia,
November 22-23, 2004, http://www.usdoj.gov/atr/public/speeches/206611.htm ; Philip Lowe, Director-
General, DG Competition, European Commission, “What’s the Future for Cartel Enforcement,” address to
Understanding Global Cartel Enforcement Conference, Brussels, Belgium, February 11, 2003,
http://europa.eu.int/comm/competition/speeches/text/sp2003_044_en.pdf ; Colette Downie, Assistant
Deputy Commissioner of Competition, Criminal Matters Branch, Competition Bureau of Canada, “The Fix
is in Detecting Cartels in Canada,” Speaking notes presented to The Australian Competition & Consumer
Commission Cracking Cartels Conference, Sydney, Australia, November 24, 2004,
http://www.competitionbureau.gc.ca/internet/index.cfm?itemID=813&lg=e
July 24, 2006
7
There is also a growing trend toward the adoption of explicit written policies
concerning the use of remedies in the case of concentrations. Whereas for criminal
antitrust violations the main concerns involve detection and deterrence of manifestly
illegal behavior, the remedial objective with regard to structural transactions is to identify
a limited set of divestitures or behavioral constraints on the parties that will address
competitive issues without involving the enforcement agencies or the courts in
burdensome, long-term or complex regulatory oversight for which they are ill-suited.
While an appropriate remedy in a specific merger case frequently involves complex and
intensely industry- and firm-specific questions, the general principles by which such#p#分页标题#e#
relief is formulated can be articulated.
Local Protectionism
The reality is that much of the distortions in the Chinese economy result from
local governmental actions that favor local activity and are inconsistent with central
government policy. Factors significantly underlying the debate regarding the appropriate
treatment of the rampant local protectionism and administrative monopolies appear to be
(1) unease with the transition from a command economy that is under, as one pundit put
it, “the visible foot” of the government, to one which relies on “the invisible hand” of the
marketplace, and (2) a lack of consensus on both the desirability and feasibility of
prohibiting the local protectionism that motivates many administrative monopolies.
Some argue that administrative monopolies should be exempt from an AML, just
as the state action doctrine in the U.S. exempts state governmental action from the U.S.
antitrust laws. This belief is based on a misunderstanding of the source of the U.S. state
action doctrine and its limits.
The state action doctrine is based on the federal system of the U.S. and the
residual sovereignty of the states.17 This exemption excludes from the U.S. antitrust laws
conduct in areas in which a state has acted to limit competition or to enable a lack of
competition, and in which the state actively monitors competitive activity.18 In addition,
under the Local Government Antitrust Act of 1984,19 local governments have immunity
from lawsuits for damages, but no immunity from lawsuits for injunctive relief and
attorneys’ fees for successful plaintiffs, if state governments enact statutes authorizing the
local governmental units to act in a particular area.20 States have taken advantage of the
state action doctrine and the Local Government Antitrust Act, sometimes from a
misunderstanding of competition in a marketplace or from a belief that certain industries
17 Parker v. Brown, 317 U.S. 341, 351 (1943); Cantor v. Detroit Edison Co., 428 U.S. 579 (1976).
18 California Liquor Dealers v. Midcal Aluminum, 445 U.S. 97, 105 (1980); Southern Motor Carriers Rate
Conference, Inc. v. United States, 471 U.S. 48 (1985).
19 15 U.S.C. §§ 34-36.
20 See also, Town of Hallie v. City of Eau Claire, 471 U.S. 34 (1985); City of Columbia v. Omni Outdoor
Advertising, Inc., 499 U.S. 365 (1991).
July 24, 2006
8
or constituencies should not be subject to competition.21
However, one important fundamental limit on the state action doctrine is the
counterbalancing prohibition in the U.S. Constitution against states imposing burdens on
interstate commerce, or seeking to advantage local businesses at the expense of out-ofstate
competitors. “Congress shall have power…to regulate commerce with foreign
nations, and among the several states.” U.S. Constitution, Art. I, §8. The Supreme Court#p#分页标题#e#
has interpreted this Commerce Clause of the Constitution to prohibit individual states
from regulating commerce with other states, and imposing burdens on non-local
undertakings that local undertakings do not have.22
In addition, the Constitution also states that “no state shall, without the consent of
the Congress, lay any imposts or duties on imports or exports…and the net produce of all
duties and imposts, laid by any state on imports or exports, shall be for the use of the
Treasury of the United States; and all such laws shall be subject to the revision and
control of the Congress…” Art. I, §10. Furthermore, the Constitution provides that “the
citizens of each State shall be entitled to all privileges and immunities of citizens in the
several States.” Art. IV, §2.
Other clauses of the Constitution have also been invoked to prohibit state action
that fostered anti-competitive activities or effects. For example, the First Amendment
right of free speech has been held to prohibit certain types of regulations that inhibited
competition.23 Similarly, the Due Process and Equal Protection clauses of the Fourteenth
Amendment have been applied to limit state action that was anticompetitive.24
Therefore, even though states, and local authorities under express permission
from the states, may limit competition in the U.S. if they actively monitor the activity,
21 For example, under the exemptions granted by Congress in the 1937 Miller-Tydings Amendment to the
Sherman Act and in the 1952 McGuire Amendment to the FTC Act, 46 states enacted laws that enforced
minimum resale price agreements, both between the parties and against third parties. These laws were
effective until Congress repealed this “fair trade” exemption with the enactment of the Consumer Goods
Pricing Act of 1975, Pub L. No. 94-145, 89 Stat. 801.
22 Willson v. Black Bird Creek Marsh Co., 27 U.S. (2 Pet.) 245, 252 (1829); Cooley v. Board of Wardens of
Port of Philadelphia, 53 U.S. (12 How.) 299 (1851); Reading Railroad v. Pennsylvania, 82 U.S. (15 Wall.)
232 (1873); Weldon v. Missouri, 91 U.S. 275 (1875); Seaboard Air Line Ry. v. Blackwell, 244 U.S. 310
(1917); South Carolina State Highway Dept v. Barnwell Bros., 303 U.S. 177 (1938); Baldwin v. J.E.
Dilworth Co., 322 U.S. 327 (1944); H.P. Hood & Sons v. DuMond, 336 U.S. 525 (1949); Dean Milk v. City
of Madison, 340 U.S. 349 (1951); Polar Ice Cream & Creamery Co. v. Andrews, 375 U.S. 361 (1964); Pike
v. Bruce Church, 397 U.S. 137 (1970); Associated Indus. of Missouri v. Lohman, 511 U.S. 641 (1994);
Fulton Corp. v. Faulkner, 516 U.S. 325 (1996); Camps Newfound/Owatonna v. Town of Harrison, 520
U.S. 564 (1997); South Central Bell Tel. Co. v. Alabama, 526 U.S. 160 (1999).
23 See, e.g., Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council, 412 U.S. 748#p#分页标题#e#
(1976); Bates v. State Bar of Arizona, 433 U.S. 350 (1977); Board of Trustees of State University of New
York v. Fox, 492 U.S. 469 (1989).
24 See, e.g., Gibson v. Berryhill, 411 U.S. 564 (1973).
July 24, 2006
9
they cannot engage in local protectionism. These Constitutional limitations against local
protectionism were specifically established because of the rampant local protectionism
that proliferated among the original 13 states under the Articles of Confederation that
preceded the Constitution, to ensure the development of an integrated national
economy.25 During the period following independence from Great Britain, before the
Constitution became effective, the 13 original states were united and governed under the
Articles of Confederation. The Articles of Confederation provided for a very weak
central government and did not limit the sovereignty of the states. As a result, individual
states established their own currencies and tariffs, and generally acted to protect their
local interests with little regard for the interests of the country. The economy of the
United States did not thrive, and the central government, along with those of several
states, was on the brink of bankruptcy. The Constitutional Convention was held to
discuss amendments to the Articles of Confederation to remedy these problems. The
result was the Constitution which superseded the Articles of Confederation and created a
strong central government.
This history may be relevant to China. A prohibition against administrative
monopolies would serve the same salutary purpose as the U.S. Constitution, of promoting
an integrated national economy under China’s unitary political system.
In all events, if detailed provisions regarding administrative monopolies are not
included in the AML, and only a statement of principle is retained in the final statute,
there remains the potential that the principle will take root and lead to development of a
body of law and, perhaps more important, a culture that curtail local protectionism. In
order to realize this potential, it is essential to develop the enforcement infrastructure
fully and appropriately.
Conclusion
While it is important to have a well-drafted statute, it is the development of a
sound infrastructure for analysis and enforcement based on the statute that ultimately
determines the success of a competition law regime. A sound infrastructure must be
based on procedural rules that provide due process and that set forth both the process by
which future rules will be developed and the process by which the agency will implement
the law. The enforcement mechanism should be structurally resistant to political
influence. Exemptions to the law should be drafted and interpreted very narrowly, to
minimize the distortions in the marketplace that may be introduced. The experience of#p#分页标题#e#
the U.S., under the Articles of Confederation, the Constitution, and the Sherman Act,
may offer lessons in these respects.
25 H.P. Hood & Sons v. DuMond, 336 U.S. 525 (1949).
特许经营在中国:审判上和立法的报告
2005-2006
(FRANCHISING IN CHINA: Judicial and
Legislative Update 2005-2006)
Forthcoming in the September issue of the International Journal of
Franchising Law
Paul Jones
Barrister, Solicitor & Trade-mark Agent
Jones & Co. 钟保禄 律师事务所 Джоунс и Ко.
365 Bay Street , Second Floor
Toronto, Canada
M5H 2V1
[email protected]
416-703-5716
© Paul Jones , 2006
1
A. Introduction
This article is a review of recent legislative and administrative developments
affecting franchising in China, and a review of some significant trade-mark and
franchising cases primarily as decided by China’s courts since the coming into
force of the new Measures for the Regulation of Commercial Franchises1 (“New
Franchise Measures”) in early 2005.
Previously a review of cases would have been difficult if not impossible because
there is no case reporting system in China, as there is in common law
jurisdictions. But as a growing number of Chinese courts set up their own web
sites and post their decisions online, and as Chinese lawyers make increasing
use of the internet to post copies of decisions and comments on cases, such a
review is now possible.
The reporting of significant franchise cases is not universal however, so the
decisions discussed in this article do not reflect a selection of the most significant
cases from all such decisions of the Chinese courts, but rather a selection of
what is available online. Still the decisions provide significant insight into the
thinking of some Chinese courts on franchise and trademark matters.
B. Growth of Franchising
China continues to grow at a rapid pace. GDP reportedly increased 10.2 % in the
first quarter of 2006,2 and 11.3% in the second quarter.3 But some have
expressed concern that the reform of China’s legal system has in fact slowed.4
The most recent survey from the China Chain Store and Franchise Association5
(“CCFA”) reported that China had 2,320 franchise systems at the end of 2005, or
10.4 % more than at the same time in the previous year.6 The average number of
outlets per system increased from 57 in 2004 to 73 in 2005.7
1 Measures for the Regulation of Commercial Franchises, 商业特许经营管理办法 (Shangye
Texujingying Guanli Ban Fa), Ministry of Commerce Order No. 25 of 2004, in effect February 1,
2005.
2 Xinhua News Agency, “China’s GDP in first quarter grows 10.2%” China View, April 20, 2006.
3 Andrew Browne, “Chinese Economy Surges by 11.3%, Fuelling Concerns,” Wall Street Journal,#p#分页标题#e#
July 19, 2006, p. A8.
4 James M. Rhodes, “Jerome A. Cohen: China’s Legal System – Notes from a Luncheon
Address,” New York City Bar Association, April 5, 2006.
5中国连锁经营协会 (Zhongguo Lian Suo Jing Ying Xie Hui) http://www.ccfa.org.cn/english/index.jsp .
6 Press Release, “Year Report on Franchise in China released by CCFA,” CCFA, 2006-03-28.
7 Id.
2
Still franchising accounts for only 3 % of China’s retail sales compared to 40% in
the United States.8 If in the future franchising in China comprises a similar
proportion of retail sales as it does in the United States franchising in China has
significant growth still ahead of it. There are currently an estimated 16,000
franchised outlets in Shanghai and the number continues to expand each year.9
There are some weaknesses in this growth. Two of the best known foreign
franchise systems in China, KFC and McDonalds, primarily operate corporate or
joint-venture owned locations. McDonalds has just one franchisee, in the city of
Tianjin in the north, and of KFC’s approximately 1,500 outlets only about 70 are
franchised.10
The other important concern is that many of the domestic franchise systems in
China are still at an early stage of development. The business models are often
not fully developed or proven and the franchisors have yet to develop the level of
support systems that are the norm in North America. CCFA reports that 30% of
domestic franchisors do not have a franchise manual, and 20% do not have an
operations manual.11
There has also been progress in the institutions to study and teach franchise
development methods in China. In 2003 Beijing Normal University established its
International Franchise Academy in Zhuhai, in cooperation with Franchise
Development Services China Ltd.12 In March of 2004 the Ministry of Education
formally approved “franchise management” as a new undergraduate major.
C. Law Reform
In terms of law reform that is relevant to franchising, the recent National People’s
Congress meeting held March 8 – 14, 200613 in Beijing was a disappointment as
a number of laws that had been anticipated were not tabled for approval at the
Congress.
8 Zhiqiong June Wang, “The Development of Franchising in China,” paper presented to the 20th
Annual International Society of Franchising Conference, Palm Springs, California, February 24-26,
2006, p. 3.
9 Dai Qian, “Investors find franchises an easier way to start a business,” Shanghai Daily, March
13, 2006.
10 Wang, supra note 5, p. 6.
11 CCFA, The 2005 Blue Book Report of Franchising and Chain Performance in China, 2005,
http://www.hznet.gov.cn/xxzh/20050414/271105.htm (accessed September 2, 2005) as cited in
Wang, supra note 5, p.13-14.#p#分页标题#e#
12 Wenxian Liu, Andrew Terry, Albert Kong, Xuesi Wang, Jijian Hou, Zhiqiong Wang, and Aifei
Tang, “Innovation in the Booming market for Franchising in China: A Study of the International
Franchise Academy, Beijing Normal University, Zuhai Campus,” paper presented to the 20th
Annual International Society of Franchising Conference, Palm Springs, California, February 24-26,
2006. Further information can be obtained from the web site of the Academy at
http;//www.bnuifa.cn or http://www.franchise.com.cn.
13 The Fourth Session of the 10th National People’s Congress.
3
Foremost among them was what is known as the proposed “Property Rights
Law.”14 China is in the process of developing a civil code comparable to those
found in Europe. This proposed law would have consolidated the many laws and
regulations currently in force in a coherent and comprehensive treatment of the
treatment of property rights in both real estate and personal property, and would
apply to state-owned property as well as private property.
China’s rapid development has led to one of the widest disparities in income in
the world. The primary cause for unrest in China’s development has not been the
thousands of laid-off workers but the taking of traditional farmland or older city
housing for the development of new factories and condominium complexes.
Violent clashes have occurred when the compensation offered by the local
government administration was considered too low.15
If it had been tabled the proposed Property Rights law would have clarified
issues regarding title, leasehold rights, and security interests in land and
equipment that have relied upon in developing franchise locations in North
America and Europe.
Another significant disappointment was the failure of the NPC to consider the
proposed Anti-Monopoly Law.16 This law would be comparable to the competition
or antitrust laws in Europe or North America. China began working on a draft
about 10 years ago, and has received input from both the European Union and
the American Bar Association.
Finally a draft “Law for personal information protection” has been prepared by a
group from the Chinese Academy of Social Sciences and was submitted to the
State Council for review early last year.17 The draft law is based on the European
model. Hong Kong SAR has had a privacy law based on the European model
since 1996.18 It did not appear, but it is likely that it will first appear as a set of
administrative rules and regulations, as has occurred with the franchise
measures.
14 物 权法 (Wu Quan Fa)
15 See for example Jim Yardley, “Farmers Being Moved Aside by China’s Real Estate Boom,”
New York Times, December 8, 2004.
16 反垄断 法 (Fan Long Duan Fa). It has now been reported that a draft has been approved by the#p#分页标题#e#
State Council (Andrew Batson, “Draft of Antitrust Legislation Wins’s China Cabinet’s Backing,”
Wall Street Journal, June 8, 2006 and Cary Huang, “Law aimed at tackling monopolies
approved,” South China Morning Post Online Edition, June 8, 2006; and was discussed at the
meeting of the National People’s Congress Standing Committee, June 19 -22, 2006, Beijing. For
the Standing Committee members’ comments on the Draft Antimonopoly Law, see
17 Shi Ting, “Landmark privacy law submitted for review,” South China Morning Post Online,
January 20, 2005; “China to legislate for protection of personal information” People’s Daily Online,
January 25, 2005.
18 Personal Data (Privacy) Ordinance, Ch. 486, Hong Kong SAR Ordinances.
4
C. Courts and Civil Procedure
One of the central problems of the Chinese judicial system has been the fact that
both the judiciary and the procuratorates (similar to a district attorney’s office) at
each level of the court system are paid out of funds from the equivalent level of
local government. This has led to what has been described as “local
protectionism” on the part of these officials.
In its latest reform plans the Supreme People’s Procuratorate announced the
intention to make the local procuratorates financially independent of their
respective local governments.19 Hopefully this will lead to a similar independence
for the courts in the near future.
Late in 2005 the Supreme People’s Court issued the Second National Foreignrelated
Commercial and Maritime Trial Work Meeting Minutes20 intended to
provide guidance to judges called upon to rule on their jurisdiction in cases
involving foreign parties. Article 126 of China’s Contract Law, the law that
governs the new Franchise Measures, stipulates that the parties to a foreign
related contract may choose the law for the settlement of disputes unless the law
provides otherwise.21
Generally the minutes take an aggressive approach on the jurisdictional reach of
the Chinese courts by providing that Chinese courts may still hear a case even if
foreign courts have already accepted or decided the case. On the other hand the
minutes introduce a forum non conveniens analysis, something not previously
seen in Chinese law. Parties may argue that a Chinese court should not hear a
case if there is a more appropriate forum in another country.
But the minutes also provide that if a parties’ choice of foreign law circumvents
mandatory or restrictive provisions of Chinese laws or regulations, or violates
Chinese public policy, then the foreign law will not apply. It would appear that
attempts to avoid the disclosure requirements or the requirement that a
franchisor have operated two locations in China for one year by choosing a#p#分页标题#e#
foreign law to govern the contract will not be held valid.
19 “Central cash to fund local judicial independence,” China Daily, September 29, 2005.
20最高人民法院关于印发<<第二次全国涉外商事海事审判工作会议纪要>>的通知, December 26,
2005.
21合同法（Hetong Fa） adopted at the Second Session of the Ninth National People’s Congress
on March 15, 1999 and came into force on October 1, 1999; 第一百二十六条 涉外合同的当事人
可以选择处理合同争议所使用的法律，但法律另外规定的除外。涉外合同的当事人没有选择的，适
用与合同有最密切联系的国家的法律. 在中华人民共和国境内履行的中外合资经营企业合同、中外
合作经营企业合同、中外合作勘探开发自然资源合同，适用中华人民共和国法律。
5
D. Intellectual Property
Any foreign franchisor with an interest in the Chinese market will be concerned
with the state of intellectual property protection in China. This year the news is
mostly good. During the 2006 meeting of the National People’s Congress in
March China’s Supreme People’s Court 22 announced the creation of a special
court to prosecute product piracy cases.23 And the web site of the Supreme
People’s Court now publishes many (but not all) intellectual property decisions
online.24
China has its own reasons for improving the enforcement of intellectual property
rights. This year’s meeting of the NPC endorsed the new five-year plan economic
policies of relying on rural development and scientific technology and
innovation.25 The goal is to build an innovation oriented country.
Another reason is that most product piracy in China harms Chinese businesses.
Estimates of the percentage of IP infringement cases that involve foreign-related
parties range from 5%26 to 20%.27
1. Conflicts with Business Names
In the western press the leading trademark case in China in the last year was the
decision of the Shanghai No. 2 Intermediate People’s Court28 with respect to the
trademarks ‘STARBUCKS’ and ‘星巴克’ (Xing ba ke). It was hailed as
encouraging others to feel that China’s courts are a place where there is now a
chance of getting legal redress.29 In fact the case is one of several efforts by
Starbucks to monitor and protect their brand in China.h
23 Associated Press, “Special Court to enforce intellectual property rules,” South China Morning
Post Online, Friday, March 10, 2006. The court is to be called the “Judicial Court of Intellectual
Property.”
24 At http://www.ipr.chinacourt.org .
25 China Daily, “NPC endorses shift in economic policy,” CHINAdaily.com.cn, March 15, 2006.
26 The China IP Blog, IP Dragon, in a posting on March 10, 2006 entitled “Judicial Court of#p#分页标题#e#
Intellectual Property Announced and Supreme People’s Court Judge’s Surprising Surprise,”
quoted Supreme Court judge Jiang Zhipei as saying “Some 95 percent of product piracy cases
involve violations against Chinese companies, with only about 5 percent stemming from
complaints from foreign companies. So it’s a strange phenomenon that foreign governments, and
some U.S. congressmen, have made very strong complaints about this.”
27 Liu Li, “IPR appeals court in the pipeline,” China Daily, March 10, 2006. The article states that
“Some 20 per cent of IPR disputes in Chinese courts are foreign-related, and in most such cases,
foreign parties are plaintiffs.”
28 上海市第二中级人民法院 (Shanghai Shi Di Er Zhong Ji Ren Min Fa Yuan)
http://www.shezfy.com/main.aspx . The decision was handed down December 31, 2005. As the
decision is under appeal the written reasons have not yet been released.
29 “Starbucks wins Chinese logo case,” BBC News, January 2, 2006.
6
In 1998 Starbucks Corporation registered the trade-mark “星巴克,” the Chinese
characters that it was using to represent its main trademark, “STARBUCKS”.30
Then in 2000 a Chinese company based in Shanghai registered its corporate
name as 上海 星巴克 咖啡 公司 (Shanghai Xingbake Coffee Co.) The Shanghai
Xingbake company considered the trademarks “STARBUCKS” and “星巴克” to
be different from its corporate name. Starbucks Corporation argued that they are
the same.
While Starbucks Corporation won the first round, the decision is under appeal.
Because it is under appeal the court has released only the order, and not the full
judgment. Accordingly the media stories are based on verbal reports and contain
errors and contradictions.31
There is a problem in China with competing merchants registering businesses
incorporating part or all of a well-known trade-mark when starting their business.
When challenged by the trade-mark owner they then claim that their use of the
name is authorized.
A month and a half before the Shanghai case was decided Starbucks won a
similar case in the Qingdao Intermediate People’s Court in Shandong Province.32
The Judge in this case decided that the Chinese version of the “STARBUCKS”
was not a famous mark because it had not been used for a sufficiently long
period of time. Still the Chinese mark was registered so the judge wrote:
被告是在中国工商机关登记注册的外资公司，经过合法注册的企业名
称应当受到法律的保护，但其前提是，该名称为合法取得且不侵害他
人的在先权利，当其使用的字号侵犯了他人的在先权利，并容易导致
相关公众误认时，被告就不能以合法注册，作为免除其侵权责任的抗#p#分页标题#e#
辩理由。(Defendant has registered as a foreign invested
corporation with Chinese Administration of Industry and Commerce.
It is entitled to legal protection only if its’ business name has been
registered when the prior rights of other are not violated. When the
30 “星巴克案美方胜 上海星巴克须更名并登报致歉” (Starbucks US wins victory, Shanghai
Starbucks must change its name and apologize) Xinhuanet January 4, 2006 (in Chinese).
31 “Starbucks wins dispute over name” Toronto Star, Tuesday, January 3, 2006, p.E2 (incorrectly
claiming that the infringer registered its name before Starbucks registered the Chinese version of
its trademark). The BBC article, supra note 27, made the same error.
32 星源公司 (Starbucks Corporation) v. 青岛星巴克咖啡餐饮有限公司 (Qingdao Star Ba Ke Coffee
& Dining Limited), 山东省青岛市中级人民法院 (Shandong Province Qingdao City Intermediate
People’s Court) November 16, 2005
7
prior rights of others are encroached upon and its business name
confuses the public, the defendant is liable and cannot avoid a
claim of infringement based on such registration. )33
In support of this proposition the judge cited the Supreme People’s Court
Interpretation on Trademark Disputes promulgated October 12, 2002 and
effective October 16, 2002. 34
As was noted earlier it is not only famous North American corporations that suffer
this problem. The Taiwanese owned 上海弘奇食品有限公司 (Shanghai Hong Qi
Food Limited) that franchises Chinese style restaurants under the trademark “永
和” (YONGHE) recently defended its mark in two other Chinese provinces.35 And
for Chinese franchisors the problem has existed for sometime.36
2. Chinese Versions of Western Marks
There is a problem with all western trademarks in China that arises in part
because of the unique characteristics of the Chinese language. Chinese does not
have any form of alphabet and uses only about 400 syllables37 to represent
approximately 10,000 characters. This means firstly that a direct phonetic
transliteration of a foreign trademark is very rarely possible in Chinese. It also
means that a particular sound may be represented by a number of characters,
some of which may have entirely unsatisfactory meanings.
Further marks that sound alike to western ears may not be considered
confusingly similar to the average Shanghai resident on the Huaihai Road
omnibus. For example in China Ikea, the Swedish furniture company, has the
33 Translation by author.
34 最高人民法院关于审理商标民事纠纷案件适用法律若干问题的解释 - Interpretations of the
Supreme People’s Court of Several Issues Concerning the Application of the Law to the Trial of
Civil Dispute Cases Involving Trademarks, promulgated October 12, 2002 and effective October#p#分页标题#e#
16, 2006.
