Pursuing the second best: The history, momentum, and remaining issues of China's anti-monopoly law

Antitrust Law Journal

Volumn 75, Issue 1, 2008, Pages 117-131

  Huang, Yong ^a  

^a UNIVERSITY OF INTERNATIONAL BUSINESS AND ECONOMICS   (China)

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EID: 59149105788     PISSN: 00036056     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Conference Paper

References (31)

1. Anti-Monopoly Law of the People's Republic of China (promulgated by the Standing Committee of the National People's Congress on Aug. 30, 2007 and effective Aug. 1, 2008) [hereinafter AML]. The translations provided in this article are the author's. An unofficial English translation is available as an appendix to Nathan Bush, The PRC Antimonopoly Law: Unanswered Questions and Challenges Ahead, ANTITRUST SOURCE, Oct. 2007, http://www.abanet.org/antitrust/at-source/07/10/Oct07-Bush10-18f.pdf.
2. Whether or not to include unfair competition in the core anti-monopoly legislation differs among countries. China opted to leave unfair competition out of its AML. Therefore, the term "anti-monopoly law" in this article refers to antitrust law only, whereas "competition law" is used to refer to both antitrust and unfair competition laws.
3. See also KONG XIANGJUN, PRINCIPLES OF ANTI-MONOPOLY LAW 3 (China Law Press 2001).
4. The former State Economic & Trade Commission (SETC) and the State Administration of Industry & Commerce (SAIC) were the original drafters of the bill, and it had been scheduled for enactment in both the Eighth and the Ninth terms of the National People's Congress (NPC). Since 1994 the two drafters had produced a single, joint draft, but for various reasons it had never been introduced in the NPC. See Shang Ming, Current Status of The Drafting of China's Anti-monopoly Law, in NEW DEVELOPMENTS OF COMPETITION LAWS IN THE ECONOMIC G LOBALIZATION 3 (Wang Xiaoye ed., Social Science Documentation Press 2005). Mr. Shang is Director of Anti-monopoly Investigation Office under the Ministry of Commerce.
5. See Cao Kangtai, Notes to the Draft PRC Anti-monopoly Law. This note is an official instrument submitted to the NPC by the State Council, serving as the formal annotation of the draft AML.
6. See The Ninth Five-Year Plan for National Socio-Economic Development and the Program for Perspective Goals in 2010 (adopted by the Eighth National People's Congress on Mar. 17, 1996).
7. This is why some Chinese scholars prefer not to include this type of activity in the AML: they see no reason to include a subject in a statute which the statute could not tackle.
8. For example, when the consumer product market opened up, several domestic household brands were eliminated because their SOE owners could not compete effectively with foreign giants like Procter & Gamble. Recognizing that the rule of "survival of the fittest" will not help these SOEs, some Chinese now argue that the Chinese brands are, in fact, assets owned by the State, where the national interest lies; so their failure for lack of competitiveness is not acceptable.
9. WORLD BANK, WORLD DEVELOPMENT REPORT 2005: A BETTER INVESTMENT CLIMATE FOR EVERYONE 258 (2004).
10. The Kuznets curve illustrates that income disparity was a common phenomenon in both the United States and United Kingdom during the expansion/development periods of those economies. Shaped like a bell curve, the Kuznets curve traces out the extent of income disparity (on the vertical axis) against time, or the stage of economic development (on the horizontal axis). The classic Kuznets curve shows income disparity increasing as the economy began to grow, reaching a maximum, and then gradually declining as the economy matures. Based on this theoretical relationship between income distribution and economic development, some Chinese scholars believe that although the income gap is substantial at the moment, it will naturally narrow down as the economy continues to grow without intervention. Therefore, they argue that the priority for the government is to improve efficiency, rather than putting equality first, allowing the expansion of the economy to correct the disparity problem by itself.
11. AML, supra note 1, art. 10 ("The Anti-monopoly Enforcement Authority designated by the State Council (Anti-Monopoly Enforcement Authority) is responsible for the enforcement of the anti-monopoly law.").
12. Id. art. 9 ("The State Council shall set up the Anti-Monopoly Commission, being responsible to organize, lead, and coordinate the anti-monopoly activities: (i) studying and making competition policies; (ii) organizing the investigation, assessing the overall market competition status, and publishing an assessment reports; (iii) enacting and promulgating anti-monopoly guidelines; (iv) coordinating the anti-monopoly law enforcement; (v) other functions assigned by the State Council.").
