Chillin'Competition

On the occasion of the publication of “China’s Anti-Monopoly Law – The First Five Years”, our friend Adrian Emch (Hogan Lovells Beijing) has offered us two presents: 1. A hardcopy of the book; 2. A book review by no other person than Professor Bill Kovacic! Yes, you read well, Bill Kovacic himself. This is the second time Bill appears on Chillin’Competition. Thanks to him and to Adrian for doing us this honour.

Review of China’s Anti-Monopoly Law – The First Five Years (Adrian Emch & David Stallibrass, eds. Wolters Kluwer, 2013)

By William E. Kovacic, George Washington University Law School (c)

On August 1, 2008, China’s new competition law system opened for business.  Three agencies — the Ministry of Commerce (MOFCOM), the National Development and Reform Commission (NDRC), and the State Administration for Industry and Commerce (SAIC) — began to implement China’s Anti-Monopoly Law (AML), and their work in the past five years has reshaped the global practice of competition law.

The fifth anniversary of the AML is a most suitable occasion for some stock-taking. The first five years have provided considerable experience with public and private enforcement.  China’s immense and expanding economy ensures that firms engaged in global trade must take the AML seriously.  Particularly for merger control, China is quickly acquiring the capacity to influence international competition law norms through the application of its own law.

The development of competition law in China has created a hunger for knowledge among academics, practitioners, and public officials about the AML’s origins, content, and application.  This interest has inspired the publication of a fast-growing body of books on China’s antimonopoly system.  A number of these volumes are exceptionally strong,[1] and other promising contributions are on the way.[2]

Amid the excellent modern commentary on the AML, China’s Anti-Monopoly Law – The First Five Years now stands atop the ladder.  All observers with an interest in China’s competition law system will find that this book greatly enriches their understanding of China’s competition law system.

For several reasons, First Five Years will receive, and deserves, a broad readership.  Five features of the book stand out. The first is the consistently superior quality of an exceedingly ambitious project.  The book includes 27 essays authored by a total of 41 authors.  In many instances, an undertaking of this scale suffers from unevenness in quality across the contributions.   Reasonable expectations might lead a publisher to be pleased if half of the papers are superb, the rest are merely average, and only a handful are entirely forgettable.  Through the skill and effort of its editors, Adrian Emch and David Stallibrass, First Five Years performs extremely well from the first essay through the last.  This is a formidable achievement. The perspectives in each chapter typically are candid, fresh, and insightful.  The extensive participation of Chinese authors, either writing their own chapters or collaborating with foreign specialists, ensures that the essays accurately portray China’s AML system’s broad conceptual architecture and its technical details.  Foreign competition law experience is related in a manner that  is meaningful to the Chinese context.

A second impressive contribution is the book’s examination of the institutional foundations of the Chinese competition law system.  The first four chapters of the book are rich in history and political science, and they are worth the price of admission, alone.   Huang Jong and Richean Zhiyan Li describe how the fragmentation of enforcement power among MOFCOM, NDRC, and SAIC have impeded the development of a “coherent antitrust policy.[3] Hao Qian sets out the antecedents of the AML and explains why China chose to distribute enforcement authority among three agencies.[4]  Wendy Ng considers the aims that appear to have guided public enforcement against the backdrop of goals – a diverse array of objectives featuring some fundamental internal contradictions – that motivated the AML’s adoption.[5]   Deng Fei and Gregory Leonard study how China’s economic conditions inform the AML’s application.[6]  As a group, these introductory chapters supply necessary and enlightening context for understanding the AML’s current, and they set a valuable foundation for seeing how the Chinese system might evolve in the future.

A third noteworthy element of First Five Years is its insightful treatment of important developments in doctrine and policy.  The examination of traditional enforcement focal points typically goes beyond a mere recital of activity and present informative interpretations of actions or omissions in the public enforcement program.  Good examples include the chapters on refusals to deal (and the lack of effort to date to apply this concept to expand competition in sectors controlled by state-owned enterprises);[7] vertical restraints;[8] supplier cartels and information exchanges among rivals;[9] dominant firm pricing strategies having exclusionary or exploitative effects;[10] and merger control and the treatment of joint ventures.[11]  The book’s treatment of these subjects is remarkably current, given the lag the inevitably occurs between the completion and publication of manuscripts.

The volume’s fourth valuable feature its illumination of the law enforcement process as it takes place before the Chinese competition agencies and through the mechanism of private cases in the courts.  Commentary on China’s antitrust system generally is thin in its description of how the Chinese agencies review cases, interact with affected parties, engage other departments of the government, and reach decisions.  What is known about these processes resides within the agencies or constitutes carefully guarded know-how held by law firms which have acted for companies before the Chinese agencies.

First Five Years pulls back the curtain and affords outsiders a fuller view of the enforcement apparatus and procedures.  In doing so, the book will enable a broader audience of practitioners, public officials, and scholars to understand what happens inside the Chinese agencies.  In doing so, the book does valuable service by increasing the transparency of the Chinese system and expanding the ability of observers to analyze the system, debate its operations, and engage the enforcement process intelligently.  Among other contributions, the book provides a superb tour through MOFCOM’s merger control process.[12]  Chapters by government officials provide helpful additions to our understanding of decision-making and priority-setting within NDRC and SAIC.[13]  First Five Years contains the best study to date of “administrative litigation“– the set of legal controls that confine the discretion of China’s government bodies.[14] The study of public enforcement is supplemented by two excellent chapters on private rights of action.[15]

A fifth important ingredient of First Five Years is its examination of how the antimonopoly law relates to collateral bodies of law and economic policy.  Several chapters place the AML in the context of complex, and often conflicting, policy impulses that buffet the competition agencies and add difficulty to the already demanding task of implementing a new set of policy commands.  To comprehend these intricate policy forces is vital to predict how the law will be applied.  Important contributions include chapters on the application of the AML to state-owned enterprises and the complications of examining the behavior of firms undergoing a transition from strict public control to more decentralized management and decision-making structures;[16] the relationship between the AML and sectoral regulation;[17] the application of the AML to intellectual property rights;[18] the regulation of outbound investment;[19] and the connection between the antitrust regime and measures designed to forestall corruption.[20]

I suggest one refinement that might make a first-rate book even better.  There is room for a chapter that discusses the place of China’s competition law system in international affairs, and studies the role that China aspires to play in the formulation of global standards for substantive analysis and procedure.  The volume’s useful chapter on technical assistance provided to China (and its discussion of the foreign influences on the elaboration of Chinese competition policy)[21] might have been supplemented by a chapter on China’s plans to engage foreign governments and competition agencies – beyond the establishment of bilateral cooperation agreements and memoranda of understanding.  Why, for example, has China declined to join the International Competition Network – a striking omission in the membership of a body that plays an important role in the development of voluntary standards with regard to substantive policy and procedure?  What role does China envision for the BRICS consortium competition policy cooperation (and, perhaps, standard setting) platform? How do efforts in the context of ASEAN to devise a more integrated regional competition policy framework relate to the emergence of China’s competition policy system? And how will the future development of the AML regime affect the oldest and, until recently, most significant competition regimes in the region – Japan and South Korea?  These are a few questions that an outward looking chapter on China’s place in the world might have taken on.