35 上海弘奇食品有限公司 v. 徐明人， 张桔兰， 江苏省连云港市中级人民法院 November 8, 2005
(Shanghai Hong Qi Food Limited v. Xu Ming Ren and Zhang Jie Lan, Jiangsu Province
Lianyungang City Intermediate People’s Court)
http://www.jsfy.gov.cn/cpws/cpws_read.jsp?id=978 ; 邱雪伟 v. 上海弘奇食品有限公司， 江西省高
级人民法院 April 17 2006 (Qiu Xue Wei v. Shanghai Hong Qi Food Limited, Jiangxi Province
Higher People’s Court) http://ipr.chinacourt.org/public/detail_sfws.php?id=3010 .
36 See for example 山东金色童年有限公司 v. 周华， 山东省临沂市中级人民法院，September 29,
2002 (Shandong Jinse Tongnian Limited v. Zhou Hua, Shandong Province Linyi City Intermediate
People’s Court) http://www.sdipr.gov.cn/art/2005/07/06/art_3677.html .
37 With the use of tones there are about 1300 distinct syllables available. While there is no
agreement on the precise number of syllables used in English, one estimate suggests about
2,750 out of a possible 11,000. See http://www.ling.ucsd.edu/~barker/Syllables/index.txt
8
Chinese name “宜家” which is transliterated in pinyin as “Yi Jia.” Together these
characters may be translated as “a proper home.” One of its major local
competitors has adopted the mark “爱家” which is transliterated as “Ai Jia” and
means “love home.”
Not only is this apparently tolerated, but one report38 noted that recently on the
opening of a new store Ikea introduced its new slogan “爱的新体验.” The
companion English version was “MORE TO LOVE” but a literal translation would
be something like “a new experience of love.”
The lesson for those wishing to protect their trademark in China is to develop a
Chinese character version of the trademark as soon as possible and to register
both the English and the Chinese character versions. In the cases discussed
earlier Starbucks won in part because it had done this. But many western
businesses have not yet developed a Chinese character trademark.
When Ferraro S.p.A., the Italian maker of chocolates, began selling its
“FERRERO ROCHER” brand chocolates in China in the 1980’s it used the
Chinese name “金莎,” which is transliterated as “Jin Sha,” and which may be
translated as “golden name” or “golden place.” However it never bothered to
register the Chinese trademark in China39, although it registered the Chinese
mark in Taiwan and Hong Kong.
A Chinese dairy company in Jiangsu Province, just north of Shanghai, not only
began to use the mark “金莎” and very similar packaging for its chocolates, which
tasted decidedly inferior to those of Ferrero, but it also applied to register the#p#分页标题#e#
mark. Even though Ferrero successfully opposed the application the Chinese
company continued to use the mark and customer confusion resulted.
Finally in 2003 Ferrero brought an action40 against its Chinese competitor under
China’s Anti-Unfair Competition Law41 Article 5(2) that prohibits businesses from
adopting the packaging or decoration distinctive of well-known goods42 in Tianjin,
38 Dror Poleg, “Bilingual Brands: Love in the time of IKEA” Danwei, May 11, 2006.
39 Emma Barraclough, “Why patience brings rewards in Asia,” Managing Intellectual Property
News, May 1, 2006.
40 意大利费列罗公司 (FERRERO S.p.A.) v. 蒙特 莎 （张家港）食品有限公司， 天津市高级人民法
院，January 9, 2006 (Italian Fei Lie Luo Company (Ferrero S.p.A.) v. Mengtesha (Zhangjiagang)
Food Company Limited, Tianjin City Higher People’s Court)
http://ipr.chinacourt.org/public/detail_sfws.php?id=658 .
41 反不正当竞争法 (Fan Bu Zheng Dang Jingzheng Fa) adopted at the 3rd Meeting of the
Standing Committee of the National People’s Congress on Spetember 2, 1993; Promulgated by
Order No. 10 of the President of the PRC, and effective as of December 1, 1993.
42 Article 5(2) reads: “经营者不得采用下列不正当手段从事市场交易，损害竞争对手: ...
9
a large city that acts as the port for Beijing. In the first hearing in No. 2
Intermediate People’s Court Ferrero lost in part because the Court held that the
packaging was not particularly well-known as being associated with Ferrero, and
the Chinese competitor had heavily marketed its products in China for more than
ten years of co-existence and held the larger market share. It ruled that although
the packaging is similar, it is not so similar as to cause confusion.
Ferrero appealed to the Higher People’s Court in Tianjin. The Court ruled in its
favour for four reasons. Citing the adherence of both China and Italy to the Paris
Convention43 the court ruled that in order to determine what is “well-known,”
reference cannot only be had to the domestic market. Secondly the Court noted
that in another action the Chinese company had been unable to prove that it had
independently created its packing design, and held that the packaging had been
copied from Ferrero’s product.
Thirdly the court said:
根据诚实信用和公认的商业道德准则，知名商品应当是诚实经营的成
果。因此，在法律上不能把使用不正当竞争手段获取的经营成果，
作为产品知名度的评价依据。( Based on the principles of good faith
and recognized business ethics, “well-known” status for a product
must be achieved through management’s own efforts. Therefore
unfair competition as specified in law cannot be used as a method#p#分页标题#e#
for management to achieve “well-known” status for a product.)44
Accordingly because the Chinese company copied Ferrero’s packaging it cannot
use its resulting status in China against Ferrero. Finally it cited Article 10bis (2) of
the Paris Convention in support of the proposition that Article 5(2) of China’s
Unfair Competition Law should be read liberally. 45
（二）擅自使用知名商品特有的名称、包装、装潢，或者使用与知名商品近似的名
称、包装、装潢，造成和他人的知名商品相混淆，使购买者误认为是该知名商品；(Operators shall
not adopt any of the following unfair means to carry on transactions in the market and cause
damage to competitors: … (2) using, without authorization, the names, packaging or decoration
peculiar to well-known goods or using names, packaging or decoration similar to those of wellknown
goods so that their goods are confused with the well-known goods of others, causing
buyers to mistake them for the goods of others).
43 Paris Convention for the Protection of Industrial Property, made March 20, 1883, as revised at
Brussels on December 14, 1900, at Washington on June 2, 1911, at The Hague on
November 6, 1925, at London on June 2, 1934, at Lisbon on October 31, 1958, and at Stockholm
on July 14, 1967, and as amended on September 28, 1979.
44 Translation by the author.
45 Article 10bis (2) reads: “Any act of competition contrary to honest practices in industrial or
commercial matters constitutes an act of unfair competition.”
10
Although Ferrero was successful in the end, had it registered its Chinese
character trade-mark initially it would have avoided the expense and loss of
market share that it has endured.
3. Contributory Infringement
Another major decision in this area came from the Beijing No. 2 Intermediate
People’s Court46 when five international design companies sued the landlord of
Beijing’s famed ‘Silk Street Market’ (and the relevant individual tenants of stalls
selling counterfeit goods) on the grounds that it had contributed to the
infringement of their trademarks by knowingly allowing counterfeit goods to be
sold by its tenants. The decisions in favour of the trademark owners were upheld
by the Beijing Higher People’s Court47 in mid April of 2006. These decisions are
final.
In each of the cases one of the key questions was whether it had been shown
that the landlord was aware of the infringement by its tenant and had become
liable for such infringement. Article 50 of the Regulations for the Implementation
of the Trademark Law48 provides that it is an infringement if it can be shown that
the defendant is “intentionally providing facilities such as storage, transport,
mailing, concealing, etc. for the purpose of infringing on another person’s#p#分页标题#e#
exclusive right to use a registered trade-mark.”
The Beijing Higher People’s Court pointed out that the landlord had provisions in
the leases that prohibited the sale of counterfeit goods on pain of termination.
The Plaintiffs had in each case first purchased goods from the tenant then had
their lawyers courier a letter to the landlord. In the opinion of the court the letter
fixed the landlord with knowledge of the infringement.
46 北京市 第二 中级人民法院 (Beijing Shi Di Er Zhong Ji Ren Min Fa Yuan)
http://bj2zy.chinacourt.org/ .
47 The five decisions are: 北京秀水街服装市场有限公司 v. 路易威登马利蒂有限公司 (Louis Vuitton)
No. 335; 北京秀水街服装市场有限公司 v. 普拉达有限公司 (Prada) No. 333; 北京秀水街服装市场有限
公司 v. 香奈儿股份有限公司 (Chanel) No. 334; 北京秀水街服装市场有限公司 v. 古乔古希股份公司
(Gucci) No. 336; 北京秀水街服装市场有限公司 v. 勃贝雷有限公司 (Burberry) No. 337; all on April 18,
2006, 北京市 高级人民法院 (Beijing Shi Gao Ji Ren Min Fa Yuan)
http://www.bj148.org/bureau/court/bjgfcon.htm . See also “Silk Street Market Loses Appeal in
Trademark Case,” China Daily, April 19, 2006.
48 商标法实施条例 (Shang Biao Fa Shishi Tiaoli) promulgated by decree No. 358 of the State
Council on August 3, 2002, and effective as of September 15, 2002), Article 50(2) reads:
第五十条有下列行为之一的，属于商标法第五十二条第（五）项所称侵犯注册商标
专用权的行为：….
（二）故意为侵犯他人注册商标专用权行为提供仓储、运输、邮寄、隐匿等便
利条件的。
11
Specifically the Court stated:
但秀水街公司在收到了律师函后，并未及时与律师取得联系，亦未采取任何有效措
施制止涉案销售侵犯注册商标专用权的商品的行为，致使原审被告潘祥春仍能在
此后一段时间内继续实施销售侵犯路易威登马利蒂公司注册商标专用权的商品的行
为，秀水街公司主观上存在故意，客观上为原审被告潘祥春的侵权行为提供了便
利，故一审判决对此认定正确。(But after receiving the letter from the
lawyer [for Vuitton], the Silk Street Company [the landlord] did not
promptly contact the lawyer nor take any effective action to keep it
from being involved in the sale of trademark infringing goods, and
allowed the defendant Pan Xiang Chun [the tenant] to continue the
sales of goods infringing Vuitton’s trademark. The Silk Street
Company objectively and intentionally abused its authority and
assisted Pan Xiang Chun, and therefore the first trial correctly
recognized this.)49
The damages awarded to each of the plaintiffs however were only about#p#分页标题#e#
$2,500.00 USD. Still the cases show that with careful preparation and
presentation of the evidence the courts are willing to enforce the laws to protect
trademarks.
E. Franchising
1. Laws, Regulations and Guidelines
The New Franchise Measures50 have now been in effect for over a year. A
number of foreign franchisors have expressed concerns about certain aspects of
the New Franchise Measures, and in particular the requirement for two outlets to
have been operated for at least one year.
The Chinese Ministry of Commerce (“MOFCOM”) had said that it would release
guidelines in the Fall of 2005, but at the time of writing a draft “Franchise
Managerial Standard” was still being reviewed.51 However the Chinese team that
reviewed it described it as very practical and as meeting the needs of China’s
franchise development.52
In March 2006 there was a reprint of a news item on the CCFA web site
suggesting that the drafting of the proposed “Commercial Franchise
49 Translation by the author.
50 Supra note 1.
51 CCFA, “Assessment Meeting on Managerial Standard held successfully in Beijing,” Press
release, English Version November 14, 2005; Chinese version October 26, 2005.
52 Id., This statement appears in the Chinese version only.
12
Administration Regulation (Tiao Li)” had been completed and that a draft may
make an appearance this year.53 The news item goes on to suggest that the draft
regulation will specify clearly the qualifications required to be a franchisor in
China.
And most recently there was a news story on the internet stating that the
franchise Tiao Li was under consideration by the State Council.54 The article
goes on to state that the new Tiao Li will contain further specifications regarding
the qualifications required of a franchisor and for disclosure to prospective
franchisees.
2. Cases in General
China is a civil law jurisdiction, and the structure of its legal system is often
modeled on that of Germany. In civil law systems a primary source of law is
doctrine55 rather than cases, and consequently civil law jurisdictions tend not to
make decisions in particular cases publicly available.
While this particular aspect of civil law may work in developed legal systems, it
has come to be considered an obstacle to the development of the rule of law,
transparency and consistency in transitional civil law systems such as the
Russian Federation and the People’s Republic of China.
Russia is now setting up a single digital network that is supposed to link all courts
by the end of 2006 so that internet users will be able to track cases from filing to
verdict online.56 A proposed law has been submitted to the Duma that would
require judges to publish their verdicts and post them on the internet. As noted#p#分页标题#e#
earlier China is now posting many intellectual property cases online.57
53 “商务部条法司：商业特许经营管理条例年内颁布,” (Ministry of Commerce Regulation
Department: Commercial Franchise Administration Regulation (Tiao Li) will be Promulgated this
Year), March 10, 2006, at http://www.ccfa.org.cn/end.jsp?id=25588 . In Chinese law a “tiao li,”
while technically still translated as “regulation,” has a higher and more formal status than the
current “guan li ban fa.”
54中国百姓创业网, “解读特许经营市场法规” (Interpretation of Franchising Regulations ) 2006-07-20. In
Chinese only).
55 These might be described as learned writings. In a Chinese context an example would be the
article by 汪传才 (Wang Chuan Cai), 特许经营合同中不竞争条款研究 (Study of the Non-Compete
Provisions of Franchise Agreements) online at www.lawpress.com.cn/newsdetail.cfm?iCntno=2252 .
Mr. Wang is an Associate Professor at Jinan University in Shenzhen, in Guangdong Province.
The article makes extensive use of American materials and cases, and in particular Peter J.
Klarfeld, ed. Covenants Against Competition in Franchise Agreements (Chicago: American Bar
Association Forum on Franchising, 1992.
56 Nabi Abdullaev, “Supreme Court Touts Automated Justice,” Moscow Times, Tuesday, April 11,
2006. The portal will be http://www.sudrf.ru .
57 See supra note 24.
13
Many courts in China now maintain their own web sites, although there does not
appear to be a comprehensive policy behind this development as in Russia.
Reports of a number of franchise cases can now be found online on such court
web sites. Commentaries on such cases and on specific topics written by
Chinese lawyers can now also be found on line.
The next part of this paper discusses some of the cases that are available, many
of which were decided since the coming into force of the New Franchise
Measures. Although in a civil law system cases do not have value as precedents
that bind judges the next time that the same question arises, cases are collected
by lawyers in civil law systems. They are submitted to judges along with the
evidence for their persuasive value. This is also done in China, and a review of
these cases will also provide some insight into what judges consider relevant in
franchise disputes in China.
3. Failure to Disclose
In 黄海燕 (Huang Haiyan) v. 北京汉森 美容有限公司 (Beijing Hansen
Cosmetology Limited Co.) decided in Beijing on November 16, 200558 the
plaintiff, a thirty-two year old woman, entered into the franchise agreement on
January 2, 2005. She paid a deposit of 30,000.00 Yuan and a franchise fee of
150,000.00 Yuan (about $3,750.00 USD and $18,700.00 USD respectively) to
set up a cosmetics service for men in Chengdu, a large city in Sichuan Province#p#分页标题#e#
in southwest China. Soon after the franchisee discovered that the trademark to
be used was not actually registered, that it was not an international brand as
represented and that there were problems with the supply of product that had not
been disclosed.
The court noted that the New Franchise Measures required written disclosure of
basic information in advance and found the franchisor to have intentionally
violated this regulation. The court described the purpose of the required
disclosure as follows:
该信息披露义务的要旨在于使加盟商能够在掌握了各种信息的程度上作出
正确的判断，是决定加盟商能否客观认识特许经营权及能否公平交易的基
础。信息披露的目的在于防止欺诈、促进公众的整体利益和促进投资分
析。因此，在特许经营中，特许人违反信息披露义务，也构成欺诈。(The
essence of the duty to disclose is to enable the prospective
franchisee to decide whether it understands the business objectives
and its rights, and whether the franchise offer is fair. The goal of
58 北京潮阳区人民法院(Beijing Chaoyang District People’s Court) （2005）朝民初字第 24486 号
(File No.).
14
such disclosure is to prevent fraud and therefore to promote
investment analysis and the general public welfare. Therefore in
franchising if a franchisor violates the disclosure requirement, this
also constitutes fraud.)59
Citing Articles 54(2) and 58 of China’s Contract Law60 the court declared the
franchise agreement to be therefore lacking in fairness, rescinded the agreement,
and ordered the return of the plaintiff’s money.
4. Lack of Qualifications to be a Franchisor
In 北京金安泰经贸有限责任公司 (Beijing Jin’an’tai Economics and Trade Ltd.) v.
北京联通实华信息网络有限责任公司 (Beijing Liantong Shihua Information
Network Ltd.) 61 the parties signed a franchise agreement to open an internet
café in 2002. Later that year for public policy reasons the government stopped
accepting or processing applications for such cafes. The franchisee sued for a
return of its funds and lost at trial when the court accepted the defense of force
majeure.
It then appealed and won. The appeal cited Article 9 of China’s Contract Law62
which stipulates that a party making a contract must have the corresponding
capacity for civil rights and civil conduct. The franchisor did not have the
authorizations necessary for an internet café. The commentator, Qian Li Hong,
suggests that this case illustrates that concluding a contract without such
authority is a breach of the principle of “good faith,” a primary basis of China’s
Contract Law.
If a company that lacks the qualifications required by the New Franchise#p#分页标题#e#
Measures to be franchisor enters into a franchise agreement not all courts see it
as a breach of the good faith provisions.
In杨素芳 (Yang Su Fang) and 干裕源 (Gan Yu Yuan) v. 张家麟 (Zhang Jia Lin)63
the plaintiffs signed a series of contracts with the defendant, a resident of Taiwan,
to open two tea shops and to buy their supplies from the defendant in 1999. The
defendant supplied both the trademark and the training. The second shop failed
and the second plaintiff requested a refund of the fees.
59 Translation by author.
60 Supra note 21.
61 钱丽红 (Qian Li Hong), 违反诚实信用原则订立合同给对方造成损失应承担缔约过错责任
(Franchisor Liable for Not Making Agreement in Good Faith and Causing Damage to Franchisee) ,
posted June 7, 2005 on http://hkfy.chinacourt.org , now no longer available.
62 Supra note 21.
63 广东省佛山市中级人民法院 (Guangdong Province Foshan City Intermediate People’s Court)
No. 15, April 22, 2005, available at: http://www.fszjfy.gov.cn/shownews.asp?newsid=8591 .
15
The case was first tried in 2002 and then appealed. Although the contract was
described as a “supply contract” both courts came to the conclusion that
substance was more important than form, and that this was really a franchise
agreement. However the defendant did not have the qualifications required of a
franchisor under the previous franchise measures.
Thus the Intermediate People’s Court on retrial cited Article 9 of the Contract
Law64 for the proposition that to enter into a contract a party must have the
corresponding capacity for civil rights and civil capacity. As the defendant was
not qualified to be a franchisor the agreements were invalid.
In China there are also restrictions on foreign investors as to the types of
industries that they can enter. Previously the distribution sector was restricted
and foreign invested enterprises were not allowed to enter a sector where China
considered its domestic players to be weak. Until December 11, 2004 franchising
was restricted to domestic enterprises.
This restriction was key to the decision in 韩美艳 (Han Mei Yan) v. 北京印气巴谊
印气健美有限公司 (Beijing Yin Qi Ba Yi Yin Qi Jian Mei Limited).65 The plaintiff
franchisee entered into a franchise agreement with the defendant on July 2, 2004
to operate a cosmetics store under their brand and paid the initial fee of 100,000
Yuan (about $12, 485.00 USD), and agreed to pay a further 641,250 Yuan (about
$80, 063.00 USD) for equipment later in two installments. When the further
payments were not made, the lawyer for the franchisor defendant sent the
plaintiff a letter terminating the contract for non-payment and advising that the
initial payment already made would be retained.
The franchisor defendant was incorporated on February 18, 2003 as a wholly#p#分页标题#e#
foreign-owned enterprise66 (“WFOE”) to operate a business in the health sector
providing cosmetology services, and to provide skill training and management
services. The trademark was not registered until March 28, 2005. But at the time
of the decision it still did not have the approval of the authorities to be engaged in
64 Article 9 states: 当事人订立合同，应当具有相应的民事权利能力和民事行为能力。当事人依法可
以委托代理人订立合同 (The parties shall, when making a contract, have corresponding capacity
for civil rights and civil conduct. A party may, in accordance with the law, entrust an agent to
make a contract).
65 北京市朝阳区人民法院(Beijing Chaoyang District People’s Court) No. 5967, August 16, 2005,
available at: http://www.lawyer3721.net/index.php3?file=detail.php3&kdir=1657 .
66 The decision describes the enterprise as a 外商独资经营 or “foreign sole-ownership
management” enterprise rather than “外资企业” or “wholly foreign-owned Enterprise.”
16
franchising. As was mentioned earlier franchising was not even opened to
WFOEs until December 11, 2004.67
As the Court in this case stated:
根据国务院《指导外商投资方向规定》及其批准的《外商投资产业指导目录》，特
许经营属于中国逐步开放的产业，列为限制类外商投资项目，并明确于2004 年12
月11 日后允许外商投资。也就是说，在2004 年12 月11 日之前，国家不允许外商
投资企业以特许经营方式从事商业活动。(According to the “Regulations
regarding Foreign Entity Investment in Industry” of the State
Council and the “Catalogue Guiding Foreign Investment in
Industry,” franchising is one of the industries that China gradually
opens up, and it was listed as ‘restricted.’ It is clear that foreign
investment is permitted after December 11, 2004. In other words,
before December 11, 2004 China did not permit foreign invested
entities to be engaged in franchising.68
Accordingly the Court found that the franchisor had violated these requirements.
Based on Article 52(5) of the Contract Law69 and Article 10 of the Interpretations
of the Supreme People's Court of Certain Issues concerning the Application of
the Contract Law70 the franchise agreement was held invalid and the money was
ordered returned to the plaintiff franchisee.
67 See 外商投资商业领域管理办法(Waishang Touzi Lingyu Guanli Ban Fa – Administrative
Measures on Foreign Investment in Commercial Sectors), approved April 16, 2004, Ministry of
Commerce Regulation No. 8, 2004. This was to fulfill part of China’s commitment to remove
restrictions on entry to markets within three years of entry into the WTO. The third anniversary of#p#分页标题#e#
such entry was December 11, 2004.
63 Translation by author
69 Supra note 21. 第五十二条 有下列情形之一的，合同无效：….（五）违反法律、行政法规的强
制性规定。(A contract is invalid under any of the following circumstances: … (5) mandatory
provisions of laws and administrative regulations are violated).
70最高人民法院关于适用《中华人民共和国合同法》若干问题的解释（一）（中英文对照）
(Interpretations The Supreme People's Court of Certain Issues concerning The Application of The
Contract Law of The People's Republic of China(Part One) adopted at the 1090th Session of the
Adjudication Committee of the Supreme People''s Court on December 1, 1999, and effective as
of December 29,1999): 第十条 当事人超越经营范围订立合同，人民法院不因此认定合同无效。但
违反国家限制经营、特许经营以及法律, 行政法规禁止经营规定的除外。(Article 10 Where the
parties entered into a contract the subject matter of which was outside their scope of business,
the People’s Court shall not invalidate the contract on such ground, except where conclusion of
the contract was in violation of state restriction concerning, or licensing requirement for, a
particular business sector, or in violation of any law or administrative regulation prohibiting the
parties from participation in a particular business sector).
17
A lawyer in Beijing71 had predicted in 2005 that the courts would find that
WFOEs could not legally be engaged in franchising in China until after December
11, 2004, 72as the court found in this case. His articles on this topic have been
posted in several places on the internet. He identifies this case as the first
decision on this issue.73
More recently he has gone further and suggested that a foreign franchisor
awarding a master franchise directly to a Chinese registered corporation, without
going through a foreign invested enterprise (“FIE”), may be in breach of the New
Franchise Measures as well as the laws regulating foreign investment.74 His
reasoning is that if the foreign investment laws previously restricted foreign
investment in franchising, as the Beijing Chaoyang District People’s Court has
found, then it is illegal to now do so other than through an FIE that complies with
the laws and regulations. In other words foreign investment laws and regulations
should govern whether or not the grant of a master franchise to a Chinese
corporation constitutes a foreign investment.
In contrast to this line of cases, previously the failure to comply with the relevant
franchise measures did not completely invalidate the franchise agreement.
In 杭州曼其服饰有限公司 (Hangzhou Graceful It Clothing Limited) v. 国家工商行
政管理总局商标评审委员会(State Administration for Industry and Commerce,#p#分页标题#e#
Trademark Office, Appraisal Committee) and 深圳市曼其投资发展有限公司
(Shenzhen Graceful It Investment Development Limited)75 the Beijing No. 1
Intermediate People’s Court had to deal with this issue in respect of the previous
Franchise Measures (the “Old Franchise Measures”).76
The Shenzhen company, the third party, was registered on June 30, 1994. On
September 16, 1999 it entered into a franchise agreement with Qi Wenrong, the
71 林晓 ， 北京博融律师事务所 (Lin Xiao, Bejing Borong Law Office).
72 See 林晓，“特许连锁系统的崩溃――当前特许经营合同无效化的危机,” (Lin Xiao, Franchise
Systems Collapse – The Crisis Arising out of the Invalidity of Current Franchise Agreements)
available on line at http://www.law-lib.com/lw/lw_view.asp?n0=4107 .
73 林晓，”述评：外资违法违规从事特许经营第一案判决 “ (Commentary: First Decision Holding a
WFOE Engaging in Franchising to Be Illegal) available at: http://www.lawlib.
com/lw/lw_view.asp?n0=5818 .
