Dawn of a New Constitutional Era or Opportunity Wasted - An Intellectual Reappraisal of China's Anti-Monopoly Law


DAWN OF A NEW CONSTITUTIONAL ERA
OR OPPORTUNITY WASTED?
AN INTELLECTUAL REAPPRAISAL OF
CHINA'S ANTI-MONOPOLY LAW
Oliver Q.C. Zhong

Abstract
Against the backdrop of a society with liberalizing but still firmly entrenched
legal norms of collective ownership and economic planning, the government
of the People's Republic of China enacted the Anti-Monopoly Law in 2007.
This article will explain the history against which the AML was passed,
followed by an analysis of the AML itself. This discussion will be divided into
two parts: a description of the AML's statutory structure as promulgated, and a
synopsis of subsequent regulatory enactments operating upon the law. In
conclusion, the article will consider the implications of the AML for the China
of today and tomorrow.

Author
Associate, Sidley Austin, Hong Kong. Research Fellow, U.S. Asia Law Institute
(2009-2010), New York University School of Law. J.D., University of Michigan;
M.P.A., University of Texas at Austin, Lyndon B. Johnson School of Public
Affairs. The author would like to express his gratitude to Professor Jerome A.
Cohen and the U.S.-Asia Law Institute at New York University School of Law,
whose generous support and invaluable assistance made this article possible.
The views expressed in this article are the author's only, and are not those of
Sidley Austin LLP.

INTRODUCTION 89

1. ANTI-MONOPOLY LAW AS PROMULGATED: A CRITICAL REVIEW 92

A. Antitrust Law Proper 93
1. Structural Formalism 93
2. Order of Priorities 93
3. Substance Without Specificity 94
4. Analysis 96

B. Law of Central-Local Relations 99
1. A Law Without Precedent 1oo
2. Universal Problems Central to Constitutionalism . 101

3. A Commerce Clause for China? 103
C. Law of Foreign Economic Relations 104

1. Article 2-Extraterritorial Jurisdiction 105
2. Article 31-National Security Review 105



3. Article 15, Section 6-Patriotic Export Cartel io6

II. DEVELOPMENTS AND REGULATORY UPDATES SINCE PROMULGATION 1o6
A. Antitrust Law Proper 1o6

1. Legislative io6
2. Enforcement 113

3. Judicial 114
B. Law of Central-Local Relations 116

1. Legislative n16

2. Non-Enforcement: The Green Dam Case 117
3. Judicial 117

C. Law of Foreign Economic Relations u8
i. Three Cases u8

2. Implications 119

III. THE GENESIS OF IDEAS: PAST, PRESENT, AND FUTURE 120

A. The Tradition 120

1. Mencius 120

2. State Monopolies in Han China: The Salt and Iron Policy 121

3. The Great Debate: Confucians v. Legalists 123
B. The Current 123

1. The Relevance of History 123

2. Why the Two-Track Model Would Not Work 125

3. If Not Now, When? 125

C. The Future 126

1. General Assessment 126

2. Treatment by the Court 127

3. Structural Matters 127

Columbia journal ofAsian Law, VOL. 24, No. i (2010)88

128CONCLUSION



An Intellectual Reappraisal of China's Anti-Monopoly Law

INTRODUCTION

Competition is self-determination. Under the central premise of liberal
capitalism, individuals are better managers of their own properties, and an
economic system organized around private competition generates greater
good in the aggregate.

However, two problems may compromise this premise. First, human
nature dictates that if the powerful can collude rather than compete with
impunity, they will. Thus consumers will suffer, innovation will cease, and
social mobility will stall. The state must therefore intervene, and in this
context, competition law is indeed fundamental in preventing corruption and
chaos in a system based upon free exchange. Second, there can be no exchange
to begin with if individuals do not have property rights. Aggregate prosperity
is a mirage if individual well-being is not established. An effective competition
law may formally address the first problem, but a truly competitive society is
unsustainable without strong institutional safeguards against the second
problem. Not surprisingly, competition law has always been a prized concept
of Western liberal democracy.

In this respect, one could be forgiven for finding the notion of a Chinese
competition law oxymoronic, or at least perplexing. After all, the People's
Republic of China ("P.R.C.") is still constitutionally organized on collective
ownership of property and politically managed by one party. Even with the
critical 2004 Amendment to the Constitution, which for the first time
pronounced protection of private property,' and the passage of the 2007
Property Law,' the state still dominates the nation's affairs both in theory and in
practice. In recent times, state involvement in property rights is waxing, not
waning.3

It is against this background that China's Anti-Monopoly Law ("AML")
was enacted, challenging commentators for an intelligent and coherent
explanation.' This is because the underlying contradictions are so unyielding
that there can be no avoiding the following difficult questions: Why was the
AML passed? Will it be effective?

An answer to the first question can be easily formulated. As a leading U.S.
antitrust expert observed, antitrust law is to developing countries in the early
twenty-first century what the hydroelectric dam presumably was to developed

'"Citizens' lawful private property shall not be violated." A [CHINA CONST. art. 13
(1982) (China).

SA lM')JZM [Property Law] (promulgated by the Standing Comm. Nat'I
People's Cong., Mar. 16, 2007, effective Oct. 1, 2007) (China).

' See, e.g., Derek Scissors, Deng Undone: The Costs of Halting Market Reform in China,
88 FOREIGN AFF. 24, 24 (2009).

A AK MFC lfl [Anti-Monopoly Law] (promulgated by the Standing Comm.
Nat'l People's Cong., Aug. 30, 2007, effective Aug. 1, 2008) (China) [hereinafter AML].

89



countries in the twentieth century.5 This fascination derives in equal parts
from a material desire for glamorous abundance as well as a rather
amorphous, almost adolescent aspiration toward liberalization. For example,
in the early 199os, Eastern European countries rushed to reopen stock markets,
which in the eyes of their citizens were symbolic of market economy and
freedom.6 The West played no small part in nurturing these aspirations,
notably under the ideological chapeau of the Washington Consensus, which
required developing countries to undertake comprehensive liberalization
measures before they could receive aid from or join multilateral institutions
organized by Western countries. Indeed, in China's case, the accession to the
World Trade Organization was an apparent catalyst for the AML to gain
priority on the crowded legislative agenda.

The latter question requires a more developed analysis. The investigation
begins from within the technical confines of competition law, that is, what
legal structure does the law put in place and what reliable projections can be
made about its positive future? A growing literature by internationally-minded
academics and major law firms addresses exactly this issue.' Close monitoring
of the AML is taking place both within and outside China, work that is both
necessary and important.

However, competition law alone is not the answer because in an economy
undergoing thirty years of the most remarkable market reform of our time,
which at its core has been a profound struggle to decide who sets the terms of
civil exchange, the arrival of canonical rules of competition must flourish as
either a decisive victory for the market or a glaring prematurity. It also cannot
be the answer because in a monolithic polity, a basic law regulating how
discrete social units deal with one another either touches a constitutional
dimension or remains a dead letter.8 There may be half-hearted execution, but
no doctrinal third way. Even from a strictly commercial viewpoint, any
experienced practitioner in China knows that the AML will certainly not
operate within a vacuum. Hence, current assessments and future predictions
of the AML's importance can only be understood within the context of the

'Yee Wah Chin, Counsel, Ingram Yuzek Gainen Carroll & Bertolotti, LLP, Remarks as a
Guest Speaker in Professor Jerome A. Cohen's Seminar, Settling International Business
Disputes with China, at New York University School of Law (Apr. 27, 2009).

6 Hungary reopened the Budapest Stock Exchange in 1990, Czechoslovakia reopened
the Prague Stock Exchange in 1992, and Romania reopened the Bucharest Stock
Exchange in 1995. China's Shanghai Stock Exchange and Shenzhen Stock Exchange
both opened in 1990.

7 See, e.g., Eleanor Fox, An Anti-Monopoly Law for China-Scaling the Walls of
Protectionist Government Restraints, 75 ANTITRUST L.J. 173 (2008); Bruce M. Owen et al.,
China's Competition Policy Reforms: The Antimonopoly Law and Beyond (John M. Olin
Program in Law and Economics, Working Paper No. 339, 2007).

The empowerment of individuals comes through in two ways: (i) by requiring the
state to compete with individuals rather than ruling by fiat, and (2) by requiring
individuals to compete with each other instead of seeking favors from the state.

90o Columbia Journal ofAsian Law, VOL. 24, No. i (2oio)



An Intellectual Reappraisal of China's Anti-Monopoly Law

country's fluttering contemporary political-legal fabric, and its historic and
intellectual tradition.

In addition, it would indeed be disappointing if competition law alone was
the answer- because this law offers a unique opportunity to set a historic
milestone on not only the country's economic transition, but also on the
avowed path to the rule of law by creating, or at least laying the foundations
for, a judicially-manageable constitutional relationship between the state and
individuals.' If such a historic breakthrough fails to materialize, it would mean
an opportunity wasted.

More than two years has passed since the AML became effective; it is time
for a reappraisal. For those who may think more time is needed for a proper
assessment, it must be underscored that the AML is an unusual piece of
legislation in terms of its drafting process. It is the end product of an
abnormally long legislative process,'o adorned with abrupt, existential twists
and turns-not at all surprising given the inherent difficulties outlined above."
For the outsider, it presents many urgent questions at commencement, and
the answers, though perhaps not readily evident, are obtainable.

This does not mean that circumstances, even significant ones, will not
change; they always do, and sometimes unexpectedly. Yet the possibility of
revision is no reason to delay examination. On the contrary, considerable
urgency lies in the fact that the AML's great potential will surely go unrealized
if the law does not receive principled academic and public policy attention.

The idea of a reappraisal refers to the many commentaries made over the
AML's long drafting process. When the law was finalized, there were already
expectations, if not confident projections, of what it would look like. Therefore,
it is the modest ambition of this article to illustrate how the discourse could be
framed differently, specifically, from a higher level of abstraction. This means a
focus on "ideas." While this article contains some illustrative discussion of
specific rules, an economic-legal analysis of a technical nature is not the
purpose of the article.

* In other words, there is an opportunity for a "breakthrough point of reform" (AEP

'o Drafting began as early as 1994 and took almost fourteen years to finish. This is
unusual in China, where "important legislation usually can be marshaled through the
legislative process very quickly, once the leadership reaches consensus on the
legislation." Owen, supra note 7, at 2-3.

" For example, the chapter on "Administrative Monopolies," a focal point of contention,
was removed in the penultimate draft, but miraculously reappeared in the final text.
See iWl [Xie Xiaodong], (lk i@ )) V MAP "WGRiA " *M it*llR [Anti-
Monopoly Law Draft Downsizes: "Anti-Administrative Monopolies" Content Removed],
WIY-J1 [BEIJING NEWS], Jan. 1n, 2oo6, available at http://www.people.com.cn/GB/54816/

54 822/ 4 o1679 9 .html; fil4 [Yuan Ting], &1VA tiVP4 Ai1fJ: 6 IM IIAtW
[Anti-Monopoly Law Marches on amid Controversy: Game of Interest Behind the
Administrative Monopolies Debate], M1 El [LEGAL DAILY], Aug. 30, 2007, available at
http://mentougou.tax861.gov.cn/cyxx/display.asp?more-id=740n. For a detailed
discussion on administrative monopolies, see infra Part I.B.

91



In sum, this article aims to do three things: (i) to re-conceptualize the
AML as promulgated, and identify major policy ambiguities; (2) to review
official updates and developments since promulgation with an eye to clarify
such ambiguities; and (3) to place the AML in China's intellectual tradition so
as to ascertain what it signifies for the present and the future. The following
parts of this article are organized accordingly.

I. ANTI-MONOPOLY LAW AS PROMULGATED: A CRITICAL REVIEW

The AML is not one but several laws. It resembles a multi-headed hydra,
not in the sense that it encompasses, as competition laws frequently do,
separate sets of rules governing separate categories of conduct (e.g., cartel,
monopolization, and concentration), but in the sense that it conglomerates
competition law proper with portions of what this article will call the law of
central-local relations-constitutional and administrative law-and the law of
foreign economic relations.

This fact should have been recognized or understood better. The reason it
has not been is attributable to, at a high level of simplification, a matter of
translation. The main discussion on this point is in Section III, yet a brief
"interlocutory" explanation here is necessary since it is quite central to a good
understanding of the issue.

Take xian fa ( A), for example. "Constitution" is the unshakeable
translation. There is no better or conceivable alternative as a matter of both
syntax and usage. Yet it has been convincingly shown that the Chinese
conception of xian fa is not quite equivalent to the word "constitution" in
English." Two points bear emphasis. First, the. Chinese Constitution is not
judicially operative. A radically different light is required when one attempts
to read the xian fa in the mode of a constitutional document with all the
customary accessories, ramifications, and implications. Second, it is not
merely a "language problem." ' "Fluency," in the conventional sense, is
irrelevant as native Chinese speakers, including legal academics, are as fallible
as native English speakers. Together, the caveat about translation represents
not a matter of linguistic esoterica but a highest form of art in the science of
comparative law.

The same can be said of many, if not most, key terms in Chinese law; one
finds, however, in the AML a particularly pronounced case. At this juncture it

suffices to point out that the translationfan long duanfa (FAIWA) and "Anti-
Monopoly Law" do not convey identical meanings. It is not too tenuous for the
AML to include contents that are not strictly "anti-monopoly" because such
contents could be properfan long duan (RAM) concerns. 4

Donald C. Clarke, Puzzling Observations in Chinese Law, in UNDERSTANDING CHINA'S

LEGAL SYSTEM 93, 103-09 (C. Stephen Hsu ed., 2003).

'3 This proposition will hold true unless one subscribes to the philosophy that all
worldly matters can be reduced to language and grammar.

