Wu Peng, Partner and Director of the Management Committee at Zhong Lun law firm, shared with ALB’s Shangjing Li about Zhong Lun’s representation of Qualcomm, and his experience of managing a law firm with over 1,000 lawyers. 

ALB: When did Zhong Lun become involved in the Qualcomm case, and what kind of difficulties did it encounter?

Wu: It was around July or August 2013 when Qualcomm first came to us for anti-monopoly advice. We assisted them between November 2013, when the investigation officially began, and February 2015 when the final decision was reached. We advised Qualcomm on China’s Anti-Monopoly Law, helped them communicate and negotiate with the National Development and Reform Commission (NDRC), drafted and translated all the files submitted to the NDRC as well as internal decisions, and provided on-site advisory and witness services for Qualcomm during NDRC’s field investigations.

I have read many reports on the Qualcomm case, most of which are far from the truth. Zhong Lun is the only law firm that has been acting for Qualcomm all the way through and has been involved in the dozens of rounds of talks and negotiations with the NDRC. I am also the only Chinese lawyer involved in the whole process.

I think it was a very difficult process for the NDRC, as the investigator and regulator, and Qualcomm, as the company under investigation, to get to understand each other. Though mutual understanding is not equivalent to acceptance or consent, it is the precondition for mutual acceptance.

In the beginning, the two sides could hardly understand each other and were oceans apart. As the discussions went on, consensus was reached in many aspects. By gaining a comprehensive understanding of both Qualcomm’s and NDRC’s positions, Zhong Lun served as an important bridge between the two parties.

Given the complexity and sensitivity of this case, we have kept a low profile and never revealed any details. Now that the case has concluded, we can say at this point that the Qualcomm case was a landmark in China’s history of anti-monopoly investigations, whether in terms of the penalty amount or complexity.

ALB: Are all the parties satisfied with the final penalty decision on Qualcomm?

Wu: Though decisions on the Qualcomm case have been made, follow-up work is still underway. We have a 20-lawyer team providing comprehensive services for Qualcomm. I am proud to say that our services are highly regarded by our client Qualcomm, as well as highly recognised and praised by NDRC leaders.

ALB: There are claims that the Chinese Government mainly targets foreign companies in antitrust investigations. What do you think about this charge?

Wu: Antitrust investigations do not always target foreign companies. Since foreign companies are more influential, and major cases are usually associated with foreign businesses, people may feel that antitrust investigations are mainly targeted at foreign companies. This perception is not true based on what I have heard. Some say this is selective law enforcement. But it is never that simple. Foreign companies and State-owned enterprises (SOEs) are ultimately treated equally. However, as both human and financial resources for law enforcement are limited, it is impossible to enforce laws promptly against each and every wrongdoer.

Take speeding while driving for example. Why are not all the drivers speeding caught? The crux of this issue is not whether all the people speeding are caught, but whether we ourselves are speeding and how to avoid speeding. So far, there are already precedents of NDRC punishing SOEs and private enterprises. The NDRC is not just targeting foreign businesses.

ALB: What are your recommendations to SOEs and foreign companies in terms of antitrust compliance?

Wu: I think I will give the same advice to them. As the Anti-Monopoly Law is one of the most important laws in China, I think compliance is a must. Foreign companies have a stronger awareness of compliance than domestic enterprises.

SOEs usually feel that domestic issues can be settled through top-level communications rather than legal means. But it no longer appears to be the case now. The leadership is putting more emphasis on governing the country by law. I think SOEs need to raise their awareness of compliance with laws and regulations, and realise that contacts and top-level coordination will play an increasingly limited role. I also have SOE clients, and I think they should strengthen training on antitrust compliance.

ALB: China’s antitrust regulators have been gradually enhancing their competency. What bumps have they met in recent years and what progress have they made?

Wu: Based on my own experience, China’s antitrust regulators have made great progress overall. China has accumulated a lot of law enforcement experience in recent years. Our law enforcement officers have greatly improved their overall competence and broadened their horizons by attending training sessions both at home and abroad.

As far as I know, China’s regulators have frequent exchanges with their counterparts in the U.S., the European Union, South Korea and other countries. From this perspective, China’s regulators are becoming increasingly aligned with international standards.

Besides experience, there has also been a sharp rise in the number of law enforcement officers. With growing international exchanges, many international practices have been learned and adopted by domestic law enforcement agencies.

ALB: What problems need to be addressed in antitrust law enforcement?

Wu: Speaking of antitrust, both the State Administration of Industry and Commerce (SAIC) and the NDRC are regulators. The former focuses on price issues, while the latter’s investigations do not involve prices. However, many problems concern both price and non-price factors. Who should be in charge of coordination, and who should have jurisdiction over such problems remain critical issues to be addressed. In fact, it is hard to say whether a monopolistic act has or doesn’t have price factors. In most cases, price factors are involved. I think the artificial separation of price and non-price factors itself is something that needs to be looked into.

The second problem involves administrative monopoly. This problem is relatively complicated as it is closely related to our institutional reforms. We have made great progress in both horizontal and vertical antitrust. But so far, I have seen no step forward in administrative monopoly. Administrative monopoly includes government-led mergers of SOEs as well as industry associations’ guidance of industries and regulation of industries pegged to administrative power. Noticeable action remains to be seen in this aspect.

ALB: Can you comment on China’s antitrust development in recent years?