74 林晓，当前国际特许面临的法律问题，(Lin Xiao, Current International Franchise Practices Face
Legal Test) available at: http://www.law-lib.com/lw/lw_view.asp?no=5861 .
75 北京市第一中级人民法院(Beijing City No. 1 Intermediate People’s Court) No. 727
(Administrative Judgment), December 12, 2005.
76商业特许经营管理办法（试行）(Shangye Texujingying Guanli Ban Fa (Shi Xing )) - Measures
for Administration of Commercial Franchise (Trial Implementation [or Proposed]) promulgated by
the former Ministry of Internal Trade on 14 November, 1997.
18
legal representative of the Plaintiff, the Hangzhou company. Qi Wenrong then
registered the Plaintiff company on October 13, 1999.
The Plaintiff then registered the trademark “曼其” for use with respect to clothing
by an application made December 25, 2000 and approved and registered on
February 28, 2002. On April 12, 2002 the third party (the Shenzhen company)
objected to the registration and requested its cancellation.
The Trademark Appraisal Committee ruled on June 15, 2005 that the Plaintiff’s
registration should be struck out, in part because the registration violated Article
15 of the Trademark Law that prohibits agents or distributors from registering the
trademarks of their principals without proper authorization.77
The Plaintiff appealed this decision. On appeal it argued that the franchise
agreement signed on October 13, 1999 between the Shenzhen company and the
Plaintiff’s principal, Qi Wenrong, was invalid because it was not made in
compliance with the 1997 Franchise Measures for Trial Implementation. Under
Article 52(5) of the Contract Law this makes the franchise agreement invalid.
Therefore the Plaintiff was not the agent or distributor of the Shenzhen company,#p#分页标题#e#
and could register the trade-mark in its own name under China’s first-to-register
system.
The court did not accept this argument, and added that it was clear from the
evidence that the Shenzhen company was already using the mark. Thus the
application by the Plaintiff was also in violation of Article 31 of the Trademark
Law.
5. Non-Payment of Royalties and Penalty Clauses
The autonomy of the parties to make their own contract is something relatively
new to China, but the courts do respect that right. In 上海金鹰广告公司
(Shanghai Golden Eagle Advertising Company) v. 俞晓东(Yu Xiao Dong)78 the
parties entered into a franchise agreement for the development service for four
brands to run from November 16, 2000 to October 31, 2003. The royalty was
40,000 Yuan per year (about $5,000.00 USD) payable in quarterly installments. If
the franchisee breached the agreement the franchisee had to pay the franchisor
a penalty of two year’s royalties or 80,000.00 Yuan.
77 商标法 -第十五条 未经授权，代理人或者代表人以自己的名义将被代理人或者被代表人的商标进
行注册，被代理人或者被代表人提出异议的，不予注册并禁止使用。 (Trademark Law – Article 15
Where an agent or representative, without authorization of the client, seeks to register in its own
name the client’s trademark and the client objects, the trademark shall not be registered and its
use shall be prohibited).
78上海市浦东新区人民法院 (Shanghai Pudong New Development Area People’s Court) No. 1,
May 18, 2005, available at: http://feilan.com/showarticle.asp?id=1492 .
19
The plaintiff fulfilled its obligations but the defendant fell behind in the payment of
royalties. On June 25, 2002 they agreed to terminate the franchise agreement,
but the defendant still owed 25,000.00 Yuan. When the defendant sought to
avoid payment of the balance, the parties ended up in a series of trials.
With respect to royalties owed the Shanghai Pudong Court stated that:
本院认为，原审原、被告之间签订的“特许加盟经营协议书”并未违
反法律强制性规定，应当确认有效，双方均应依约严格履行。之后签
订的“终止特许加盟协议”亦系双方真实意思表示，该协议明确于
2002 年6 月25 日终止“特许加盟经营协议书”，故原审被告应当支付
截至该日的相应经营使用费。(This Court is of the opinion that the
Franchise Agreement is valid if both parties signed the Franchise
Agreement and its provisions do not violate the mandatory
provisions of any laws, and accordingly both sides should perform
strictly as agreed. The parties both having later signed the
Franchise Termination Agreement it is clear that the Franchise#p#分页标题#e#
Agreement was terminated on June 25, 2002, and that therefore
the defendant must pay the royalties up to this date).79
However the court thought that although the penalty clause was valid, a penalty
of 80,000 Yuan on a debt of 25,000 Yuan was excessive, and reduced it to
15,000 Yuan.
In the Fall of 2003 a case was decided where the franchisee claimed that it had
not received all the support that it was entitled to. In 北京便宜坊烤鸭集团有限公
司(Beijing Pian Yi Fang Roast Duck Limited) v. 北京龙成科工贸公司 (Beijing
Long Cheng Ke Gong Mao Company)80 the parties entered into an agreement on
June 16, 2000 to set up a restaurant and operate it for five years. The royalty
was 120,000 Yuan in the first year, and increased 5% each year thereafter. The
agreement also provided for a 5% per day additional penalty for late payments.
The restaurant was set up but the defendants were continually behind in their
royalty payments, so the plaintiff sued. The defendants countersued that the
plaintiff had not fulfilled certain obligations with respect to the trademark and
such failure had caused them heavy losses.
79 Translation by the author.
80北京市第二中级人民法院(Beijing City No. 2 Intermediate People’s Court) No. 3409, September
19, 2003, available at:
The court held that the two defendants had not provided sufficient evidence to
prove their objections with respect to the trademark, nor to disprove the plaintiff’s
contention that the defendants had not provided the required co-operation to
complete the trademark procedures. They therefore had to pay damages and
interest.
However the court concluded that because the penalty for delayed payment was
far higher than the legal standard the provision was invalid.81
5. Yonghe Statement of Claim
Finally on June 6, 2005 a suit was filed by a franchisee against 上海永和大王餐
饮有限公司 (Shanghai Yonghe Big King Dining Company Limited) and a
management consulting company in Shanghai No. 1 Intermediate People’s Court
and posted online, presumably by the franchisees’ lawyer.82 The franchisor is
well-known in China and is related to a Taiwanese parent company. It has a
trade dress similar to KFC but has a menu featuring Chinese cuisine.
The franchise agreement was signed on February 10, 2003 to open another
location in Shanghai and pays a franchise fee of 620,000.00 Yuan (about
$77,360.00 USD). It is alleged that the franchisor was responsible for choosing
the location and therefore responsible for the losses that at May 31, 2005 totaled
668,513.12 Yuan. The franchisee sent out a letter terminating the agreement and
requesting compensation.
The pleadings argue that before December 11, 2004 a foreign-invested
enterprise (‘FIE”) could not franchise in China because it was not a permitted#p#分页标题#e#
activity; but after December 11, 2004 an FIE could franchise provided that
franchising was approved as part of its activities. Accordingly at the time when
the franchise agreement was signed, the franchisor did not have the civil capacity,
as was successfully argued in the case mentioned previously. The pleadings
specifically cite the Supreme People’s Court’s commentary on interpreting the
Contract Law83.
Secondly the pleadings argue that because the franchisor does not have certain
registered trademarks, as required by the previous Franchise Measures and the
new ones, the franchisor has violated Articles 40, 42 and 48 of the Contract
81 The Supreme People’s Court issues ‘guidelines’ to the courts regarding penalty standards.
82 上海永和大王餐饮有限公司 (Shanghai Yonghe Big King Dining Company Limited) Civil
Indictment (Statement of Claim) posted at www.fclaw.com.cn/na.asp?id=668&title=特许经营纠纷 .
83 Supra note 70.
21
Law84. Article 42 imposes liability for a pre-contractual duty of good faith and
requires disclosure of key facts.85
Finally it is argued that the franchise agreement violates the fairness principle of
the Contract Law because the franchisee owns the assets but the franchisor
stipulates the method of operation, and because a royalty is charged for a license
to use a trademark that is not registered.
F. Conclusion
84 Supra note 21.
85第四十二条 当事人在订立合同过程中有下列情形之一，给对方造成损失的，应当承担损害赔偿
责任： （一）假借订立合同，恶意进行磋商； （二）故意隐瞒与订立合同有关的重要事实
或者提供虚假情况； （三）有其他违背诚实信用原则的行为. (Article 42: In the making of a
contract, the party that falls under any of the following circumstances, causing thus loss to the
other party, shall hold the liability for the loss. (1) engaging in consultation with malicious intention
in name of making a contract; (2) concealing intentionally key facts related to the making of a
contract;(3) taking any other act contrary to the principle of good faith.) In Québec and Germany
such provisions have been interpreted as requiring a form of pre-contractual disclosure of
material facts. In Québec see Cadieux c. St-A. Photo Corporation, Cour supérieure 500-05-
006829-947 (le 9 avril 1997) « La bonne foi est le fondement de toute relation contractuelle. Elle
doit gouverner la conduite des parties…La réticence ou l’omission de lui révéler la réalité
entournant le studio a vicié le consentement donné: ce motif justifie l’annulation du contract de
franchise et le remboursement des sommes versées. » (Good faith is the basis of all contractual#p#分页标题#e#
relations. It should govern the conduct of the parties…The hesitation or omission of the defendant
[franchisor] to reveal the reality regarding the studio vitiated the consent given: this justifies the
annulment of the franchise agreement and the reimbursement of payments made.) In Germany
see Landgericht Kaiserslautern – Aktenzeichen 4 O 607/00, 26 Mai 2004 „Die Klägerin hat aus
dem Gesichtspunkt der culpa in contrahendo wegen Verletzung vorvertraglicher Aufklärungsund
Informations- pflichten einen Anspruch gegen die Beklagte auf Schadensersatz. Der
Franchisegeber hat bei Verhandlungen über den Abschluss eines Vertrages die Verpflichtung,
den anderen Teil über Umstände aufzuklären, die zur Vereitelung des Vertrages zweckgeeignet
sind und für die Entschließung des anderen Teils von wesentlicher Bedeutung sind (vgl. OLG
Rostock 1996, 13 ff. m. w. N.). Zu solchen Umständen gehören, ohne dass es weiterer
Begründung bedarf, insbesondere Angaben über die Gewinnerwartung und
Rentabilitätsberechnung.“ (The Plaintiff has a claim against the Defendant based on the doctrine
of culpa in contrahendo because of its breach of its pre-contractual duty to provide education and
information, which breach gives rise to compensation. Before concluding a contract the
Franchisor has an obligation to explain to the other party facts that would thwart the purpose of
the contract and that are of substantial importance to the other party in the resolution of the
negotiations (see Rostock 1996, ff. m.w.N.). Such circumstances include particularly, without
further justification, information regarding expected profits and financial feasibility.) Translations
by the author.
22
One of the more notable aspects of this paper is simply that there are now
sufficient cases easily available that it could be written. For both Chinese and
foreigners alike the Chinese legal system is becoming more transparent.
The review of the trademark cases suggests that Chinese courts will enforce
trademark rights when they are presented with the appropriate evidence. It
suggests that notwithstanding China’s reputation for counterfeits and piracy,
intellectual property rights can be protected if an extra effort is made on the part
of the owner to secure and enforce them.
The review of the franchise cases raises new questions for foreign franchisors
about the validity of franchise agreements entered into before December 11,
2004 that may cause considerable concern. It also raises questions about the
method of entry for a foreign franchisor under the New Franchise Measures. It
would appear that the prudent way for a foreign franchisor to enter the Chinese
market is to set-up a WFOE that is registered to conduct franchising activities. In
this regard it will be necessary to monitor the development of further Chinese#p#分页标题#e#
cases and regulations on the subject of foreign entry into franchising, including
the Yong He case.
It would be useful to have further commentary from Chinese qualified lawyers on
this topic. A recent news item quoting a Beijing lawyer suggests that the
forthcoming Tiao Li will specify that foreign franchisors that require the payment
of funds outside of China will have to register with the government and evidence
the operation of two successful units in China.86
86 Supra note 54, “特许经营企业必须到当地经贸管理部门办理备案登记，境外企业或跨境交付的
特许企业必须到国家主管部门申请备案，并提交在境外有两个以上成功运营店铺的资料.”
23
Doing Business in China
Insights from an In-House Perspective
ABA Annual Meeting
August 4, 2006
Greg S. Slater
Senior Trade Counsel
Intel Corporation
Administrative Law
Transparency Generally
• WTO accession and market reforms have resulted in hundreds of new
laws and thousands of new regulations
• China has no APA or federal register equivalent, which creates
significant problems for industry
– Many central government ministries are honoring their WTO commitment to
publish new laws, but there still are major gaps
– Challenge is both obtaining drafts and having a reasonable comment period
– Ministries / agencies are at different levels of understanding re the
importance of getting industry input up front
• The Legislative Affairs Office (“LAO”) is working on beefing up its
administrative law and standardizing public participation rights
– LAO has reviewed many different legal systems, yet it can’t just copy
Western methods in dealing with the rights/interests of 1.3 billion people
– Ensuring transparency with draft laws/regulations is a priority but will take
time due to China’s demographics and its different level of resources
– China’s laws and even its regulations tend to be flexible (broadly worded),
yet China eventually will also need a right to challenge outdated regulations
Administrative Law
Public Participation Rights
• Case Study: Several years ago, China’s Ministry of Information and
Industry (“MII”) issued the computer products return, repair and
replacement (“3R”) regulation
– No opportunity for industry to be heard was given
– The regulation offered a lower level of benefits to the consumer than Intel’s
worldwide warranty program
– But it still required a significant change in our program to accommodate 3R
specific requirements in China
– We also had to set up a customer service center in China
– These additional costs of doing business could have been avoided#p#分页标题#e#
– The failure of better “collaboration” between private industry & government
to develop effective and efficient regulations leads to non-compliance
• Overcoming obstacles: Consider telling clients to proactively educate
the ministries / agencies that impact their industry on their challenges
– E.g., help relevant government officials understand how you or your client
does business, maybe even before a pending regulation
– Goal is to avoid problems down the road (An EHS example follows)
Environmental, Health & Safety
• PRC quickly moving to adopt modern (and beyond) EHS standards due
to deteriorating environment from rapid industrial growth
– A number of new EHS laws / regulations are ahead of the PRC government’s
technical knowledge, expertise & experience – For e.g.,
• Environmental Impact Assessment Law
• Proposed SAR limits for products emitting RF emissions
• Proposed discharge standards for semiconductor industry
– If enforced as initially drafted, they would create significant operational
obstacles for many companies (e.g., energy efficiency regulation)
• Case Study: PRC’s “RoHS like” regulation
– China has proposed to ban certain substances (e.g., lead, etc.) in electronic
products sold in China
– Proposal is built on Europe’s RoHS directive, but initially was more stringent
– We inserted ourselves very early in the process and proactively advised MII
of technical issues concerning the bans and impact on all companies
– This gave us the ability to persuade MII of the need for certain exemptions
similar to those in the EU’s RoHS directive
– Result: MII rule will be done in 2 yrs v. 10+ yrs for EU’s directive (we
enjoyed more transparency with MII than with EU officials)
– Our Strategy: Fill in compliance details with an international standard
Technology Standards
China’s Strategy
• Standards are critical in our industry as they open up markets,
ensure compatibility & create new products
• China understands this well and wants to be a world leader in
both technology and standard setting by 2020
– It can’t effectively participate in international technology standards
• Lacks intellectual property (IP)
– PRC local standards starting to blossom / examples:
• Audio-video coding & decoding (AVS)
• 3G mobile telephony (TD-SCDMA)
• Like other countries, PRC’s strategy is not monolithic
– Some officials understand and follow WTO rules in their desire (and
right) to promote local technologies
– Others are more nationalistic
• They want to undermine foreign IP triggered by standards due to high#p#分页标题#e#
royalty rates in some cases (e.g., DVD machines)
• And thus use standards to protect local technologies from competition
– This can create serious problems for foreign products
Technology Standards
Adapting to the System
• Challenges as a foreign company
– Gaining full membership rights in relevant Chinese standard
setting bodies
– Persuading the standard body to adopt reasonable, fair and
transparent IP policies re:
• Royalties (e.g., RAND v. capped at low rate or RF?)
• IP disclosures (e.g., pending patent applications?)
– Persuading the government to take a back seat and let
market forces work to choose the best technology
• “Voluntary” means not mandatory, but…
• Heavy involvement by SAC, MII and others
• Yet it can be done!
– AVS is a good (not perfect) example of ability to balance
interests of IP holders, implementers & other stakeholders
Trade
WTO Status
• China has made MAJOR changes as a result of WTO accession
and market reforms -- A few examples:
– Local content measures and export performance requirements are
largely gone
– Many tariffs and quotas eliminated / reduced
– IP laws revised to reflect majority of TRIPS obligations
• Many PRC officials are still learning what WTO requires, which
creates trade issues and also opportunities
– E.g., MII’s notice to WTO TBT committee that IP embedded in
international standards creates a trade barrier
– China has made changes to laws and regulations that it erroneously
thought were compelled by WTO requirements
• As with other countries, China is quickly learning how to play
the trade game
– E.g., not having signed the Government Procurement Act, it can
discriminate against foreign product in its purchases
Trade
Overcoming Obstacles
• Case Study:
– MII significantly reduced the 17% value added tax for
semiconductors “made in China” to promote local IC industry
– Some PRC authorities knew it was a clear GATT violation
(i.e., discriminatory tax), but others disagreed
– USTR brought a WTO case, 1st one, against China
– Case settled before panel assembled
• With trade issues, it is important to
– Present the whole case early (i.e., don’t piecemeal the
problem, but explain the technical, legal and policy points)
– Show how, long term, it’s beneficial for China to follow WTO
(other countries have had to learn the hard way too)
– Not escalate prematurely, which can aggravate the situation
due to politics inherent in trade issues
1
DOING BUSINESS
IN CHINA
LABOR AND EMPLOYMENT ISSUES#p#分页标题#e#
ABA ANNUAL CONVENTION
Aug. 4, 2006
Professor Ron Brown
Univ. of Hawaii Law School
2
Issues for U.S. investors
• continuing application of U.S. laws
− Foreign Corrupt Practices Act,
− Whistleblower’s protection of the Sarbanes-Oxley Act,
− Title VII.
• application of Chinese labor and employment
laws
− labor contracts,
− labor standards,
− prohibitions on discrimination,
− trade unions in collective bargaining,
− mandatory arbitration in resolving workplace disputes.
3
Title VII and other civil rights laws
• Apply extraterritorially to qualified U.S. employer
− Punitive damages allowed
− Attorney’s fee shifting for prevailing parties
• Inapplicable to non-U.S. citizens
− improper treatment of foreign citizens as “hostile
workplace environment”
4
Foreign Corrupt Practices Act
• Guanxi (connection)
− It is customary for many foreign investors to pay
Chinese officials “inducement” or “incentive” to
expedite business projects.
• Prohibition
− The Foreign Corrupt Practices Act (FCPA) outlaws
“bribery” of a foreign office to influence any official
act, induce any unlawful action, induce any action that
would assist in obtaining or retaining business, or
secure any improper advantage.
5
Case illustration of FCPA
• Diagnostic Products Corporation (DPC)
− DPC Tianjin as wholly owned Chinese subsidiary
• Prohibited payment
− From 1991 to 2002, DPC Tianjin made around $1.6 million cash
payments to physicians employed in state-owned Chinese
hospitals
− for the purpose and effect of obtaining and retaining business
with local Chinese hospitals
• Consequences
− In May 2005, DOJ filed one count of FCPA criminal charges
− DPC Tianjin pleaded guilty and agreed to a stipulated fine of $2
million.
6
Whistleblower’s protection under
Sarbanes-Oxley Act (SOX)
• Carnero v. Boston Scientific Corp., 433 F. 3d 1
(1st Cir. 2006)
− Sarbanes-Oxley’s whistleblower protection does not
apply extra-territorially.
− Whistle-blowing protections are available only to U.S.
citizens whose employment is in the U.S.
• U.S. – based employees protected
− U.S.-based employers (public companies or their
subsidiaries)
− with China-projects
− having employees travel between the U.S. and China
7
International labor standards
• Corporate Social Responsibility
− Some companies self-impose and monitor
− mandatory disclosure of working conditions and standards as#p#分页标题#e#
listing condition on the Shenzhen Stock Exchange
• SA8000
− International certification
− Contractually imposed on Chinese subcontractors
• ILO Standards, Convention – enforcement issues
8
Hiring in China
• Anti-discrimination prohibition in the Chinese
Labor Law is not applicable until employee is
hired.
• Women Rights and Interests Law (revised) offers
some protection on gender discrimination in the
workplace and, recently, against sexual
harassment.
9
Chinese employment contract
• Employer’s duty to provide a written contract
• Mandatory contractual terms
• Other statutory benefits
− minimum wage rates and hour standards, equal pay, workers
compensation, workplace safety, pensions
• Employment handbook (employer disciplinary rules)
• New Draft Labor Contract Law (probationary periods
shortened; severance compensation upon expiration of
fixed-term labor contract; unlawful dismissal
compensation doubled; outsourced “dispatch” workers
from TP-employer regulated, etc.)
10
Terminating Chinese employee
• Employee rights in labor contract include statutory
protections
• Termination triggered by labor contracts provisions
• Termination as disciplinary sanction
− Also permissible under employment handbook (e.g., MC rules)
• Grievance procedure
− Internal mediation participated by union rep.
− Arbitration through govt. labor arbitration committee
− Arbitration decision reviewed de novo by courts
11
Dealing with Chinese labor unions
• All China Federation of Trade Unions (ACFTU)
• Theoretically, employer has no right to block the
formation of union branch, once employees
request to do so. (Wal-Mart update)
• Many foreign-invested-employers have no union
presence (under 20%).
• Union branches are generally supportive of
employers’ interests in promoting productivity
and other labor discipline.
12
The role of Chinese labor unions
• The role often varies by industry and region.
• Union can negotiate collective contracts.
• The union does have a legal role to play in the
supervision and administration of labor laws and
dispute resolution procedures, particularly in
terminations.
• Regular consultation is required in terminations,
layoffs, and labor arbitration.
13
Protecting Against Unfair Competition
by Employees in China
• Restrictive covenant is used either as part of employment
contract or as a separate contract.
• Chinese law on “covenant not to compete” seeks to
place limits on geographical distance, time, and liquidated#p#分页标题#e#
damages; and requires separate payment to the employee.
[New Draft Labor Contract Law –2 year maximum and
required compensation is year’s compensation; if
employee breaches, damages limited to 3 times above
compensation paid.]
• Dispute may be subject to labor arbitration, and
arbitrators may apply Unfair Competition Law.
14
Case illustration: Microsoft v. Google
• Kai-Fu Lee, head of Microsoft research lab in China
• Google hired Lee in 2005 to lead its business in
China.
• Microsoft filed a law suit in a Washington state
court, alleging violation of Lee’s restrictive covenant.
• Google filed a counter claim in a federal district
court.
• The parties settled after Microsoft won a court
ruling barring Lee working on certain Google
projects.
15
Case illustration: the Chinese approach
• Chen, employee of Yamato (Shanghai)
− Chen’s restrictive covenant: “if Chen terminates the
contract for any reason, he shall not work in any
other places which makes a similar product or in the
same in industry for 5 years.”
• Chen left Yamato and joined CIIC (Hong Kong).
• Yamato sued Chen for violation of restrictive
covenant.
• Yamato lost the case at both labor arbitration and
the court review, on the ground of unreasonable
restriction (5 years).
16
• For U.S. citizens working in China, a number of
HRM/labor-related laws may apply extraterritorially.
• American FIE’s need to comply with China’s
growing number of labor laws—it’s no longer cheap
to avoid compliance and think of it as a “mere” cost
of doing business.
• Depending on the nature of U.S. investment,
Chinese union is an entity of possibly great
significance.
• Consider using both U.S. contract provisions and
Chinese labor contracts to protect trade secrets.
• Keep an eye on the New Draft Labor Contract
Law—it may well have big consequences for future
employment practices in China
Conclusion
ABA ANNUAL CONVENTION AUGUST 4, 2006
PROFESSOR RON BROWN
UNIV. OF HAWAII LAW SCHOOL
DOING BUSINESS IN CHINA: LABOR AND EMPLOYMENT ISSUES
Introduction
Doing business in China in the 70s and 80s hardly ever involved serious legal concerns
over labor and employment issues. Times have changed. While businesses still rush into China
for markets and cheap labor costs, set up wholly-foreign-owned-enterprises (WFOE), Joint
Ventures (JV), etc. and undertake mergers and acquisitions (M & A), they must now be
concerned with the increasing application of Chinese labor and employment laws, not to mention
the continuing application of those U.S. labor laws applied extra-territorially.#p#分页标题#e#
The laws are all in place and China is working through how best to administer and
enforce those laws, while still encouraging economic investment and development. Its use of
labor contracts, labor standards, prohibitions on discrimination, the variant role of trade unions in
collective bargaining, and the use of and arbitration in resolving workplace disputes have all
complicated the ability of foreign employers to manage their workforces. Additionally,
protecting the confidential and proprietary business interests of employers through covenants not
to compete has also become of increasing importance to business and employment lawyers.
Whose Laws?
Global Labor Standards?
Global labor standards continue to be given local application. For example, the World
Bank’s International Finance Corporation (IFC) which is the Bank’s private sector lending arm,
in February 2006 adopted a new loan performance standard on labor rights and working
conditions. All companies that borrow from the IFC will be required to abide by the core labor
1
standards of the International Labor Organization (ILO). These standards among other things
prohibit discriminatory practices, require recognition of freedom of association and the right to
collective bargaining. Additional obligations impose duties on basic conditions, including health
and safety standards, protection for contract workers, and a policy for reductions in employment.
