The enforcement of the Anti-Monopoly Law in China: an institutional design perspective

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Date: Fall 2011
From: Antitrust Bulletin(Vol. 56, Issue 3)
Publisher: Sage Publications, Inc.
Document Type: Article
Length: 11,338 words
Lexile Measure: 1860L

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The unveiling of the Anti-Monopoly Law (the AML) on August 30, 2007, marked a symbolic commencement of a new era of competition for China. Since the law was enacted in 2008, every move made by the Chinese antitrust authorities has been closely watched by the international community. Although much attention has been devoted to second-guessing the political motives behind each of the Chinese government's decisions, little effort has been directed to studying problems in the institutional framework for implementing the AML. This article identifies three problems in the institutional design of China's antitrust enforcement system and calls for attention to remedy them.

I. INTRODUCTION

The unveiling of the Anti-Monopoly Law (the AML) on August 30, 2007, (1) marked a symbolic commencement of a new era of competition for China. Taking account of some fundamental aspects of Chinese culture and government, foreign observers predicted that the enforcement of the AML would be different from that of its U.S. and European counterparts. (2) Since the law was enacted in 2008, every move made by the Chinese antitrust authorities has been closely watched by the international community. To the disappointment of many, the AML has yet to be applied to tackle one of the most vexing issues in the Chinese economy--the alleged abuse of dominant position by large state-owned enterprises (SOEs). Meanwhile, there has been widespread speculation that the enforcement of the AML will be targeted solely at foreign firms. There are good reasons to be skeptical about the incentives of the Chinese government in promulgating the new law. However, no antitrust enforcement takes place in a vacuum, and the best that can be hoped for is that decisions be soundly grounded in economics and fact. (3) Indeed, institutional design plays a key role in ensuring sound decision making by antitrust agencies and courts. Unfortunately, although much attention has been devoted to second-guessing the political motives behind each of the Chinese government's decisions, little effort has been directed to studying problems in the institutional framework for implementing the AML. This article identifies those problems and calls for attention to remedy them.

This article is divided into two parts. The first part provides an overview of the institutional framework. The second part examines three problems in the institutional design of the enforcement system: First, what are the pros and cons of the tripartite system of enforcement (the parallel enforcement of the AML by three different administrative agencies)? Second, what is the fundamental defect in China's merger control system and what can be done to alleviate it? Third, why has private enforcement been unsuccessful thus far--and should it be enhanced in China? A key policy recommendation is that the Ministry of Commerce (MOFCOM) should publish a brief notice promptly after a transaction has been notified to the agency. Such a step could make the merger process more transparent without imposing heavy administrative burdens on the government.

II. THE STRUCTURE OF THE INSTITUTIONAL FRAMEWORK

The enforcement of the AML consists of two major parts: administrative enforcement...

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Gale Document Number: GALE|A276276064