14 Whether to do so would be desirable is another question not discussed in this article.

92 Columbia Journal ofAsian Law, Vol. 24, No. i (2020)



An Intellectual Reappraisal of China's Anti-Monopoly Law

It is only wise, accordingly, to heed the functional separation and parse
through the AML text separately. This section examines each of the three
components in turn.

A. Antitrust Law Proper

1. Structural Formalism

However groundbreaking its subject matter, the AML remains a typical
Chinese law, embodying a number of typical characteristics. First, in terms of
the overall structure, it prizes formality. Since it is the controlling authority in
a specialty area of law, it must be conclusive. Its success relies upon not only
supplying right answers to current disputes but also upon being broad and
structured enough to entertain all potential problems in an authoritative and
organized way.

To this end, like other Chinese laws, it begins with a chapter of
overarching "general principles" that explain the law's purpose, jurisdiction,
definitions, and so on. Further down, Article 3 defines "monopolistic conduct"
for the purpose of the AML as (i) monopolistic contracts; (2) abuses of a
dominant market position; and (3) concentrations that restrain or potentially
restrain competition."

Chapters 2, 3, and 4, respectively, address each of these three categories of
conduct. These categories must strike U.S. lawyers as familiar because they are
roughly comparable to Sections i and 2 of the Sherman Act and Section 7 of
the Clayton Act. Chapter 5 contains the unique provisions about
administrative power, which this article discusses at length below. Chapter 6
describes the investigation process. Chapter 7 defines liabilities. Chapter 8,
which is the "Appendix," concludes with specific provisions for intellectual
property and agriculture.

2. Order of Priorities

Second, the law brims with aspirational language that seems stock and
dispensable, yet may contain a surprising amount of significance. Nothing
better epitomizes this than Article i, which, in its entirety, provides that:

[I]n order to prevent and stop monopolistic conduct, to protect fair
competition of the market, to enhance efficiencies of economic
operations, to safeguard consumer interests and public interests of the
society, and to promote the healthy development of the Socialist
market economy, this Law is hereby promulgated. 6

5 AML, supra note 4, art. 3.
16 Id. at art. 1.

93



Prosaic as it may look, this is several storms in one small teacup and a
rather contradictory mixture at that. On the positive side, the persistent use of
the term "monopolistic conduct" in lieu of simply "monopoly," reveals a
whole-hearted Chinese acceptance of a particularly American influence." It
has become only in recent decades the settled view in the United States itself
that the role of antitrust law is to punish abusive conduct, not the status of
monopoly that may have been obtained through hard work, innovation, or
luck.'8 Indeed, obtaining the status of monopoly is exactly what antitrust law
incentivizes businesses to aspire to. Also, the prominent position conferred on
efficiencies-behind "competition" yet before "consumer interests"-is
remarkably effortless and free of the historical baggage that has taxed more
mature jurisdictions for decades. 9

On the negative side, however, "fair" competition and "public interests"
are both common codes for anti-competitive government intervention. In
addition, "healthy development" is typical Chinese officialese for central
planning of the economy, which is surely beyond the scope of any competition
rules. One can easily see that the drafter took special care to insert "Socialist"
before "market economy" to maintain the correct color of the document, even
though the term managed to come up only at the bottom of the group.2 0

3. Substance Without Specificity

Third and most importantly, the law lacks specificity. An example can be
made out of every article, but especially illustrative is the terse Article 50 in
Chapter 7, the chapter on liabilities, which states that, "an undertaking whose
monopolistic conduct has caused damages to another person, shall be
responsible for civil liabilities according to the law."'

On the one hand, this language seems tantalizingly close to announcing a
private cause of action, which would be highly significant, but it does not quite

This is true not only with regards to the AML, but to all subsequent implementing
regulations.

18 See, e.g., Verizon Commc'n Inc. v. Trinko, 540 U.S. 398 (2004); Aspen Skiing Co. v.
Aspen Highlands Skiing Corp., 472 U.S. 585 (1985).

'9 For an overview of issues relating to the efficiencies in American law, see Thomas B.
Leary, Commissioner, Fed. Trade Comm'n, Prepared Remarks at the ABA Section of
Antitrust Law: Efficiencies and Antitrust: A Story of Ongoing Evolution (Nov. 8, 2002),

available at http://www.ftc.gov/speeches/leary/efficienciesandantitrust.shtm.

20 This is swiftly followed by a subtle reverse of order where more fleshed-out articles of
the statute place state control before competition. See AML, supra note 4, at arts. 4, 5
("The State promulgates and enforces competition rules that are compatible with the
Socialist market economy, improves macroeconomic management, and establishes a
market system that is integrated, open, competitive and orderly" and "[u]ndertakings
may, through fair competition and voluntary union, lawfully effect concentration,
expand operations and enhance competitiveness in the marketplace.").

' AML, supra note 4, at art. 50.

94 Columbia journal ofAsian Law, VOL. 24, No. i (2020)



state it.22 On the other hand, the law could be read to cap liabilities across-the-
board in three ways (remember that this article governs the entire AML): (i) by
requiring proof of actual damages with the burden likely on the plaintiffs; (2)

by excluding any possibility of awarding punitive damages such as the U.S.-
style treble damages (because punitive damages are not available under the
rubric of "civil liabilities" as defined by China's prevailing civil law); and (3) by
precluding criminal penalties since they are not specifically provided.' But
again, none of these speculations are unequivocally supported by the text.

If, in vacuo, these doubts. appear speculative and groundless, compare
Article XX of the Anti-Unfair Competition Law (AUCL), the AML's less-storied
predecessor that has been in place since 1993.' It provides, in two paragraphs:

An undertaking who violated this Law shall, where such violation
caused damages to the victim undertaking, pay compensatory
damages; where such damages to the victim undertaking are difficult
to compute, the compensation shall equal the amount of profits the
offending undertaking has made from the violation for the duration of
the violation, plus reasonable costs which the victim undertaking has
incurred in investigating the improper competitive conduct of the
offending undertaking which has infringed upon the victim
undertaking's lawful rights.

The victim undertaking, whose lawful interests have been
infringed upon by improper competitive conduct, may bring an action
to the People's Court.2

22 Judicial practice later proved that the courts accepted some but not all claims,
perhaps an example of the art of drafting. See infra Part II.A.3.

" Article 134 of the General Principles of Civil Law defines "civil liabilities" as cessation,
damages, restitution, apology, restoration of reputation, and so on, none of which is of
a punitive nature. ARAWRi&ll1J [General Principles of the Civil Law]
(promulgated by the Standing Comm. Nat'l People's Cong., Apr. 12, 1986, effective Jan.
1, 1987), art. 134 (China). Technically, criminal sanctions could still be instituted by a
direct insertion of such language into China's unified criminal code, but Chinese
legislative custom is to authorize such sanctions first in the substantive specialty law by
specifically including a trigger clause. The first draft of the AML did contain such
language, but it was deleted in the second draft. See I 9 [Shi Jianzhong], & $IA

Z [Anti-Monopoly Law Draft Should Further Improve
Liabilities Provisions], 9SX9Ml. [EcoN. OBSERVER] (Aug. 18, 2007), available at
http://www.eeo.com.cn/Politics/eeo-special/2007/o8/20/80797.html (citing similar
clauses in recent specialty substantive laws, including the Company Law, art. 216, the
Securities Law, art. 231, and the Property Law, art. 40.2).

24 A [Anti-Unfair Competition Law] (promulgated by the
Standing. Comm. Nat'l People's Cong., Sept. 2, 1993, effective Dec. 1, 1993) (China)
[hereinafter AUCLI.
25 Id. at art. 20.

An Intellectual Reappraisal of China's Anti-Monopoly Law 95



Columbia Journal ofAsian Law, Vol. 24, No. i (2010)

This is a telltale reminder that many murky provisions in Chinese law are
fruits of deliberation rather than carelessness. There can be no argument that
Article 50 of the AML neglects to consider the issue of private remedies,
because its predecessor, Article 20 of the AUCL, clearly provided a private
cause of action and a two-step formula to calculate damages. Article 50 of the
AML intentionally removed such certainties, while leaving the door open for
other forms of damages in addition to actual compensation (such as, perhaps,
restitution) and more importantly, suits by not only injured competitors, as

under the AUCL, but also injured consumers. The only certainty it seems to
add-this in itself remains unspoken-is a policy determination not to arm
the AML with the teeth of criminal sanctions.2

Specificity is lacking because it is unfeasible, unnecessary, or undesirable.
Unfeasible because, for reasons similar to those stated about formality, the law
could be unmanageably bulky if technical details were intermingled with
overarching principles. Unnecessary because in the Chinese legislative process
the State Council and relevant ministries typically issue implementing
regulations and rules in due order after the National People's Congress (NPC)
promulgates a law. Undesirable because amending a law passed by the NPC is
considerably more difficult than amending regulations passed at a lower level.
Especially for a ground-breaking law like the AML, the NPC may have wanted
to retain more flexibility on its part and let the trial and error occur below.

Brevity is not unusual, nor is vagueness ipso facto problematic. The
Sherman Act, if anything, celebrates brevity to such an extreme that it cannot
mean what it apparently says, and the vagueness could not be resolved by
reading within its corners. 7 The difference, however, is one between brevity
and systematic and persistent vagueness. The U.S. Congress specifically
intended for the courts to develop doctrines to give substance to the Sherman
Act, whereas under China's NPC-dominant legislative model, the courts play
not even a remote second fiddle; follow-up rules are developed at technocratic
ministries with jurisdiction given by the statute. It is fair to ask whether this
model is sufficient for supplying the kind of clarity that serves the interests of
both the regulators and the industry.

4. Analysis

In sum, as far as antitrust law proper is concerned, the promulgation of
the AML is the beginning, not the end: the weight-bearing walls are erected,
but much else is a work in progress. This is not to say the law is utterly lacking

z6 Criminal penalties are present in two provisions in the AML. However, neither
provision targets substantive antitrust violations. Each provision only addresses

improprieties during investigation. AML, supra note 4, at arts. 52 (on parties who resist

investigation or destroy evidence, etc.), 54 (on investigators who abuse their power or

leak commercial secrets obtained during investigation, etc.).

2, See Standard Oil Co. of N.J. v. United States, 221 U.S. 1 (1911).

8 Id.

96



An Intellectual Reappraisal of China's Anti-Monopoly Law

in substance. In fact, the AML sets out a reasonable three-prong regulatory
structure and establishes basic rules and exceptions for each prong. But
antitrust is an area where the clich6d devil is in the details. It may be easy to
appreciate in principle that a monopolistic contract is prohibited unless an
exception applies, 9 that a party wielding market power may not abuse such

power, 30 or that eligible mergers and acquisitions must be approved in
advance.' Yet it is quite impossible to apply such statements directly to any
real-world fact pattern without running into legal uncertainties at every turn.
The solutions of these ambiguities all depend on follow-up regulations that
may define the many minute, but necessary, details.

An intriguing question here, from a technical standpoint, is whether China
will be able to utilize a late-mover advantage and quickly adopt intelligent
rules from more mature jurisdictions. There is strong reason for optimism
because the Chinese is good at learning crafts, and competition law is after all,
technical. The optimism also comes from the fact that China's administrative
system can implement new rules without delay once it decides to. Administrators
would rarely adopt a rule that has been proven unwise in practice.

At this stage, while one looks forward to follow-up regulations, the major
doubts are not about technical soundness but policy commitment. Two
questions can be raised. The more superficial one is about enforcement: are
the authorities serious about not only having a well-drafted antitrust law on
the books, but also seeing its effects played out in full? And if they are, will
their institutional capacities allow them to do so?

The second and more fundamental question has to do with the profound
contradiction raised in the introduction, that is, assuming the government
fully understood that its domineering role in the economy would not coexist
well with unbent competition rules, what decision, in enacting the AML, did it
make in that regard? This is critical because the state is playing trio
participation in economic life: in many industries as the setter of price, in
many overlapping ones as a dominant player, and, in still more, as the ultimate
planner of industrial organization. Therefore, how the Chinese government
decides to treat itself will determine if the AML's core antitrust law is
meaningful in all of its three prongs. This is because official price controls
could easily be textbook price cartels as prohibited under Chapter 2, unilateral
conduct by large state-owned monopolies could easily be abusive as against
Chapter 3, and state-brokered industrial reorganizations could easily run afoul
of merger rules in Chapter 4.

Of the first and third concerns, the AML speaks little in the relevant
chapters. However, strong inferences can be drawn that the government did
not intend radical change. For example, Chapter 2, if strictly enforced to the
letter, aided by Articles 36 and 37 (which extend the prohibition to state
action), would render a vast amount of governmental management over the

" AML, supra note 4, at arts. 13-16.

30 Id. at arts. 17-19.

' Id. at arts. 20-31.

97



economy illegal, which is plainly unthinkable. " Moreover, as a formal
legalistic matter, it would seem to run head-on against the Price Law, an
equally powerful act by the legislature, which authorizes the government to
control market prices in major ways.33 As for Chapter 4, which covers mergers
and acquisitions, there is no special reference to government action. Yet given
the reality that major industry consolidations must win approval from a high-
level planning authority, it is difficult to imagine that the deals could
subsequently fail to consummate due to a failure to obtain AML clearance.

As for the second antitrust concern addressed in Chapter 3, the AML in
Article 7 at least gives a glimpse of the government's thinking:

With regard to state-dominated industries which bear on the
lifeline of the national economy and national security and with regard
to industries exclusively licensed by law to be run by the State, the
State protects the undertakings' lawful operations, regulates and
controls such undertakings' operations and the prices of the goods
and services they provide according to the law, protect consumers'
interests, and promotes technological progress.

Undertakings in industries defined by the previous paragraph
shall operate in accordance with the. law, maintain honesty and
trustworthiness, strictly self-discipline, and accept supervision by the
public, and shall not exploit their controlling position or exclusive
license to harm the consumers' interests.

