China’s Anti-Monopoly Law: What Is the Welfare Standard?

Competition Policy & Antitrust

Article Snapshot

Author(s)

Pingping Shan, Guofu Tan, Simon Wilkie and Michael A. Williams

Source

Review of Industrial Organization, forthcoming (2012)

Summary

This paper examines how Chinese law balances consumer and firm interests in antitrust enforcement.

Policy Relevance

China generally enforces antitrust law in a manner that suggests it has consumer interests in mind, although data are scarce and somewhat conflicted.

Main Points

  • China established antitrust regulations in the Anti-Monopoly Law (AML) in 2007. The law was a response to antitrust issues that accompanied the development of free markets in China.
     
  • Typically, antitrust regulators consider how a merger will affect consumers and firms, and permit it to proceed (or not) on this basis.
     
  • There are several ways for an antitrust regulator to consider consumer and firm interests:

    • The United States ignores firm interests and considers only consumer welfare—that is, the net benefit that a merger will produce for consumers.
       
    • Canada considers both firm and consumer welfare, weighting consumer welfare more heavily.
       
    • European Union nations mostly consider consumer welfare, although they also act to protect inefficient incumbent firms.
       
  • In China, AML explicitly aims to protect consumers and producers, make it easy for firms to enter into competition with other firms, encourage technological advancement, and generally help China develop economically.
     
  • China’s main antitrust regulator tends to act in a manner that would be consistent with an antitrust regulator focused on consumer welfare. However, not much data is available.
     
  • Other agencies in China seem to act in opposition to this standard, issuing interpretations and expansions of AML that are more supportive of firm welfare.

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