The Antimonopoly Law and Its Structural Shortcomings

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Adrian Emch, Aug 11, 2008

The new Chinese antitrust regime is taking shape. The Antimonopoly Law became effective on August 1, 2008; the first implementing regulation has been adopted; and it has become clear which government agencies will be the Antimonopoly Enforcement Authorities. The AML represents substantial progress over the patchwork of prior antitrust rules. More generally, the law is also a significant step in China’s slow, but steady, transformation from a planned economy to a market economy. However, in spite of the overall positive impression that the AML has made, certain aspects of the law are not satisfactory. This commentary will focus on three areas where structural shortcomings exist. First, the allocation of the enforcement powers to three distinct bodies, the State Administration of Industry and Commerce, and the National Development and Reform Commission creates a complicated institutional framework where conflicts are probable. Second, certain of the AML’s provisions contain derogations to the principle that competition policy is the only criterion to assess whether a given conduct is legal under the AML. In some cases, social and political factors allow for otherwise anticompetitive behavior to become lawful under the AML. The derogations have the potential of affecting the AML’s credibility as a modern, economics-based antitrust law. Third, the many open-ended provisions in the AML can be a double-edged sword. While leaving room for an economics-based, case-by-case approach, they also leave the door open to arbitrary enforcement actions and may reduce legal certainty for business operators.

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