November 11, 2005
Antitrust in China (and a Fond Farewell)
Posted by geoffrey manne

It is commonly said that, as tariff barriers to trade have fallen around the world, private barriers have become correspondingly more important; as public (tariff) protection on behalf of domestic industry against foreign competition has weakened, private (anticompetitive) protection is likely to surge.   

I think this argument is a little harder to make than its proponents would have it, for two reasons:  First, as tariff barriers to foreign competition fall, it becomes harder, not easier, to maintain domestic monopolies.  Second, antitrust enforcement is not an unalloyed good, and, especially if practiced discriminatorily (favoring, that is, domestic firms over foreign ones), it has the potential itself to stymie rather than expand competition.  Enforcement of antitrust laws may be a far bigger problem than non-enforcement.

With this in mind, I draw your attention to one of the most anticipated developments in global antitrust:  China's Antitrust Law (You'll find the most recent draft (in Chinese), as well as the ABA's joint commentary on it (in English), here).  It's not finalized yet, and its arrival has been impending for several years now, but it's only a matter of time before the face of global antitrust is significantly altered.

I would just point out two interesting aspects of the Chinese law.  First, it provides for significant agency enforcement, with little involvement by the courts.  The problem here, of course, is that, as with most antitrust laws, the substance is in the enforcement, not the law itself.  Antitrust laws tend to be vague and short (see sections 1 and 2 of the Sherman Act).  And if you're worried about abusive enforcement of vague rules, it's obviously problematic to leave discretion in the hands of an insular agency.  The law has the potential to do considerable damage, depending on how it's enforced.

But perhaps this is tempered by the other interesting aspect of the law:  its application to administrative monopolies.  Unlike the US antitrust laws, the Chinese law will apply (assuming, of course, effective enforcement) even to anticompetitive behavior undertaken by or under protection of government entities, including, perhaps, fully-state-owned enterprises.  Private-state involvement (and corruption) runs deep in China.  Vigorous enforcement of the antitrust law against government enterprises might significantly improve the business landscape there.

And, in the end, the adoption, interpretation and enforcement of a US- or EU-style antitrust law in China could induce a pervasive shift in norms (see Harold Hongju Koh, Transnational Legal Process, 75 Neb. L. Rev. 181), perhaps eventually even locking it in to its current (though dramatically desultory) path toward liberalization.

Barring an uncontrollable need to mount my soapbox again tomorrow (and then assuming the continued indulgence of my hosts), this is likely my last post here at the 'Glom.  I've had a rousing good time, and even managed to piss off a few people in the process.  The former was my intention far more than the latter, so my apologies to those in the latter camp.  Many thanks to Christine, Gordon & Vic.  Look for more antics, analysis and a little high dudgeon from me in the blogosphere in the near future.

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