13. Price Law of the People's Republic of China (promulgated by the Standing Committee of the National People's Congress on Dec. 29, 1997 and effective May 1, 1998), reprinted and translated at http://en.chinagate.com.cn/english/ 430.htm. (Translation available by subscription at http://www.chinalawinfo.com.) .
14. Anti-Unfair Competition Law of the People's Republic of China (promulgated by the Standing Commitee of the National People's Congress on Sept. 2, 1993 and effective Dec. 1, 1993), reprinted and translated at http://www.csptal.com/en/en-z.asp?id=47. (Translation available by subscription at http://www.chinalawinfo.com.).
15. Huang Yong, Understanding Chinese Anti-monopoly Law, CAIJING MAG., Sept. 6, 2007, available at http://www.caijing.com.cn/newcn/ruleoflaw/other/2007-09-02/28866.shtml.
16. AML, supra note 1, art. 7 ("Industries controlled by the State-owned economy and relied upon by the national economy and national security or industries implementing exclusive operation and sales in accordance with the law shall be protected by the State to conduct lawful operation by the business operators. The State shall supervise and control the price of commodities and services provided by these business operators and the operation of these business operators so as to protect the interests of the consumer and facilitate technical progress. The business operators mentioned in the paragraph above shall operate, in good faith, in accordance with the law and in a self-disciplined manner, accepting public supervision and shall not harm the interests of the consumer from a controlling or exclusive dealing position.").
17. Constitution, Art. 7, [1982] (PRC) ("The state economy is the sector of socialist economy under ownership by the whole people; it is the leading force in the national economy. The state ensures the consolidation and growth of the state economy."), reprinted and translated at http://english.peopledaily.com.cn/constitution/constitution.html.
18. This conclusion is not shared by academics and other government agencies because, under the current Chinese legal framework, it is not uncommon that general laws trump sector-specific laws. The only safe conclusion at this stage is that the hierarchy of relations between the AML and the sector laws is unclear.
19. AML, supra note 1, art. 5 ("Business operators may concentrate when such an action is in accordance with the law and adheres to fair competition and is a voluntary union that expands the scale of operation and improves market competition.").
20. Id. art. 31 ("In the case that national security is concerned, besides the examination on concentration in accordance with this Law, the examination on national security according to the relevant regulations of the State shall be conducted as well on the acquisition of domestic business operaters by foreign capital or other circumstances involving the concentration of foreign capital.").
21. See Xing Houyuan, Foreign Buyers and National Security, http://news.hexun.com/2007-08-20/100228699.html.
22. AML, supra note 1, art. 11 ("The Trade associations shall strengthen the self-discipline of industries to lead business operators toward competing in accordance with the law and protecting the order of market competition.").
23. According to the Xinhua News Agency, after the first reading of the AML bill, the NPC consulted with a variety of interest groups, including provincial governments and trade associations, which, in turn, vigorously advocated for "self-discipline" and "orderly competition." Then the NPC and the State Council agreed to add Article 11 to the bill. For more details, see the Xinhua coverage on June 24, 2007, http://www.sina.com.cn.
24. Press Release, Nat'l Dev. & Reform Comm'n, On the Investigation of Price Conspiracy in Instant Noodle Products (Aug. 16, 2007), http://www.ndrc.gov.cn/xwfb/t20070816-154142.htm.
25. AML, supra note 1, art. 16 ("The trade association shall not organize the business operators in the industry to be engaged in monopolistic conduct prohibited by this chapter.").
26. Id. art. 46 ("In the case that the trade association violates the provisions of this Law to organize the business operators to reach monopolistic agreements, the Anti-monopoly Enforcement Authority may impose a fine of less than 500,000 RMB; and in the case of a serious situation, the registration authority of social organizations may revoke the registration in accordance with the law.").
27. This happened when the legislation was still being drafted within the State Council, before the submission to the NPC.
28. Although it is necessary to have this chapter in the AML, I am pessimistic regarding its effectiveness because the final version only provides a set of mild restrictions upon state power, so mild that no meaningful enforcement can be foreseen.
29. The AML only has 57 articles, 6, 487 Chinese characters in total.
30. See, e.g., Kevin J. O'Connor, Federalist Lessons for International Antitrust Convergence, 70 ANTITRUST L.J. 413 (2002);
31. see also Randolph W. Tritell, International Antitrust Convergence: A Positive View, ANTITRUST, Summer 2005, at 25.