The latest development of the Chinese competition law regime

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The latest development of the Chinese
competition law regime
TING GONG Law Faculty K. U. Leuven
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Introduction Purpose of the Presentation

• I. Provide an overview of the existing
  competition rules in China.
• II. Present the latest development of the
  Chinese competition regime in terms of the
  proposed Anti-Monopoly Law.

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Introduction Outline of the Presentation

• I. General remarks
• II. The evolution and enforcement of the
  Chinese competition law system
• III. The new development of Chinese
  competition law regime
• IV. Conclusion

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I. General Remarks
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Chinas economic reforms over the past two
decades have brought remarkable growth-The
development of a vibrant private sector-The
significant reform of the state-owned sector
-Market based competition promotes efficiency

The idea of establishing competition law to
protect the competitive process was developed by
bureaucratic elite that sought to encourage
economic growth and competitiveness.
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II. The evolution and enforcement of the Chinese
competition system
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The earliest substantive competition rules were
enacted in 1980

• Interim Provisions on carrying out and protecting
  socialist competition, State Council, Beijing
  Oct.1980
• Target Regional protectionism
• Art.3 and Art.6

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Anti-Unfair Competition Law 1993

• It is primarily a consumer protection law, not a
  complete competition code
• Some competition issues
• Art 6 Predatory Pricing
• Art12 Tie-in
• Art 5 Bid-rigging
• Art 7 Administrative Monopoly
• The enforcement authority SAIC
• The major problems in enforcement

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Miscellaneous legislation

• Price Law 1997
• 2003 Interim Provisions for Merger and
  Acquisition of Domestic Enterprises by Foreign
  Investors
• 2003 Interim Regulation on Prohibition of
  Monopolistic Pricing Acts

Art.14 SDRC
Background 2002 Survey MOC
Art.2, Art.3, Art.5 SDRC
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Limitation of current competition regime under
the new circumstances

• Problems
• overlapping nature of regulations
• weak and duplicitous enforcement mechanisms
• lack of a coherent strategic vision on
  competition matters
• New Issues
• increased problems of the solvency of the
  state-owned business sector
• the expansion of the private economic sector
• the threats to domestic producers represented by
  WTO entry
• intensified foreign competition
• the aggravation caused by administrative barriers
  to internal trade.

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III.The new development of Chinese competition
law regime
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The long delay of timetable for legislation was
due to several reasons

• Opponent opinions at the policy-decision level
• Technical issues of the new law and divided
  international suggestions
• Conflict of interest among government agencies
• Outside factors

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Provision Analysis

• Art.1 Objectives
• This law is enacted for the purposes of
  prohibiting monopolistic conducts, safeguarding
  fair competition, protecting the legitimate
  rights of consumers, and the public interest, and
  to ensure the healthy development of the
  socialist market economy.

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Provision Analysis

• Art.2 defines jurisdictional coverage
• This Law shall be applicable to monopolistic
  conducts in economic activities within the
  Peoples Republic of China.
• This Law shall apply to the conducts outside the
  territory of the Peoples Republic of China
  eliminating or having restrictive effect on
  competition on the domestic market of the PRC.

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Provision Analysis

• Art.3 Monopolistic conduct is defined in this
  law as
• the following activities that eliminate or
  restrict competition, damage the interests of
  consumers, or endanger the public interest
• (i) Agreements, decisions or other concerted
  actions among undertakings
• (ii) Abuse of market domination
• (iii) Concentration of enterprises that
  eliminates or restricts competition
• (iv) Abuse of administrative power by Government
  agencies and their subordinate departments that
  eliminates or restricts competition.
  (Administrative monopoly)

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Provision Analysis

• Art.4 defines
• An undertaking in this law refers to a legal
  person, other organization or natural person that
  engages in businesses of commodities (hereinafter
  commodities include services).
• A relevant market is defined in terms of a
  geographic area, a specific commodity combined
  with a temporal component.

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Provision Analysis

• Art.5 all government departments and agencies are
  required to take action to create and maintain a
  fair and open trading environment
• Art.6 empowers the competition authority to
  enforce the law. The Anti-monopoly Authority
  under the State Council is entrusted with a broad
  range of powers, similar to the position of
  European Commission
• Art.7 social supervision of monopoly activities

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Chapter 2 Agreement and Concerted practices

• Art.8-Art.11

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Comparison I
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Exemptions

• Broadly worded exemption
• Although the Draft Law appears to have adopted
  the EUs approach by containing specific
  exemptions provisions rather than using the rule
  of reason analysis as does the US, the Draft Law
  is obviously more lenient than the EU Laws.

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Chapter 3 Abuse of dominant position

• Art12-Art22
• Article 15 Presumption of Dominant Market
  Position
• Undertakings in relevant market that have any of
  the following market shares, can be assumed to be
  in a dominant market position
• Undertakings with a market share of less than
  1/10 will not be deemed as occupying a dominant
  market position even if they fall within the
  scope of item (iii).
• Once market dominance is determined the
  substantive prohibitions become relevant. The
  following abusive practices are
• Sale or buy products at unfair prices (high or
  low)
• Predatory Pricing
• Article 18 Price discrimination and Dissimilar
  Treatment
• Article 19 Refusal to sell
• Article 20 Exclusive Transactions, Forced
  Transactions
• Article 21 Tie-in and unreasonable trading
  conditions
• Article 22 Refusal of Access to Network

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Comparison II
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Chapter 4 Merger Control

• Art23Art31
• A proposed concentration is not permitted if
  (1)(2)(3)
• AMA can grant special approval to a concentration
  if it is advantageous to the national economy and
  public interest
• AMA can include conditions in its approval
• No appeal for merger applicants to challenge an
  AMA merger review.

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Comparison III
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Chapter 6 Anti-Monopoly Authority

• Art.36-Art.45
• A centralized enforcement system similar to the
  EU Commission
• Review anti-monopoly matters, issue competition
  policies and rules, conduct investigations, stop
  violations and impose fines.

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Chapter 7 Penalties and Responsibilities

• Art.46-Art.53

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Chapter 8Supplementary Articles

• Art.54-Art.58

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III. Conclusion
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Thank you for your attention??
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