Some background on global developments and their application to China follow by way
of introducing some areas of China’s developing labor law. There are several themes that can be
observed globally in labor law development. The ongoing social compact between capital and
labor continues to be negotiated globally and nationally, with capital arguably increasing its
prominence in recent times. In the employment context, the employer has gained added
advantage over labor, though to be sure there is some progress shown by labor.
Perhaps because of this alignment, conflicts through work stoppages have decreased
(though not necessarily workplace disputes per se), and “mechanisms of cooperation” have been
put into place at the same time as union membership declines. Due both to opportunity and lack
of effective union resistance, employers have increased their use of contingent workers and offshore
workforces. International competitive pressures, it is argued, have resulted in developed
countries, like developing countries, “racing to the bottom” to achieve the lowest costs, and
often, the cost is labor interests.
Since WTO’s rebuff in recent years to include labor standards in its mandate, the
International Labor Organization (ILO) has moved ahead into the area with its core labor
standards. Certainly there are now in place, increasingly sophisticated international labor#p#分页标题#e#
standards, largely emanating from United Nation’s covenants and ILO Conventions.
2
Debate on the practical usefulness of these consensus standards centers on enforceability
issues when a country doesn’t ratify them or does ratify them, but fails to meaningfully
implement and enforce them.
While the debate on enforceability of ILO standards continues, some countries such as
the U.S. have unilaterally imposed restrictions or granted benefits to U.S. companies who deal
with other countries who adhere to the core ILO labor standards (e.g., U.S. Trade Act, Overseas
Private Investment Corporation Act). In recent years there has been increasing discussion,
emanating from the International Confederation of Free Trade Unions (ICFTU), for the
acceptance and use of a “labor clause” in trade agreements—the so-called “social clause.”
(Stephen S. Golub, International Labor Standards and International Trade, IMF Working Paper
97/37 (Washington, April 1997). As discussed subsequently, Shenzhen, China is beginning to
work on guidelines in this area, to be implemented through use of the Shenzhen Stock Exchange.
Of the 178 ILO member states, 150 have ratified 6 of the 8 core labor standards; and 116
have ratified all 8 (including France, Germany, and the United Kingdom). China has ratified 3
core standards and 23 other ILO Conventions and the U.S. has ratified 2 core standards and 14
others. Of course, ratification or not, the key is to have meaningful domestic labor legislation,
but there are some observations that can be made on most countries, including as to China..
(See, Ronald C. Brown, China’s Collective Contract Provisions: Can Collective Negotiations
Embody Collective Bargaining? 16 Duke J. of Comp. and Int’l Law 35 (2005); and Ronald C.
Brown, China’s Employment Discrimination Laws During Economic Transition, 19.2 Columbia
J. of Asian Law 361 (2006).
How China measures up to specific areas of the ILO core labor standards is discussed
below.
3
Freedom of Association and Protection of the Right to Organize and Collectively Bargain
China’s only trade union, the All China Federation of Trade Unions (ACFTU), according
to top union official chairperson Wang Zhaoguo, a member of the Politburo, had 134 million
trade union members in 2003, which represented about 60 percent of the employees (China:
ACFTU boss urges unions to protect workers, Asian Labour News, December 22, 2003).
New amendments to the Trade Union Law stipulate that “all enterprises” with 25 or more
employees must, upon request of employees, establish a labor union and negotiate on matters of
importance to employees.
In China there is a right to associate and form and join a trade union or labor
organization – but, not one of the employees’ choice; in all cases it must be affiliated with the#p#分页标题#e#
AFCTU which “exercises leadership” over the subordinate levels. The ACFTU since the
founding of the People’s Republic of China (PRC) has had a close working relationship with the
Government and the Chinese Communist Party (CCP). This relationship, in very recent years,
shows some evidence to be undergoing some loosening in practice as to the role it plays in labor
relations and employee advocacy. However, while the role may “morph”, the law is clear, as
stated in China’s reservation to the U.N. Covenant on Economic, Social, and Cultural Rights,
Article 8.1(a) that limited the right of choice of unions to the laws of China (which do not permit
it).
According to the ICFTU, there are numbers of reports of China prohibiting attempts to
create independent trade unions in violation of laws, with violators suffering penalties of
criminal and/or administrative detainment (reeducation through labor), or sometimes even
psychiatric detainment.
4
Provisions on collective negotiations were issued in May, 2004 by the Ministry of Labor
and Social Security which purportedly seeks to implement the 1994 Labor Law’s call for
collective contracts. These provisions followed some prior experimentation of this process.
Included is regulation of the process, content, government supervision, and a dispute resolution
mechanism.
Examining whether this meets the ILO Convention on collective bargaining will
be an interesting undertaking. Already, in a June, 2004 publication, some have expressed
skepticism and concluded “that it is primarily the continued integration of the trade union into
management at the workplace that prevents collective consultation from providing an adequate
framework for the regulation of labor relations.” The ICFTU is likewise critical, saying earlier
experiments show the ... “contracts were drawn up by the employers and simply reflect minimum
legal requirements or the continuation of past practice ... there is very little collective
bargaining.” (China, PRC: Annual Survey of Violations of Trade Union Rights, available at
http://www.icftu.org).
Whether this “Chinese characteristic” will evolve into a process that harmonizes with
international labor standards, for some, will await inspection of experience under these new legal
provisions and the substantive content of resulting contracts. Related is the fact that labor
disputes in China have been on the rise in recent times and this and other legislation seeks to
provide further avenues of legal redress.
With fewer than 150,000 lawyers in China, it has been noted “only a few are sufficiently
trained to handle labor disputes, which may slow the “healthy” development of these processes.
Strikes likewise occur in China and are not explicitly provided for in law; neither are they#p#分页标题#e#
prohibited. Interestingly, the ACFTU, in the Trade Union Law, is called upon ... “to assist the
5
enterprise or institution in making proper preparations for resuming work and restoring work
order as soon as possible.” Also, Article 47 of the new Work Safety Law, issued in 2003,
authorizes workers to stop work and leave the workplace if their personal safety is directly
endangered.
One could argue there seems to be an emerging legally implicit acceptance of the right to
strike; at the same time, there appears to be clear government disfavor against some of the
striking leaders for bringing “social disorder” or “interfering with production.”
Another issue facing China, not only in the administration and enforcement of these labor
law provisions, is also the need for uniform and consistent enforcement of the laws. China has
been somewhat hindered in this regard by the transition from socialism to a socialist market
economy, and thereby, from union-enforcement to government-enforcement of labor laws.
As China and the U.S. continue with their labor laws relating to the two ILO core labor
standards covering the right to freedom of association and collective bargaining, the ILO notes
that in numerical terms, “... half of the world’s workers remain unprotected by the conventions’
provisions. Alarmingly, large countries as Brazil, China, India, and the United States have still
not ratified fundamental ILO conventions on freedom of association.” (Unfair Advantage:
Workers Freedom of Association in the United States under International Human Rights
Standards, Human Rights Watch (August, 2000).
Discrimination and Remuneration
In China, the Constitution provides that “women enjoy equal rights with men in all
spheres of “life.” The 1994 Labor Law likewise prohibits illegal discrimination, and other
national and local laws seek to address inequality of women and minorities. And yet, in practice,
the Women’s Federation and others, will point out there is recurring social and employer
6
discrimination against women in employment opportunities. Likewise, though ethnic national
minorities, numbering over 100 million people, are provided special “assisting legislative
benefits,” their opportunities are reported to be more limited than the majority Han; and
migrating workers, often minorities, frequently find they are either not protected under existing
labor laws or have no knowledge or access to these laws. (Ronald C. Brown, China’s
Employment Discrimination Laws During Economic Transition, 19 Columbia J. of Asian Law
361 (2006).
Wide disparities in wage levels and varying labor law protections are sometimes
explained by China’s political-legal system of creating national laws, but having the “local#p#分页标题#e#
detailed implementing regulations” drafted by local governments. This creates lawful disparities
in rights and benefits among men, women, and minorities, both nationally and regionally. For
example, there is a national minimum wage law requirement, but it allows local standards,
according to the local economic situation. These varying standards, while not in themselves
inherently discriminatory, do not easily create an identifiable standard for which fairness,
consistency, and anti-discrimination can be measured.
China is reportedly working with the ILO to move toward eventual ratification of the core
labor conventions on discrimination.
U.S. Laws Applied Extra-Territorially?
For U.S. citizens working in China there are a number of HRM/labor-related laws that
may apply extraterritorially. For a qualified U.S. employer, many of America’s civil rights laws
apply in the foreign workplace. These include Title Seven of the Civil Rights Act, with its
punitive damages and provisions for attorney fees for prevailing parties. They are inapplicable to
7
non-U.S. citizens, though improper treatment of foreign citizens arguably can establish a “hostile
workplace environment” for the U.S. employees under Title Seven.
American law also can arise where an “inducement” or “incentive” is paid to a Chinese
official in a business project to bring the transaction into fruition. U.S. law prohibits such
transactions by U.S. businesses or individuals, and imposes civil and criminal liabilities. The
Foreign Corrupt Practices Act (FCPA) outlaws “bribery” of a foreign office to influence any
official act, induce any unlawful action, induce any action that would assist in obtaining or
retaining business, or secure any improper advantage.
Prosecution of such a case is illustrated in the Diagnostic Products Corporation case
decided in 2002.
Diagnostic Products Corporation (DPC) is a Los Angeles-based top U.S.
producer and seller of diagnostic medical equipment. DPC Tianjin is its
wholly owned Chinese subsidiary.
From late 1991 through December 2002, for the purpose and effect of
obtaining and retaining business with local Chinese hospitals, DPC Tianjin
made cash payments to laboratory personnel and physicians employed in
certain state-owned Chinese hospitals in exchange for agreements that the
hospitals would obtain DPC Tianjin’s products and services. This practice,
authorized by DPC Tianjin’s general manager, involved personnel who
were employed by hospitals owned by the legal authorities in the People’s
Republic of China and, thus, “foreign officials” as defined by the FCPA.
In most cases, the bribes were paid in cash and hand-delivered by DPC
Tianjin salespeople to the person who controlled purchasing decisions for#p#分页标题#e#
the particular hospital department. The bribery totaled approximately $1.6
million.
On May 20, 2005, DOJ filed one count of FCPA criminal charges in the
United States District Court for the Central District of California. On June
20, 2005, DPC Tianjin pleaded guilty and agreed to a stipulated fine of $2
million.
What if an employee wants to “blow the whistle” under the Sarbanes-Oxley Law (SOX)
for perceived fraud? Is the “employer”, its “subsidiary”, or its “subcontractor” subject to the law?
Is the “employee” protected under the “whistle-blower” provision? Though a long discussion can
8
entail, the current case law appears to find SOX does not apply extra-territorially and whistleblowing
protections are available only to U.S. citizens whose employment is in the U.S. (Carnero
v. Boston Scientific Corp 433 F. 3d 1 (1st Cir. 2006). However, one can easily imagine situations
of U.S.-based employers with China-projects having employees travel between the U.S. and
China and falling under the coverage of this law. (See DOL interpretation in Ede v. Swatch
Group, 2004-SOX-68 (ALJ Jan, 14, 2005) (employees who worked only in Switzerland, Hong
Kong, Singapore and Beijing not covered).
Another labor-related legal issue on the horizon in China comes from new “guidelines”
on corporate social responsibility. For example, it has been reported that Shenzhen is working on
improving labor standards and conditions by requiring disclosure of working conditions and
standards, utilizing listing on the Shenzhen Stock Exchange as the triggering factor. (First
Financial Daily June 9, 2006).
The point of mentioning these extra-territorial applications of U.S. laws in China, is to
remind Human Resource Managers and their legal advisors that training, orientation, and
compliance must be geared toward not only Chinese labor laws, but also toward U.S. laws
relating to labor and management. Additionally, there may be “codes of conduct” (of various
legal efficacy), and contractual requirements of labor standards imposed on Chinese subcontractors,
such as under SA 8000 requirements.
Hiring, Conditions, and Termination
Once on the ground in China, personnel must be hired, a perhaps daunting task for the
uninitiated. Assuming however that Chinese citizens are recruited, are there limitations on your
choices? For example, may an employer select on the bases of gender, age, appearance, absence
of disabilities and ethnicity? Well, yes; because most of the anti-discrimination prohibitions in
9
the Labor Law, which protect against unlawful discrimination on gender, ethnicity, and religious
belief first require an employment relationship, usually evidenced by a labor contract. Applicants
are not yet employees and have few enforceable rights. Gender discrimination and sexual#p#分页标题#e#
harassment are also covered by the Women Rights and Interests Law whose protections can be
taken directly to court, though there is some domestic discussion (and few court cases) whether
there first must be a “labor dispute” arising from an employment relationship.
Once hired, employees (as opposed to independent contractors and possibly, “dispatched
workers” from a third-party employer) are entitled to the protections under the labor contract
provisions of the Labor Law, which must be provided by their employer, under penalty of law.
These include mandatory contractual terms and also incorporate by reference other statutory
labor rights and benefits, which include minimum wage rates and hour standards, equal pay,
workers compensation, workplace safety, unemployment, pensions, etc.
Discipline and termination are controlled by the labor contract and related statutory
regulations. Discipline is established by the employer under an employer’s work rules put in
place at the workplace, with their only apparent limitation being violation of laws or public
policy. Termination and work-related grievances are raised by workers and the union under labor
arbitration commissions, part of the government’s labor bureau. The law prescribes internal
mediation within the employer’s workplace, followed by labor arbitration, which resolves the
“labor dispute”. Arbitrators are empowered to render decisions and awards utilizing contractual
language and statutory obligations. One of the most common awards is an order for back wages
not yet paid by the employer.
In a typical labor arbitration case, Huang worked as a janitor at local hospital in
Guangdong. Huang had a written labor contract from June 1, 2003 to May 30, 2004. On Apr. 29,
10
2004, Huang told her supervisor that she would not renew her contract because of her medical
conditions. Huang stopped working on May 20, 2004. Huang came back to the hospital on May
25, 2004 to get her last paycheck. In June, Huang sued the employer in arbitration committee,
seeking severance payment. The arbitrator ruled for Huang, ordered hospital to pay RMB 3000
and
terminated the contract. The arbitrator reasoned that Huang's stopping working on May 20 was
not terminable under the Labor Law, art. 25, since the employment handbook had no
mention of such disciplinary sanction. Instead, art. 24 applies, and since Huang was terminated
before the end of her term. Severance pay was mandatory. The parties did not appeal. (A labor
contract case, China Labor, April, 2005).
An appeal may be made to the courts, which reviews the case de novo. This is a clear
disincentive to the employee grieving and in contrast to the role of the Chinese courts on appeals
of commercial arbitration, which are not de novo.
Foreigners in China also use the labor arbitration process as illustrated in the#p#分页标题#e#
following two cases. Scott, a Canadian citizen, had been working in Shanghai since
1989. He worked as a senior executive for a Shanghai retail store from 1989 to 2003.
The retail store hired Scott, via a American headhunting firm. Therefore, Scott had
only one employment contract with the American firm, not the retail employer he was
assigned to and working for. The retail store had sponsored Scott in his Chinese visa
and work permit. In 2005, Scott petitioned for labor arbitration, seeking to establish a
labor contract with an indefinite term with the retail employer. The employer argued
11
that Scott was a dispatched worker (a temporary worker of another employer). The
arbitrator ruled for the employer. Scott appealed to court. Later the parties settled.
In a second case, Kato, a Japanese citizen was hired by a FIE Design Corp. in
Shanghai and he worked there from November, 2004 to January, 2005. Before Kato
started to work, he and the employer signed a memo agreement to set his annual
salary at $24,000, which is paid every 15 days. Kato quit the job in January, 2005.
The employer still owed him over $3000 in unpaid wages. Kato petitioned for labor
arbitration. The arbitrator dismissed the case, on the ground that Kato was working
without proper permit. Kato appealed to court. The court accepted the case as a labor
K dispute. The parties thereafter settled. (Foreign employee in labor
arbitration,Shandong Labor, August, 2005).
Union?
Another challenge facing employers doing business in China is what role, if any, is to be
played by the Chinese trade union, the All China Federation of Trade Unions (ACFTU). While
the Trade Union Law requires, upon request, a labor union in employers of a certain size,
observation shows that many employers, including foreign-invested-employers (FIEs), have no
union – not to mention the case of Wal-Mart (who is said to still be awaiting a request for a
union by its employees!)
Recent years experience shows that unions, under the new “market economy” have
pulled back from trying to manage companies, and have been quite supportive of employers’
12
interests in promoting productivity and other labor discipline. This works in tandem with
national goals of economic development. However, the particular type of “cooperation” that
takes place varies in every workplace; and, though the law provides for collective contracts
negotiated by the union, many such agreements traditionally have merely reflected statutory
requirements, rather than “above-and-beyond” contractual rights and benefits.
Union leadership is undertaking continuing discussions about the appropriate role of
unions, including a possibly heightened role as employee advocate; currently its role often varies
by industry and region. The union does have a legal role to play in the supervision and#p#分页标题#e#
administration of labor laws and dispute resolution procedures. Regular consultation is required,
for example in terminations, layoffs, labor arbitration, etc. Depending on the nature of U.S.
investment in China, the ACFTU is an entity of possibly great significance to FIEs, and HRM
and their legal representatives must address how best to deal with unions in China.
The following case is an illustration of how the ACFTU describes the role of the union.
Xinfa (Beijing) is the wholly owned subsidiary of a French Concrete
Company. It has over 500 employees. The workers in Xinfa established a
union since 1995. It is a “model grassroots union” accredited by the
ACFTU. The union has a special committee to represent workers in
termination/dispute issues. In the late 90’s, the union successfully
represented a worker to fight against Xinfa’s termination decision. The
worker was caught playing poker in the shower room. The supervisor
(Brazilian) was going to fire the worker. The union stood up, pointing out
that playing poker was not “serious misconduct” under the existing
employment manual. Finally, the union had a meeting with Xinfa’s
President Davis (American). Davis gave in and took back the termination
decision (Model Union in FIE, China Union, Feb. 2002).
Employment-Related Issues
Employers usually have great interest in preserving confidential and proprietary
information, including trade secrets, intellectual property, and other competitively useful data.
13
Therefore, employers wish to limit and restrain the ability of its employees holding such
information from disseminating it, using it or otherwise appropriating it.
The usual means of regulating misuse of this protected information in China is by
contract or statute. China has laws on unfair competition, intellectual property, and contracts; and
in June 2006 the State Council gave its approval to a new anti-monopoly law, moving it forward
toward final enactment.
The employment-related issue can arise from a restrictive covenant located in a labor
contract or as existing as a separate contract. Issues arising under the former are labeled a “labor
dispute”, subject to labor arbitration; whereas the latter arises under contract law and goes to the
court. (Labor Contract Law (draft), art. 16, provides the restrictive covenant can be integrated
into the labor contract). Interestingly, on the labor arbitration case, the arbitrator may also apply
the unfair competition law in reaching a decision (Unfair Competition Law art. 20 (1993), Memo
regarding commercial secrets, MOLSS (1999). “Dispatched workers” also have legal obligations
in this area, under additional laws (Enterprise Patent Regulation Art. 12 (2000).
Restrictive covenants are governed under the labor contract provisions of the Labor Law#p#分页标题#e#
(a new draft Labor Contract Law seeks to place limits on geographical distance, time, and
liquidated damages; and, require separate payment to the employee for the provision (Labor
Contract Law (draft) art. 16 (2006).
Illustrations of actions to enforce restrictive covenant provisions, both in the U.S. and in China
are shown below.
Kai-Fu Lee was the head of the Microsoft research lab in China. Lee was
born in Taiwan and reared in Tennessee. Lee was hired by Google in July
2005 to lead its business in China and was given a compensation package
of nearly $10 million. Microsoft filed a suit in a Washington state court,
14
alleging Lee violated his restrictive covenant within his employment
contract at Microsoft by joining a competing company within one year of
his departure. Google filed a counter-suit in a federal court in San Jose,
California, attempting to release Lee from the terms of the non-compete
agreement he signed with Microsoft.
Late in 2005, Microsoft won a court ruling barring Lee from working on
projects at Google.
In Dec. 2005, Google and Microsoft settled the case (12/24/05 China
Daily).
In another case, arising in China, the Chinese court denied enforcement of the covenant
as it was found to be an unreasonable restriction on the employee.
In that case, Chen started to work for Yamato (Shanghai) in 1997. Yamato (Shanghai) is the
wholly owned subsidiary of Yamato Co. (Japan). In 1998, Chen was promoted and renewed his
labor contract. In the labor contract, Yamato (Shanghai) added a restrictive covenant; “if Chen
terminates the contract for any reason, he shall not work in any other places which makes a
similar product or in the same in industry for 5 years.
In 2000, Chen left Yamato (Shanghai) after giving proper notice. Three months later,
Chen joined CIIC (Hong Kong) as sales manager in Shanghai. CIIC (Hong Kong) is an importer
of a certain electronic product, which is also manufactured by Yamato (Shanghai).
When Yamato (Shanghai) learned about Chen’s new job, it requested Chen to honor the
restrictive covenant. Chen refused. In July 2000, Yamato (Shanghai) brought a labor arbitration
case against Chen.
The arbitration committee rejected the case. Yamato (Shanghai) appealed to the court.
The court ruled in favor of Chen, on the ground that the covenant was unreasonable (On
restrictive covenant, China Labor, Oct. 2005; labor arbitration is appropriate where the labor
15
relationship existed and the dispute arising out of the labor relationship. SPC 2001
interpretation.).
Issues have also recently arisen regarding possible violations from Chinese workers or
“interns” having contact with “protected employer information” when coming to the U.S. to train
or observe. What legal devices may best work to protect employer interests while the Chinese are#p#分页标题#e#
in the U.S. raises interesting legal challenges. Perhaps both U.S. contract provisions and Chinese
labor contracts, properly drafted, can together provide some legal protections, notwithstanding
the violations occur on U.S. soil.
Conclusion
The significance of labor and employment law affecting companies doing business in
China is no longer in issue. There are law firms now specializing in just these issues. The
significant point to remember is to become aware of the agenda items dealing with labor and
employment issues and deal with them as you would other legal issues, such as tax, corporate, or
bankruptcy law.
For more detailed discussion by the author of some of the above Chinese labor law issues, see:
China's Collective Contract Provisions: Can Collective Negotiations Embody Collective
Bargaining? 16 Duke Journal of Comparative and International Law 35 (2005).
China's Employment Discrimination Laws During Economic Transition, 19.2 Columbia J. of
Asian Law 361 (2006).
U.S.-China Labor Mediation and Arbitration Compared __, American L. Rev. __ (2006).
16
35
CHINA’S COLLECTIVE CONTRACT
PROVISIONS: CAN COLLECTIVE
NEGOTIATIONS EMBODY COLLECTIVE
BARGAINING?
RONALD C. BROWN*
INTRODUCTION
Some people see things as they are and say, why? I dream of things
that never were and say, why not?
George Bernard Shaw
This article examines whether China’s new “collective negotiations”
law, in the context of Chinese conditions, can blossom into
“collective bargaining,” as referenced by International Labor Organization
(ILO) standards and compared with U.S. approaches. Admittedly,
it is hard for many to imagine that multinational corporations
such as Wal-Mart, Samsung, Dell, along with increasing numbers of
Chinese domestic companies, could be negotiating labor terms and
benefits above statutory minimums. It is harder, perhaps, to convince
the Chinese that in doing so, China can still maintain its areas of
comparative advantage. However, recent developments in China’s
labor legislation suggest that, beyond sheer imagination, Chinese laborers
now seem more enabled than ever to negotiate or bargain
their working standards.
On May 1, 2004, Provisions on Collective Contract (Provisions)1
issued by the Ministry of Labor and Social Security (MOLSS) became
effective on a national level. These Provisions build upon China’s experience
since the mid-1980s with individual labor contracts and with
the 1994 Labor Law’s mandate to create a system of collective con-
Copyright © 2006 by Ronald C. Brown
* Professor of Law, University of Hawaii Law School; Director, Center for Chinese Studies,
University of Hawaii; 2004-2005 Fulbright Distinguished Lecturer, Peking University Law#p#分页标题#e#
School and Tsinghua University Law School.
1. JITI HETONG GUIDING [hereinafter PROVISIONS] art. 1 (Jan. 20, 2004),
http://www.chinacourt.org/flwk/show1.php?file_id=91497 (last visited Nov. 1, 2005). The 2004
Provisions repeal the Jiti Hetong Guiding (Provisions on Collective Contract) issued by then
Ministry of Labor on December 5, 1994. See PROVISIONS art. 57.
36 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 16:35
tracts.2 The 2004 Provisions provide that a collective contract can be
negotiated on behalf of the employees to protect their employment
and workplace interests. Prior to 2004, several hundred thousand collective
contracts, which covered seventy-six million workers, were already
in existence under earlier regulations.3 As will be discussed,
many of these collective contracts could be described as bare-boned
reflections of labor statutory minimums. In contrast, the 2004 Provisions
provide more detail and apparently seek to eliminate some of
the obstacles observed under the earlier negotiated agreements and
to achieve more comprehensive contracts.
The 2004 Provisions authorize employees to initiate the process
through more authentic representatives to prepare proposals on a
wide scope of subjects clearly beyond the usual statutory labor standards
and protections. The process of negotiations is delineated, with
“good faith” requirements built in to facilitate cooperative exchanges
of proposals. The government’s Labor Bureaus are given regulatory
responsibility to supe rvise and intervene in the negotiations to ensure
fair dealing. They also are authorized to resolve disputes arising prior
to final agreement.