In other words, two kinds of industries are allowed to "self-regulate,"
which, given an absence of any liability provisions in Chapter 7, amounts to
little restriction. The first group of industries refers to those dominated by
state-owned enterprises and is important to the national economy and
national security, while the second group includes those industries
monopolized by the state by fiat. It is possible to read Article 7 expansively,
with the implication that this article alone could effectively carve the heart out
of the AML since the qualifications for the first group are malleable enough to
accommodate major industries such as banking and finance, oil and gas,
electricity generation and distribution, aviation, heavy industries, etc., and the
second group obviously refers to classic anti-competitive industries such as
commodities, mining, tobacco, and alcohol.

There are, however, several plausible alternative readings that would
render the picture a little more hopeful. For example, despite the fact that
Article 7 is in the General Provision, it could mean not a blanket exemption,
but strictly a narrow immunity from monopolization prosecution in Chapter 3,

See infra Part I.B.

*AR ~fiJl*1&& [Price Law] (promulgated by the Standing Comm. Nat'l
People's Cong., Dec. 29, 1997, effective May 1, 1998) (China) [hereinafter Price Law].

3 AML, supra note 4, at art. 7.

98 Columbia fournal ofAsian Law, VOL 24, No. 1 (20io)



An Intellectual Reappraisal of China's Anti-Monopoly Law

while other chapters would still apply." Or the "lawful operations" language
could be used as a backdoor to allow prosecution of any conduct that, if
judicially determined, would indeed be "unlawful." 36 Alternately, the
government could "release" an industry into AML jurisdiction by withdrawing
the exclusive license or liberalizing entry requirements so that state
involvement in the industry is no longer dominant.

These may seem a bit far-fetched, but far-fetched things do happen in
China. The government retains the necessary flexibility in Article 7. Despite its
austere appearance, the article contains enough flexibility that if the
government intends to loosen its grip on an industry, it can do so without
having to amend the law. The government could allow the AML, later in time,
to override competing directives from the Price Law, and make the AML
enforcement agency at least an equal peer to industrial planners. A critical
observer, therefore, should focus attention on what the government's real
zone of sensitivity is as regulatory updates begin to trickle in. While it seems
certain that the government intended to shield certain industries for the time
being, the very trouble it took to insert Article 7 to effect that political decision
in law is welcome, and might reflect a still more welcome attitude to enforce
the AML faithfully in other industries. In any event, one really cannot be
certain what industries would be immune, to what extent, and for how long
until after a few credible reports return from the field.

B. Law of Central-Local Relations

The controversy is well-known. Chapter 5 (led by Article 8 in the General
Provisions) has been subject to intense debate because it is certainly not
competition law. This is not to say that it does not bear on competition; on the
contrary, it takes custody of a most essential kind of competition. Yet this
component of the AML, popularly known as provisions against "administrative
monopolies," is simply not within the ambit of competition law as
conventionally known. It was once deleted in its entirety from the draft,
precisely because critics argued, inter alia, that its inclusion would corrupt the
formal integrity of the AML as a competition law.' It was added back to the
final text on the strength of the rebuttal that without it, the AML would be
unable to address the most egregious kind of restraint on competition in
contemporary China, and the whole exercise would lose a great deal of
meaning.38

35A textual argument could be made by making a comparison to agriculture, which is
completely exempted in a separate chapter. AML, supra note 4, at art. 61.

36 U.S.-trained lawyers should be familiar with this technique since similar reasoning is
used in American cases stripping official immunity. See, e.g., Ex parte Young, 209 U.S.
123 (1908) (holding that by violating federal law, state officials exceed their official
power and are therefore not protected by the Eleventh Amendment).

3 See Xie, supra note n.

38 Id.

99



100 Columbia journal ofAsian Law, Vol. 24, No. 1 (2oo)

"Administrative monopolies" is, however, a misleading name. It is easily
confused with the kind of monopolies that Article 7 precludes from antitrust
regulation just surveyed above: industries dominated by the state that are "too
important" to be open to competition, and industries exclusively run by the
state that are considered for policy reasons better to remain closed to
competition. What Chapter 5 adds to regulation is not monopolies as entities
but monopolies as governmental power. Surely, as a matter of economic
theory, governmental power is accurately a form of monopoly. The law of
central-local relations is a better term because it is what Chapter 5 is
essentially about.

1. A Law Without Precedent

Chapter 5 curbs the excess of governmental administrative power in two
typical manifestations: (i) "benefiting" local interests at the expense of foreign
interests; and (2) benefiting the government itself and its friends at the
expense of the public.

If the general rule set out in Article 8 in the General Provisions appears a
little gratuitous ("abuse of power," after all, usually cannot be good), Chapter 5
is utterly convincing in its specifics.39 Strictly speaking, the claim is untrue that
the law is unprecedented; precedent could be found in the 1993 AUCL. But the
provisions of the AUCL are simplistic and rarely enforced, where Chapter 5, by
comparison, is a significant improvement. Where the AUCL lists conclusory
prohibitions against public utilities, 40 instances of governments forcing
consumers to buy from an exclusive vendor," and against local governments
impeding the flow of commerce in and out of areas they control, Chapter 5
contains provisions on the same subjects that are more polished, concrete, and
up-to-date. For example, Chapter 5 enumerates as typical violations
discriminatory levies, ' discriminatory technical certification standards, 43

39 AML, supra note 4, at art. 8 ("Administrative agencies and entities authorized by law
and regulation to perform a function of public administration shall not abuse their
administrative power in precluding and restraining competition.").

4o A concurrent State Administration of Industry and Commerce (SAIC) regulation,
concerning public utilities is somewhat more specific, but there is no evidence that it is
well-enforced, either. See Af ItA> l fidl1 $It ffiitWFM [Several Rules on
Prohibiting Public Utilities from Conducts Restraining Competition] (promulgated by
the State Administration for Industry and Commerce, Dec. 24, 1993, effective Dec. 24,

1993) (China). Note that "public utilities" is defined broadly to include "water,
electricity, heating, gas, postal service, telephone and telegram, and transport and
logistics." Id. at art. 2. It is interesting to also note whether the outdated concept of
dianxun (MiA) (telephone and telegram services) would encompass the wide swath of
the economy that is now wireless communications and Internet-based services.

4' AUCL, supra note 24, at arts. 6, 7 § 1.

4 See AML, supra note 4, at art. 33, § 1.
43 Id. at art. 33, § 2.



An Intellectual Reappraisal of China's Anti-Monopoly Law 101

discriminatory entry permits," and physical road barrierS45 disfavoring goods
from wai di (* Il) (outside the area). It also prohibits discriminatory
treatment of wai di businesses in participating in local biddings,46 making
direct local investments, and setting up local branches.47 These provisions are
clearly inherited from a controversial 2oo regulation against regional
blockades set forth by the State Council under the reformist Premier Zhu
Rongji.48

What makes Chapter 5 truly unprecedented, and in theory quite
revolutionary, are Articles 36 and 37. These two articles provide that
"administrative agencies and entities authorized- by law and regulation to
perform a function of public administration shall not abuse their
administrative power in ordering undertakings to engage in monopolistic
conduct defined by this Law,"49 or "in promulgating regulations that contain
contents which preclude or restrain competition."o These provisions resemble
unheralded and unveiled assaults on administrative power. Unlike other
articles of Chapter 5 where application is limited to discriminatory state
action, Articles 36 and 37 review the legality of governmental actions generally.
Together, the pair covers the field nicely: Article 36 curtails the government's
ability to actually commandeer market participants ex post, whereas Article 37
invalidates ex ante government regulations on facial review even if no
underlying transactional transgression has occurred.

2. Universal Problems Central to Constitutionalism

Chapter 5 is aimed at structural matters. The scale of its potential
significance, therefore, is fully revealed only from a structural perspective. Two
problems are at stake here, each immense in its own right.

The problem of local protectionism is as old as the human race. It is
always a pleasure to consume superior foreign fare, but lasting enjoyment
requires adequate means of payment, which presupposes good sales of the
fruits of one's own labor. When trade prospers, credits and goods change
hands willingly; however, in leaner times, some businesses invariably fall into
difficulty, laden with inventory and wanting liquidity. Domestic political

4 Id. at art. 33, § 3.

41 Id. at art. 33, § 4.

46 Id. at art. 34.

47 Id. at art. 35.

48 I at? h yA(IE Wilh ' (State Council Regulation on
Prohibition of Regional Blockades in Market Economic Activities] (promulgated by the
State Council, Feb. 21, 2001, effective Feb. 21, zoo), P.R.C. State Council Order No. 303
[hereinafter Regional Blockade Regulation].
49 AML, supra note 4, at art. 36.

'o Id. at art. 37.



102 Columbia Journal ofAsian Law, Vol. 24, No. 1 (2010)

pressure always mounts, demanding a "crisis" reaction, which usually involves
some breaking of promises and use of force. While capturing goods from
overseas involves the risky adventure of fleets and gunpowder, mandatory
purchase within one's own territory requires merely a domestic political
consensus that foreigners are powerless to frustrate. Of course, isolationism
makes everyone worse off. But truth has never prevented the recurrence of
human follies and local protectionism has never been far from vogue. 51

The problem of abusive administrative power is equally universal. What is
an easier way to sell one's products at an elevated price than becoming the
exclusive provider pursuant to an administrative order? Still better, what is a
better way to guarantee demand than making the product a required purchase
for every citizen? These are the worst offenses against competition because
they are caused by the abuse of public power, and there is no easy remedy. The
abuse is not accidental and cannot be hoped to disappear by self-discipline.
When the government expands beyond supplying essential public goods, it
necessarily interferes in the market, assuming some of the market's role in
price discovery, and favoring some suppliers over others. Without an effective
internal mechanism to promote accountability or a strong external system of
checks and balances, there is no deterrence on businesses and government
officials from abusing the process.

In the domestic context, the two problems are deeply connected." The
strength of local powers pitted against one another necessarily comes at the
expense of the central government. At the same time, the problems often
indicate unbridled executive power in each locality.

Governments have come up with solutions for both problems, invariably
on constitutional terms for their gravity. After all, the very idea of a
"constitution" is one that unites local interests into one national interest, and
one that defines the collective power the people cede to their representatives.
While different political traditions offer different experiences, the United
States has supplied the ingenious two-in-one answer in the Commerce Clause
of the Constitution and the related dormant Commerce Clause developed by
the Supreme Court. " The Commerce Clause occupies a corpus of
jurisprudence that is defined by two frontiers, resolving two problems at once.
Positively, it demarcates the federal legislative power; anything that falls
outside the field remains with the states." Negatively, aided by the Supremacy

5' A recent example is the "Buy American" clause in the United States economic
stimulus program. See Editorial, The Peril of "Buy American," N.Y. TIMES, June 3, 2009,

at A26. China has quickly come up with its own version. See Ian Johnson, Foreign
Businesses Say China Is Growing More Protectionist, WALL ST. J., Apr. 28, 2009.

5 That is, inter-regional protectionism as opposed to the more familiar international
protectionism.

s3 U.S. CONST. art. 1, §8 ("Congress shall have power ... to regulate commerce with
foreign nations, and among the several States").

' U.S. CONsT. amend. X ("The powers not delegated to the United States by the
Constitution, nor prohibited by it to the States, are reserved to the States respectively,
or to the people.").



An Intellectual Reappraisal of China's Anti-Monopoly Law

Clause, it allocates certain powers to the federal government, even if the
federal government has not yet utilized it.15

3. A Commerce Clause for China?

The two problems of constitutionalism-local protectionism and
unchecked administrative power-are acutely present in China. Regional
rivalries have been a constant theme in Chinese history; the very fact that the
Zhu Rongji government had to push through a rule against regional blockades
provides written evidence that such problems had not become extinct as a
habit of the past. Administrative abuses are widespread. Exemplary is the common
practice of tai pai (*V R) (literally, "spread out and make designations"), which
is the forced sale of commercial products within a certain administrative
system. The two are often connected, as tai pai often involves a local product,
and its artificial domination of the locality is often done for the purpose of, or
having the effect of, rejecting wai di products. As such, the transactional
victims are local consumers and wai di producers, but the central government
is the victim from a constitutional perspective because these abuses dilute its
supreme power.

As a matter of constitutional law, China has yet to respond with a unified
answer in the form of a law of central-local relations. In theory, there is no
need to do so, because the power of the state belongs collectively to the
people, and among the people there can be minor internal contradictions (A
[Q 1 IlMil). The will of the central government has traditionally cascaded
down to provincial, local levels by relays of internal circulars and directives. It
has not been considered a possibility that this mechanism could be defined in
law and put under the supervision of the judiciary.

It is doubtful that Chapter 5 will function like the Commerce Clause in the
United States Constitution. Under Chapter 5, there is no enforcement. The

" A note must be made that, in the United States, the state action doctrine immunizes
actions of state governments from antitrust laws. See, e.g., Parker v. Brown, 317 U.S. 341
(1943). Also, the Local Government Antitrust Act of 1984, 15 U.S.C. §§ 34-36 (1984),
shields many actions of local governments from antitrust damage liabilities, although it
does not prevent injunctive relief. See Town of Hallie v. City of Eau Claire, 471 U.S. 34
(1985). It must be strictly distinguished, however, from the kinds of administrative
abuses China has seen, as the state action doctrine is subject to a broad "market
participant exception." See City of Columbia v. Omni Outdoor Adver., 499 U.S. 365
(1991); see also Linda Greenhouse, Court Upholds Antitrust Immunity of Local
Governments, N.Y. TIMES, Apr. 2, 1991. More importantly, state actions are bound by
constitutional limitations, mainly the Dormant Commerce Clause and the Privileges
and Immunities Clause of Article IV of the Constitution, which prohibit restraints on
interstate commerce and discrimination against out-of-state entities. For a thorough
analysis, see 1* % * [Chen Yihua], IT i$ I Wil : A 1 & KR Wi M M I t i
[Administrative Monopoly: The State Action Doctrine Under U.S. Antitrust Law], in &
ItitMAlajiH [HOT SPOTS OF CHINESE ANTIMONOPOLY LEGISLATION] 127-140 (TEliklf@
[Wang Xiaoye] ed., 2007).

