Anti-competitive agreements took many forms in history, with most notable examples being cartels and trusts. The objective of such agreements is to limit competition between participants involved in the agreements. Common methods include fixing prices, controlling production, sharing markets, and boycotting. This notion is so important to competition law that many countries use anti-competitive agreements to denote competition law, such as antitrust law in the USA and federal cartel office (Bundeskartellamt) in Germany. Anti-competitive agreements catch most attention of competition authorities. For example, China has enforced its Anti-monopoly Law since August 2008. Till the end of 2021, Chinese competition authorities have adopted in total 407 decisions, including 263 in relation to anti-competitive agreements, 93 on abuse of dominance, and 51 blocking or conditionally approving merger notifications. Of those, anti-competitive agreements constitute 64.6%. In terms of the number of cases, anti-competitive agreements are certainly more important than abusing dominance and merger control.
Anti-competitive agreements first caught social attention at the end of the nineteenth century. However, the original purpose was not so much to limit competition, but to establish a self-saving solution among a group of firms in order to jointly get through economic crisis. Therefore, anti-competitive agreements were initially considered positive to the society, as they may stabilize prices and employment. However, it was soon discovered that anti-competitive agreements can significantly impair the market mechanism, thereby bringing more bad than good. Although legislative attempts were initiated more or less at a similar time on both sides of the Atlantic, the Sherman Antitrust Act adopted in the USA in 1890 was the first modern competition law to govern anti-competitive agreements. With the proliferation of competition laws, anti-competitive agreements are considered illegal under all systems of competition law.
Competition law differentiates two types of anti-competitive agreements: horizontal and vertical. Horizontal agreements refer to anti-competitive agreements directly agreed between competitors, or firms on the same relevant market. Vertical agreements are agreed between firms in neighboring levels on the same production chain, or in the upstream and downstream markets. The AML dedicates different articles to horizontal agreements and vertical agreements. Article 17 of the AML governs horizontal agreements, and non-exhaustively enlists five examples of horizontal agreements: pricing fixing; quantity limitation; market allocation; jointly restraint on new technology;, and boycotts. Article 18 of the AML deals with vertical agreements, and give two examples, namely fixing retail prices and imposing minimum retail prices. The division of horizontal-vertical agreements can also be observed in the EU and the USA. For example, the European Commission adopted the Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union to horizontal cooperation agreements (OJ C 11/1, 14 January 2011), and the Guidelines on Vertical Restraints (OJ C 130/1, 19 May 2010).
The division between horizontal and vertical agreements is not so important by itself, but is relevant for competition assessment. Since the adoption of the Sherman Antitrust Act, the USA courts after Standard Oil (1911) have gradually developed two distinct approaches for competition assessment for agreements, i.e. per se illegal and rule of reason. Agreements subject to per se illegality are assumed to be illegal in an abstract manner. In comparison, those subject to rule of reason must be evaluated by the pro-competitive side and the anti-competitive side, in conjunction with the concrete facts in a particular case. Such a difference also exists in the EU (Société Technique Minière, 1966), under the terms of restriction of competition by object (equivalent to per se illegal) and by effect (rule of reason).
The distinction between per se illegal and rule of reason is not expressly included in the provisions of the AML. Chinese justice in the early cases mistakenly required all agreements to be analyzed under the rule of reason. This can be observed in Shenzhen Anti-pest Association (2012). The High Court of Guangdong Province reviewed a pricing fixing decision made by the Anti-pest Association in Shenzhen for its members. The court maintained that the decision was not an anti-competitive agreement because the market shares of all the participants were only about 22.32%, and hence could not affect competition in a significant way. This was corrected by the Supreme Court of China in the Provision on Several Issues in the Trial of Civil Dispute Cases Arising from Monopolistic Conduct (Judicial Interpretation 2020 Nr. 19). Article 7 of the provision requires defendants to prove the anti-competitive effect of the disputed matter falling into Article 17 of the AML. This arrangement essentially makes the analysis closer to per se illegal. So far in China, all the exemplified agreements are regarded per se illegal, and non- exemplified agreements are handled under rule of reason. This practice is comparable with the USA and the EU. Nevertheless, one difference still remains that China and the EU considers retail price maintenance as per se illegal while the USA puts it into the rule of reason category after Leegin (2007).
Agreements can restrain competition in one way or another. However, it is not the purpose of competition law to prohibit all agreements without regard to the extent of limiting competition. Competition law only prohibit agreements that substantially or significantly limit competition. As such, many jurisdictions adopt guidelines (block exemptions) to exclude from their applicable scope agreements that limit competition in a non-significant way. This is normally done by reference to market shares of the participants. The less the market share, the more likely it is for the agreement to be exempted. For example, China has included exemption directly into Article 18 of the AML in 2022.
In addition to block exemptions, agreements can also be exempted on a case-by-case basis. Under Article 20 of the AML, the beneficiary must prove the agreements, though limiting competition, can promote technologies or new products, improve quality, production costs and efficiency, and protect social public interests (e.g. energy saving, environmental protection and rescue relief). In addition, they also have to establish that the agreement would not significantly limit competition, and can allow consumers a fair share of the resulting benefit. Similar arrangements can also be observed under Article 101 of the Treaty of Functioning of the European Union.