Lastly, there is a process of formality in “finalizing” the collective
contract. The enforcement of the rights arising under this concluded
contract are the same as those arising under the law regulating labor
contracts, both of which utilize dispute resolution procedures within
the enterprise, government-administered labor arbitration and the
courts.
This article examines the 2004 Provisions on collective negotiations,
sets forth some of the issues of the current Provisions, and
draws comparative references to collective bargaining approaches in
the United States and under the ILO’s labor standards; discusses their
likely viability in China; and proposes a number of labor reform “pos-
2. ZHONGHUA REMIN GONGHEGUO LAODONG FA [hereinafter LABOR LAW] arts. 33-35
(July 5, 1994), http://www.chinacourt.org/flwk/show1.php?file_id=20195.
3. Reported figure from the Laodong Baozhang Bu [Ministry of Labor and Social Security
(MOLSS)], cited in Simon Clarke, Chang -Hee Lee and Qi Li, Collective Consultation and
Industrial Relations in China, British Journal of Industrial Relations, June 2004, at 239-40 [hereinafter#p#分页标题#e#
Clarke]. The All China Federation of Trade Unions (ACFTU) claimed 510,000 enterprises
had concluded such agreements, with 318,000 of these agreements within Foreign Invested
Enterprises (FIEs), Privately Owned Enterprises (POEs), and Town and Village
Enterprises (TVEs). See Quanguo jianli pingdeng xieshang he jiti hetong zhidu qiye yu wushiy iwan
hu [Collective Contract Protect Worker’s Rights: over 510,000 enterprises have established
collective contract system], RENMIN RIBAO [PEOPLE’S DAILY], Nov. 20, 2001, at 1, available at
http://www.people.com.cn/GB/paper464/4750/519609.html (last visited Nov. 1, 2005) [hereina fter
Collective Contract Protect Worker’s Rights].
2006] CHINA’S COLLECTIVE CONTRACT PROVISIONS 37
sibilities,” when viewed in the context of China’s existing and evolving
labor law environment.
I. CHINA’S 2004 COLLECTIVE CONTRACT PROVISIONS
A. Legal Origins
The new collective negotiation Provisions grew from a rather
short legal history. There was interest by China’s trade union, the All
China Federation of Trade Unions (ACFTU), in the early 1990s and
it began to experiment with collective negotiations.4 The 1992 Trade
Union Law in fact first authorized unions at the enterprise level to
conclude collective contracts with the employer.5 The 1994 Labor
Law further formalized the process and provided that the ACFTU
was responsible to utilize this system nationally.6 The Trade Union
Law as amended in 2001 continued to strengthen the union’s mandate
in collective wage negotiations.7 Toward the end of 2001, the
ACFTU reported it had over 510,000 such collective agreements at
the enterprise level covering over 75 million workers.8
Other legal documents contributing to the legal origins of collective
negotiations were issued by the MOLSS in 2000 and 2001. The
first, the 2000 Interim Measures of Collective Wage Consultation,9
rather comprehensively provides for annual wage negotiations between
the employer and union. It includes requirements of “good
faith” negotiation and “fair representation.”10 This emphasis on
“wage” negotiations would seem to reflect the government’s moving
toward market-based determinations by the parties at local levels, yet
still under a nationally -structured regulatory process.
4. TAYLOR ET AL., INDUSTRIAL RELATIONS IN CHINA 8 (2004)[hereinafterTAYLOR]
5. ZHONGHUA REMIN GONGHEGUO GONGHUI FA [hereinafterTRADE UNION LAW] art.
18 (1992) (current version at ZHONGHUA REMIN GONGHEGUO GONGHUI FA [TRADE UNION
LAW] art. 20 (amended 2001)), available at
http://www.chinacourt.org/flwk/show1.php?file_id=38454 (last visited Nov. 1, 2005). Hereina fter,
all articles are from a 2001 version.
6. LABOR LAW art. 33.
7. TRADE UNION LAW art. 10.#p#分页标题#e#
8. Collective Contract Protect Worker’s Rights, PEOPLE’S DAILY, supra note 3.
9. See GONGZI JITIXIESHANG SHIXING BANFA [INTERIM MEASURES OF COLLECTIVE
WAGE CONSULTATION], MOLSS (2000),
http://www.chinacourt.org/flwk/show1.php?file_id=36176 (last visited Nov. 1, 2005).
10. See id. art. 15. Article 15 mandates that a party shall not harass, threaten, exaggerate,
bribe, deceive, or defraud the other party. This section is comparable to the good faith bargaining
requirement in Nat’l Labor Relations Bd. v. Mackay Radio & Telegraph Co., 304 U.S. 333,
333 (1938).
38 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 16:35
A second legal edict was issued on November 14, 2001 by several
interested government organizations—MOLSS, ACFTU, State Economic
and Trade Commission (SETC), and China Enterprise Management
Association, entitled, Joint Circular on Promoting Collective
Consultation and Collective Contract.11 It reiterated the duty of employers
to engage in collective negotiations and it called upon governments,
unions, workers’ congresses, and party members to participate
in tri-party consultation to accomplish objectives. The likely
significance of this Joint Circular, promulgated in the month following
the newly amended Trade Union Law of 2001, is the political
statement to the ACFTU, leading the collective negotiations, that the
union must be mindful that there are other important interests and
stakeholders in this process and the implementation of the colle ctive
agreement.
B. 2004 Provisions on Collective Contract
The 57 new Provisions are divided into eight chapters:
One: General Rules (Arts. 1-7)
Two: Content of Collective Negotiation (Arts. 8-18)
Three: Collective Negotiation Representative (Arts. 19-31)
Four:Collective Negotiation Procedures (Arts. 32-35)
Five: Conclusion, Alteration, Recession and Termination of
Collective Contract (Arts. 36-41)
Six: Review and Examination of Collective Contracts (Arts. 42-
48)
Seven: Resolution of Disputes on Collective Negotiation (Arts.
49-54)
Eight: Supplementary Articles (Arts. 55-57)
1. Coverage and Purposes. The Provisions are enacted in accordance
with the Labor Law and the Trade Union Law.12 Article 56
of the Provisions emphasizes the union’s authority by subjecting the
“employing unit” (employers) to the Trade Union Law and other related
laws and regulations if employer refuses to engage in collective
negotiation requirements.13 The purposes of the Provisions are
11. GUANYU JINGYIBU TUIXING PINGDENG XIESHANG HE JITI HETONG ZHIDU DE
TONGZHI [JOINT CIRCULAR ON PROMOTING COLLECTIVE CONSULTATION AND COLLECTIVE
CONTRACT], MOLSS (Nov.14, 2001), http://www.chinacourt.org/flwk/show1.php?file id=38562
(last visited Nov. 1, 2005).#p#分页标题#e#
12. PROVISIONS art. 1.
13. See id. art. 56.
2006] CHINA’S COLLECTIVE CONTRACT PROVISIONS 39
“regulating the behavior of collective negotiation,” the “signing of the
collective contract,” and the “protecting legal rights and interests of
laborers and employing units.”14 All “enterprises and public institutions
that practice commercialized management within the P.R.C” are
covered by the Provisions.15 This broad coverage parallels the coverage
of employers and employees under China’s individual labor contract
system.16
2. Negotiating Representatives. There shall be legal negotiating
representatives of equal numbers (at least three) on each side and
each with one chief representative.17 The representative in the “employee
party” shall be selected by the trade union of the unit (or, if
none, then by democratic recommendations, agreed upon by one-half
of the staff in that unit).18 The chief representative is the chair of the
trade union unless an alternative is selected by the chair by written
delegation (or if a union does not exist, the chief representative shall
be elected from the negotiating representatives through democratic
means).19
Perhaps a significant change from past practice, Article 24 of the
2004 Provisions stipulates, “negotiation representatives of the employing
unit and those of the staff shall not act as each other’s representatives.”
20 This would appear to foreclose an employer designa ting
a trade union official as a negotiating representative of an
employer, even where that official is a managerial employee of the
employer, a scenario all too familiar under earlier practices. The employer
otherwise selects its own negotiating representatives.21
An interesting provision, Article 23, permits both sides to select
“professional personnel” (Zhuanye Renyuan) to act as the negotiation
representative.22 Limitations exist, as their number may not ex-
14. Id. art. 1.
15. Id. art. 2.
16. LABOR LAW arts. 2, 16-32.
17. PROVISIONS art. 19.
18. Id. art. 20. The original text says that the representative shall be appointed by the existing
union of the unit. It does not appear that the appointed representative has to pa ss the simple
majority vote. The employer has a duty to recognize the existence of such a bargaining unit
by making an affirmative response to any negotiation request. Id. art. 32. See also TRADE
UNION LAW art. 10.
19. PROVISIONS art. 20.
20. See id. art. 24.
21. Id. art. 21.
22. Id. art. 23.
40 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 16:35
ceed one-third of one side’s representatives, and no person outside
one’s own unit can act as chief representative.23#p#分页标题#e#
Certain traditional responsibilities and functions, such as partic ipation,
sharing information, etc., are fixed upon the negotiating representatives.
24 Additionally, they are called upon to “safeguard the
normal order of work and production and shall not adopt any action
of threatening, buying popular support and deception.”25
Employee representatives’ terms of service are determined by
the represented party26 and their employment tenure is protected during
that term against employer’s retaliation of terminating the representative’s
labor contract.27 If the labor contract were to expire during
the representative’s tenure, Article 28 automatically extends the
contract up to the completion of his representative obligation.28 Exceptions
exist where the representative seriously violates employer
rules, other employment-related duties, or has been investigated for
criminal violations.
3. Scope of Negotiable Subjects. References to the delineated
subjects for negotiation are in Article 33 of the Labor Law, and Articles
3 and 8-18 of the 2004 Provisions. Article 3 of the Provisions describes
the content of the collective contract as follows:
[W]ritten agreement signed through collective negotiation . . . concerning
labor remuneration, working time, rest and holiday, labor,
security and sanitation, professional training, and insurance and
welfare in accordance with the stipulation of laws, regulations and
rules; the special collective contract as set forth refers to the special
written agreement signed between the employing unit and employees
of that unit, in accordance with laws, regulations and rules, concerning
the content of collective negotiation.29
Article 8 includes the scope of negotiable subjects that can be covered
in the collective contract listing some 15 categories relating to employment.
30 Articles 9-18 then list examples under each category.31
23. Id.
24. Id. art. 25.
25. PROVISIONS art. 26.
26. Id. art. 22.
27. Id. art. 28.
28. Id.
29. Id. art. 3 (emphasis added). A “special agreement” usually refers to a wage agreement
or other agreement on a specific topic. Article 4 again distinguishes between signing the “collective
contract or special contract,” and Article 6 states both are legally binding on the employer
and employees. Id. arts. 4, 6.
30. PROVISIONS art. 8.
2006] CHINA’S COLLECTIVE CONTRACT PROVISIONS 41
4. Labor Bureau Supervision of Collective Negotiations. General
Provisions in Chapter One provide the principles and supervision
for the conduct of negotiations. Article 4 says negotiation shall
mainly adopt the form of consultation “conference.”32 The negotiation
conduct shall observe the following principles: act legally, respectfully,#p#分页标题#e#
honestly, fairly, consult, cooperate and collaborate equally
and in consideration of legal rights, and finally, “no drastic behavior is
allowed.”33
Responsibility for supervising the collective negotiation process,
and the “signing, reviewing and performing” of the signed collective
contracts or special collective contracts shall be with the Labor Bureaus
above county level.34 For any unresolved disputes that occur
during the collective negotiations, but prior to the signing, either or
both parties may submit a written application to the Labor Bureau
requesting resolution.35 The Labor Bureau may also initiate resolution
procedures on its own, as necessary. The procedures in most
cases should be ended within thirty days of acceptance of the case by
the Labor Bureau.36 The Labor Bureau at the conclusion of its process
formulates an Agreement on Dispute Resolution.37 Thereafter,
the Labor Bureau and the parties must agree and sign to be bound by
the Agreement before it is effective.38 Some items in the Agreement
where there was no unanimous resolution shall be carried on with
continuous consultation.
Separate dispute resolution provisions protect the rights of individual
employees, who are also negotiating representatives, against
improper termination39 and modification of their normal work
status.40 Such disputes are to be resolved by the local labor arbitration
commission.41 The same forum is used to resolve any rights dis-
31. Id. arts. 9-18.
32. Id. art. 4.
33. Id. art. 5.
34. Id. art. 7; see also id. arts. 42-48.
35. PROVISIONS art. 49.
36. Id. art. 52.
37. Id. art. 53.
38. Id. art. 54. Thus, the Dispute Resolution Agreement appears to remain entirely voluntary.
39. Id. art. 28.
40. Id. art. 27.
41. PROVISIONS art. 29.
42 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 16:35
putes which arise out of the performance of the concluded collective
contract.42
5. Collective Negotiation Procedures. Within the General Rules
of convening a conference, wherein the meetings take place following
prescribed rules of conduct conducive to negotiation, certain other
procedures are provided in the Provisions. To initiate the process,
Article 32 states a party of collective negotiation may make written
request of the other party; and a written response must be given
within twenty days; and this request to negotiate may not be refused
without proper reason.43 The “preparation phrase” then calls upon
parties to familiarize themselves with the laws and regulations concerning
collective negotiations, collective recommendations from the
employer and employees and identify topics for discussion during negotiation.
44 After a location, time, recorder are chosen, the parties#p#分页标题#e#
are prepared to begin.45
The collective negotiation begins with each chief representative,
in turn, addressing the agenda and procedures of the meeting.
Thereafter, each will put forward concrete proposals and the other
side will respond and discussion ensues regarding the proposals.46
During the negotiations, the chief representatives shall make summaries
of the recommendations. Those unanimously agreed upon shall
be formed into the collective contract or special collective contract
and signed by the chief representatives of both parties.47 In case there
is no agreement on issues, the negotiation may be suspended, and the
parties shall negotia te the next meeting place and content.48
To conclude the collective contract, the agreed upon draft is presented
to the employees for discussion. Thereafter, a two-thirds quorum
must be present, and the draft must be approved by a majority of
the workers’ congress representatives or a majority of the total employees
(if a workers’ congress has not been established).49 Thereafter,
the chief representatives of each side sign the contract, which is
usually of one to three years in duration and can be extended by re-
42. Id. art. 55.
43. See id. art. 32.
44. Id. art. 33.
45. Id.
46. Id. art. 34.
47. PROVISIONS art. 34(4).
48. Id. art. 35.
49. Id. art. 36.
2006] CHINA’S COLLECTIVE CONTRACT PROVISIONS 43
quest and agreement of the parties.50 The contract, though binding on
the parties, may be modified by the parties, or altered or terminated
by certain conditions causing an inability to perform, such as bankruptcy,
force majeure, or conditions in the agreement.51
The final step is to submit (register) the concluded collective contract
to the Labor Bureau for review and examination.52 It is examined
to ensure compliance with legal requirements.53 If there is an
“objection” by the Labor Bureau, the partie s will be notified and the
contract will be referred back to the parties who can renegotiate or
re-sign, absent those portions.54 There seems to be a practice of little
or no referral back to the pa rties.55 In the case of no objection by the
Labor Bureau, the contract is effective within 15 days of receipt of the
document.56 The law requires the contract to be promulgated “by the
negotiation representative” to all employees on the day it becomes
effective.57
6. Duties of Proper Conduct for Collective Negotiations. The
regulatory framework of collective negotiations is set up to be monitored
by a government agency, viz., the Labor Bureau and its special
division with responsibility to supervise and to resolve disputes.58 The
numbers of negotiating obligations, some mentioned earlier, for cla rity
can be organized under the following three categories.#p#分页标题#e#
a. Fair and Consultative Representation. The negotiating representatives
must “participate” in the negotiations59 after having consulted
with employees regarding negotiating topics60 and must accept
inquires from their constituency, publicize the status of negotiations,
collect opinion,61 and provide information concerning collective negotiations.
62
50. Id. arts. 37-38.
51. Id. arts. 39-41.
52. Id. art. 42.
53. PROVISIONS art. 44.
54. Id. art. 46.
55. Clarke , supra note 2, at 246.
56. PROVISIONS art. 47.
57. Id. art. 48.
58. Id. art. 7.
59. Id. art. 25(1).
60. Id. art. 33(2).
61. Id. art. 25(2).
62. PROVISIONS art. 25(3).
44 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 16:35
b. Negotiating Duty. Objective measures of negotiating include
the following. The negotiating representative must be legally authorized63
to conduct negotiations on behalf of the represented party’s interests,
must “not refuse” to respond to requests to engage in collective
negotiations,64 and must “participate.”65 The negotiating
representative must provide “information” concerning collective negotiations66
and determine the time and place for negotiations.67 The
employer is prohibited from refusing the collective negotiations requirements
without “proper reason,” 68 and a violation of said provision
is expressly subject to the Trade Union Law, which confirms in
Article 53(4) that “[R]ejecting consultation on an equal footing without
justifiable reasons” is a violation.69 Subjective measures of the
conduct of negotiating duty include “honesty,” “keeping promises,”
“fair collaboration,” and “consideration of legal rights and interests
for cooperation.”70
The Provisions are based on and incorporate the Labor Law and
the Trade Union Law that also set forth standards on negotiating
conduct as well as duties of fair treatment of employees.71 Furthermore,
Article 25(6) of the Provisions obligates the negotiating representatives
to those other obligations stipulated by laws, regulations
and rules.72
c. Fair Treatment of Employees. While the 2004 Provisions do
not directly regulate fair treatment of employees, said Provisions incorporate
the Trade Union Law on the subject, including employees’
right to organize and join the union. Article 3 of the 2001 Trade Union
Law provides in pe rtinent part the following basic guarantee:
[Employees] who rely on wages . . . regardless of their nationality,
race, sex, occupation, religious beliefs or educational background,
63. Id. art. 19.
64. Id. art. 32.
65. Id. art. 25(1).
66. Id. art. 25(3).
67. Id. art. 33(4).#p#分页标题#e#
68. PROVISIONS art. 56.
69. TRADE UNION LAW art. 53(4).
70. PROVISIONSart. 5.
71. Id. art.1.
72. Id. art. 25(6).
2006] CHINA’S COLLECTIVE CONTRACT PROVISIONS 45
have the right to organize and join trade unions according to law.
No organizations or individuals shall obstruct or restrict them.73
Article 11 provides that:
[T]rade union organizations at higher levels may dispatch their
members to assist and guide the workers and staff members of enterprises
to set up their trade unions, no units or individuals may obstruct
their effort.74
Article 50 instructs that if anyone violates Article 3 or 11 by obstructing
employees in joining trade union organizations, or obstructing
higher trade unions in assisting and guiding employees in preparation
for establishing trade unions, then the violation shall be ordered to be
corrected by the “administrative department for labor” (Labor Bureau),
with appeals to appropriate government offices.75 There is also
possible criminal violation if there is violence or intimidation.76
Article 51 prohibits anyone from retaliating against any staff
member of a trade union by modifying the employee’s job.77 Said
provision also prohibits insults, slander, or personal injury to any staff
member of a trade union who performs his or her duties “according
to law.” Punishment for violations includes criminal prosecution or
administrative sanctions by the public security (the police).78 Article
52 provides that if an employee or a staff member of the union has his
or her labor contract cancelled because of joining the trade union,
there is entitlement to reinstatement with retroactive pay or an order
by the Labor Bureau to pay “two times the amount of his annual income.”
79
Article 53 prohibits obstructing the trade union in its work to organize
employees to exert “(1) democratic rights through the congress
of the workers and staff members and other forms;” (2) unlawfully
“dissolving or merging trade union organizations;” and “(3)
preventing a trade union from participating in the investigation into
and solution of an accident causing job-related injuries or death to
workers or staff members or other infringements upon the legitimate
rights and interests of the workers and staff members.”80
73. TRADE UNION LAW art. 3 (emphasis added).
74. Id. art. 11 (emphasis added).
75. Id. art. 50.
76. Id.
77. Id. art. 51.
78. Id.
79. TRADE UNION LAW art. 52.
80. Id. art. 53 (emphasis added).
46 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 16:35
Employees who are negotiating representatives are protected by
the 2004 Provision from retaliation. For example, an employee who
is a negotia ting representative cannot have his or her labor contract#p#分页标题#e#
terminated when it expires during performance of representative obligations,
rather it must be automatically extended up to the completion
of his or her representative obligations.81 Such employee can
only be terminated upon a sufficient showing by the employer of serious
violation of duty or employer rules.82 Similarly, an employer shall
not adjust or remove the employee’s working position without proper
reason,83 and the employee shall be regarded as performing normal
work when participating in collective negotiations.84 Moreover, additional
provisions of the Trade Union Law likewise provide protections
for trade union funds, and proscribe improper conduct by trade
union staff members against employees or the trade union.85
The negotiating representative also has two affirmative obligations
under Article 26 of the Provisions. The representative has a
duty to “safeguard the normal order of work and production and shall
not adopt any action of threatening, buying popular support and deception.”
86 The first part appears to obligate the union representative
to act affirmatively to avoid or end of any employee disruption of services,
while the second part seems to place an obligation of proper
conduct upon both employee and employer representatives, as leaders
in negotiations. The second affirmative obligation is to keep the
commercial secrets of the employer acquired during the collective negotiations.
87
Disputes relating to “proper conduct” regarding the objective
and subjective aspects of the negotiations, including disagreements or
impasses on proposals, are to be resolved by the Labor Bureau.88
Other disputes that relate to retaliation against employee representative’s
rights, and under Articles 27 and 28, are to be resolved before
the local labor arbitration commission.89
81. PROVISIONS art. 28.
82. Id.
83. Id.
84. Id. art. 27.
85. TRADE UNION LAW arts. 54-55.
86. PROVISIONS art. 26.
87. Id.
88. Id. art. 49. This is for “any disputes” which occur during the collective negotiation.
89. Id. art. 29.
2006] CHINA’S COLLECTIVE CONTRACT PROVISIONS 47
II. CHINESE CONDITIONS AFFECTING COLLECTIVE
NEGOTIATIONS
China’s recent history and economic growth both explain the developments
occurring in this area of labor law as well as help define
the direction that must be taken. With the transition from the “iron
rice bowl system” to labor contracts, the effects of moving China from
a socialist planned economy to a socialist market economy have taken
hold. Privatization, layoffs, new management strategies emphasizing
profits and competition have produced both “wage consciousness”
and feelings of unfairness in view of regional wage disparities, occupational#p#分页标题#e#
wage gaps, unequal job opportunities, and sagging labor and
security safety nets.
The economic growth phenomenon has produced a 100 to 150
million person “floating population” seeking to earn their share of the
growth. It also has produced national scandals of employers refusing
to pay the wages of migrant workers, presently an underclass in
China. Coal miners are dying by the thousands each year due to unsafe
working conditions. Consequently, the issue of better enforcement
of the labor protections provided in the labor laws is on the labor
reform agenda.
China is at a crossroads. On the one hand, it has the necessary
ingredients to make its labor law system work much better than it
does; on the other hand, its history of labor relations has seemed to
blend with the forces of economic development, and it seems unsure
if it makes the choice to better enforce its labor laws, whether it will
be placed at an internationally competitive disadvantage. Employers
who might otherwise follow the labor laws are in a quandary; why
spend the money to follow the labor laws if it doesn’t matter?90
Can higher labor standards negotiated into collective contracts
provide a mechanism inside the enterprise by which employees’ labor
rights could be better enforced? This, of course, is a different question
than, will they be enforced, especially since rights under collective
contract enforcement use the same legal mechanism as for statutory
rights.
A. Economic Transition
To understand the nuances of current labor relations in China,
one must put it into the context of China’s fast-moving economic
90. Clarke , supra note 2, at 248.
48 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 16:35
conditions. When economic transition moved from policies establishing
special economic zones of development into policies transforming
all of China’s economy from a socialist planned economy to a socialist
market economy, social and economic ramifications were expected
and occurred. With a market economy came competition, the need
for more flexible management, and the quest for profits—which required
cutting costs. For China’s labor-intensive industrial economy,
this usually meant keeping labor costs low. Privatization and competitive
measures brought layoffs (especially in the already overstaffed
State Owned Enterprises (SOEs)) and kept wages and benefits
to bare minimums. With individual control waning, conditions
lent themselves to workers’ economic improvement through collective
negotiations.
Wage concerns of workers came of increasing importance as
widening gaps occurred in the annual growth of real wages versus
GNP, with great numbers of workers feeling left out. The record reflects#p#分页标题#e#
that China’s impressive economic growth in GNP for over a
decade is not matched in the real wage growth of workers, which
roughly keeps pace with rates of inflation.91 The lawful minimum
wage in China varies by locales according to local economic factors,
as is the national mandate under China’s Regulations on Minimum
Wage.92 According to the Regulation, China seeks to accommodate
an international labor standard that sets local minimum wages within
the range of 40 percent to 60 percent of the average wage standard in
the locality.93 One source states that in 1993 China’s average minimum
wages met or exceeded the 40 percent minimum, but by the late
1990s there had been a steady and consistent erosion below that mini-
91. By comparing ILO official statistics (ILO LABORSTA database) to the rate of inflation,
it is argued that there was at least a relative wage decline of Chinese manufacturing workers.