1o3



ColumbiaJournal ofAsian Law, Vol. 24, No. i (2oo)

only remedies of a Chapter 5 violation are "rectification" at the request of the
violator agency's higher authority, disciplinary sanction "according to the law"
against officials directly responsible, and a recommendation, which the anti-
monopoly enforcement agency "may" raise to "relevant higher authorities"
with regard to a resolution "according to the law.",6 Similar to the AUCL and
the rules in the Regional Blockade Regulation, these sanctions are
insufficient. 7 How would a rectification order come about from the higher
authority? Does every such authority now have the extra responsibility of
constantly monitoring lower authorities for AML violations? Assuming that
the higher authority will learn about the violation from a recommendation
from the anti-monopoly enforcement agency, what incentive does it have to
follow it up, especially when to do so would taint the integrity of the system?
And what about decisions by the State Council where there is no higher
authority? Given the breadth of the mandate, how large a bureaucracy will be
necessary for handling the job? And according to what law should these
sanctions by carried out? There is no evidence suggesting that the
enforcement of Chapter 5 of the AML will be effective.

The dim prospect of effective enforcement reflects the deeper issue of
weak legislative will. By deciding, in the last minute, to reinsert Chapter 5 into
the AML, legislators have made an emphatic statement that the issue remains
on the policy agenda. By not reinforcing the prohibition with sanctions any
harsher than those already proven ineffectual, they have delivered an equally
strong message that the issue is not a present priority.

C. Law of Foreign Economic Relations

The textual anchor of the third component of the AML is scattered among
only a few articles of the statute. It encompasses rules that apply specifically to
foreign entities. At promulgation, this part of the AML attracted tremendous
attention, particularly from international businessmen and lawyers. Yet from a
jurisprudential point of view, it is the simplest of the three components.

5
6 AML, supra note 4, at art. 51.

" Pursuant to the Regional Blockade Regulation, local governments must correct their
own mistakes. If they fail to do so, the directly higher level of government will
intervene. Regional Blockade Regulation, supra note 48, at art. 6. If the directly higher
level of government fails to take action, then the provincial government will intervene.
Id. at art. 7. If the offense is committed by a provincial government, rectification will be
ordered by the State Council. Id. at art. 8. If an offense is committed following
directives from a State Council ministry or agency, rectification will be ordered by the
State Council, even if the offense is committed at a local level. Id. at art. 9. A criticism
bulletin relating to the offense will be circulated by the provincial government if the
offender is a local government, or by the State Council if the offender is a provincial
government. Id. at art. 21.

1o4 .



An Intellectual Reappraisal of China's Anti-Monopoly Law

1. Article 2- Extraterritorial Jurisdiction

Article 2 defines jurisdiction for the entire law, which governs
monopolistic conduct occurring in the territories of the P.R.C. and occurring
where it "generates exclusive or restrictive effects" on P.R.C. domestic
competition . There is no doubt that the drafters of the AML aimed at
creating an effect-based, broad extraterritorial jurisdiction.

But for nations to apply competition laws extraterritorially, merely stating
legislative jurisdiction is not enough. It is essential that they have enforcement
jurisdiction whereby their authorities can conduct investigations, collect
evidence, serve process, and enforce penalties." China's ability to regulate
foreign transactions is necessarily limited by its enforcement jurisdiction, and
most likely restricted to businesses with large operations within China and in
relation to mergers and acquisitions. The reason Article 2 casts an expansive
net may simply reflect the legislative habit to maintain a deliberate degree of
ambiguity, which translates into desirable official discretion when pressured. The
true extraterritorial reach of the AML will be immediately clear from field reports.

2. Article 31-National Security Review

Article 31 provides that "[floreign capital's acquisition of domestic
enterprises or participation in concentration in other fashion, where they
implicate national security, shall be subject to, in addition to ordinary
concentration review provided by this Law, a national security review pursuant
to relevant rules of the State."6o When drafting this article, legislators may
have had the Unocal case in mind.6 In 2005, the third-largest Chinese oil and
gas company's audacious bid for the then eighth largest U.S. counterpart
famously fell apart due to resistance on Capitol Hill. The deal failed before
reaching the Committee on Foreign Investment in the United States (CFIUS)
for a national security review. The experience may have sparked legislative
inspiration for China to equip itself with a similar mechanism.

The "relevant rules of the State" language in Article 31 is designed as a
placeholder, which the State Council will later fill, which probably will involve
a multi-ministry committee similar to CFIUS in the United States. Every
country has a legitimate reason to install a national security review mechanism
for foreign economic transactions. The only question is why include it in the AML
instead of a stand-alone law or a State Council directive? Is it only a measure
of convenience or does it reflect the idea that the AML should be used to fend
off foreign economic aggression? A country's first basic competition law is too

AML, supra note 4, at art. 2.
59 

ALISON JONES, BRENDA SUFRIN & BRENDA SMITH, EC COMPETITION LAW 1374 (2007).

6o AML, supra note 4, at art. 31.
61 CNOOC Announces Withdrawal of Offer for Unocal, PEOPLE'S DAILY, Aug. 3, 2005,

available at http://english.peopledaily.com.cn/2005o8/o3/eng2oo5o8o3_j99949.html.

105



Columbia Journal ofAsian Law, Vol. 24, No. 1 (2010)

important to be a vehicle for housing clauses that are irrelevant to competition
proper. In addition, foreign-specific language damages the authority of the
AML as a law of general application. More worrisome, however, is the realistic
possibility that the drafters intended the AML to be used as a tool to promote
the domestic economy rather than to protect strictly security-related interests.
If this were the case, then it would violate the spirit of the law and cast doubt
on the government's commitment to enforcing other parts of the AML
seriously (i.e., regulations concerning purely domestic transactions).

3. Article 15, Section 6-Patriotic Export Cartel

Often overlooked is Article 15, Section 6, one of the several enumerated
savings clauses from the general prohibition of anti-competitive contracts
under Articles 13 and 14, which are generally considered egregious forms of
private anti-competitive behavior and usually held per se illegal. This
particular savings clause exonerates an otherwise illegal contract if it were
made to "safeguard just interests in export trade and export economic
cooperation."6

, It does not specify whose just interests, but one can presume it
is referring to China's interests. In effect, this clause legitimizes export cartels.
This is a glaring example of using the law as a tool to promote the national
interest. However, it is uncertain whether this provision will be enforced. One
thing worth following is this provision's potential spillover effect, as its specific
inclusion may be taken as confirmation of a general, unspoken "spirit" of the
AML to favor domestic businesses.

II. DEVELOPMENTS AND REGULATORY UPDATES SINCE PROMULGATION

The following summaries are organized into legislative, (executive)
enforcement, and judicial categories. In China, separation of power does not
exist. Actions taken by various branches of the government are generally
consistent. It is important to note, however, that government agencies do
sometimes pursue competing interests and political turf wars do occur. The
fact that the AML is administered by several different agencies has had an
impact on its implementation.

A. Antitrust Law Proper

1. Legislative

As a structural matter, the State Council has established an Anti-
Monopoly Commission ("AMC"), whose responsibilities include "researching
and formulating competition policies, evaluating overall market

62 AML, supra note 4, at art. 15.6.

io6



An Intellectual Reappraisal of China's Anti-Monopoly Law

competitiveness and compiling reports, promulgating anti-monopoly
guidelines, and coordinating anti-monopoly administrative enforcement."63
During the drafting process some had proposed that this agency, which would
be nested directly under the State Council, be more powerful and invested
with concrete enforcement capabilities.64 But as it turns out, the role of the
Commission is settled on general policy formulation and enforcement
coordination.

The composition of the AMC reflects this rather aloof role. 65 The
Commission is chaired by Wang Qishan, the Vice Premier of the State Council
in charge of the economy. The four vice-chairs are also heads of three

66enforcement agencies and a deputy chief-of-staff of the State Council. The
other fourteen members of the Commission are deputy ministers from fourteen
ministry-level central agencies mostly in charge of key individual industries.7

The high-profile line-up embodies a prominent political status, but it also
signals that detail is not the intention of the body. Indeed, the day-to-day
functions of the AMC are explicitly carried out by the Ministry of Commerce
(MOFCOM). Ma Xiuhong, a Deputy Minister at MOFCOM and a member of
the AMC, doubles as the Commission's Secretary.

Concrete enforcement responsibility is divided among three entities.
MOFCOM is in charge of Chapter 4 and, in accordance with Article 32 of the
Foreign Trade Law,69 matters that occur in the course of foreign trade."o The

63 M [General Office of the State Council], I~lll
[ [State Council Sets Up Anti-Monopoly Committee: Has Four Major

Responsibilities], Aug. i, 2008, available at http://www.gov.cn/jrzg/zoo8-o8/ol/content
1o62161.htm.
6
,See MA 1 F44Vil0)fihfi ibi0f4 [State Council Anti-Monopoly

Committee Clarified to Be a Coordinator], f#i## [XINHUA], Aug. 29, 2007, available at
http://politics.people.com.cn/GB/1o26/6i89O12.html.

6
,See W A jRUt&W [General Office of the State Council], A
JlR * fIRA- OAl (lMill 4 9) [Notice on Major Responsibilities of the State
Council Anti-Monopoly Committee and Its Composition (Notice No. 1o4)], Dec. 26, 20o8,

available at http://www.competitionlaw.cn/show.aspx?id=4487&cid=32 [hereinafter
State Council Notice No. 104].

66 The three vice-chairs who are heads of enforcement agencies are Chen Deming,
Minister of Commerce; Zhang Ping, NDRC Director; and Zhou Bohua, SAIC Chief.
67 Other ministries, in addition to the three mentioned above, include the Ministry of
Industry and Information Technology, the Ministry of Finance, the Ministry of
Supervision, the Ministry of Transportation, the Commission of State Assets, the
Bureau of Intellectual Property, the Office of Legal Affairs, and Regulatory
Commissions on Banking, Securities, Insurance, and Electricity.

See State Council Notice No. 104, supra note 65.
69 [Foreign Trade Law] (promulgated by the Standing
Comm. Nat'l People's Cong., Apr. 6, 2004, effective July 1, 2004) (China), available at
http://www.gov.cn/flfg/2005-o6/27/content_9851.htm.

1o7



State Administration of Industry and Commerce (SAIC) covers almost
everything else, from monopolization and cartels to "administrative
monopolies," except where "price" is involved, which falls under the
jurisdiction of the National Development and Reform Commission (NDRC).

In theory, the tripartite division of authority could work, but in practice, it
will certainly give rise to confusion. MOFCOM could dramatically increase its
jurisdiction whenever a case contains a foreign element, which happens
increasingly frequently as Chinese companies continue to pursue the "go out"
strategy. More blurry is the boundary between SAIC and NDRC, which cannot
be drawn with any principle, because any market dispute is essentially a
matter of "price." Perhaps by design, this is where the AMC would interfere by
arbitrating over internal disputes as they arise. Considering, however, that
only the most important cases will attract the collective attention of the vice
premier and the ministers, and that the Commission is staffed out of
MOFCOM, it is foreseeable that the gray area between SAIC and NDRC will be
poorly visited and when some action is considered necessary, but jurisdiction
is unclear, MOFCOM will likely be the default fallback administrator.

MOFCOM and SAIC have set up new internal bureaus dedicated to AML
enforcement-the Anti-Monopoly Bureau (AMB) and the Anti-Monopoly and
Improper Competition Law-Enforcement Bureau ("Fair Competition Bureau").
The AMB contains six internal divisions. The NDRC has designated the task
to an existing office, the Division of Price Supervision and Inspection.

MOFCOM and SAIC have moved in a laudably rapid fashion to draft
implementing rules, on both substance and procedure. MOFCOM has drafted
a substantive regulation of reporting thresholds" and U.S.-style guidelines on
market definitions.' Interestingly, these two sets of rules were promulgated

70 The latter category can be expansive and potentially used by MOFCOM to
significantly enlarge its AML jurisdiction in the future. MOFCOM has published a
notice which declared that it will receive tips and information of potential violations in
foreign trade situations. Wi1ARIMA [Ministry of Commerce, Anti-Monopoly
Bureau], tAl"MM *4Ml l [Notice on Reports Regarding Suspected
Monopolistic Behavior the Anti-Monopoly Bureau Is Responsible for Receiving], Nov. 3,
2008, available at http://fldj.mofcom.gov.cn/aarticle/zcfb/200812/2oo8l205930993.html.

' The divisions are the General Affairs Division, Competition Policy Division, two
Investigation Divisions, Supervision and Law Enforcement Division, and Economic
Analysis Division. See H. Stephen Harris, Jr. & Keith D. Shugarman, Interview with
Shang Ming, Director-General of the Anti-Monopoly Bureau under the Ministry of
Commerce of the People's Republic of China, 8 ANTITRUST SOURCE 3, 1-7 (2oo9), available
at http://www.abanet.org/antitrust/at-source/o9/o2/o2-o9.html.

' See N * R A E - t! 9 1 F * l [State Council Regulation on the
Reporting Standards of Concentration of Undertakings (promulgated by the State
Council, Aug. 3, 2008, effective Aug. 3, 20o8) [hereinafter Reporting Standard
Regulation 20o8].