Wu: China is a rising star in antitrust enforcement, though it is relatively late in antitrust legislation. It has been only six years since the Anti-Monopoly Law took effect in 2008, while in South Korea, it has been several decades. However, we have dealt with cases of international influence due to China’s economic importance. Besides the US and the EU, China may be the country with the greatest clout in antitrust. In the past, antitrust was hardly heard in China. But now, it has become one of the most keenly-watched antitrust jurisdictions in the world.

ALB: Quite a few big law firms in China have gone global by “marrying” foreign law firms. What is Zhong Lun’s plan in this respect?

Wu: We will make a big move this year. We have hired a top-notch consulting firm in the international legal community, the one that has worked on the merger between King & Wood and Mallesons, to provide suggestions and advisory solutions from an outsider’s point of view. Meanwhile, we have held a number of internal meetings and are preparing to pursue a major direction in global development as early as September 2015 and as late as March next year.  There are now four options. The first is the road King & Wood has taken, i.e. dominating an international merger. But based on my understanding of Zhong Lun’s status quo, this is not a likely choice. The second is taking part in an international law firm merger of equals, just as Dacheng did. Many international law firms are willing to partner with Zhong Lun, but we have not decided whether or not to merge. We are still considering that option.

The third is the “best friend” model, i.e. becoming partners or signing strategic cooperation agreements with top-tier global law firms to prioritise working with them. Such partnership is neither unique nor exclusive. The law firms we choose to work with are all top five law firms in each jurisdiction because we ourselves are among that rank in China. We can provide best services for clients by teaming up with local law firms.

The fourth is the model currently adopted by Zhong Lun. We stress that we aim to be China’s local law firm, with our overseas offices mainly serving as windows to provide supporting services for Chinese offices. Additionally, we have joined two loose international law firm alliances. One is Terralex, which has over 150 law firm members, and the other is WLG (World Law Group). WLG only allows one member in each country. After its Chinese member King & Wood quit, WLG picked us to be its Chinese member, and we joined after careful consideration. Since both the alliances are loose and non-exclusive, joining them is in line with our current strategies of nonalignment, focusing on the domestic market, setting up small offices in foreign countries, and joining loose international alliances.

Of the four options, I personally believe the latter two stand more of a chance. So far, those who want to merge with us either are not good enough for us or just want to “take over” us. Given our development so far, Zhong Lun can never agree to lose itself. We can go for merger but we cannot be acquired or merged.

ALB: What kind of culture defines Zhong Lun today?

Wu: Diversity is a vital characteristic of Zhong Lun. Zhong Lun is very open and democratic. At Zhong Lun, everyone can have his own platform to develop.

We encourage our partners to focus on areas they specialise in. We classify lawyers into 19 specialties. All of our partners have one major specialty and two minor specialties. For example, I used to work in many areas that I am no longer engaged in now. Currently, my major specialty is antitrust, with mergers and acquisitions, and arbitration as my two minor specialties, because a person only has limited energy.

At Zhong Lun, we have no such concept of promoting people based on seniority. We have more than 200 partners, and all the new hires have very good development opportunities. Among the 200-plus partners, old Zhong Luners, i.e. partners who have been with Zhong Lun for more than 15 years, account for less than a quarter. Three-quarters of our partners have joined recently.

We have long maintained high per capita revenue, which is quite a feat in the legal profession. All the staff has kept excellent work conditions so far. Our managing partners are all working hard on the frontlines. To set an example for others, I attend each important partner negotiation in person, and revise documents myself.

Zhong Lun has a very good “ecosystem”. Everyone has good development opportunities. In the beginning, some partners’ income is only one-tenth of that of founding partners like me, but now their income is equal to or even higher than ours. Unlike some law firms that set a ceiling on remuneration so that no one will have an income exceeding that of the founding partners, we set no income ceiling. At Zhong Lun, the more you work, the more you earn. People do what they are capable of doing. On the other hand, it is also ok if you want to have another lifestyle that is less demanding. We have arrangements for employees to retire as consultants or for partners to downgrade.

ALB: Zhong Lun now has more than 200 partners and over 1,000 lawyers worldwide. In your opinion, what is the most effective way to manage a big law firm?

Wu: Zhong Lun operates as a company while encouraging people to work more and earn more, thus striking a good balance. We have a democratic system, and elect management committee members and director by secret ballot. We also have a mechanism under which the director of the management committee can only serve two terms at most and can be removed for poor performance, though there has been no such precedent so far.

In terms of management, there are seven members in our management committee, with each member in charge of one area. I am the head of that committee. I think it is important to fully mobilise the initiative of each committee member. In this respect, I am more like a coordinator as I am good at coordination and communication. I do not issue orders directly but respect the self-discipline of our partners.

Second, I believe technology should also be employed while managing a law firm. We started to apply technology in firm management quite early. For example, we use advanced database and Internet software for data retrieval. We have invested heavily in this area. Last year, Zhong Lun invested 10 million yuan in IT applications alone, which is a large amount among domestic law firms.

Moreover, law firm partners need to adapt to a rapidly changing legal landscape. For example, China’s Anti-Monopoly Law was not promulgated until 2008. No such law existed ten years ago, but our law firm was already founded in 1993. Partners need to be forward-looking, and should not just look at domestic affairs, but also watch international developments. When there was no anti-monopoly law in China, I already sensed that China would have such a law in the future. At that time, I believed it was necessary to learn and accumulate knowledge in this aspect so as to stay ahead of others.