See Anita Chan, A Race to the Bottom, 46 CHINA PERSPECTIVES 41, 42 (2003). According
to data obtained from ILO LABORSTA database , in 1993 the average wages at all economic
enterprises was about 281 yuan/month and in 2002 it was 1,035 yuan/month. Not surprisingly,
the lowest average in 2002, 533 yuan/month, was in the agricultural services area, whereas the
highest was in the financial sector (1,595 yuan/month). In manufacturing, the average was 917
yuan/month. See ILO LABORSTA, Table 5A Wages, by Economic Activity , available at
http://laborsta.ilo.org/ (last visited Mar. 19, 2005).
92. ZUIDI GONGZI GUIDING [hereinafter REGULATIONS ON MINIMUM WAGE] art. 6 (Jan.
20, 2004), http://www.chinacourt.org/flwk/show1.php?file_id=91496 (last visited Nov. 1, 2005);
see also LABOR LAW, arts. 48-49.
93. REGULATIONS ON MINIMUM WAGE, Attachment Section 2. Calculations Methods of
Minimum Wage Standard. The 40%-60% range is the international standard used when calculating
minimum wage.
2006] CHINA’S COLLECTIVE CONTRACT PROVISIONS 49
mum.94 For Foreign Invested Enterprises (FIEs), in addition to
minimum wage requirements, by legal edict the average wage of a
FIE should not fall below the local average rate in the same industry.
95
Increasing wage gaps also concerns workers. Some Chinese citizens
were able to realize Deng Xiaoping’s famous slogan “to get rich
is glorious” much faster than others, and with economic reforms came
great wage diversity between regions, between urban and rural, and
between management and labor. In the year 2000, regional variations
of average income ranged from 1,544 yuan/month in Shanghai to 582
yuan/month in Chonqing.96 Minimum wage variations between local
governments ranged from 620 yuan/month in Nanjing to 545
yuan/month in Beijing.97
Observations by World Bank President Wolfensohn about#p#分页标题#e#
China’s wage gaps have raised alarms; he stated that the likely conse-
94. Chan, supra, note 91, at 42. In Beijing in 2000 the average wage was reported at
1,362.50 yuan/month and the minimum wage at 412 yuan/month. See Beijing Labor and Social
Security Bureau, Guanyu Tiaozheng 2000 Nian Beijingshi Zuidi Gongzi Biaozhun de Tongzhi
[Notice on 2000 Beijing Minimal Wage Guideline] (Jun. 27, 2000),
http://www.bjld.gov.cn/tszl/zdshbz/t20010907_2142.htm (last visited Mar. 19, 2005). Beijing’s
minimum wage in September, 2004 was reported at 545 yuan/month. See Beijing Labor and Social
Security Bureau, Guanyu Tiaozheng 2004 Nian Beijingshi Zuidi Gongzi Biaozhun de Tongzhi
[Notice on 2004 Beijing Minimal Wage Guideline] (Jun. 30, 2004),
http://www.bjld.gov.cn/tszl/zdshbz/t20040924_402234257.htm (last visited Mar. 19, 2005). The
exact average wage of workers earning in China is difficult to ascertain, and it varies by political
districts. According to a 2004 survey conducted by one research institute under the Development
Research Center of the State Council (DRCSC), 70.8 percent of Chinese urban employees
earn 800 to 2,500 yuan (US$96.74 to US$302. 3) monthly. See Chinese Urban Employees Earn
More, CHINA DAILY, May 31, 2004, http://www.chinadaily.com.cn/english/doc/2004-
05/31/content_335250.htm (last visited Mar. 19, 2005).
95. WAISHANG TOUZI QIYE GONGZI SHOURU GUANLI ZANXING BANFA [INTERIM
MEASURES ON FIE WAGES], art. 4 (Feb. 14, 1997),
http://www.chinacourt.org/flwk/show1.php?file_id=27601 (last visited Mar. 19, 2005).
96. Chan, supra note 91, at 41, 45 (Figure 2).
97. See Jiangsu Xinwen [Jiangsu News], Qiye Zuidi Gongzi Zuoqi Shangtiao Nanjingshi
Feng Sange Cenci Tiaozheng [Nanjing City Increases Minimal Wages],
http://www.jschina.com.cn/gb/jschina/news/jiangsu/in&co/userobject1ai480595.html (last visited
Mar. 19, 2005) (citing Nanjing Labor and Social Security Bureau, Guanyu Tiaozheng Nanjingshi
Qiye Zuidi Gongzi Biaozhun de Tongzhi [Notice on Nanjing Minimal Wage] (2004); Beijing Labor
and Social Security Bureau, Notice on Beijing Minimal Wage Guideline (Jun. 30, 2004). For
a more detailed report on the changes of local minimal wage standards, see Bufen Shengshi
Shangtiao Zuidi Gongzi Biaozhun [Provinces Increase Minimal Wage Standards], XINHUA
NEWS AGENCY, July 27, 2004, http://news.xinhuanet.com/newscenter/2004-
07/27/content_1654505.htm (last visited Mar. 19, 2005). See also Compendium of Country Information
on Wages, Benefits, Poverty Line and Meeting Workers Needs: China 2003, United
States Department of Labor, Bureau of International Labor Affairs at II-20,
http://www.dol.gov/ILAB/media/reports/oiea/wagestudy/begin.htm (last visited Mar. 19, 2005).
50 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 16:35
quence is social unrest.98 According to the World Bank, China in the#p#分页标题#e#
past 20 years has achieved great progress in poverty reduction (insufficient
food and clothing) from 200 million people to 29 million, but
Wolfensohn pointed out that China still has 400 million people living
on less than $2/day USD. Incomes are rising, but the rate of increase
of the urban areas is rising two times faster than the rural increase.
President Wolfensohn estimated the wage gap in 10 years will be one
of the highest in the world; and he noted that in 2003 China had 10
million citizens engaged in protests, not only over labor issues (such
as layoffs and wages), but also over rising rural taxes and forced relocation
in urban areas.99
Another wage gap exists between workers and managers. A recent
survey by the State Council has identified that sixty-one percent
of Chinese enterprises were paid three to fifteen times higher than
employees, while twenty-one percent were paid fifteen to fifty times
higher, and fifteen pe rcent of the FIEs were paid fifty times more.100
A December 2003 government survey in China states that seventy-
two percent of China’s nearly 100 million migrant workers are
owed pay. The Construction Ministry estimates that workers in 2003
were owed over “$12 billion in wages” by their employers even
though the law requires wages be paid at least monthly, and estimates
put the unpaid debts to migrants at one-third of the value of production
in construction and real estate industries.101 Those involved say
98. David Murphy, The Dangers of too Much Success, FAR EASTERN ECONOMIC REVIEW,
Jun. 10, 2004, at 29.
99. Id. at 30. CCP’s Outlook magazine reported recently that three million people staged
58,000 protests on labor issues across China in 2003. See also Labor Activists Detect Change and
China Repression, REUTERS NEWS, Jan. 13, 2005, http://www.china -
labour.org.hk/iso/article.adp?article_id=6177&category_name=China%
20Labour%20Bulletin%20in%20the%20News (last visited Mar. 19, 2005).
100. Laozong Yuangong Shouru Chaju Zuida Chao Wushibei [Manager Earns Fifty Times
More], GUANGZHOU DAILY, (Apr. 25, 2004), A2 (citing Guowuyuan Fazhan Yanjiu Zhongxin
[The Development Research Center of the State Council], Zhongguo Qiye Renliziyuan Guanli
Diaocha Baogao [Human Resource Report] (2004)). News article available at
http://gzdaily.dayoo.com/gb/content/2004-04/25/content_1517025.htm (last visited Mar. 19,
2005). For Chinese senior managers, the law recognizes that their actual income (including
dividends) may be much higher than the nominal income wage payment under an employment
contract. However, the difference between actual and nominal income of a Chinese senior
manager is subject to the supervision of the union and may be used for the benefits of other employees’
welfare, such as housing or pension. See INTERIM MEASURES ON FIEWAGES art. 10.#p#分页标题#e#
101. Anthony Kuhn, A High Price to Pay for a Job, FAR EASTERN ECONOMIC REVIEW,
Jan. 22, 2004, at 30-32. Other commentators note these violations of labor laws have caused a
labor shortage in Guangdong (which account for an estimated 40 percent of the back pay cases
in China in 2003), as potential workers stay away. When this is added to demographic trends
2006] CHINA’S COLLECTIVE CONTRACT PROVISIONS 51
most of the workers do not have formal labor contracts as the law requires.
It was reported that Beijing Municipal Government in the
first six months of 2004 helped 110,000 migrant workers recover 290
million yuan ($35 million USD) of unpaid wages, causing the first decline
in labor disputes in Beijing since 2000.102
When adding up some of the ill side -effects of economic reforms,
such as slow -rising wages, widening wage gaps, and unpaid wages of
migrant workers (who make up the “floating population” of 100 to
150 million Chinese citizens)—with each affected employee seeking
to find his or her share of the new economic development, one can
understand why the central government has had as a high priority
putting a social security safety net in place with accompanying labor
law protections. This effort brought into existence the 1994 Labor
Law which broadly outlined labor standards requirements. By 2004,
many of the standards had been more formally enacted into specific
laws and regulations including new regulations on minimum wage and
hours. Notwithstanding the progress in legislation, employees continued
to demand that the laws be made to work and some collective
protests have taken place demanding improved benefits.
B. Trade Union’s Role
1. Emerging Role. The path was clearer for the governmentendorsed
union, the ACFTU, in the early days of the People’s Republic
of China when, “within the state socialist system, the interests
of both management and the trade union were supposed to be identical
and their identification was reinforced by the subordination of
both to the Party-state.”103 While the Chinese Communist Party
(CCP) in recent years during the economic transition has stepped
back somewhat from seeking to directly influence management’s micro-
market decisions, it continues to maintain a close policy relationship
with the ACFTU. Although the union is set up as an independthat
predict a shrinkage of entry -level, low-skilled industrial workers, it is argued this will translate
into more “ba rgaining power” for those entering into the labor force in the future. Dali L.
Yang, China’s Looming Labor Shortage, FAR EASTERN ECONOMIC REVIEW, Jan.-Feb. 2005, at
20, 22.
102. Li Jing, Beijing Government Urges Employers to Pay Up, CHINA DAILY, Sep. 14, 2004,
at 3, http://www.chinadaily.com.cn/english/doc/2004-09/14/content_374270.htm (last visited Mar.#p#分页标题#e#
19, 2005). See also Guoyu jishu gongren de diaoyan baogao [Analyzing Labor Shortage and
Skilled Labor Shortage], MOLSS, Sept. 8, 2004, available at
http://www.molss.gov.cn/news/2004/0908b.htm.
103. Clarke , supra note 3, at 241.
52 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 16:35
ent and autonomous body, like the All China Women’s Federation, it
is maintained as a quasi-governmental entity.104 The ACFTU is the
exclusive trade union in China and any new union must be affiliated
with it.105
China’s dramatic economic development in the past three decades
has caused the ACFTU to emerge as an organization which under
law plays “a dual role in the transition towards a market economy.”
106 In that dual role of promoting both employee interests and
economic reforms and social stability, it has also witnessed some internal
discussion, if not struggles, between those in the union who
want the ACFTU to be more active in the advocacy and representation
of the employees’ interests, and those in the CCP who want the
union to be more responsive to the needs of society for social stability.
107 In practice, as will be discussed, some observers feel the
ACFTU’s current predominant function in the workplace is a management
function.
2. Legal Authority. Chinese labor law in fact requires the
ACFTU to serve two masters. In addition to representing “the legitimate
rights and interests of the workers,”108 it must also assist the
government and the CCP in “upholding the overall rights and interests
of the whole nation.”109
As to the union’s advocacy role on behalf of the employees, the
ACFTU is to provide guidance and assistance to workers on obtaining
individual labor and collective contracts and to advance workers’
interests against the employers’ regarding compliance with a variety
of health, safety, and labor laws.110 In the event of a work stoppage or
slowdown, the ACFTU’s responsibility is to both represent the employees’
interests and to assist the employer in properly dealing with
the matter to restore the normal order of production, thus in effect,
mediating solutions to the dispute.111 The union distributes this bifurcated
loyalty also by serving on intra-enterprise mediation commit-
104. See TRADE UNION LAW art. 4.
105. Id. art. 11.
106. Clarke, supra note 3, at 241.
107. TAYLOR ET AL., supra note 4, at 115.
108. TRADE UNION LAW art. 2.
109. Id. art. 6.
110. Id. arts. 20-25.
111. Id. art. 27.
2006] CHINA’S COLLECTIVE CONTRACT PROVISIONS 53
tees and the tripartite Labor Arbitration Commissions, both of which
seek to resolve disputes over employees’ labor rights.112
While conducting its work “independently,” the union is admonished#p#分页标题#e#
to “concentrate on the focus of economic construction, adhere
to the socialist road,”113 and, as its basic responsibility, “safeguard the
rights and interests of workers.”114 Additionally, Article 7 of the
Trade Union Law requires that “trade unions should mobilize and
organize employees to participate in the economic construction positively,
to complete production duties and working duties with great
efforts. Trade unions shall educate employees . . . to build disciplined
employee groups.”115
The 2001 Trade Union Law protects the union and the employees
against improper interference with the rights granted under this
law, including the rights of employees and trade unions to engage in
lawful union activity.116 It also provides remedies for certain violations,
discussed above under “fair treatment of employees.”117 The
1994 Labor Law obligates the trade unions of various levels to “safeguard
the legitimate rights and interests of the workers and exercise
supervision over the employers with regard to the implementation of
labour discipline and the laws and regulations.”118
C. Prior Experience with Collective Negotiations
Recent studies in China on industrial relations aspects of collective
negotiations concluded before the new 2004 Provisions have examined
SOEs, private enterprises, and FIEs and point out some of
the deficiencies, which the 2004 Provisions addressed, dealing with
process, content, and the role of the trade union. First, with regard to
process, the Clarke study observes the following:
[T]he system of collective consultation is not merely a means for
the state to intervene in enterprises, but nor does it provide the
framework for a new industrial relations system in China. At the
present stage of its development, it is essentially a development of
the anachronistic system of “workers’ participation in management”
and a (rather ineffective) adjunct to the juridical regulation
of labour relations, providing a means to remind employers and
112. LABOR LAW arts. 80-81.
113. TRADE UNION LAW art. 4.
114. Id. art. 6.
115. Id. art. 7.
116. Id. art. 3.
117. Id. arts. 50-53.
118. LABOR LAW art. 88.
54 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 16:35
trade union officers of their legal obligations and, in principle
though not in practice, a means by which industrial conflict can be
defused by channeling it into juridical procedures.119
The authors feel there will be no change “until the enterprise trade
union develops into an organization that, in its structure and practice,
disengages from management to represent the interests of its members.”
120 Another recent study concludes on a similar note:#p#分页标题#e#
The system of collective contracts, theoretically designed by the superior
authorities as an effective mechanism to help adjust labour
relations, has undergone major revision when it comes to be applied
in practice. Even though the collective contract could be concluded
between the management and the union in many enterprises,
the whole process of consultation is little more than
administrative compliance with quotas assigned from above.121
Next, with regard to content of the collective contracts, the Clarke
study concludes the following:
Employers remain reluctant to incorporate any substantive detail in
the collective contract, so that the contract adds little or nothing to
the existing legal regulation of the terms and conditions and employment.
At best, the collective contract provides a means of reminding
employers of their legal obligations and monitoring the
implementation of labour legislation in the workplace.122
In its analysis of the content of collective contracts of SOEs, the
Chang study observes that there were three categories of contract
clauses in the agreements: the first deals with principles and formalities,
such as who are the parties, etc.; the second contains the clauses
to be implemented by the parties; the third category deals with commitments
of the parties and duration.123 The study shows the second
category of implementation clauses took up an average of about 70
percent of the total number of clauses. Further examination reveals
over 60 percent of these clauses were defined by the labor law (usually
a duplication), 20 to 30 percent were made in reference to the law
(e.g., time schedule for implementing certain required female medical
examinations), and about 10 percent of the clauses, on average, dealt
with subjects relating to improvement of the employees’ benefits.124
119. Clarke, supra note 3, at 251.
120. Id. at 251-52.
121. TAYLOR, supra note 4, at 206.
122. Clarke, supra note 4, at 250.
123. TAYLOR, supra note 4, at 193-94.
124. Id.
2006] CHINA’S COLLECTIVE CONTRACT PROVISIONS 55
Interestingly, the Clarke study observes that wage negotiations
were often conducted separately from the collective contract negotiations,
with the negotiated wages reflecting the minimum wages at the
enterprise. Likely, this bifurcated approach may be because wages
are often revised annually, whereas a collective contract may stay in
effect for two or three years.125
Lastly, the controversial role of the trade union has drawn much
attention in recent studies. The primary hindrance is continually
identified as the employees not having a real advocate for their interests
under the current system in China. It appears to some that “the
predominant functions of the trade union at the workplace still tend#p#分页标题#e#
to be management functions.”126 Clarke’s study concluded that the
following was the principal function of the trade union:
[To] “take economic development as its central task,” encouraging
workers to increase productivity, enforcing labor discipline and
conducting extensive propaganda on behalf of management. ‘Protecting
the rights and interests of employees’ is at best interpreted
as monitoring managerial practice to ensure that it conforms to all
the relevant laws and regulations, and implementing the social and
welfare policy of the enterprise—visiting sick workers, dealing with
personal problems, distributing benefits, organizing picnics and arranging
celebrations.127
The concept of the trade union being something other than “just a
branch of management” and of representing and protecting employee
interests “in opposition to those of the employer is something unfamiliar,
if not entirely alien, to [the union’s] traditional practice and to
[its] traditional conception of [that] role.”128
Part of the explanation is the identity of the trade union officials.
A typical official at the enterprise level has been described as follows:
Trade union officers are drawn largely from the ranks of management.
A full-time trade union president is paid by the employer
and normally enjoys the status (and salary) of a deputy general director
of the company; the personal careers of union leaders revolve
around the positions of party cadre, union leader and enterprise
manager; they are usually members of the Board of Directors
and/or the Supervisory Board of the company; and they (rightly)
regard themselves as members of the senior management team.
125. Clarke, supra note 3, at 247.
126. Id. at 242.
127. Id.
128. Id.
56 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 16:35
Whether or not there is a formal election of the trade union chair,
the latter is normally appointed by management.129
Clarke’s study found many examples where the “real parties” in interest
were obfuscated; it illustrated the often lock-step harmony of
interests:
In some enterprises senior members of management participated in
the negotiations on the trade union side. In one enterprise the finance
director was a member of the trade union in the consultation
committee; in another a senior financial manager participated on
the trade union side in an advisory capacity. At the same time, the
trade union president, as a member of the Board of Directors or
Supervisory Board, usually participates in the formulation of management’s
response to the trade union proposals for the collective
contract.130
Left out of the equation is whether the employees feel their interests#p#分页标题#e#
are being properly negotiated and protected; although theoretically,
and under the law, they can refuse to ratify the proposed final agreement.
131
In prior years, the CCP would have played a more direct and active
role to ensure the employer and union worked “harmoniously,”
but in recent years the CCP works more indirectly, usually through
the trade union. In that respect, the above study shows that “at least
five of the 12 trade union presidents also held the post of party secretary
or deputy party secretary.”132
This ambiguity of who is the employer and who is the union
(though not necessarily who is the boss) is further complicated by
China’s legacy of SOE’s being units of larger integrated bureaucracies
in the planned economy, the periodic use of Workers’ Congresses,
and the absence of unions in many enterprises across China. The traditional
SOEs utilized “employers” and trade unions as agents for
controlling bureaucratic entities of an economic plan. With economic
reforms and new laws, legal responsibility is increasingly fixed on the
“employing unit”—the employer. However, at the enterprise level,
there is little meaningful influence to prevent the union and the employer
from “wearing each other’s hats” and in the process basically
becoming the same voice.
The Worker’s Congresses, set up in SOEs to provide workers’
democratic management, are not used, particularly in private enter-
129. Id. at 242-43.
130. Id. at 246.
131. See PROVISIONS art. 37.
132. Clarke, supra note 3, at 243.
2006] CHINA’S COLLECTIVE CONTRACT PROVISIONS 57
prises. However, when used in SOEs, they can be one more “player”
in the complexities of relationships in the negotiations relating to the
welfare of the employees and the enterprises. They were reestablished
in 1981 to provide for workers at the enterprise level to
participate in management.133 The Congress is supposed to meet at
least once a year and its executive body, the trade union, generally
executes its functions. These functions include review and approval
or disapproval of management’s plans, appointments, and decisions.
Its efficacy in practical terms is suspect, and, post-1979 history and
rapidly changing governance structures in China seem to have overtaken
its usefulness. For example, the current Corporation Law
greatly diluted and reduced the power and role of Worker’s Congresses
to merely “exercise democratic management”134 and “democratic
supervision.”135 The former “legal” functions of the Workers’
Congress to appraise and supervise the cadres and elect the Director
of the enterprise are deleted and replaced by a corporate board of directors#p#分页标题#e#
and supervisory committee.136 Whether this will be a fatal
blow to the Workers’ Congresses in SOEs remains to be seen.
Another emerging role of trade unions in collective negotiations,
observed in the pre-2004 studies, is the introduction and possible institutionalization
of industrial unions. Due to the increased presence
of small to medium FIEs, Privately Owned Enterprises (POEs), and
Town and Village Enterprises (TVEs) in the new socialist ma rket
economy, a large number of workers coming from rural or less industrialized
areas of China are being employed, and, as is well documented,
their labor rights are exploited.137 The unionization rate in
these enterprises is very low, and there is little expectation of labor
law enforcement, let alone negotiation of collective contracts. It has
been suggested that these largely overseas-funded enterprises do not
necessarily resist collective negotiations, rather they see unions and
negotiations as “irrelevant” and the government and the CCP as either
reluctant or impotent to induce the enterprises to sign agree-
133. Quanmin Suoyouzhi Gongye Qiye Zhigong Daibiao Dahui Tiaoli [Regulation on
State-Owned Enterprise Workers’ Congress] arts. 1-6 (1986),
http://www.chinacourt.org/flwk/show1.php?file_id=5586 (last visited Mar. 19, 2005).
134. ZHONGHUA RENMIN GONGHEGUO GONGSI FA [CORPORATION LAW] art. 16 (1999),
http://www.chinacourt.org/flwk/show1.php?file_id=96089 (last visited Nov. 10, 2005).
135. Id. arts. 16, 55.
136. TAYLOR, supra note 4, at 1.
137. See Clarke, supra note 3, at 248.
58 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 16:35
ments.138 The ACFTU has taken notice, and as early as 1996 in a
document issued jointly by then Ministry of Labor, the ACFTU, the
SETC, and China Enterprise Confederation an approval was given
for the use of “professional or industrial unions” of the primary trade
union to negotiate collective contracts on behalf of the employees at
these various enterprises.139
Pursuant to this policy of using industrial unions, the ACFTU
has reportedly established these types of local trade union organiz ations
in 25 provinces since 1996.140 The agreements under these industrial
unions cover all of the private enterprises in one district or
industrial sector. The union signs the agreements with the “employers’
associations” at the same levels. These “associations” are described
as “established under the relevant government departments
rather than genuine employers’ organizations.”141 Clarke’s study, under
pre-2004 Provisions, indicates that in at least one area, Chengdu
(where there were some 30 agreements), there has been an increase
in union membership following the agreements.142 An added bonus#p#分页标题#e#
for workers in Chengdu is that the city-level ACFTU had “successfully
been taking cases to the City Arbitration Committee when the
employers had failed to abide by the agreement.”143 A downside
noted, was that it worked because of government intervention (as
“employers’ associations” were local government authorities supervising
local private enterprises) rather than as voluntary regulation of
collective negotiations by private employers.144
There were some positive aspects observed in the pre-2004 collective
negotiation process. The “existing system provides an effective
method of soliciting the reactions of employees to management
proposals;” however, due to the great amount of discretion a union
138. Id.
139. TAYLOR, supra note 4, at 196. The Trade Union Law states, “[E]nterprises of some
industries or industries of similar nature may set up national or regional industrial unions as circumstances
require.” TRADE UNION LAW art. 10.
140. Clarke, supra note 3, at 249. A union in Hangzhou reportedly had recent guarantees of
800 yuan per month through collective contracts. Interestingly, a comment by Fu Nanbao,
president of the trade union in Xinhe, said that with the help of the trade union and the new
wage negotiating system, “the relationship between employers and workers has gone from being
‘adversarial’ to ‘cooperative.’” Shao Xiaoyi, Negotiated Salary System Saves Industry, CHINA
DAILY, Feb. 24, 2005, at 5, http://www.chinadaily.com.cn/english/doc/2005-
02/24/content_418852.htm (last visited Mar. 19, 2005).
141. Clarke, supra note 3, at 249.
142. Id.
143. Id.
144. Id.
2006] CHINA’S COLLECTIVE CONTRACT PROVISIONS 59
has, the ability of employees to have an effective channel to articulate
their own aspirations is more limited.145 In some cases involving large
FIEs who wish to be “good citizens,” such as Beijing Jeep Ltd., Babcock
& Wilcox Company, and Shanghai Volkswagen Automotive
Company Ltd., there have been comprehensive collective contracts,
though not necessarily prompted by the laws.146 Willing unions have
also evidenced their abilities “to design sophisticated negotiation
strategies involving high, medium and bottom lines for their wage negotiation.”
147
III. COMPARATIVE REFERENCES: ILO AND UNITED
STATES
Before further analyzing the 2004 Provisions, some references of
ILO labor standards and U.S. approaches are provided for context
and measurement of China’s collective negotiation under the new
Provisions.