I See M141 &&MJAA [Bureau of Anti-Monopoly, Ministry of Commerce], - fH)ATIf
th w tiEti [Guidelines on the Determination of Relevant Markets] (2009), available at
http://www.mofcom.gov.cn/aarticle/zhengcejd/bj/20o907/20o9 07o6384131.html.

Columbia Journal ofAsian Law, Vol1. 24, No. I (2olo)1o8



An Intellectual Reappraisal of China's Anti-Monopoly Law

under the name of the State Council and the State Council AMC, placing them
on a higher legal status. MOFCOM has also released for public comment
drafts of two sets of procedural regulations, on reported' and unreported
concentrations.7 On SAIC's part, it has released two drafts of substantive
rules, on Chapter 2 ("SAIC Chapter 2 Regulation") and Chapter 3 ("SAIC
Chapter 3 Regulation"), for public comment. 76 SAIC has also formally
promulgated two sets of procedural regulations on Chapters 2 and 3 ("SAIC
Regular Procedure Regulation"),' and Chapter 5 prosecutions ("SAIC Chapter

5 Procedure Regulation"). 8
MOFCOM has carried out the extra, necessary step of harmonizing the

new AML mandate with similar obligations under pre-existing foreign-related
merger control regulations over which it shares jurisdiction with other central
government agencies. Enacted in 2003, the prototype of such regulation

74 See 0*A# M [Bureau of Anti-Monopoly, Ministry of Commerce], A) afTf iE
A*X4 ( (E # $ (bTEArQ)) 2-59 lli A [Seeking Commentary for
Draft Provisional Measures of Review of the Concentration of Undertakings] (2009),

available at http://fldj.mofcom.gov.cn/aarticle/zcfb/200901/2009010601l5li.html.

"See MAq& MA [Bureau of Anti-Monopoly, Ministry of Commerce], (RfXA
3t tat ,T&# M WhK 4 & ii L 30V #, (VA)) bTER X [Seeking
Commentary for Draft Provisional Measures for the Investigation and Disposal of
Concentrated Undertakings Not Subject to Mandatory Reporting Yet Still Suspected of
Monopolistic Violations] (2009), available at http://fldj.mofcom.gov.cn/aarticle/zcfb/
200902/200902o6031314.html.

6 The drafts were published on the SAIC web page. IM,04 [SAIC], A* M± i
tZ IT )' 09 5 A i (V A) [Draft of Relevant Rules on Prohibiting Monopolistic
Contracting Behaviors] (2009) [hereinafter SAIC Chapter 2 Regulation], available at
www.saic.gov.cn/zwgk/zyfb/qt/fld/200904/Pozoo90427545000463689.doc; I -0 .0 A
[SAIC], MARi 44i3RJ@ [Draft of Relevant Rules on Prohibiting
Abuse of Dominant Market Power] (2oo9) [hereinafter SAIC Chapter 3 Regulation],
available at http://www.saic.gov.cn/zwgk/zyfb/qt/fld/201005/Po2010052561364156985.doc;

flJP* [Qin Xudong], l I . ff11 ,WR 'AM11 [SAIC Details AML
Enforcement Rules], MO4 [CAIJING], Apr. 28, 2009, available at www.caijing.com.cn/2009-
04-28/11015 5612.html.

IW [SAIC Procedural
Rules on Prosecuting Monopolistic Agreement and Abuse of Market Power Cases]
(promulgated by the SAIC, May 26, 2009, effective July 1, 2009) [hereinafter SAIC
Regular Procedural Regulation], available at http://www.gov.cn/gongbao/content/
2oo/content j511010.htm. Recently, SAIC released for public comment a draft of
Chapter 5 rules. I0.RA [SAIC], #iM A ri 1 HWAr R_ t$'J1fAlMLW ('iE*
REM) [Seeking Commentary on Draft Rules on Stopping Abuse of Administrative
Power Excluding or Restraining Competition] (2010), available at http://www.competition
law.cn/show.aspx?id=559o&cid=32.

8 I &i ILtjiL f ft$16 [SAIC Procedural
Rules on Stopping Abuse of Administrative Power Excluding or Restraining
Competition] (promulgated by the SAIC, May 26, 2009, effective July 1, 2009), available
at http://www.gov.cn/gzdt/2009-o6/o5/content_1333312.htm.

lo9



110 Columbia Journal ofAsian Law, Vol. 24, No. i (2oo)

contained a conclusory prohibition against foreign acquisitions that would
result in "undue concentration or exclusion or restraint of competition." 9

Three years later, it morphed into a full-blown chapter of "anti-monopoly
review." Although notifications were filed under this chapter while it was in
effect, there was scant evidence it was enforced seriously.8 Now MOFCOM
has repealed the moot chapter and integrated its antitrust review power under
the unified rubric of the AML.a'

From these implementing rules, three welcome features present
themselves. First, these rules reflect a pragmatic open-mindedness on the part
of the regulators. Where actual numbers or bright-line conditions are
required, be it the determination of what roughly resembles "concerted
behaviors" for Chapter 2, the definition of market power for Chapter 3,82 or the
reporting thresholds for Chapter 4, 83 the authorities have shown great
openness in adopting international best practices and flexibility to adjustment
after a trial period.8i

79 ' V #)RiTA [Provisional Regulation on Foreign Investors'
Acquisition of Domestic Businesses] (promulgated by the Ministry of Foreign Trade
and Economic Cooperation, State Administration of Taxation, State Administration for
Industry and Commerce, State Administration of Foreign Exchange, Mar. 7, 2003,
effective Apr. 12, 2003), art. 3, available at http://tfs.MOFCOM.gov.cn/aarticle/date/i/s/
200 509 /200 509 003 66385 .html.

80A [Regulation on Foreign Investors' Acquisition of
Domestic Businesses] (promulgated by Ministry of Commerce, Aug. 8, 20o6, effective
Sept. 8, 2oo6), arts. 51-54, available at http://tfs.mofcom.gov.cn/aarticle/zcfb/2oo6o8/
20o6o8028 394 38.html. Interestingly, details that recently emerged from a high profile
corruption investigation shed light on how a MOFCOM "antitrust review" provided
opportunities for corruption. According to the complaint against Guo Jingyi, a former
official in the Treaties and Laws Division and Deputy Director of the MOFCOM Anti-
Monopoly Investigation Office, an "anti-monopoly investigation" hearing was held in
2oo6 on the merger of two major home appliance companies. The parties declared a

successful merger before MOFCOM issued any opinion on the competition issue. _A-

_ibMfMIC *I fi [MOFCOM Official Guo Jingyi
Prosecuted, Cluster Corruption in Central Government Agencies Surfaces], RL3AT.
[BEIJING EVENING NEWS], Feb. 5, 2010, available at http://society.people.com.cn/GB/42733/
109 4 0102.html.

81 See IP!AK1,~ 2009 *M 6 --', & (1i 1k
MAA)) [MOFCOM Order No. 6 in 2009, Announcing Regulation on Foreign Investors'
Acquisition of Domestic Businesses] (promulgated by MOFCOM, June 22, 2009,

effective June 22, 2009), available at http://www.mofcom.gov.cn/aarticle/b/c/
200 9 0 7 /200907o6416939.html.

82 SAIC Chapter 3 Regulation, supra note 76, at arts. 5-7.

83 Reporting Standard Regulation 2oo8, supra note 72.

8See, e.g., I [Question and Answer
with the State Council Office of Legal Affairs on the Reporting Standard of Undertaking
Concentrations], 9ft$IM [XINHUA NET], Aug. 5, 2oo8, http://news.xinhuanet.com/

fortune/2008-o8/o5/content_8956920.htm ("Note that no country in the world has
come up with an absolutely reasonable and accurate ex ante reporting standard. The



An Intellectual Reappraisal of China's Anti-Monopoly Law

Second, these rules do embody the advantage of China as a late-mover and
a quick implementer of modern policy ideas. The best example is the leniency
system written into both the substantive and procedural SAIC regulations,8
which is in fact a relatively recent inclusion in U.S.8 and E.C.87 competition
laws themselves."

Third, these rules retain important enforcement authority over the central
government level. This is as much an intelligent policy determination to
enforce the new law cautiously and make it "right" the first time as a realistic
assessment that provincial and local branches of the enforcement authorities
lack the necessary expertise to carry out the work at all, much less maintain a
desirable national uniformity. The expertise deficiency is more aggravated at
SAIC than MOFCOM. A telling sign is that SAIC had waited a year after the
law began to run to organize an "AML knowledge contest" for its employees
nationwide, a common way for Chinese bureaucracies to implement a new
idea internally via campaigning.

common practice is to begin with an approximate range and readjust according to
actual practice. After a period of application of this standard, if it turns out not a
perfect fit, we will modify it in a timely fashion.").

' SAIC Chapter 2 Regulation, supra note 76, at arts. 12-13; SAIC Regular Procedural
Regulation, supra note 77, at art. 20.

8 The current U.S. corporate and individual leniency policies were set up in 1993 and
1994, respectively. The program is recognized as an important investigative tool for
detecting cartel activity. See Scott D. Hammond & Belinda A. Barnett, Frequently Asked
Questions Regarding the Antitrust Division's Leniency Program and Model Leniency
Letters, U.S. Department of Justice, Nov. 19, 2oo8, http://www.justice.gov/atr/public/
criminal/239583.htm.

8'The E.C. leniency program was established in 1996, and recently modified in 2oo6.

See Commission Notice on the Non-Imposition or Reduction of Fines in Cartel Cases,
Official Journal C 207, 4 (1996); Commission Notice on Immunity from Fines and
Reduction of Fines in Cartel Cases, Official Journal C 298, 17 (2006). Philip Lowe,
Director-General of the Antitrust Modernization Commission of the E.C. characterized
it as "the most important investigative tool in the fight against cartels." Submission by
the Directorate General for Competition of the European Commission, Antitrust
Modernization Commission, COMP A/4 D (2oo6) 83, 6 (Apr. 4, zoo6), available at
http://govinfo.library.unt.edu/amc/public-studies-fr28902/international-pdf/o6o4o6
DGComp_Intl.pdf.

8 Interestingly, both the U.S. and E.C. leniency programs contain the "first-in-door"
rule, granting immunity to the first whistleblower only. The SAIC leniency program, by
comparison, provides a more attractive and graduated bait, promising full immunity to
the first responder, fifty percent immunity to the second, and thirty percent to the
third. SAIC Chapter 2 Regulation, supra note 76, at art. 3.

89 The questions are published in SAIC's publicly-circulated system newspaper. See R
r [Knowledge Quiz on Anti-Monopoly Law], ISI9 ifil. [CHINA

INDUSTRY & COM. DAILY], July 30, 2oo9, at A4 , available at http://www.saic.gov.cn/ywdt/
gsyw/zjyw/xxbl2009o8/tzoo9o8O3_69566.html.

I



112 Columbiajournal ofAsian Law, Vol. 24, No. i (2010)

Compared with the other two agencies, NDRC is noticeably quiet. It has
been slow to come up with its own implementing rules, 90 and it did not bother
to create a special AML office like the others did.' This lack of initiative is
strong evidence of a lack of interest. The NDRC's delay in developing
implementing rules suggests that it does not envisage immediate hands-on
enforcement actions, so it does not need self-guiding rules. The decision not to
establish a special AML office means the NDRC has not seen the need to
dedicate human resources for this new purpose. Perhaps for the same reason,
the staffers in the Division of Price Supervision and Inspection (*rM V lfil),
which handles AML work, have not diligently carried out their responsibilities
as they otherwise should have. All of this is not surprising considering that the
NDRC was the central planner of the past; it is the organ through which the
central government implements its economic and industrial policies. The
NDRC has always had its own ideas about its role in managing the economy,
especially in the area of price control-since 1993 it has had its own rules on
dealing with "price monopolies" which find an independent "legal" basis in the
Price Law.92 Assuming a share of the AML jurisdiction is for NDRC hardly
empowerment at all, then little has changed from its vantage point. The NDRC
never intended to transform itself into an active third enforcement agency.

In light of the above discussion, it would be fair to conclude that
MOFCOM would eventually emerge as the principal and perhaps the only
reliable enforcement agency of core antitrust law. This would carry both
positive and negative implications. Judging from its track record and actual
performance to date, MOFCOM is the most professional and competent
among the three agencies. However, the AML could transform into a law that
is applied rigorously only to foreign-related transactions despite official
reassurances to the contrary.93

oThe NDRC finally released, on August 12, 2009, its draft of implementing rules for
public comment. CMX &$ [NDRC], g a g ti iEW ((RFA4
-1 W ' ('TiE * & ) )) -i 0 Ia S 1 [NDRC Seeking Commentary on Rules of
Prohibiting Monopoly in Price Setting] (2009), available at http://www.sdpc.gov.cn/
yjzq/t20090812_296056.htm. The draft lacks detailed provisions, and in various places,
copies the AML verbatim. The comment period ended on September 6, 2009.

9' Unconfirmed media reports as recent as July 1, 2010 claim that the NDRC will
establish an anti-price monopoly sub-division under the Division of Price Supervision
and Administration. i &E [NDRC Will
Establish Anti-Price Monopoly Subdivision, Market Price Monitor Subdivision], AR;IN
[PEOPLE'S NET], July 1, 2010, http://politics.people.com.cn/GB/1o27/1zo3o538.html.

" See $11 iLt * 4 I Wi T If A 5t [Provisional Rules on Prohibition of Price
Monopolistic Behaviors] (promulgated by the NDRC, June 18, 2003, effective Nov. 1,
2003), available at http://tfs.mofcom.gov.cn/aarticle/date/i/s/2oo503/2005o3ooo28oo8.html.
93 See, e.g., Harris & Shugarman, supra note 71, at 3 ("It should be noted that the AML
will be uniformly and equally applicable to both domestic and foreign enterprises of all
types without any discriminatory treatment.").



