FTC Commissioner: U.S. Must ‘Stand Up’ to China Over Intellectual Property Theft

NATIONAL HARBOR, Md. – Acting Federal Trade Commission Chairman Maureen K. Ohlhausen said U.S. companies are “concerned” about investing in China due to their poor treatment of intellectual property rights.

“We’re not an international trade organization, but I think some of the challenges that I have been hearing about is companies are starting to be worried about investing in China if they lose control of their intellectual property, if they are manufacturing in China or if part of the price of admission is they have to share that intellectual property. I think that’s certainly one of the concerns I’m starting to hear being raised because of what’s been happening,” Ohlhausen said during a panel discussion about China’s expansion at the Conservative Political Action Conference.

Gordon Chang, an American Conservative Union Foundation policy fellow, joined Ohlhausen on the panel. He said there are specific rules that U.S. companies have to follow in China.

“For instance, if you want to manufacture cars in China you have to share technology, you have to do it through a joint venture, you can’t have a wholly owned foreign car plant in China – that’s a specific on-the-books rule and there are tons of those,” he said.

Following the discussion, PJM asked Ohlhausen what steps the FTC is taking to combat theft of intellectual property.

“What I’m encouraging FTC to do is to make sure that we aren’t doing things in our approach to antitrust. We’re turning a blind eye or saying as a matter of antitrust, you must share your property without due compensation,” she said.

“I’m trying to be very sure that we aren’t doing things here that are giving cover to regimes, like China, that don’t have the same respect for any intellectual property rights. The other thing we’re doing is weighing in with the Chinese on their intellectual property guidelines to encourage greater respect for these rights,” she added.

The Trump administration has floated the idea of imposing a tax on Chinese imports of anywhere between 30 to 45 percent. PJM asked Ohlhausen about the possible consequences of a tax on Chinese imports for U.S. consumers.

“That is not an FTC issue, so I wouldn’t feel that I’m the right person to give you the best answer about that. I would say that there have been concerns about treatment of U.S. companies in China for antitrust purposes and China’s honestly investing a lot of it in the U.S., so we’ve got some oversight into that, but the tax issue is just outside of our area,” she replied.

In December, the Chinese government reportedly opened an investigation of General Motors’ joint venture with China’s SAIC Motor for potential antitrust violations.

During the panel discussion, Ohlhausen described an “ongoing battle” over antitrust issues because China’s actions have encouraged similar behavior from other countries.

“The Chinese have been the leader but the Koreas, Taiwan and India fall into line and also say, ‘Yeah, we too want to be able to kind of take intellectual property and say it should be at a much lower payment rate or not paid for at all and we’re going to use our antitrust tools as a way to justify that.’ So I think it’s very important that we stand up, because you sort of see others falling into line. We’ve tried to work with our international partners, the Europeans, the Australians on these issues but it’s definitely an ongoing battle,” she said.

Ohlhausen was asked how she recommends the new administration deal with antitrust issues in China going forward. She outlined two of her main concerns in that area.

“First of all is due process – this is making sure that the Chinese and the trust officials give appropriate due process to companies that are getting their transactions reviewed or their conduct reviewed in China. So, making sure people have access to counsel, that they know what the evidence is against them, that they have the right to cross-examine, that they understand what the basis of the decision is, so that’s one concern,” she said.

“I think the other concern is making sure that it is applied fairly, that the idea that the industrial policy would be part of the antitrust review or should not, that shouldn’t be permitted,” she added.

Ohlhausen also said the FTC is closely monitoring cybersecurity threats from China and other nations.

“We’re paying close attention to these issues, and what we’re trying to do is when we engage with our counterparts around the world to be alert to what the threats are. And then we’re trying to make sure that companies in the West takes steps to protect against these kinds of threats coming in, so they’ve got the right cyber systems in place to repel those threats,” she said.