Administrative monopoly in China : the role of the Anti- Monopoly Law in domestic integration. Deborah Healey

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1 Administrative monopoly in China : the role of the Anti- Monopoly Law in domestic integration Deborah Healey

2 Administrative or regulatory conduct which affects the market..misuse by government of its administrative power, legal and extralegal, to promote, manipulate, impede or prevent economic activities (Williams)..abuse of administrative position to eliminate or restrict competition (Xu) Administrative monopoly law has the effect of keeping in check industrial policy. (Meng Yanbei) Administrative decisions which have the effect of eliminating or restricting competition (Healey) Does the conduct have to be intentional or have some pejorative element?

3 Administrative monopoly provisions: Must be viewed in the context of the overall objects and other provisions of the AML Safeguarding fair market competition, improving efficiency, protecting consumers and the public interest (Art. 1) Implementing competition rules suitable to the socialist market economy, fostering a unified, open, competitive and orderly market system (Art 4) Protection of legitimate business activities of industries dominated by the State-owned economy and which have a direct bearing on national economic wellbeing and security- but they must conduct business in accordance with the law (Art. 7)

4 AML prohibitions on administrative monopoly Prohibitions on : abuse of administrative powers to eliminate or restrict competition by administrative agencies and bodies responsible by law or regulation for public affairs administration (Art. 8) the proscription by an agency of the businesses with whom other bodies must deal (Art 32) (getting in or out) regional blockades by setting discriminatory fees, charges or standards or discriminatory prices for products from other regions; technical requirements or inspection standards from products from other regions; or certification or entry restrictions; licences; checkpoints to prevent entry or exit; other actions impeding the free flow of products between regions. (Art 33)

5 AML prohibitions on administrative monopoly Articles 34 and 35: Anticompetitive regional restrictions on bidding, qualification requirements, assessment standards, using unpublished information or criteria as grounds for rejection, unequal rejection of investment or establishment of branches in regions Article 36 prohibits administrative agencies from compelling undertakings to engage in monopolistic conduct prohibited by the AML Article 37 Catchall- prohibits the abuse of administrative power in making regulations to eliminate or restrict competition

6 Issues with implementation Status of AML which is not a constitutional law Problems with enforcement of laws generally in China Intergovernmental power structures Fiscal incentives for provincial /local authorities to flout the law Structure of the enforcement mechanisms

7 Other jurisdictions UNCTAD RPP PROJECT : COMPETITION LAW AND THE STATE: ENFORCEMENT OF COMPETITION LAW AGAINST STATE AND HYBRID ACTS (Professor Eleanor Fox, Deborah Healey) Role of Competition authorities in relation to administrative monopoly conduct Some have an advocacy role Some may issues opinions Some may challenge anticompetitive rules and regulations before Tribunals (examples of countries which have some or all of these functions are Italy France, Kazakhstan, Hungary, Lithuania, Spain)

8 Other jurisdictions Limiting entry, etc ( eg. China, EU, Hungary, Korea, Lithuania, Mexico, Spain) Blocking markets (eg. Jamaica, Guyana) Bidding with discriminatory conditions 11 countries in the survey Other countries had these types of prohibitions in other laws

9 The examples The AQSIQ case Guangdong GPS case Futsal case

10 Government initiatives: May 2013 State Council to break Regional Blockades and Industry Monopolies for the Third Time, Timetable to be finalised by the End of the Year (Economic Observer, 23 May 2013, noted in the China Competition Bulletin (Wang/Fels) May/June Involves MOFCOM, State Administration of Taxation, NDRC, SAIC, and the regulators of banks, insurance companies and securities, other govt. departments - Elimination of regional blockades, breaking down industrial monopolies to maintain a unified national market that has fair, open and orderly competition - Important part of these reforms is the revision and cleaning up of regulatory and other documents that provide special protection for local products and services and segment markets - Done before in 2001 and 2004 but limited effect because of strong opposition from local governments

11 3 rd Plenum November 2013 Decisive role of the market in resource allocation Administrative monopolies will be further broken and competitive business will be introduced (xinhuanet.com/english ) Market barriers must be removed, and regional protectionism and local government intervention will be curtailed (xinhuanet.com/english/indepth )

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