An Intellectual Reappraisal of China's Anti-Monopoly Law

2. Enforcement

Poor enforcement of the AML is not an exaggeration. There is increasing
evidence that the law is to a large extent not enforced and worse, because the
agencies do not seem to know how to enforce it, this trend will persist for the
foreseeable future.

Take Chapter 2 on cartels. To get a good taste of the situation, one needs
to look no further than newspaper periodicals dated around April 20, 2009. On
the same day, the European Commission launched new investigations against
the Star and Oneworld airline alliances for suspected unlawful collusive
conduct, 94 five major Chinese airlines "coincidentally" raised domestic fares by
equal averages of ten percent.95 This latest act by the airlines' "price alliance"
was again endorsed by the General Administration of Civil Aviation (CAAC),
the ministry-level regulator of the industry.96 "Under the civil aviation system
that is uniquely Chinese," a CAAC official was quoted as justifying what looked
like a naked price cartel, "it is true that [the airlines] must not charge prices so
high as to reap all the profits at the expense of consumers; it is equally true,
however, that they may not charge prices so low as to disrupt the market
order."97 This position is consistent with the CAAC Domestic Transportation
Price Reform Plan, a CAAC official document that sets maximum and
minimum fares often cited by the airlines to justify their conduct. Not only did
the AML enforcement agency not prosecute the cartel, it acquiesced to the
industry's argument that the non-prosecution was required by law, namely,
Article 4 of the AML, which speaks of establishing an "orderly" market."'

Chapter 3, on monopolization, is an interesting area of the statute because
it has aroused responses from a public excited about the new avenue to air
grievances against dominant and state-backed corporations. Some people filed
complaints to the agencies while others went to the courts directly. This
reflects not only the AML's failure to carefully design and announce a
mechanism for private causes of action, but also the public's perception that
the enforcement agencies are not all that different from the courts. In the public's
mind, the AML is simply another way to settle accounts with the government.

Chapter 4, on merger control, creates the appearance that the AML as a
whole is actively enforced. However, the truth is more complicated. Although
it is fair to state that MOFCOM has been the. most diligent enforcement

9 See Kevin Done, Transatlantic Deals Highlight Divisions over Regulation, FIN. TIMES,
Apr. 22, 2009.

1 [| -1 iRT-R* [Domestic Airline Companies Link Hands to Raise Prices], T_
1l .E N [GUANGZHOU DAILY], Apr. 22, 2009, http://gzdaily.dayoo.com/html/2oo9-

04/22/content_544486.htm.

96 See ilkqA- [Xie Liangbing], AA "%fit" #-A [A Chronicle of Airline "Price
Alliances"], 0T9@XiV [EcON. OBSERVER ONLINE], May 2, 2009, http://www.eeo.com

.cn/eeo/jjgcb/2009/o5/o4/136583.shtml.

97 Id.

98 AML, supra note 4, at art. 4.

113



Columbia Journal ofAsian Law, Vol. 24, No. 1 (2oo)

agency, most of its critical decisions, including the three that are surveyed in
the next section, concerning foreign-related transactions. Purely domestic
transactions are seldom challenged. As of the end of June 2009, MOFCOM has
received fifty-eight filings under Chapter 4, forty-six of which are now closed.
Of the forty-six, there were two conditional approvals and one rejection-the
same three foreign-related cases analyzed in Part II.C. All other cases were
cleared.99 Consider the Unicom/Netcom merger. On October 15, 2oo8, China
Unicom and China Netcom, two massive telecommunications companies,
merged as part of a state-brokered industrial reorganization. The deal far
exceeded reporting thresholds yet was not reported to MOFCOM for AML
clearance.'oo Similar incidents have occurred in a range of other industries.''

3. Judicial

Varying levels of enforcement intensity are only natural in a multiple-
agency model, because the agencies necessarily differ in institutional tradition,
expertise, and habit. The political process is one way to counteract
prosecutorial lethargy, but a more effective counterbalance may be the court
system. The AML has generated intense enthusiasm among the public, who
seem to think that their grievances against dominant corporations, especially
service providers, may be resolved by invoking the authority of the statute.

Comprehensive statistics are difficult to obtain, but individual cases are
known to have been filed, and even accepted and tried, by the courts. On
August 1, 2008, the day the AML went into effect, three complaints were filed

99 0 [Bureau of Anti-Monopoly, Ministry of Commerce], 1
f 1 [Latest Statistics on Anti-Monopoly Investigation Cases], July

21, 2009, http://fldj.mofcom.gov.cn/aarticle/zcfb/zoo907/20907o64o983.html.

" A deal must be pre-cleared by MOFCOM if the combined worldwide sales revenues
of all parties from the previous fiscal year exceed io billion RMB, or combined China
sales exceed 2 billion RMB, and at least two of the parties' China sales exceed 400
million RMB. Reporting Standard Regulation 20o8, supra note 72, at art. 3; AML, supra
note 4, at art. 21. In 2007, the year preceding the deal, Unicom's revenues reached
100.47 billion RMB, and Netcom's revenues reached 86.92 billion RMB. See T1*051

[Wang Biqiang], lIKA iAP##- iiW [Unicom-Netcom Merger Could Violate AML],

00 Ril [EcoN. OBSERVER], May 1, 2oo9, available at http://www.eeo.com.cn/industry/
it-telecomm/2009/5/ol/136645.shtml.

'o' Wang, supra note loo; see also Stephanie Wong, China Bid to Rival Toyota May Trip
on Local Politics, BLOOMBERG NEWS, May 27, 2009, http://www.bloomberg.com/apps/
news?pid=newsarchive&sid=aouUtlQ7nSMU ("The central government intends to
combine the nation's 14 largest automakers into ii by 2on as part of plans to curb
competition and create larger players able to invest in developing more sophisticated
vehicles."); Wendy Leung, China Eastern, Shanghai Air to Combine After Losses,
BLOOMBERG NEWS, June 8, 2009, http://www.bloomberg.com/apps/news?pid=
newsarchive&sid=aBJVDBUYWO3c ("The combined group would have 306 planes and
more than 6oo routes, giving it a 50 percent share of air travel in China's financial
capital [Shanghai].").

n14



An Intellectual Reappraisal of China's Anti-Monopoly Law 115

in Beijing courts."o2 One was an action against Netcom for discrimination on
account of a customer's non-Beijing resident status.o3 Although the case was
eventually dismissed for failure to meet the statute of limitations,"o4 large
telecommunications firms like Netcom, which with their high penetration and
chronically poor service have antagonized a large portion of the population,
have been sued on several other occasions. At least in one case, Netcom
prevailed. The Xicheng District Court in Beijing ruled that it did not abuse its
market power by terminating the Plaintiffs account after the contract period
had expired.o' China Mobile, the largest carrier in the world based on number
of users, was sued by for charging, in addition to usage fees, monthly fees to
maintain the account and for price discrimination. The case was accepted by
the Dongcheng District Court in Beijing, removed to the Beijing No. 2

Intermediate Court due to a jurisdiction directive from the Beijing High Court,
and settled out of court in October 2009 for a token 145 RMB.os

Another interesting case involves Baidu, China's leading Internet search
engine. It was sued by a former client for allegedly removing the client from
search results.o' Interestingly, the Plaintiff first submitted a complaint with
SAIC in October 2008, which resulted in no agency action.o8 The Plaintiff then
filed a lawsuit with the Beijing No. i Intermediate Court in December 2oo8.09

102 i N -L [First AML Litigation Accepted; Netcom
Is Defendant], M $ F [XINHUA NET], Sept. 17, 2oo8, http://news.xinhuanet.com/
internet/20o8-09/17/content-oo48543.htm.

103 Id.

104 fi#T' [He Chunzhong], KfEE P ifilM 1 : [First Civil
AML Case Accepted; Plaintiff Asks for One Yuan], MfiS [XINHUA NET], Sept. 22, 2oo8,
available at http://news.xinhuanet.com/internet/2oo8-o9/22/content-ioo89169.htm.
The later than required acceptance conferred no legal benefit to the plaintiff or
disadvantage to the defendant. Courts in China do break rules.

1o' In this case, the plaintiff wanted to continue his telephone account under the
conditions of the old contract, but Netcom had changed its service offerings and would
only maintain the plaintiffs old number if he signed up for a different service. See VON
[Zhu Yan], /iA1ff A lNAMEWiJ "-Wi" [Netcom Sued Under AML for Halting
Monthly Xiaolingtong Services], MAI iJR [BEIJING NEWS], Jan. 19, zoo9, available at
http://www.thebeijingnews.com/news/beijing/2009/ol-19/42@081943.htm.

'6See $h111$ [Qin Xudong], AR j jMW W [AML Case Against China
Mobile Accepted by Court], WA [CAlJING], Mar. 31, zoo9, available at http://www.caijing
.com.cn/2oo9-o3-31/nor'3o848.html; il4[Zhou Ze], $@ W W M &1
[Settlement Reached for Anti-Monopoly Case Against China Mobile], R1114'I [SoHU
BLOG], Oct. 25, 2009, http://zhouze.blog.sohu.com/134885568.html.

10 See Aifl [Qin Xudong], i [First Trial of Baidu AML Case
Held], R93A [CAIJING], Apr. 22, 2009, available at http://www.caijing.com.cn/zoo9-o4-
22/110151711.htm.

1os Id.

'0 See iAQ i qWA [Gao Jian & Guo Jingxia], 1L3ER- & f9I16)M-3Jiliff
9 [First AML Case Accepted in Beijing; Baidu Is Defendant], AI, l 4R [BEIJING DAILY],



The court ruled in Baidu's favor, holding that the Plaintiff did not present
sufficient evidence to prove Baidu's market power."o Baidu had been sued
earlier in Shenzhen on a similar claim, and was able to dismiss that case on
jurisdictional grounds."'

One positive sign from these cases is that the courts, although hesitant at
first, are willing to entertain private actions, at least in Chapter 3 cases. But
with a court system unfamiliar with this new law and no guidance from the
enforcement agencies, early popular enthusiasm for a judicial application of
the AML must be tempered. In addition, one must be careful to distinguish
the frivolous suits from those with merit. When meritless suits are turned
down, public cynicism grows.

Another positive judicial development is the creation of a special "anti-
monopoly division" (.&kJVh) by the Shanghai No. 2 Intermediate People's
Court, the first of its kind in the country on December 23, 2008."2 Most cases
brought under the AML are pre-screened into two categories as a matter of
docket administration: civil claims are handed over to the intellectual property
law division and administrative claims to the administrative law division. The
Shanghai experiment is a pilot program approved by the Supreme People's
Court with the aim to promote judicial expertise in this specialty area. This is
certainly a sign of progress.

B. Law of Central-Local Relations

1. Legislative

It is difficult to imagine that Chapter 5 will fulfill its high constitutional
promise. There is no evidence that the SAIC has investigated any action by a
central government ministry or a local government through either coercive

Apr. 17, 2009, available at http://news.xinhuanet.com/legal/2009-o4/17/content
111983 5 1.htm.

"oSee & -!WE_-V Ji 51 T1& F [Baidu Won the First Anti-

Monopoly Case; Balancing Needed between Patent Protection and Anti-Monopoly], 3 P1
f-1gR [CHINA BROADCASTING NETWORK], Dec. 19, 2009, http://media.people.com.cn/

GB/4o606/1o614168.html.

"'See 4 fiA [Wei Wenjie], i [Baidu Encounters

China's First Internet Anti-Monopoly Investigation], rA$1J fl [LEGAL DAILY], Nov. ii,

2oo8, available at http://www.legaldaily.com.cn/ajzj/content/2oo8-u/og/content-978238.htm.

nSee $189 [Pan Sishen], lP)# ik T [Country's First

Special AML Division Set Up], 1 I iR [CHINA COURTS NETWORK], Dec. 23, 2oo8,

http://goo.gl/kNWQ; li [Liu Jian], kiif&VR4T+PiA;GjM'W #J
"='M" A [Special AML Division Set Up in Shanghai; Innovative "Two-in-one" Model],

8 $1J E1 4lR [LEGAL DAILY], Dec. 24, 2oo8, available at http://www.legaldaily.com
.cn/bm/content/2oo8-12/23/contentio6o69.htm.

Columbia~ournal ofAsian Law, Vol. 24, No. i (2ozo)n16



An Intellectual Reappraisal of China's Anti-Monopoly Law

behavior (Article 36) or general regulation (Article 37). This is not surprising
because, judging from its slow progress of drafting implementation rules, SAIC
does not intend to or seem ready to enforce the law in any serious manner.

As previously noted, the SAIC has only recently released substantive draft
regulations for Chapter 5. Compared to Chapter 2 and 3's thirty-two detailed
articles, Chapter 5 contains only eleven articles, mostly barebones and
conclusory, copied verbatim from the AML itself. They do not resemble
implementation rules. Based on the quality of these regulations, and with no
substantive counterpart, the SAIC will likely be a weak enforcing agent.

Furthermore, the regulations make provincial-level SAIC offices
responsible for carrying out the enforcement duty on government entities at
the provincial-level and below; these offices would report any abuse and issue
a recommendation to the violator's higher authority." Enforcement will likely
not happen. Imagine, for example, that a provincial government releases a
document favoring a locally-made product over a foreign one. The idea that
the SAIC branch in the same province, administratively inferior to and fiscally
reliant on the "violator," would report such action to the- State Council is
doubtful, especially considering that its "recommendation" would have no
coercive power, and it would only alienate itself in the local political microcosm.

