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The cabinet yesterday gave in principle approval to a draft anti-monopoly law which would provide a free and fair competitive environment to all enterprises.

A statement from an executive meeting of the State Council presided over by Premier Wen Jiabao said the draft law, after revision, will be submitted to the Standing Committee of the National People's Congress, the top legislature, for deliberation.

"Monopoly is not an offence in itself. The trouble arises when monopolies wield their dominant status to curb competition," said Huang Yong, an anti-monopoly consultant at the Ministry of Commerce, adding that the law does not specifically target multinationals.

The draft law contains articles regulating monopoly agreements, abuse of dominant market status and large-scale consolidation.

It defines "monopoly" as a single operator controlling half or more of an industry's overall market share, or two operators colluding to hold two-thirds, or three holding three-quarters.

While multinationals are reluctant to publicly discuss the proposed anti-monopoly law, in private, many executives are extremely attentive to every detail in the draft, said Lester Brown, a Beijing-based lawyer at law firm Allen & Blake LLP.

"Some foreign-invested businesses have become a little uneasy about the law in the wake of a State Administration for Industry and Commerce report in 2004, which warned that foreign business giants were building monopolies in China," said Wang Xiaoye, a law professor at the Chinese Academy of Social Sciences who participated in the drafting of the law.

According to the report, some transnational companies have been using their dominant positions in technology, brand recognition and capital and management to suppress competitors and maximize profits on the Chinese mainland. For instance, Kodak and Fuji account for about 75 per cent of China's film and bromide-paper segments.

(For more biz stories, please visit Industry Updates)