China's product safety agency under pressure from within
Lawsuits filed by eight Chinese firms alleging collusion by the government ministry could test the country's new anti-monopoly law.
SHANGHAI — China's product quality and food safety agency came under pressure last year after Chinese businesses exported tainted pet food and lead-laden toys. Now it is under fire from domestic companies.
In the last month, eight Chinese firms have filed lawsuits against the agency, accusing it of stifling competition by colluding with a business in which it had a financial stake.
The lawsuits could test China's new anti-monopoly law, which took effect Aug. 1. Among its provisions, the law prohibits abuse of government administrative powers that restrain competition, thus opening up for legal challenges the commercial activities of government bodies and officials.
The complaints by the eight companies, which supply product-authentication and tracking systems, were brought against China's General Administration of Quality Supervision, Inspection and Quarantine, or AQSIQ. The agency is a ministerial-level entity responsible for ensuring the quality and safety of many products, including food.
"This is more than just a lawsuit, it's an anti-corruption fight against AQSIQ," said Zhou Ze, the attorney at Beijing-based Zhanda Law Firm who filed the suits. "It will be a warning to other government agencies, helping them to improve operations and how they should use their public rights and power."
Zhou contends that since 2005, AQSIQ has been heavily promoting an electronic bar-code and Internet-based authentication system developed by China Credit Information Technology Co. Late last year the agency said that to improve product quality and safety it would require businesses in food and eight other industries to join China Credit's network. Network users are charged an annual fee and incur charges for specific services. As of July, nearly 67,000 companies had signed up with China Credit, AQSIQ reported.
AQSIQ owns 30% of China Credit, according to public filings with the Hong Kong Stock Exchange that were made by CITIC 21CN Co., a Hong Kong firm that owns 50% of China Credit. The remaining 20% is held by China Huaxin Telecom.
All three share in China Credit's profit, the filings show.
AQSIQ did not respond to telephone calls and a fax last week requesting comment. Local media have raised questions about the joint venture. Over the weekend, the agency said on its website that it did not invest any money in China Credit, nor did it earn a penny from it. AQSIQ said it had made plans to divest its stake.