2. Non-Enforcement: The Green Dam Case

SAIC's general absence from enforcement was particularly noticeable over
the well-publicized Green Dam case. In early June 2009, China's Ministry of
Industry and Information Technology released a "notice" requiring that, as of
July 1, 2o9, all computers manufactured, sold, or imported into China must be
pre-installed with the Green Dam Youth Escort filtering software.'" The
government recognized that many important issues were at stake, but failed to
thoroughly account for the requirement's AML implications. At a minimum,
an investigation would have been warranted, but the SAIC never acted upon
on the notice.

3. Judicial

The judiciary has been equally silent on this issue. Unlike core antitrust
cases, the courts in this area have kept their doors firmly closed. An exemplary
case is one filed by four digital verification technology companies against the

"' SAIC Regular Procedural Regulation, supra note 77, at art. 4.

14 See, e.g., Dammed If You Do; Protecting China's Innocents from Smut, Violence and
the Dalai Lama, EcoNoMIsT, June 25, 2009, available at http://www.economist.com/
node/13917484?story-id=3917484. Due to public opposition and international outcry,
the implementation of the order has been suspended. See Michael Wines, After Outcry,
China Delays Requirement for Web-Filtering Software, N.Y. TIMES, June 30, 2009,

available at http://www.nytimes.com/2009/o7/o/technology/oichina.html?_r=2.

n17



General Administration of Quality Supervision, Inspection, and Quarantine
(AQSIQ)." The Plaintiff companies assisted clients, usually consumer-product
manufacturers, in convincing their retail customers that the products they
purchased were authentic. This was done by labeling each product with an
identifying code, which consumers could verify by calling a service center or
visiting a website. Plaintiffs' businesses were successful until AQSIQ, the
national regulator of product quality, created its own commercial arm and
started issuing notices compelling manufacturers of many categories of
products to use its services. The Beijing No. i Intermediate Court ruled that it
would not accept the case."6

The present case and the Green Dam are strikingly familiar. Both appear
to involve administrative agents that operate outside the law. If anything,
AQSIQ's alleged violation was more flagrant because it stood to gain directly
from its actions. Chapter 5 was written to address exactly this sort of behavior.
Unfortunately, the SAIC and the courts are unwilling to enforce the law.

C. Law of Foreign Economic Relations

1. Three Cases

To many, Coca-Cola/Huiyuan is the landmark AML case. On March 18,
2009, MOFCOM ruled that Coca-Cola's planned acquisition of Huiyuan, a
leading Chinese producer of fruit juice, is prohibited under Chapter 4 of the
AML."' The Economist noted:

Last August, after 14 years of debate, the Chinese government at last
imposed what was informally referred to as its 'economic
constitution,' a broad anti-monopoly law for a country rife with state-
imposed monopolies. In the subsequent months, people have
wondered how the law would be applied, and whether it would
advance China's transformation into a market economy, or serve as an
impediment to genuine competition .... [A]n answer emerged with
the rejection of the largest outright acquisition by a foreign company,

as5?4A- [Li Hongbing], FAIWM-Ait"RlS) [First AML Case: Behind the Curtain],
PIiN'it [S. WEEKEND], Aug. 21, zoo8, available at http://www.infzm.com/content/
16174.

"6 See He, supra note 104.

"17-*#l [MOFCOM], 95 R Ml~h R ,M22 (# 4F tCl
5 & II (Li'1t | q3 I ill $ f It 1n1 i ) [Public Announcement Regarding the
Decision to Restrict Coca-Cola from Buying Hui Yuan, Bulletin No. 22] (2009), available
at http://fldj.mofcom.gov.cn/aarticle/ztxx/2009o3/200903o6io8494.html.

Columbia journal ofAsian Law, Vol. 24, No. i (2oio)n8



An Intellectual Reappraisal of China's Anti-Monopoly Law

a $2.4 billion offer by Coca-Cola for China Huiyuan, the country's

largest juice company.u8

Coca-Cola/Huiyuan was one of three high-profile cases that MOFCOM
reviewed and either rejected or granted conditional AML clearance. On
November 19, 2oo8, prior to its decision in Coca-Cola/Huiyuan, MOFCOM
approved a merger between InBev Belgium and Anheuser-Busch, two of the
largest brewers in the world, on the condition that both companies would not
increase its holding in existing joint ventures with leading Chinese beer brands
or seek new partners in the Chinese market."' On April 24, 2009, MOFCOM
similarly approved the merger between Mitsubishi Rayon, a Japanese
chemicals company, and Lucite International Group, a competitor, on a
number of conditions, including the divestiture of Lucite's China division and
both corporations agreement to stay away from further expansions in China
for the next five years.2

o

2. Implications

One popular criticism of the three decisions is that they were too short
and the reasoning in each decision was weak."' However, it is unrealistic for
even a well-prepared debutante to perform like a seasoned hand. The relevant
questions should be whether MOFCOM was well-prepared and has shown
potential to adequately enforce the AML. One may argue that MOFCOM
could have prepared better in each of the three cases, but there certainly was a
trend of increasing sophistication in the decisions from InBevIAB to Mitsubishi
Rayon/Lucite.22

"8 Squeezed Out: China Indicates the Real Targets of Its Anti-Monopoly Law: Outsiders,
ECONOMIST, Mar. 18, 2009 [hereinafter Squeezed Out], available at http://www.economist
.com/node/13315056.

"9 Anheuser-Busch owned twenty-seven percent of Tsingtao, China's second largest
brewery, and InBev controlled 28-56% of Zhujiang Brewery, the fourth largest brewery
in China. RAM [MOFCOM], A A1 # (zoo8) A 95 - [MOFCOM
Announcement No. 95 (2oo8)], Nov. 18, zoo8, available at http://fldj.mofcom.gov.cn/
aarticle/ztxx/2008u1/2oo8u'o58992i6.html.

120oMA [MOFCOM], AR 4I L# (2009 IP z8 9) [MOFCOM
Announcement No. 28 (2009)], available at http://fldj.mofcom.gov.cn/aarticle/ztxx/
200904/200904o619880 5 .html; see China Conditionally OKs Mitsubishi Rayon, Lucite
Deal, DowJONES, Apr. 27, 2009; Ei [Wang You], Ai M #1f18
4 [MOFCOM Conditionally Approves Mitsubishi Rayon Acquisition of Lucite], V-ftt%
Elf [CHINA FIRST FIN. DAILY], Apr. 27, 2009, available at http://www.competitionlaw
.cn/show.aspx?id=48o1&cid=42.
121 See Squeezed Out, supra note n8.
122 Anti-Monopoly Bureau Chief Shang Ming deserves credit for his good grasp of
technical knowledge and transparent leadership style, as demonstrated by the press
conference he gave shortly after the InBev/AB case. 1 [Anti-Monopoly

n19



Columbia Journal ofAsian Law, Vol. 24, No. i (2oo)

Another criticism of the decisions is that they were decided as foreign
economic relation cases. In each case, the interests of local Chinese
competitors were given overwhelming consideration, which was duly reflected
in the decision. There is irrefutable evidence of a protectionist mindset within
the agency because, normally, the fear of competitors in merger cases is given
less scrutiny. It is difficult to determine exactly how large a role nationalist
sentiment played in these decisions, but it is important to appreciate that,
partly due intense international attention, MOFCOM attempted to reach fair
decisions.

III. THE GENESIS OF IDEAS: PAST, PRESENT, AND FUTURE

As mentioned in the introduction, many Chinese laws take into account
more than merely rationality and policy considerations; their purpose often
cannot be ascertained without understanding their place in the country's
tradition. This part presents a summary discussion of the relevant tradition
and its impact on the AML.

A. The Tradition

1. Mencius

It is generally recognized that the Chinese word for monopoly, long duan,
was first used by Mencius (b. 372-289 B.C.). It would be a mistake, however, to
assume that he also came up with the idea of opposing monopolies. The
Mencian notion of long duan is actually the opposite of what monopoly means
today. It is a misnomer confirmed by usage; examining its history is the first
step in understanding the traditional background for the AML.

Long duan was mentioned twice in one allegorical conversation that
supposedly took place between Mencius, who at the time had resigned from
the court and was homeward-bound, and one of his disciples, Ch'an-tzu. At
the request of a local prince, Ch'an-tzu attempted to persuade Mencius to
return to the court by offering Mencius a generous stipend.' In response,
Mencius explained that becoming rich was not what he desired. To illustrate
his point, he told a story about a man named Tsze-shi, who was a social
climber, repeatedly offering his services to his prince and repeatedly being
turned away. Referencing Tsze-shfi, an observer once noted to Menicus that,
"[w]ho indeed is there of men but wishes for riches and honor? But he only,

Bureau, Ministry of Commerce], i*} iIC
4 M i2l, ial [MOFCOM Anti-Monopoly Division Head Answers Questions from

Journalists Regarding Mergers and Anti-Monopoly Investigations], Nov. 18, zoo8,
http://fldj.mofcom.gov.cn/aarticle/zcfb/2008l2/2008l2O5935637.html.

" The spelling of the names follows that adopted by James Legge. See infra note 125.

12o0



An Intellectual Reappraisal of China's Anti-Monopoly Law 121

among seekers of these, tried to monopolize the conspicuous mound."'" The
observer proceeded to explain what that curious phrase meant:

Of old time, the market-dealers exchanged the article which they had
for others which they had not, and simply had certain officers to keep
order among them. It happened that there was this mean fellow, who
made it a point to look out for a conspicuous mound, and get up upon
it. Thence he looked right and left, to catch in his net the whole gain
of the market. The people all thought his conduct mean, and therefore
they proceeded to lay a tax upon his wares. The taxing of traders took
its rise from this mean fellow."

Was Tsze-shQi a monopolist? Probably not. He was despised because he
was different from the common folk. He did not make things nor was he a
professional merchant; in modern terms, he would be called a trader, market-
maker, or arbitrageur. There is no evidence that suggests that he
"monopolized" the trades. In addition, the whole community probably
benefited from his work; those who traded with him probably received good
deals, be it lower prices or better choice of goods. The origin of the trader's
bad reputation was probably Mencius himself. The Mencian notion of "trade,"
which he touted as a virtue, really meant bartering or making small exchanges
for self-subsistence. His disdain for long duan bore no relation to the modern
rationale against anti-competitive behavior; rather, he loathed the practice
and those who dared to perpetrate it because it facilitated larger-scale
commerce. In his mind, this was the cause behind the erosion of the peaceful
morals of high. Mencius perceived the ancient equivalent of modern market
abuse differently. He may not have opposed a price cartel, an abusive
monopolist, or an undue concentration. For instance, if all.the blacksmiths in
a town conspired not to trade iron implements for less than a certain amount
of grain, the easiest way to break up this cartel would involve a farmer
standing on a mound and offering to buy more for less per unit. This man
would be Mencius' disfavored man of long duan, but certainly not a
monopolist.

2. State Monopolies in Han China: The Salt and Iron Policy

State monopolies of key industries were instituted in China as early as 117
B.C., and these monopolies remained an important policy component for
many dynasties. In 117 B.C., the Han Dynasty was experiencing a period of

12 MENCIus, THE WORKS OF MENCIUS, BOOK II(ii)(x) (James Legge ed. & trans., Courier
Dover Publications 1990).
125 Id. at 227-28.

126 A comprehensive survey is beyond the scope of this article, but for a fascinating
account of the state salt monopoly in the Song Dynasty, see CECILIA LEE-FANG CHIEN,
SALT AND STATE: AN ANNOTATED TRANSLATION OF THE SONGSHI SALT MONOPOLY TREATISE,



122 Columbia Journal ofAsian Law, Vol. 24, No. i (2010)

relative prosperity under Emperor Wu. The Emperor had waged aggressive
military campaigns against nomadic barbarians, depleting the state's treasury.
To increase revenue, he instituted monopolies on at an empirical level. Iron
and salt offices were set up empire-wide. A central bureaucracy was established
to calculate and control output in order to stabilize prices, a policy known as
"equalized transportation" (J~ji). The legendary statesman Sang Hongyang,
who had been made the emperor's Palace Attendant at age thirteen because of
his ability to do mental arithmetic, was appointed to oversee the program.'

In many ways, these monopolies were no different than modern
monopolies. The failings were the same: inflated price, excess capacity, and
poor quality. At times, prices were so high that some of the government
illegally forced people to buy iron. Z

The monopolies substantially increased the central government's
revenues, but popular discontent was widespread. In 81 B.C., only a few years
after Emperor Wu's death, a Grand Inquest on the effect of state intervention
was held.' Representatives of provincial elites argued for the abolishment of
the monopolies. Sang Hongyang, now the highest civilian official in the royal

court (01193 k), countered these arguments by emphasizing the monopolies'
immense importance to not just the government's fiscal sustainability, but the
political stability of a unified, centralized state.3' The challenge to the
monopolies eventually failed, but the debate was recorded in the book, Yien-
Tieh Lun (The Discourse on Salt and Iron).

MICHIGAN MONOGRAPHS IN CHINESE STUDIES (Center for Chinese Studies, Univ. of
Michigan 2004).

127 DONALD B. WAGNER, THE STATE AND THE IRON INDUSTRY IN HAN CHINA 10 (2002).

,za Id. at 24.

129 Id. at 81.

13 For example, Sang Hongyang said,

Now to give the people free rein to strive after power and profit and to end the
salt and iron monopoly would be to give the advantage to the overbearing and
aggressive in the pursuit of their covetous practices. All the evil-minded
would come together, cliques would become parties-for the aggressive if not
constantly curbed are ungovernable-and combines of disorderly persons
would take form.

HUAN K'UAN, DISCOURSES ON SALT AND IRON: A DEBATE ON STATE CONTROL OF COMMERCE

AND INDUSTRY IN ANCIENT CHINA, CHAPTERS 1-XXVIII 31 (Esson M. Gale ed. & trans.,
Ch'eng-Wen Publishing Co. 1967) [hereinafter Gale].

