Chinese Competition Law Notes

• PRC Competition Law

  • The Political Economy of Competition Law in China

    • Competition Law in China and The Importance of Context

      1. Intro:

         • In December 1978 the CPC made the critical decision to shift its focus from 'class struggle' to 'economic development'

         • Since then, China has adopted incremental and far-reaching reforms to shift its centrally-planned economy to one that is market-based, open up its economy to foreign investment and participate in global markets.

           1. China’s entry into the World Trade Organization(WTO) on 11 December 2001 marked its formal integration into the global economic system

         • Its economic growth has been hailed as remarkable not only for the high, sustained rate at which it has been achieved, but also because it has been achieved with a relatively weak legal system and underdeveloped financial markets, institutions thought to be critical to economic development

         • Before this happened, however, China's legal system was practically nonexistent

           1. Something for which it can thank the Cultural Revolution

           2. Since the mid 90's, China has attached increasing importance to the rule of law and to establishing and improving its laws and legal institutions in order to promote and support economic reforms and the development of a market economy

           3. As part of these efforts, it enacted its first comprehensive competition law in 2007 - the Anti-monopoly Law (AML)

         • The AML regulates anti competitive agreements (referred to as 'monopoly agreements'), abuses of dominant market positions, and mergers, which are together defined as monopolistic conduct

           1. There are also some provisions in the AML that have been tailored to address China-specific matters such as administrative monopoly, which is the abuse of administrative power to restrict competition and includes exercises of administrative power that impede the free flow of goods within China's internal market or competition in or market entry into particular industries or sectors

      2. Evolutions of the AML to date

         • The development, adoption and subsequent implementation and enforcement of the Aml has garnered substantial attention and commentary from academics, lawyers, government officials, economists, business and media outlets in China and beyond

         • Generally speaking, the AML is regarded as a modern competition law that is largely consistent in form and substance with prevailing international competition law norms, and in particular the competition laws of the European Union and Germany

           1. Many note that substantive provisions in the AML are similar to provisions in EU competition law and that a number of legal doctrines from the USA antitrust law have also been reflected in the AML

              1. Xiaoye Wang and Adrian Emch,‘Five Years of Implementation of China’s Anti-monopoly Law–Achievements and Challenges’(2013) 1 Journal of Antitrust Enforcement 247 at 251–4

                 1. Decisions under the AML also seem to take on the same language and grammar as those adopted in the USA and Europe

              2. They also note that decisions, especially merger decisions, reflect growing analytical depth and sophistication

         • The AML, has nonetheless, attracted some criticism

           1. Commentators voice concerns that so-called non-competition factors are influencing the outcomes of investigations and reviews taken by the Chinese competition agencies.

           2. They are also worried that the AML is not being applied equally to state-owned enterprises and is being enforced in a manner that discriminates against foreign companies

           3. Another key complaint is the lack of transparency and due process in the investigation process

           4. Critics are also concerned about the effectiveness of the administrative enforcement nature

      3. Consideration of Non-competition Factors

         • The inclusion of public interest and ‘the healthy development of the socialist market economy’ as express objectives of the AML has been viewed as problematic by many commentators. - Article 1

         • They regard these objectives as being inappropriate for competition law and contrary to international competition law norms

           1. In their view, the objectives of competition law should be limited to enhancing economic efficiency and consumer welfare, and conduct should be assessed by reference to its impact on competition only

           2. Other objectives or considerations such as matter related to industrial policy or foreign investment policy, referred to as 'non-competition' matters, lie outside the realm of CL and policy are better addressed in other laws and policies

         • These are also considered too vague, meaning that it allows the AML to be enforced in a manner such that non-competition objectives such as industrial policy, the interests of the SOE's or stabilities concerns might take precedence over competition concerns such as consumer welfare and efficiency

         • In addition, other provisions of the AML provide for the consideration of industrial policy, economic development and social factors

           1. Namely articles 4, 27, 28

         • A number of commentators believe that non-competition factors have influenced AML enforcement outcomes

           1. For merger enforcement, this issue has generally arisen in situations where a decision reached by China's Ministry of Commerce was different to that reached by other competition authorities reviewing the same merger, or where the conditions imposed by the MOFCOM on a merger appeared, in their opinion, not to be directed at addressing the stated competition concerns

           2. Mergers involving products Considered to raise such concerns

           3. red important to Chinese economic development or stability, well-known Chinese brands, IP or sensitive or strategic industries also tend to raise such concerns

         • In such cases, commentators have speculated that non-competition considerations were the reason for the divergent outcomes or perceived disconnect between the stated competition concerns and the conditions imposed

           1. Similarly, concerns that the AML was being enforced to achieve non-competition policy goals have been voiced in non-merger investigations where...

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