Competition Law in China. A Law and Economics Perspective, Jingyuan MA

Jingyuan Ma

This section selects books on themes related to competition laws and economics. This compilation does not attempt to be exhaustive but rather a survey of themes important in the area. The survey usually covers publication over the last three months after publication of the latest issue of Concurrences. Publishers, authors and editors are welcome to send books to catherine.prieto@univ-paris1.fr for review in this section.

Twelve years after the entry into force of its Anti-Monopoly Law (AML), China has established a comprehensive antitrust legal framework with its own characteristics and is mulling over its next step. This latest book by Mrs. Jingyuan Ma, an assistant professor at the Central University of Finance and Economics in Beijing, provides a solid overview of the competition law and policy in China from a law and economics perspective. It exhibits the unique features of legislative goals, substantive rules and enforcement patterns of the AML through comparison with competition laws in the US and the EU.

Apart from an introduction chapter and a conclusion chapter, this book is set out in three parts, twelve chapters. The two chapters in Part One constitute an overview of the AML, introducing readers to its legislative background and goals. Part Two, comprising five chapters, summarizes the laws, regulations and landmark cases related to horizontal and vertical restrictions, abuse of dominant position, merger review, and administrative monopolies. Part Three consists of five chapters and focuses on the enforcement of the AML. It reviews successively the design of competition agencies, the choice of antitrust sanctions, the role of courts and economic experts in China, and the internationalization of merger policy. It also tries to explain the ineffectiveness of competition enforcement mechanism from a behavioral economics perspective.

In Part One, chapter 2 gives a sketch of the legislative history, drafting process, enforcement agencies, substantive and procedural rules of the AML, while chapter 3 presents the major debates on the goals of competition law in China. Since the AML has multiple and non-hierarchical goals such as fair competition, economic efficiency, public interest, promotion of a socialist market economy and innovation, Mrs. Ma points out that one of the main characteristics of the AML is the incorporation of non-economic goals into the purpose of the law or, in other words, a mix of industrial policy and competition law system, which makes it distinct from the competition law in other jurisdictions. She also argues that the challenge of balancing both economic and non-economic goals substantially weakens the enforcement of competition law in China. In this respect, she holds that the fair competition review system which has been implemented since 2017 to coordinate competition and industrial policy has significantly improved the competition law enforcement as further discussed in chapter 8.

Part Two studies the substance of competition law and regulations in China. Chapter 4 focuses on cartel regulation. It introduces the definition, typology, exemptions, sanctions and leniency program of cartels under the AML. Mrs. Ma also examines relevant cases and notes that around one third of the cartel activities were organized by industrial associations, and the sanctions imposed were not severe enough compared with their illegal gains. This explains why the 2020 draft revision of the AML significantly increases the fine imposable on companies and industrial associations. Chapter 5 is about vertical restrictions, with particular attention being paid to resale price maintenance (RPM) cases. Given the fact that competition agencies and courts in China are mainly concerned about anti-competitive effects of RPM agreements, Mrs. Ma proposes that a more nuanced pro- and anti-competitive analysis should be adopted in their decisions with efficiency gains taken into account. In chapter 6, Mrs. Ma demonstrates the definition and determination of dominant position and abusive conduct pursuant to the AML. She further points out that the refusal to deal and the imposition of restrictive conditions on trade are often conducted by public enterprises. She also complements this chapter by adding the updates provided for in Article 21 of the 2020 draft revision of the AML on the determination of dominance of Internet operators. Chapter 7 depicts China’s merger control regime. It provides a summary of merger review cases which gives a general impression, according to Mrs. Ma, that the merger control policy has been greatly influenced by industrial policies. Chapter 8 discusses the issues of administrative monopoly. For a long time, the AML has been criticized as ineffective in dealing with the administrative monopoly problem. Mrs. Ma presents relevant cases and the recent progress of fair competition review in regulating administrative monopolies. All of the above discussions in this part reflect the prevailing influence exercised by administrative power in the practices of monopoly agreements, abuse of dominance, and concentrations in China.

Part Three, the longest part of this book, is dedicated to the enforcement of the AML. It situates the Chinese questions in the worldwide debate on the optimal enforcement framework of competition law. In view of the predominant role of competition agencies in the enforcement of the AML, Mrs. Ma first assesses the institutional design of competition agencies in chapter 9. By conducting a comparative study of major competition authorities around the world, she outlines some fundamental elements in a well-functioning institutional design, such as structural independence, accountability in financial capacity and personnel recruitment. Based on these criteria, she points out that, despite the positive effects of efficiency improvement after the agency consolidation in 2018, China’s newly formed competition agency, the State Administration for Market Regulation (SAMR), still suffers from limited structural and operational independence. Mrs. Ma proposes that the SAMR should recruit more managers and staff members with knowledge and expertise to build agency capacity. In chapter 10, Mrs. Ma conducts an economic analysis of antitrust sanctions. She notes that there is a global trend of increasing fines and introducing criminal penalties as well as individual liabilities to enhance deterrence. However, criminal and individual liabilities targeting anti-competitive behaviors have not been introduced in China. It is worth noting that Article 57 of the 2020 draft revision of the AML opens the door for criminal liabilities of business operators conducting monopolistic behaviors, but its details are not yet clear. Therefore, by comparing the pros and cons of administrative versus criminal penalties under the Becker Model, Mrs. Ma suggests that, given the particular situation in China, it may be more practical and convincing to increase the cost of antitrust violations through administrative fines rather than shifting to criminalization.

Chapter 11 reviews the development of private enforcement of the AML. It analyzes the advantages and limitations of agency public enforcement and private actions before the courts. The empirical studies conducted by Mrs. Ma show that companies are reluctant to appeal against the administrative penalty decisions made by the competition agencies. Even if the concerned party appeals, the courts are more likely to rule in favor of the agency. Mrs. Ma further finds that, although courts are restrained from regulatory capture, they lack specific expertise when dealing with complex economic antitrust cases. The appointment of economic experts can mitigate this problem but may give rise to the selection problem. After assessing different enforcement patterns of competition law in chapters 9 to 11, chapter 12 discusses the optimal mix of enforcement tools by applying behavioral economics theories. Mrs. Ma believes that the findings of behavioral studies can serve to provide more nuanced criteria for the assessment of each enforcement instrument, and to offer some additional explanations for the ineffectiveness of a particular mix of enforcement mechanisms.

Chapter 13 deals with the internationalization of merger policy by looking into the practices in the US, the EU, and China. It shows that, although competition agencies in different jurisdictions give priorities to different goals when making transnational merger control decisions, they keep enhancing cooperation through technical assistance, experts’ working groups, and learning from “best practices.” Mrs. Ma thereby concludes that a global convergence of merger policy may be achieved by the joint efforts of different competition authorities to improve analytical methods and harmonize procedural rules.

In a nutshell, the most interesting point of this book is that it illustrates how the Chinese competition law system has been constructed under the influence of administrative monopoly while mainly relying on administrative enforcement at the same time. In normative terms, it explores how the competition law enforcement in China can be improved by applying economic theories. Published shortly after the promulgation of the 2020 draft revision of the AML, this book is a timely retrospect of the evolution of the AML. It also serves as a reliable resource for practitioners, scholars and students to better grasp the prospect of competition law and policy in China.

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Author

  • University of Paris I Panthéon-Sorbonne

Quotation

Zhijin Liu, Competition Law in China. A Law and Economics Perspective, Jingyuan MA, September 2020, Concurrences N° 3-2020, Art. N° 96024, pp. 236-237

Publisher Springer

Date 1 January 2020

Number of pages 282

Visites 114

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