A. ILO Labor Standards
By providing labor standards reached by a consensus of its some
178-member states, the ILO presents countries a choice. Though
there are competitive advantages in world markets to maintain low#p#分页标题#e#
labor standards so as to maximize profits, support economic development,
and attract foreign investment, there still exists a strong
movement among enlightened countries to undertake labor reforms
for the clear purpose of providing their citizens a safe and decent
working environment.
In 1998, the ILO put forth conventions of eight “core labor standards”
by which it will take measure of countries’ labor conditions
and practices under national laws.148 Nearly eighty-five percent of the
145. Id. at 245.
146. TAYLOR, supra note 4, at 202-03.
147. Id. at 203.
148. International Labour Organization Declaration on Fundamental Principles and Rights
at Work, Gen. Conf. Res., 86th Sess. (June 19, 1998), reprinted in 37 I.L.M. 1233 (1998). From
the Copenhagen Social Summit in 1995 to the 1998 Declaration on Fundamental Principles and
Rights at Work, the ILO has pressed for an international consensus on the content of the core
labor standards. In 1998, the ILO adopted the Convention concerning the Prohibition and Immediate
Action for the Elimination of the Worst Forms of Child Labour (Convention No. 182).
It also adopted its Declaration on Fundamental Principles and Rights at Work together with a
follow-up procedure based upon technical cooperation and reporting. The principles have been
incorporated into codes of conduct by the private sector and also used as a basis for action by
60 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 16:35
members have ratified six of the core standards, and nearly sixty-five
percent, including European nations, have ratified all eight.149
China, as a “developing” country, continues to progress in its labor
law reforms, and it has ratified three of the core labor standards,
and overall ratified 23 conventions, and has become a member of
ILO’s governing board.150 By comparison, the United States has ratified
two of the core standards and 14 conventions overall.151 Of
course, the issue always remaining is how well the existing national
labor laws and practices accord with ILO standards.
Relevant to the issue of collective negotiation, this Article examines
two of the core labor standards—Freedom of Association and
Protection of the Right to Organise (Convention No. 87) and the
Right to Organise and Collectively Bargain (Convention No. 98).152
Neither China nor the United States has ratified these two conventions.
1. Freedom of Association and Protection of the Right to Organize.
In the United States, there are nearly 16 million unionized workers,
consisting of about 8 percent of the workers in the private sector
and about 36 percent in the government sector. 153 The primary federal
labor law in this area is the National Labor Relations Act
(NLRA), which guarantees the right to freedom of association, the#p#分页标题#e#
right to join unions, to bargain collectively, and to engage in “convarious
regional organizations. See Dinah Shelton, Protecting Human Rights in a Globalized
World, 25 B.C. INT’L &COMP. L. REV. 273, 306 (2002).
149. See Ratifications of the ILO Fundamental Conventions as of 11 Feb 2005,
http://webfusion.ilo.org/public/db/standards/normes/appl/appl-ratif8conv.cfm?Lang=EN (last
visited Nov. 1, 2005).
150. For a list of ratification, see ILOLEX, http://www.ilo.org/ilolex/cgi-lex/ratifce.pl?China
(last visited Nov. 1, 2005); China Labour E-Bulletin Issue No. 8, Editor’s Note (July 2, 2002),
http://www.china -labour.org.hk/iso/newsletter_details.adp? newsletter_id=41 (last visited Mar.
19, 2005) (The ACFTU won a seat in the Worker’s Group of the ILO’s Governing Body in June
2002).
151. See ILOLEX,(last visited
Nov. 1, 2005).
152. Freedom of association is defined in the Freedom of Association and Protection of the
Right to Organise Convention (Convention No. 87) and the Right to Organize and Collective
Bargaining Convention (Convention No. 98).
153. “In 2004, 12.5 percent of all wage and salary workers were union members, down from
12.9 percent in 2003 . . . . The union membe rship rate has steadily declined from a high of 20.1
percent in 1983 . . . . About 36 percent of government workers were union members in 2004,
compared with about 8 percent of workers in private-sector industries.” See Bureau of Labor
Statistics, Union Members Summary (Jan. 27, 2005),
http://www.bls.gov/news.release/union2.nr0.htm.
2006] CHINA’S COLLECTIVE CONTRACT PROVISIONS 61
certed” activity, including strikes. The violations of the right to associate
under the NLRA include harassment, surveillance, threats, and
discharge. Such practices are deemed “unfair labor practices,” and
the law provides remedies.
China’s only trade union, the ACFTU, according to top union official
Chairperson Zhang Junjiu, a member of the Politburo, had 134
million trade union members in 2003 out of about 250 million urban
workers, which represented about less than 60% of the employees
(though union membership in private and foreign-invested sectors is
estimated to be less than 20%).154 New amendments to the Trade Union
Law stipulate that all enterprises with 25 or more employees must
establish a labor union and negotiate on matters of importance to
employees, and there are legal protections for the right to organize.155
In China, although there is a right to associate and form a trade
union, it is not necessarily one of the employees’ choices because in
all cases the union must be affiliated with the ACFTU, which exercises
leadership over the subordinate levels.156 The ACFTU, since the
founding of the People’s Republic of China, has had a close working#p#分页标题#e#
relationship with the government and the CCP. This relationship, in
very recent years, shows evidence of undergoing some loosening in
practice as to the role the union plays in labor relations and employee
advocacy. However, while the role may “morph,” the law is clear, as
stated in China’s reservation to the U.N. Covenant on Economic, Social,
and Cultural Rights, Article 8.1(a), which limits the right of
choice of unions to the laws of China (which do not permit it).157 According
to the International Confederation of Free Trade Unions
(ICFTU), there are numbers of reports of China prohibiting attempts
to create independent trade unions, which are in violation of Chinese
154. Quanguo Gonghui Huiyuan Dadao Yidiansan Yi Ren, Chuang Lishi Zuigao Shuiping
[Union Membership Reaches New Historical Peak], Xinghua News Agency, Nov. 11, 2002,
http://news.xinhuanet.com/newscenter/2002-11/11/content_625980.htm (last visited Nov. 10,
2005).
155. TRADE UNION LAW art. 10. See also id. arts. 19-22 (supporting that legal protection is
the practical consequence of Article 10 since all enterprises with 25 or more employees must
establish a labor union, and that the workers, through a union, can voice their opinions on important
matters)
156. See id. arts. 10-11. Approval is a requisite of affiliation.
157. Aaron N. Lehl, Note, China’s Trade Union System Under the International Covenant on
Economic, Social and Cultural Rights: Is China in Compliance with Article 8?, 21 U. HAW. L.
REV. 203, 205, 236 (1999).
62 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 16:35
laws, with violators suffering penalties of criminal and/or administrative
detainment, or sometimes even psychiatric detainment.158
2. Right to Organize and Collective Bargaining . Also under the
ILO labor standards is the right to engage in collective bargaining
(implicitly including the right to strike), which derives naturally from
the freedom of association.159 In the United States, the NLRA again
is the primary law granting this right to private employees. Colle ctive
bargaining in the United States usually involves vigorous negotiations
and exchanges of proposals with the National Labor Relations Board
(NLRB), the administrative body supervising the employer and union
to ensure they conduct their negotiations fairly and in good faith,
without committing unfair labor practices, as discussed below. The
NLRB is, in many ways, a model agency for administrative enforcement,
backed by the power of the courts to enforce its remedies.
However, its effectiveness is tempered by backlogs and inadequate
statutory penalties.
American workers and labor unions feel strongly that there must
be a right to strike so as to permit them to counter the economic
power and pressure of the employers. However, though there is a#p#分页标题#e#
statutory right to strike in the private sector, case-law interpretation
of that statute permits employers to replace striking workers permanently.
160 Most public sector employees are prohibited from striking
158. See ICFTU, China, People’s Republic of: Annual Survey of Violations of Trade Union
Rights (2004), (last
visited Mar. 19, 2005).
159. “For the Committee of Experts, [under the ILO], although the right to strike is not
mentioned explicitly in Convention No. 87 [Freedom of Associa tion], it derives from Article 3,
which sets forth the right of organizations to organize their activities and to formulate their programmes.”
BERNARD GERNIGON ET AL., FUNDAMENTAL RIGHTS AT WORK AND
INTERNATIONAL LABOUR STANDARDS, 20 n.4 (2003). But see, the U.N.’s International Covenant
on Economic Social and Cultural Rights, which proclaims “[t]he right to strike, provided
that it is exercised in conformity with the laws of the particular country.” ICESCR, Art. 8(d).
Collective Bargaining Convention (No. 154, art. 2) defines “collective bargaining” as extending
“to all negotiations which take place between an employer” and a workers’ organization for:
“(a) determining working conditions and terms of employment; and/or (b) regulating relations
between employers and workers; and/or (c) regulating relations between employers or their organizations
and a workers’ organization or workers’ organizations.” ILO, C154 Collective Bargaining
Convention (1981), (last visited Mar.
31, 2005).
160. Nat’l Labor Relations Bd. v. MacKay Radio and Tel. Co., 304 U.S. 333, 345-46 (1938);
Nat’l Labor Relations Bd. v. Curtin Matheson Scientific, Inc., 494 U.S. 775, 790 (1990).
2006] CHINA’S COLLECTIVE CONTRACT PROVISIONS 63
because of their “essential” services. In case of federal workers, it is a
criminal felony to strike.161
Strikes likewise occur in China but are not explicitly provided for
in law; neither are they prohibited. As mentioned before, the
ACFTU, according to Article 27 of the Trade Union Law, is called
upon to mediate and assist the enterprise and employees in making
proper preparations for resuming work and restoring work order as
soon as possible when there is a “work stoppage or a slow down.”162
Also, Article 47 of the 2002 Work Safety Law authorizes workers to
stop work and leave the workplace if their personal safety is directly
endangered.163 One could argue that there seems to be an emerging
legally implicit acceptance of the right to strike. At the same time,
however, there appears to be clear government disfavor against some
of the strike leaders for bringing socia l disorder or interfering with
production.164
China’s 2004 Provisions purportedly seek to implement the 1994#p#分页标题#e#
Labor Law’s call for collective contracts. Included is regulation of the
process, content, government supervision, and a dispute resolution
mechanism, discussed below. Whether these Provisions and the practices
under them can meet the standards of the ILO Convention on
Collective Bargaining will bear examination in the years ahead.
Some China observers have expressed skepticism and concluded from
the similar practices that preceded the new Provisions that “it is primarily
the continued integration of the trade union into management
at the workplace that prevents collective consultation from providing
an adequate framework for the regulation of labour relations.”165 The
ICFTU is likewise critical, saying that earlier experiments show the
“contracts [were] or are drawn up by employers and simply reflect
161. 18 U.S.C. § 1918(3) (2000).
162. TRADE UNION LAW, Art. 27.
163. ZHONGHUA RENMIN GONGHEGUO ANQUAN SHENGCHAN FA [WORK SAFETY LAW]
art. 47 (Jun. 29, 2002).
164. FENG CHEN, Subsistence Crises, Managerial Corruption and Labor Protests in China , 44
CHINA JOURNAL 41 (2002). See also THE INT’L CTR. FOR TRADE UNION RIGHTS, China: Special
Report, available at http://www.ictur.labournet.org/China.htm (last visited Mar. 19, 2005).
165. Clarke, supra note 3, at 235. The Committee of Experts, under the ILO, states: “To be
effective, the exercise of the right to collective bargaining requires that workers’ organizations
are independent and not under the control of employers or employers’ organizations, and that
the process of collective bargaining can proceed without undue interference by the authorities.”
BERNARD GERNIGON ET AL., supra note 160, at 29.
64 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 16:35
minimum legal requirements or the continuation of past practice
[and] [t]here is very little actual ba rgaining.”166
Whether the Chinese collective negotiations under the 2004 Provisions
will evolve into a process that harmonizes with international
labor standards awaits future examination of (1) practices under these
new Provisions, (2) the evolving role of the ACFTU, and (3) the substantive
content of resulting contracts. It is evident that economic
transition has awakened wage consciousness, and labor disputes in
China have been on the rise in recent times. Such circumstances may
provide a positive impetus for utilizing the 2004 Provisions in a way
that could evolve collective negotiations into more meaningful bargaining.
As China and the United States continue with their labor laws
relating to the two ILO core labor standards covering the right to
freedom of association and collective bargaining, the ILO notes that
in numerical terms, “half of the world’s workers remain unprotected#p#分页标题#e#
by the conventions’ provisions. Alarmingly, large countries as Brazil,
China, India, Mexico, and the United States have still not ratified
fundamental ILO Conventions on freedom of association.”167
B. Comparative U.S.-China Approaches: Collective Bargaining vs.
Collective Negotiations
A brief comparison of U.S.-China collective bargaining versus
collective negotiations points out at least five areas of differences in
approaches. First, the parties are quite different in interests and constituencies.
In the United States, unions must maintain an “arm’s
length” relationship with the employer to avoid being subverted from
the union’s single purpose of employee advocacy.168 This is explained
by the unions having come into prominence only after fighting employers
for the right. In 1935, the NLRA granted employees in the
private sector the right to be represented by a union in its workplace
interests and collectively bargain through that representative free
166. ICFTU, China People’s Republic of: Annual Survey of Violations of Trade Union
Rights, supra note 157. “[G]iven the non-democratic, Party-dominated nature of unions, colle ctive
bargaining fell far short of international standards.” BUREAU OF DEMOCRACY, HUMAN
RIGHTS, AND LABOR, Country Reports on Human Rights Practices—2003, available at
http://www.state.gov/g/drl/rls/hrrpt/2003/27768.htm (last visited Mar. 19, 2005).
167. ICFTU Online, New Report: Half the World’s Workers Denied Fundamental Workers’
Rights, available at http://www.icftu.org/displaydocument.asp?Index=991219292&Language=EN
(last visited Mar. 19, 2005). For a detailed list of ratification status, see ILO, ILOLEX Conventions,
http://www.ilo.org/ilolex/english/convdisp1.htm (last visited Mar. 19, 2005).
168. See National Labor Relations Act § 8(a)(2), 29 U.S.C.A. § 158(a)(2) (2000).
2006] CHINA’S COLLECTIVE CONTRACT PROVISIONS 65
from employer’s (and later free from union’s) interference.169 Source
is silent as to whether the collective bargain will be free from union
interference. The union typically is a local union affiliated with a national
union. These national unions usually support the efforts of the
local union in organizing, bargaining, and, when necessary, striking.
The union’s single purpose of employee advocacy is made possible by
the union’s firm and unequivocal duty of fair representation owed to
the employees it represents. The union must deal “fairly” (diligently
and non-arbitrarily) with the employees, including in the bargaining,
contract administration, and the labor arbitration stages. Violation of
this duty is an unfair labor practice and can also be taken to the courts
for a remedy.170
In contrast, the function of the Chinese trade unions in a socialist#p#分页标题#e#
planned economy was sometimes referred to as a “transmission belt”
of the CCP; and, under the present socialist market economy, it has
become a multi-purposed institution to promote China’s economic
development and social stability, as well as its other role of protecting
the labor rights of employees. This is in stark contrast to the singlepurpose
role of the union in the United States.
The dual or multi-purpose of the Chinese union has created sufficient
ambiguity to raise issues whether collective negotiations is a
conversation between two parties or a multi-headed monologue
among parties with “harmonious” interests, which may or may not
also capture the real interests of the Chinese employees. This multipurpose
approach might be usefully compared with Japan’s industrial
relations approach where its unions have a dual purpose, advocating
for employees and the employer’s economic well-being. And, of
course, the Chinese employees cannot choose an alternative union
from the market place. However, unlike in the United States, under
Chinese law, employees may more easily “select” a union without an
election process and without an employer campaign trying to persuade
employees to vote for no union. Even without the presence of
an official union, the Chinese workers have the benefit of bargaining
collectively as if they were unionized by passing the threshold of a
169. National Labor Relations Act § 7, 29 U.S.C. §157 (2001) (granted employee’s right to
organize). However, the definition of employee excludes workers hired either by federal or
state governments, see id. § 2(3)-(4).
170. See ROBERT A. GORMAN AND MATTHEW W. FINKIN, BASIC TEXT ON LABOR LAW:
UNIONIZATION AND COLLECTIVE BARGAINING 981-1018 (2d ed. 2004). See also LABOR
UNION LAW AND REGULATION 1-10 (William W. Osborne, Jr. et al. eds., 2003).
66 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 16:35
simply majority vote, to which an employer cannot object.171 Wal-
Mart has claimed no groups of employees in any of its many stores in
China have ever asked for a union, which—if the union has decided
it’s bad for business—could be true.172
A second area of comparison is the type of employee groups represented
by the union. The unions in the United States use exclusive
representation of a group of employees within the enterprises or an
industry, whereas the Chinese unions generally utilize “enterprise unionism”
to negotiate for most employees within a particular enterprise.
Again, the Chinese approach is similar to the traditional bargaining
approach used by Japanese labor unions, though in recent
years the latter also has begun to link with vertical union structures in
more meaningful ways during negotiations. The use of enterprise unionism#p#分页标题#e#
diminishes the power of the unions compared with an American-
style union relationship, where unions can cross employer
boundaries involving multi-employers and within entire industries
with the ability to bring economic pressures on the larger employer
group. On the other hand, the ACFTU is expressly authorized to set
up national or regional industrial trade unions as circumstances require
for enterprises of some industries or industries of similar nature.
173
A third difference is in the statutory definition of the scope of
bargaining/negotiation. In the United States, the NLRA uses a single
phrase “wage, hours, and other terms and conditions”174 and lets the
administrative agency and the courts subsequently broaden the coverage
by providing more detailed interpretations.175 The Chinese
1994 Labor Law and the 2004 Provisions themselves supply great
numbers of categories and illustrations of the types of items that are
deemed proper subjects for negotiations. Further clarifications of related
labor laws can come through various legal interpretations from
a variety of government branches and agencies, including the Supreme
People’s Court, the State Council, and the MOLSS. Perhaps
the different approaches reflect a civil law system versus a common
law system. However, in reality, the small number of contract terms
in the actual Chinese collective contract pales in comparison to the
171. PROVISIONS art. 20.
172. Wal-Mart Concedes China Can Make Unions, CHINA DAILY, (Nov. 23, 2004),
http://www.chinadaily.com.cn/english/doc/2004-11/23/content_394129.htm.
173. TRADE UNION LAW art. 12.
174. National Labor Relations Act § 8(d).
175. 48A Am. Jur. 2d Labor and Labor Relations §§ 3018-19 (2004).
2006] CHINA’S COLLECTIVE CONTRACT PROVISIONS 67
substantially thicker multi-terms of a typical U.S. collective bargaining
contract.
Fourthly, bargaining duties in the United States and China are
arguably similar. Both U.S. and Chinese law say that the parties cannot
refuse to negotiate, must negotiate honestly and in “good faith,”
must provide information upon request to the other party, and generally
must engage in a process of proposing and counter-proposing. In
the United States, the law requires “good faith” bargaining by both
sides over “mandatory subjects” (wages, hours, and other terms and
conditions) until agreement or impasse is reached.176 This means having
representatives independent from the other party’s representatives,
having authority to reach agreement, meeting at reasonable
times and places, and generally offering and discussing proposals and
counter-proposals in an attempt to reach an agreement. If genuine
“impasse” is reached in negotiations, in most cases after a first contract,#p#分页标题#e#
the parties must notify the government’s Federal Mediation and
Conciliation Services (FMCS), which can assist the parties in trying to
reach a mediated agreement.177 Upon impasse, the employer can unilaterally
implement its last offers made to the union. The union can
picket and strike (as they also could before the impasse), and the employer
may legally, temporarily or permanently , replace the striking
employees.178
Some conduct permissible in the United States, such as picketing,
striking, and other economic pressures, is not a realistic and practical
option in China. As discussed, strikes in China do occur and are not
legislatively banned, and the trade union has the responsibility to assist
in ending strikes, and, in some work safety situations, work stoppages
may be acceptable. Yet, under clearly established practices
where there may well be government penalties associated with strike
activ ities.
Fifthly, there are clear differences in the U.S. and China approaches
to enforcement and remedies against improper conduct. The
Chinese Labor Bureau has the responsibility to supervise the negotiation
process179 and to coordinate the parties in resolving issues180 by
176. See id.
177. Id. § 8(d)(3).
178. GORMAN ET AL., supra note 160, at 600-15. See Mackay Radio & Tel. Co., 304 U.S. at
345 (noting that employers may replace striking employees).
179. PROVISIONSart. 49.
180. TRADE UNION LAW art. 50.
68 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 16:35
conducting a “dispute resolution process.”181 Thus, it is at least arguable,
in theory, that the Labor Bureau could mediate/negotiate a settlement
of certain improper conduct, as well as substantive contract
issues, both presumably in accordance with legal requirements.
However, very significantly, Article 54 of the 2004 Provisions stipulates
the mediated settlement is not effective until signed by the chief
representatives of each side, thus apparently negating a unilateral decision
by the Labor Bureau.182
Remedies may also be available under the Trade Union Law if
the employer refuses collective negotiations requirements put forward
by the trade union without any proper reason.183 For improper
conduct occurring during negotiation or arising later from the performance
of the collective contract that violates the labor rights (contract
or statutory) of employees, the disputes are to be resolved by
Labor Arbitration Commission, with appeal to the courts for de novo
review. The Trade Union Law also provides a range of remedies for
violation of employee and union member’s labor rights; as such the
prevention of an individual’s joining a trade union,184 insulting a trade
union member,185 hindering trade union investigation of labor right#p#分页标题#e#
infringements,186 or refusing to hold equal negotiation without any
tenable reasons.187 Remedies range from the trade union requesting
government prosecution,188 to compensation (reinstatement with
backpay or double the annual income of the wronged employee).189
Comparison also reveals a significant difference in terms of the
location of statutory remedies for violations of employees’ statutory
labor rights related to collective negotiations. In China, the statutory
remedies are found in many locations involving numbers of labor
laws. One illustration of possible remedies for proscribed negotiation
conduct can be found, as just discussed above, in the Trade Union
Law. Another example is seen in the case of the Labor Law, which
provides that violations are to be rectified and appropriate compensa-
181. Id. art. 53(4).
182. Id. art. 54.
183. Id. art. 56.
184. Id. art. 53.
185. Id. art. 51.
186. TRADE UNION LAW art. 53(3).
187. Id. art. 53(4).
188. Id. art. 54.
189. Id. art. 52.
2006] CHINA’S COLLECTIVE CONTRACT PROVISIONS 69
tion owed should be paid.190 The 2004 Provisions, likewise, “house”
another location for remedies. Presumably, the Labor Arbitration
Commissions through their labor arbitration tribunals will make appropriate
reference to and use of these legal rights and remedies.
The U.S. approach of enforcement of statutory labor rights violations
differs from that of the Chinese in that the United States has a
single bureaucratic administration, the NLRB, and one single governing
law, the NLRA that supervises the process. The NLRB handles
the adjudication of unfair labor practice cases, and its General Counsel’s
Office does the investigation and prosecution of law violators.191
The NLRB is authorized to provide a range of remedies to “effectuate
the purposes of the Act.”192 These include “cease and desist” orders,
notice posting regarding violations, reinstatement, back pay, and
a variety of other affirmative remedies.193 The law requires these
remedies to be enforced through the courts.194 As to the enforcement
of collective bargaining agreements, the contract rights are enforced
by the parties through private (non-governmental) labor arbitration.
195 This is authorized under the law and precludes going directly
to court to enforce the collective bargaining agreement without first
exhausting the arbitration process.196 Judicial review of the arbitration
decision is limited to a review that usually defers to the arbitration
decision, as long as the process was fair and regular.
IV. “IMAGINING” CHANGE: POSSIBILITIES FOR LABOR
REFORM
An objective examination of the 2004 Provisions may reveal to
some the possibility that China’s collective negotiations could, with#p#分页标题#e#
additional labor reforms, take on essential characteristics of collective
bargaining, as reflected in ILO standards and U.S. experience. While
actual implementation is yet to be seen, one can be hopeful, within
reason, that the steady evolvement in recent years’ labor legislation
can be matched by labor reforms in practice. Imagining what is possible,
tempered by what is likely within “Chinese conditions,” can
move forward the possibilities of real labor reform. It is within that
190. LABOR LAW art. 91.
191. National Labor Relations Act, § 3.
192. Id. § 3(c).
193. Id.
194. Id. § 10(e).
195. Id. § 8(d).
196. Id. § 8(d)(4)(C); see also National Labor Relations Act, § 203(d).
70 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 16:35
spirit that the following possibilities for labor reform in China are
suggested.
A. Defining the Parties and Adjusting the Role of the Union
Insisting on an “arm’s length” relationship between the employer
and the union in representing entrepreneurial and employee welfare
interests is a beginning and adheres more closely to the ILO labor
standards. Presently, the ACFTU is set up in labor relations to be all
things to all people. It is possible, without systemic changes in
China’s political-legal system, to “de-integrate” the employer and union
in their “symbiotic” relationship and still allow the union to have
a dual purpose, similar perhaps to a Japanese-style, functioning to
represent the employees while at the same time protecting the economic
best interests of the enterprise. Arguably, it can even indirectly
serve a third purpose, the economic development of the country
and its social stability. Some years ago, the CCP pulled back from its
direct intervention in enterprise management activities and perhaps
that policy change could be a model for labor reform in collective negotiations.