" The American reader might be surprised to learn that it was even used in 1935 to
attack Franklin D. Roosevelt's New Deal. Thomas T. Read, Iron, Men and Governments,

14 COLUM. U. Q. 141 (1935), cited in WAGNER, supra note 127, at 2.



An Intellectual Reappraisal of China's Anti-Monopoly Law

3. The Great Debate: Confucians v. Legalists

It is important to note that the opposition to the salt and iron monopolies.
did not come from the industry. In fact, the Emperor relied on the
industrialists to run the monopolies. He placed prominent industrialists in
high public offices.'" The political calculus, cited by Sang Hongyang, was
indeed as important as the fiscal one. Instead, the opposition came from
Mencius and other traditionalists of the Confucian School, the Ru School.
They viewed the massive concentration of power, brought about by
centralized revenue gathering and redistribution, as unfair and immoral. They
advocated equalitarianism and redistribution, and wanted the society restored
to a time when it "had markets but no coinage," and people "exchanged that
which he had for that which he lacked."'33

Sang Hongyang was a member of the School of Law-the Fa School.
Althoughfa is the standard modern translation for "law," it meant "rule" in the
ancient context. The Legalists believed that the state has the right to rule its
subjects by promulgating regulations and orders.

Naturally, the Confucians and Legalists clashed over the Han Dynasty
monopolies. The dispute was not framed as a competition issue; rather, it was
viewed as a constitutional issue. The contention was over the limits of
economic and political power of the state; the commercial values of
competition-efficiency, consumer welfare, innovation, and social mobility-
were not at issue. The Legalists rejected this latter issue because they viewed
state dominance of commercial instrumentalities as imperative, foreclosing
any discussion on the merits of competition versus private monopolization.
The Confucians ignored the issue of commercial competition because they
wanted to replace state monopolies with "simplicity" and "propriety." The
Mencian word long duan was never used to describe the "monopolies" during
the debate.

B. The Current

1. The Relevance of History

History's relevance to us, according to English legal historian F.W.
Maitland, is in the hope that "[a]bove all, by slow degrees the thoughts of our
forefathers, their common thoughts about common things, will have become
thinkable once more."' Competition law is essential precisely because it stays
close to these "common thoughts" about "common things." For the ordinary

132 Dongguo Xianyang and Kong Jin, who had made fortunes in salt and iron
respectively, were made Assistants to the Minister of Agriculture and took charge of the
monopolies under the supervision of Sang Hongyang. See WAGNER, supra note 127, at i.

' Gale, supra note 130, at 27.

'3 F.W. MAITLAND, DOMESDAY BOOK AND BEYOND: THREE ESSAYS IN THE EARLY HISTORY OF

ENGLAND 520 (1907).

123



man, what products and services he is to consume to sustain his way of life
and at what cost is a daily consideration. The law of supply and demand is
always constant. History remains highly relevant to understanding the AML in
several respects.

First, as a matter of substantive coverage, it was necessary to include the
law on central-local relations in AML (i.e., Chapter 5). It may not be
conventional competition law, but in order to achieve the ends of
"conventional" competition law in China, unconventional means must be
necessary. What is the purpose of competition law if it is not to curtail market
power? In this respect, China comes from the opposite direction as the
Western mainstream. While competition law was introduced to answer
excessive private market power in many Western countries, the market power
in China has always been in the hands of the state since the Salt and Iron
Policy. If the AML did not tackle this concern, there would be little else to
address and little extra competition to generate.

Note that by simply regulating state-dominated industries, which is
exactly what Article 7 does, would be insufficient. The state's market power is
abused when it uses administrative power to change market rules to serve its
own interests, whether or not it is a direct participant. An exclusive license
may create, but not maintain a state monopoly; however, ad hoc
administrative power may maintain a monopoly by either coercion of private
players or by general regulation. Chapter 5, Article 36, and Article 37, in
particular, are perspicacious in identifying the crux of the problem. 35

Furthermore, it is important to note that the law on foreign economic
relations has no place in the AML. The national security review simply bears
no relation to any competitive dynamism, unless one interprets the word
"competition" to mean one against foreign nations. The nationalistic tendency,
suggested by the three merger cases, and explicitly announced in the export
cartel exemption, unfortunately tends to confirm this. The fact that foreign-
related merger control has become the face of the AML is troubling:

Second, the popular enthusiasm, seen especially in court challenges, is not
surprising. The public has traditionally had little influence on state affairs. In
the collective subconscious, the anti-market Mencian term, long duan, has
morphed into an all-encompassing banner that represents unfairness at the
hands of state monopolies such as the oil companies, newly-formed
oligopolies closely linked to the state such as China Mobile and Netcom, and
up-and-coming private behemoths such as Baidu. This poses a thorny
normative question for policymakers and academics. On the one hand, these
concerns should be addressed because their solution is an important goal of
competition law. On the other hand, these concerns pose the risk of turning
the AML into a garden-variety consumer protection law, depriving it of any
strategic thrust.

Third, as a matter of intellectual preparation, the AML will draw little
support from .Chinese traditions. The Legalists' principles are exactly what the
competition law aims to overturn. The proper intellectual guidance to a

'3 See supra Part I.B.

124 Columbiajournal ofAsian Law, Vol. 24, No. i (2oio)



An Intellectual Reappraisal of China's Anti-Monopoly Law

competitive society is principles of the rule of law, which formally entered the
Chinese Constitution only in 1999, and remain very much an open field. The
lack of tradition is at once a curse and a blessing. The reform will not benefit
from any established shortcuts, but it will encounter no insurmountable
obstacles either. The result is a reform model heavily driven by policy priority,
which at any given time is a scarce commodity and is highly path-dependent.
This is true for China's reforms in general, but particularly so for competition
law.

2. Why the Two-Track Model Would Not Work

The stock market makes strategic appearances in this article, because it
provides an ideal counterpoint. Before China decided to open its stock
exchanges in 1990, there was a fierce debate where traditionalists insisted on
the ideological color of every reform proposal. The solution was one of
incrementalism: some assets would float first, while the "untouchables"-large
chunks of state assets representing collective ownership-would be
restructured into controlling, "non-circulating" shares of holding companies
above public arms, and enter circulation gradually. Today, the Shanghai Stock
Exchange and Shenzhen Stock Exchange entertain large volumes of trade and
are regularly followed by international investors.

This must have been what the leadership had in mind with regard to the
AML. The plan was probably to have a first draft of the statute, implemented
under select circumstances, closely controlled by administrators every step of
the way. Why, indeed, cannot the AML be implemented this way?
Incrementalism has brought China tremendous success. Why must the AML
be different? The reason is competition law's special position in the market
economy. Competition law is about the system and its basic rules. One cannot
divide up the ground and make some fairer than others; it would result in no
fairness at all. If state-controlled players do not compete, it makes no sense to
compel only the private players to do so. The two-track model will not be able
to repeat its success in the competition area.

3. If Not Now, When?

The kind of ground-revamping reform necessary for the AML to achieve
effectiveness is not a possibility in the present or the foreseeable future. It
would demand substantial liberalization of most industries currently owned or
dominated by the state, an independent and competent judiciary to entertain
and adjudicate claims, and new ways for all levels of government to exercise
their power vis-d-vis enterprises and individuals; none of which is supported
by political will or the underlying socio-economic reality.

The mismatch between high promise and reality may suggest that the
AML was defective before the statute was even drafted. The AML is a product
of an elite movement led by reform-minded politicians and academics. Unlike
other areas of legal reform (e.g., criminal procedure reform), where a system

125



Columbia Journal ofAsian Law, Vol. 24, No. i (2010)

was already in place, the competition law reform requires new procedures and
tremendous resources. This translates into two difficulties.

First, as a practical matter, it is far easier to tweak a system that is already
in place than to erect a new one. Using criminal procedure reform as an
example, despite tremendous objective difficulties in its own right, the courts
and procuratorates needed only to modify their practices in certain ways. The
AML, on the other hand, involves the establishment of an entirely new
process, which requires significant resources. For example, the agencies need
to hire and train a large number of new personnel.

Second, on an abstract level, it is easier to pass a law than to enforce it as
faithfully as the drafters had originally intended. Enforcing a law requires the
ability to change an ecosystem. One reason the agencies do not delegate
enforcement authority to government levels lower than the provincial level is
that government officials on the ground simply do not understand the rules or
will not treat them seriously because of the negative impacts on the officials'
existing interests.

This article has stayed a largely positivist course, but one final normative
observation is due. The suggestion that the AML risks being a wasted
opportunity is not meant as a criticism of China. Opportunities are different
from obligations precisely because they could be foregone for the right
reasons. Modern policymaking is shaped by multiple values, and every
country's leadership has unique constituencies to cater to. Competition law is
no panacea to unfair competition. It is a recurring issue in the developing
world's waves of economic liberalization.

C. The Future

As such, the AML will soon cease to draw as much attention as it has in
the three years after its promulgation in 2007. Although its future trajectory is
largely predictable, a narrow band of opportunities exist.

1. General Assessment

The AML will likely become a specialty foreign merger control law because
it has the prospect of regular and intelligent application. MOFCOM has
demonstrated enough professionalism and transparency that international
best practices will continue to be able to influence its policy and limit any
nationalistic tendencies that the agency from time to time may be pressured to
accommodate.

The rest of the AML will likely stay quiet. This article has already
explained why the NDRC is inactive. SAIC, who controls enforcement
jurisdiction of Chapters 2, 3, and 5, is the prime example of a bureaucracy
entrenched in the traditional ways. It may organize campaigns within its
system to give the impression that it is enforcing the new law. Yet, considering
its current record of enforcing the AUCL, it will most likely treat the AML as
an "AUCL-plus," and not seriously upgrade its methods.

126



An Intellectual Reappraisal of China's Anti-Monopoly Law

2. Treatment by the Court

In the short term, real progress is more likely to come from the courts if
they decide to accommodate a broader range of AML claims. If they are not
quite prepared for Chapter 5, then they may at least be ready for Chapter 2 (for
business plaintiffs) and Chapter 3 (for consumer plaintiffs).' 6 Convincing the
former class that the AML is a viable tool for suing state actors is critical. With
more resources, business plaintiffs are more likely to obtain favorable verdicts.
The key development to watch is whether the pilot program at the Shanghai
No. 2 Intermediate People's Court will be considered a success and replicated
widely. Once the capabilities are established, more private suits will likely
follow.

The next question is whether the courts can actually adjudicate in a
competent and capable way. The Baidu case was interesting because it was a
rare example of a case between domestic parties with an alleged non-state
monopolizer. It gave the courts.an opportunity to interpret and enforce the
law, to develop a good analysis, and to set a good precedent. Even though the
court had a rather easy time disposing of the claim on evidentiary grounds
because the plaintiff simply failed to provide enough evidence to support its
argument, it was a step in the right direction and gave practitioners a roadmap
of how to prepare for future cases.

3. Structural Matters

The more difficult parts of the AML-Chapter 4, as applied in major
domestic consolidations, and Chapter 5-can hopefully be enforced after
structural changes in the next stage of reform.

MOFCOM must first solidify itself as the most powerful enforcement
agency and claim its full jurisdiction in domestic matters. A case to watch is
the Unicom/Netcom merger. There is no suspense in the outcome; MOFCOM
will not unravel a deal approved by the State Council. However, it will be
interesting to see if MOFCOM, under the scrutiny of the public, the business
community, and its own bureaucratic ranks, will be able to exercise its AML
authority to some extent. This could be done by MOFCOM's granting special
leave for the merging parties to make a late filing, which it will then approve.
Decision makers must realize that if no measure is taken it could set a fatal
precedent for the authority of the AML and the credibility of its most effective
enforcer.'3 7

Finally, as for Chapter 5, any push to enforce it must come from a high
authority, probably the State Council or the AMC; SAIC is not the proper

6 Although this is currently not an option under the statute, private suits would be a
reasonable way to enforce Chapter 5.
17See ) A JOIIgi IjP MI~j }[The Arrogance ofBig State-Owned Enterprises
and the Weakness ofAnti-Monopoly Law], 0 9O'll4. [ECON. OBSERVER], May 1, 2009,
http://www.eeo.com.cn/observer/pop-commentary/2oo9/o 5/o1/1 36656.shtml.

127



enforcement agency because it is not powerful enough against high-level
government violators and its interests are too intertwined with lower-level
violators. Technically, the enforcement could be done internally by inserting a
single line of reasoning in administrative orders invalidating local practices,
listing a Chapter 5 violation as one of the justifications. However, it is difficult
to image that the State Council will spend its finite capital acting as a special
prosecutor. The more sensible enforcer would be the AMC, whose secretariat
is housed in MOFCOM. A potential policy recommendation would be to make
MOFCOM a "super-ministry," charged with enforcing the AML. This would
transfer MOFCOM's technical expertise into other areas; elevating the agency
one step closer to top decision makers would make its actions sufficiently
powerful.

CONCLUSION

China's AML stands for many things; antitrust law is only one of them. It
is best viewed as a critical episode in a much larger movement-the latest
major installation in an accelerated institution-building process since the
country's accession to the World Trade Organization. As a single piece of
legislation, it has the most potential to leave an impact on China's
constitutional structure. Yet, at this moment, the opportunity is being lost. It
will likely become another item in the central government's macroeconomic
toolbox, and because of its inherent conflict with other policies, will be seldom
used. More likely, it will evolve into a specialty law on foreign-related merger
review and perhaps as an enhanced consumer protection law enforced
haphazardly.

The reality is that one cannot have a competition-law regime more
advanced than the underlying economy is free. Competition law acts as the
rules of the game. The rules can only help the game to a certain extent. In the
end, it is the talent, industry, and teamwork of the players that decide whether
they will leave the playground enriched, satisfied, and happy.

128 Columbia~ournal ofAsian Law, Vol 24, No. i (2olo)