But clearly under international standards, it should be the
business of the employer, not the union, to make the case for its own
interests. Details of separating trade union representatives and management
could be worked out and consideration might be given to the
NLRA’s 8(a)(2) unfair labor practice limiting employer domination
and interference with the labor union (or in China’s case, perhaps
also visa-versa).197
The role of the Chinese union can be slightly adjusted under existing
policies. Because China primarily uses “enterprise unionism”
(bargaining at the employer level), as has been mentioned, it has become
enmeshed with the employer and management interests. One
way to intervene in this “sweetheart” relationship is to require a regional
(or “outside”) union to participate or perhaps have a leading#p#分页标题#e#
role in the local negotiations, as the “professional representative” as
is provided for in the 2004 Provisions. Current Chinese law now
permits the ACFTU to have national or regional unions and to provide
assistance to local unions. This practice is commonplace in the
United States, and it allows for more independence in the negotiation.
Additionally, this “outside” union representative can bring into
the negotiation examples of “real” model contracts that show numerous
negotiated contractual supplements to statutory labor rights. Pro-
197. Id. § 8(a)(2).
2006] CHINA’S COLLECTIVE CONTRACT PROVISIONS 71
fessional representatives of the union may also more easily propose
limitations on employer rules and regulations, which under the labor
contract provisions can be the basis for employee discipline and discharge.
198 Finally, pe rhaps some creatively delegated responsibilities
and adherence to established international standards could be devised
to guard the respective interests of the parties, especially those of the
employees, to provide against mixed loyalties and conflicts of interests
by the negotiating parties.
An additional method of achieving increased autonomy of the
union during collective negotiations is to place and enforce a stronger
“duty of fair representation” on the union, so that the union will have
to be accountable to represent its own constituency. Presently, a duty
of fair representation by the union already exists to a limited degree,
as the union bears the responsibilities to solicit input from employees’
proposals, to report on the progress of discussions, and then to seek
ratification by the employees of the negotiated contract. But there
seems to be no effective consequence for the union’s refusing or arbitrarily
disregarding employee input on contract provisions or of not
fully or fairly representing the employees’ interests in labor rights
disputes. Moreover, at the present time, without a stronger duty of
fair representation, there seems little adverse consequence to the union
representatives for exchanging confidential negotiating positions
with the employer, unless that will indicate “bad faith” negotiating.
Placing an affirmative obligation on the union and creating a legal
cause of action by which the union’s action or inaction could be challenged
by employees (not just through internal union processes)
would encourage union responsibility to keep employees’ rights and
interests in mind. Internal union review presently is a mechanism in
Article 55 of the Trade Union Law, which states: “[S]taff members to
trade unions who, in violation of this Law, damage employees’ or
trade union interests, shall be ordered to make corrections or be imposed#p#分页标题#e#
sanction by trade unions at the same levels or higher trade unions.”
199
The weakness is the absence of a clear definition of what “damages”
employees’ interests; nor is there a clear consequence for these
types of violations. As a reference, unions’ constitutions and internal
processes in the United States were determined to be inadequate by
themselves to address such employee concerns. As a result, the
198. LABOR LAW art. 25(2).
199. TRADE UNION LAW art. 55.
72 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 16:35
NLRB and the courts were made guardians of the employees’ treatment
by the union in fair representation cases.
Another adjustment that can be made from existing law and
practice is for the union to expand its current use of industrial unions.
This provides protection to untold numbers of heretofore unrepresented
employees in need of protection of their labor rights and the
ACFTU has already had successes in its use. And, even where the
union is successful, employers can still benefit by avoiding competitive
disadvantages from non-covered employers, as all in the industry
would be subject to the same labor provisions, though perhaps with
some local market variances.
B. Adjusting the Scope and Content of Negotiated Contracts
First, because collective wage negotiations reportedly are often
conducted independently from collective negotiations, a natural adjustment
would be to combine the negotiations and put into the negotiated
agreement a “re-opener” clause on wages after one year, but to
keep the remainder of the collective contract in full force for its entire
duration. Such a provision is common in the United States. This
comprehensive agreement brings economic issues back to the negotiating
table where there can be part of a larger discussion on payment
of employee welfare and benefit provisions. The past practice in
China of artificially removing wages and related items undercuts the
emphasis of the new Provisions, which have a very broad scope for
economic and non-economic topics for negotiation. But without the
subject of wages, the negotiation on economic issues is diminished.
Related to the negotiation process and the statutorily expanded
number of negotiation topics, the union must aim to achieve contractual
labor rights above and supplementary to statutory labor rights. It
would seem that is part of the CCP’s interest in having the ACFTU
promoting social stability, especially among society’s potentially volatile
employee force. By the same token, the ACFTU can better serve
its role of improving employment rights and benefits and channeling
the conflicts into dispute resolution processes as prescribed by the
Provisions. The union of course, in its “dual purpose” role, can reasonably#p#分页标题#e#
take into consideration the market condition of the employer
in formulating realistic negotiating proposals.
Lastly and as briefly mentioned earlier, there seems to be, under
the labor contract provisions of the Labor Law, an unnoticed and
largely unlimited ability for employers in the form of “employer
rules” to write into labor contracts innumerable grounds for legal
2006] CHINA’S COLLECTIVE CONTRACT PROVISIONS 73
termination. Employer rules and regulations are authorized by Articles
4 and 19 of the 1994 Labor Law, and they are apparently limited
only in that they not be unlawful. Nevertheless, they are rules by
which employees can be “lawfully” disciplined or terminated under
their labor contracts. Article 25(2) of the Labor Law states that,
where employees seriously violate the employer’s labor discipline
(rules and regulations), they may be terminated.200 There is a legal
requirement that these rules be placed in a labor contract; 201 therefore,
it is interesting that studies did not find contract clauses in the
content of the collective contracts that would place contractual limitations
on such seemingly unlimited employer power.
An example of a case involving employer rules was where an
employee’s termination for quarreling with her supervisor was upheld
in arbitration because it violated an employer rule that an employee
should never “publicly contradict a supe rvisor.”202 In the United
States, while employers may impose certain rules of conduct on employees,
the unions always address their concerns over these rules
through other provisions in the collective bargaining agreement, such
as a “good cause” limitation or a requirement of “progressive discipline.”
C. Clarifying Authority and Remedies of Labor Bureau
Of great aid to a meaningful and consistent collective negotiations
process in China is to consider clarifying and strengthening the
administrative authority and remedies of Labor Bureaus to supervise
the conduct of the collective negotiations. In China, the legal enforcement
mechanism of labor rights and interests lies with government
administrative agencies, viz., the Labor Bureaus. The Labor
Bureaus supervise the collective negotiation process, whereas the labor
arbitration commission and tribunals adjudicate the labor rights
violations. However, the Labor Bureau has only a vaguely defined
mediation role in seeking to resolve negotiation disputes, and the labor
arbitration forum for labor rights is there for employees who use
them. The Chinese system must use the labor arbitration commission
and its tribunal as a “quasi-labor court” handling labor rights disputes
arising from all sources, statutory and contractual.
200. LABOR LAW art. 25(2).#p#分页标题#e#
201. Id. art. 19(5).
202. See Lu Shihua, Yuangong shouche tiaozhan laodong fa [Employee Handbook Cha llenges
Law], ZHONGGUO LAODONG BAOZHANG BAO [CHINA LABOR AND SOCIAL SECURITY
NEWS], Apr. 24, 2004, http://www.clssn.com/bqty/2004pdf/042401.pdf (last visited Nov. 1, 2005).
74 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 16:35
In contrast, the United States uses only the NLRB for issues relating
to the statutory negotiation process and related unfair labor
practices but leaves collective contract rights disputes to private arbitration
and the courts. Other statutory rights in the United States are
typically enforced through other government administrative agencies,
which are usually “housed” under the governing statutes. There are
benefits to both approaches, single versus multiple forums, assuming
each is equipped with meaningful and effective authority and remedies
to correct and stop the labor law violations. However, in the example
of China’s collective negotiations provisions, an employee, and
even the Labor Bureau itself, may need to search in many “houses”
for sources of labor rights and interests that might be violated, and
possible remedies, which may vary. For example, in collective negotiations,
obligations can arise from the Labor Law, the Trade Union
Law or the 2004 Provisions on collective negotiations, as well as from
other miscellaneous legal directives. However, such “diffused” authority
may ameliorate the efficacy of the laws, even as they now exist.
For instance, what if the employer were to engage in negotiation
misconduct, such as “bad faith” bargaining? Is it a violation of a labor
interest for the Labor Bureau to resolve, or a labor right for the Labor
Arbitration Commission and a Labor Arbitration Tribunal to resolve?
And, what is the remedy? Do any of these government labor
agencies have the authority to issue a “go back to negotiation” order?
And even if so, how will the agency by legal means enforce that order
against a recalcitrant employer? The court will enforce a labor arbitration
decision, but how will the Labor Bureau, in a timely fashion,
obtain such an order and also supervise the negotiation conduct of
the parties? If the negotiation misconduct also violates labor rights,
how will the Labor Bureau, if at all, coordinate its supervision with
the potential remedies coming from the Labor Arbitration Tribunals?
One reform that could strengthen the administrative authority of
the Labor Bureau to supervise negotiation conduct is to “clarify” Article
54 of the Provisions to broadly interpret “any disputes” as including
disputes about negotiation conduct. A second clarification
would be to remove the requirement that the parties must consent to#p#分页标题#e#
a “Dispute Settlement Agreement,” as to negotiation conduct violations
(as opposed to substantive terms of a collective contract).
An alternative to providing the Labor Bureau sufficient authority
to supervise the negotiation conduct is to provide the parties direct
access to the courts. This would allow the employer or the trade un2006]
CHINA’S COLLECTIVE CONTRACT PROVISIONS 75
ion (and possibly employees) to directly file a lawsuit on the “group
labor dispute” in the appropriate court to determine if there were any
legal violations of the requirements of negotiation conduct. Presumably,
the court could fashion an appropriate remedy if a violation
were found.
Appeals from the administrative organs in China again are bifurcated.
For disputes arising out of the negotiations, the Provisions
provide no clear guidance for review beyond the Labor Bureau level.
Therefore, it is assumed that there could be a request for an administrative
appeal within the MOLSS, and possible a review by the court.
By contrast, for labor rights, employees go to intra-enterprise mediation
or directly to the Labor Arbitration Commission that will set up
Labor Arbitration Tribunals. An appeal from this decision can be
made to the courts, but it will be a de novo review causing added delay
and expense for the worker. Some workers also have shown interest
in class-action suits (e.g., on the case of mass non-payment of
wages by an employer).203 In the United States, the courts generally
defer to the administrative decisions of the NLRB over statutory labor
disputes and also to the decisions of the private arbitrator in contract
labor disputes, thus providing employees with a much quicker
decision than would exist if the case were re-litigated in the courts in
the normal course of appeals.
Workers in China also have sought remedies through options
other than using the Labor Bureaus. Strikes and economic protests in
China do occur, often when an employer has refused to pay wages or
honor safety conditions, and the employees erupt in frustration.
However, strikers, and particularly strike leaders, are not well protected
under the law and risk legal consequences. Of course, strikes
in the United States are not entirely risk-free, as employers have the
legal right to permanently replace private employee strikers in order
to keep their business operating.
There are other remedies that could be provided as an alternative
to unregulated strikes and protests and could channel these volatile
labor disputes into a regulated forum. For example, in the United
States, some local government employees are provided “interest arbi-
203. Xinhua News Agency reported that 71 workers prevailed in the mass non-payment suit
and local People’s Court helped the workers collect the judgment just before the employer#p#分页标题#e#
could liquidate his assets. See Laoban er’yi tuoqian gongzi fayuan gongzheng zhifa weihu gongren
quanyi [The People’s Court Protect Workers’ Rights], XINHUA NEWS AGENCY, Oct. 14,
2004, http://news.xinhuanet.com/legal/2004-10/14/content_2089502.htm (last visited Mar. 19,
2005).
76 DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 16:35
tration” in lieu of a strike.204 Indeed, strikes in state and local government
are usually outlawed, and proposals have been made for using
interest arbitration, partial strikes, and other mechanisms as alternatives
to the strike.205
Of course, national characteristics always dominate, as they
should, in the formulation and implementation of legislation. In the
area of collective negotiations some of the “Chinese national characteristics,”
or “Chinese environment,” include non-confrontational negotiations,
unions born as implementers of national policies (rather
than as employee advocates), enterprise unionism, the legacies of a
socialist planned economy (such as the role of the trade union), and
law enforcement and rule of law concepts that still need further development
in the minds of everyday citizens. Implementation of the
above suggested “clarifications” could certainly bring the practice of
collective negotiations closer to meaningful collective bargaining under
international standards; and, in the process can ultimately lead to
a better safeguarding of Chinese workers’ labor rights.
CONCLUSION
In conclusion, there are benefits to an analysis that examines all
the pieces of a particular law and practice. Each can be examined
piece-meal and/or as a whole. And, one can surely anticipate that explanations
and reasons will be forthcoming on each proposal, “why
this won’t work,” “why this is misunderstood,” and “why this is impracticable.”
204. Arbitration emerged as an alternative to strikes in addressing public sector labormanagement
interests. For example, the Ohio Collective Bargaining Act, OHIO REV. CODE
ANN. 4117.01-23 (2002), provides mechanisms to resolve disputes before strikes occur, and in
the case of police, fire, and safety forces, to resolve disputes so that strikes would not occur. For
a detailed discussion, see James T. O’Reilly, More Magic with Less Smoke: A Ten Year Retrospective
on Ohio’s Collective Bargaining Law, 19 DAYTON L. REV. 1 (1993). Similarly, the Oregon
Public Employee Collective Bargaining Act (OrPECBA), OR. REV. STAT. §§ 243.650-782
(2002), prohibits police officers, firefighters, prison and mental health institution guards, and
911 operators from striking, but provides them with a right to petition for interest arbitration.
Martin H. Malin, Public Employees’ Right to Strike: Law and Experience, 26 U. MICH. J.L.#p#分页标题#e#
REFORM 313,348-49 (1993).
205. See Merton C. Bernstein, Alternatives to the Strike in Public Labor Relations, 85 HARV.
L. REV. 459, 459 (1971) (arguing that an absolute ban on strikes by public employees is ineffective,
but proposing other procedures for public labor relations dispute resolution). See also
Benjamin Aaron, Unfair Labor Practices and the Right to Strike in the Public Sector: Has the
National Labor Relations Act Been a Good Model, 38 STAN. L. REV. 1097, 1118-19 (1986) (discussing
legal alternatives to the strike, as developed by individual U.S. states).
2006] CHINA’S COLLECTIVE CONTRACT PROVISIONS 77
But just imagine if the labor reformers in China can look past
“things as they are” and instead focus on “things that never were”
and say, “why not?” Perhaps the use of the collective negotiations
under the 2004 Provisions can aid in that process and provide the forum
that channels the growing collective demands of workers for improved
labor rights and benefits.
The Pending
China Anti-Monopoly Law
H. Stephen Harris, Jr.
Doing Business in China –
The Latest Challenges
American Bar Association
Annual Meeting
Honolulu
August 4, 2006
Influence of International Law and Norms
on Competition Law
• Until the 1980s, U.S. was the only major
jurisdiction with strongly enforced
comprehensive antitrust law regime
• Other jurisdictions had laws, but little
enforcement prior to 1980s or later:
– Canada (enacted 1889)
– Europe (enacted by Treaty of Rome, 1957)
– Japan (enacted 1947)
Influence of International Law and Norms
on Competition Law
• Explosion of competition laws during
1980s and 1990s
• Over 100 jurisdictions now have such laws
Influence of International Law and Norms
on Competition Law
• Several high-profile disagreements highlighted
need for development of norms:
– GE/Honeywell merger: approved in U.S., blocked in
EU
– Boeing/McDonnell-Douglas (same)
– Nippon Paper criminal prosecution in U.S. (disputed
by Japan as improper extraterritorial enforcement)
Influence of International Law and Norms
on Competition Law
• Increasing interaction among antitrust enforcers
has tended to develop consensus on broad
norms:
– increasing cooperation, formal and informal, among
antitrust enforcement agencies
– growth in “positive comity” bilateral agreements
– close coordination on cartel investigations and
enforcement
Influence of International Law and Norms
on Competition Law
• Formal efforts to develop international norms:
– International Competition Policy Advisory#p#分页标题#e#
Committee Report (U.S., 2000)
– ABA, IBA, OECD, UNCTAD and other NGO
working groups developed proposed norms (e.g.,
OECD Merger Recommendation)
– International Competition Network (now with
agencies from over 85 member countries)
– International consortia and symposia and published
papers
Influence of International Law and Norms
on Competition Law
• General consensus on certain key points:
– “Hard-core” horizontal collusion unlawful:
• Price-fixing
• Bid-rigging
• Allocating territories or customers among
competitors
• “Naked” agreements not to compete
Influence of International Law and Norms
on Competition Law
• General consensus on certain key points:
– Large mergers affecting local markets should
be subjected to review to prevent creation of
monopolies
Influence of International Law and Norms
on Competition Law
• Less consensus on types of exclusionary,
exploitative and discriminatory single-firm
conduct violates law
– generally prohibitions apply only to “dominant”
firms
– may apply to “collective dominance” (EU, but not
U.S.)
– may obligate a dominant party to deal with entities
(more broadly applicable in EU than U.S.)
– bundling, “unfair pricing”
Influence of International Law and Norms
on Competition Law
• Less consensus, especially in developing
countries, re whether “non-pure”
competition law factors should be
considered
– Effect on local businesses (“protecting
competitors, not competition”)
– Effect on local jobs
– Restriction of import competition
Influence of International Law and Norms
on Competition Law
• Less consensus on standards, e.g.:
– in merger review, should creation of
dominance or substantial lessening of
competition be the test?
– should complaining party be required to
demonstrate substantial harm to competition?
Challenges and Obstacles to
International Competition Law Standards
• Commercial traditions and customs
– collaborative activities common in many
cultures (Japan, Europe)
– “culture of competition” takes time to
establish
Challenges and Obstacles to
International Competition Law Standards
• Legal systems
– Civil jurisdictions usually seriously restrict
discovery in litigation, rendering private
competition litigation generally ineffective
– Resistance to “punitive” damages such as U.S.
treble damages limits attractiveness of
bringing complaints, impeding “private#p#分页标题#e#
enforcement”
Challenges and Obstacles to
International Competition Law Standards
• Legal systems
– Jurisdictions with strong reliance on administrative
enforcement may emphasize protection of
government interests (including, e.g., protecting local
competitors) more than the consumers’ interests in
competition
– Jurisdictions with recently enacted competition laws
lack bar and judiciary familiar with economic
concepts of competition law
Challenges and Obstacles to
International Competition Law Standards
• Legal systems
– Jurisdictions without strong reliance on
criminal penalties for non-violent conduct
resist criminalization of anticompetitive
conduct
Challenges and Obstacles to
International Competition Law Standards
• Economic systems
– Jurisdictions moving from planned economies
to market economies lack infrastructure and
“culture of competition”
– Enterprises owned by government, or seen as
“national champion” may be protected by
government
Challenges and Obstacles to
International Competition Law Standards
• Genuine disputes among economists and
legal scholars on “proper” objects of
competition law
– significant debate on types of single-firm
conduct that harm competition
– significant debate on methods of proving
harm to competition
Observations and Practical Considerations in
Overcoming These Obstacles in China
• The PRC has never had a comprehensive
competition law
• From 1970s forward, China has adopted a
broad policy of movement to a “socialist
market economy,” including intentions to
privatize State-Owned Enterprises and
restrict “regional blockage”
Observations and Practical Considerations in
Overcoming These Obstacles in China
• Progress has been slow and uneven on these
reforms
• From 1993 to date, serious efforts have been
underway to develop a comprehensive
competition law
A Observations and Practical Considerations
in Overcoming These Obstacles in China
• 1997: Enactment of Price Law (effective 1998),
prohibits price-fixing, but created local agencies
that controlled certain pricing
• 1997: Comprehensive competition law
temporarily shelved as political winds reversed
and government supported growth of large SOEs
as “major engines of economic growth”
Observations and Practical Considerations in
Overcoming These Obstacles in China
• Late 1990s – early 2000s: much criticism
of trademark piracy and other
infringements of IP rights
• Seen as threat to continuing investment#p#分页标题#e#
• China adopts some policies to reduce IP
infringement, but criticism continues
Observations and Practical Considerations in
Overcoming These Obstacles in China
• 2002: China accedes to the WTO
• In response to concerns about China’s ability to
comply with WTO requirements, NPC Standing
Committee stated that China would adopt
comprehensive antitrust law
• Government officials highlighted the need to
address anticompetitive conduct by
“administrative monopolies” (protected SOEs)
Observations and Practical Considerations in
Overcoming These Obstacles in China
• 2002: MOFTEC adopts notice and review
procedures for concentrations of foreignowned
enterprises
• 2003: MOFCOM and SAIC adopt
Provisional Rules on the Prohibition of
Monopolistic Pricing Behaviors
(incorporating some elements of
comprehensive modern competition laws)
Observations and Practical Considerations in
Overcoming These Obstacles in China
• 2002: Reinvigoration of efforts to draft
comprehensive competition law
• 2002-2005: MOFCOM, SAIC and the State
Council host many conferences and
meetings with Chinese and foreign experts
and officials
Observations and Practical Considerations in
Overcoming These Obstacles in China
• 2002-2005: numerous requests for input
• 2002-2005: comments from IBA, ABA,
OECD, UNCTAD, APEC; most
government enforcers, Chinese academics
and others
• 2002-2005: numerous drafts of a proposed
“Anti-Monopoly Law”
Observations and Practical Considerations in
Overcoming These Obstacles in China
• Significant value from discussion and
debate and movement towards international
norms:
– Draft M&A review provisions made more
consistent, substantively and procedurally,
with most other jurisdictions
– Inclusion of more normative concepts of
market definition
Observations and Practical Considerations in
Overcoming These Obstacles in China
• Significant value from discussion and
debate and movement towards international
norms:
– Differentiation between horizontal and
vertical agreements
– Change from prohibition of monopoly status
to prohibition of monopolistic conduct
Remaining Obstacles and Challenges
in November 11, 2005 Draft
• The “Essential Facilities Provision”
• April 8, 2005 Draft, Article 22:
– “In the case that an undertaking is unable to compete with the
undertakings with dominant market position without the access to a
network or other infrastructures owned by those dominant undertakings in
relevant market, the undertakings in dominant position shall not refuse to#p#分页标题#e#
grant access to the network or other infrastructures to other undertakings
at reasonable prices. However, the undertaking in dominant position may
be exempted if it can establish that it is impossible or unreasonable to
grant access to the network or other infrastructures to other undertakings
on account of technology, security or other justifiable reasons.”
• Deleted from 11/11/05 Draft (but may indicate policy)
Remaining Obstacles and Challenges
in November 11, 2005 Draft
• The “IP Abuse Provision”
• April 8, 2005 Draft, Article 56:
– “This Law is not applicable to undertakings who exercise their rights
under the Patent Law, the Trademark Law and the Copyright Law.
However, abuse of intellectual property rights in violation of this Law will
be dealt with pursuant to this Law.”
• November 11, 2005 Draft, Article 48:
– “This Law is applicable to conduct by undertakings eliminating or
restricting competition by the abuse of rights stipulated by the Intellectual
Property Right Laws or administrative regulations
Remaining Obstacles and Challenges
in November 11, 2005 Draft
• The Treatment of “Regional Blockage” or
“Sectoral Monopolies”
• April 8, 2005 Draft, Article 45 and related
sections
– Essentially giving the Anti-Monopoly Authority superior
power to enforce competition law over sectoral laws and
regulations inconsistent with the Anti-Monopoly Law
• November, 11, 2005 Draft, Article 38:
– Generally delegates sector-specific agencies to take lead on
investigations of violations in their sectors, and applies
sectoral laws and regulations
Remaining Obstacles and Challenges
in November 11, 2005 Draft
• The Treatment of “Administrative Monopolies”
• April 8, 2005 Draft, Article 35
– “The Government and its subordinate departments shall not
promulgate rules with provisions eliminating or limiting
competition in violation of laws and administrative
regulations so as to prevent the establishment of a unified and
orderly national market and of a fair competitive
environment.”
• Deleted in November 11, 2005 Draft
Remaining Obstacles and Challenges
in November 11, 2005 Draft
• The Number, Independence, Powers and
Structure of the Enforcement Agency/Agencies
• April 8, 2005 Draft:
– Single agency under the aegis of the State Council
(the most independent approach possible under
China’s political system)
• November 11, 2005 Draft:
– Multiple agencies with “Anti-Monopoly Committee”
of principles of various departments and organs
Remaining Obstacles and Challenges#p#分页标题#e#
in November 11, 2005 Draft
• Legal Liability
• April 8, 2005 Draft, Article 52:
– “The undertaking that violates the provisions of this law and injures the
rights and interests of others shall make compensations to the victim. The
amount of compensation will be twice of the actual loss suffered by the
victim. When it is difficult to calculate the loss of the victim, the amount
of compensation will be the profit gained by the reasonable expenses of
the victim incurred during the course of investigation and legal
proceedings.”
– November 11, 2005 Draft, Article 44:
“When an undertaking’s conduct in violation of this Law causes loss to
others, the undertaking shall be responsible for civil liabilities such as to
compensate the injury.”
Remaining Structural
Obstacles and Challenges
• Legal Liability/Court enforcement vs.
administrative process
• Courts lack training and expertise in competition
law and market economics
• Courts are controlled by local governments with
interest in protecting SOEs
• Agency more likely to create consistent
approach to law
• Special competition court?
Thank you.
1 ABA Annual Meeting All rights reserved 2006 I2PAsia
Intellectual Property Concerns for
Doing Business in China
Elizabeth Chien-Hale
[email protected]
Aug. 4, 2006
2 ABA Annual Meeting All rights reserved 2006 I2PAsia
Business Considerations: