Intra-authority problems - Problems before the competition authorities

3. The enforcement of the AML

3.2 Problems before the competition authorities

3.2.2 Intra-authority problems

In addition to the inter-authority problems, some intra-authority shortcomings also contribute to the inefficient enforcement of the AML. Low hierarchy is the first problem. The administrative level of these enforcement authorities within the Chinese administrative system is not sufficiently high, leading to their less independence and authority.304_{In 2008}

the merger between China Unicom and China Netcom, the two leading telecommunication SOEs, could illustrate that the enforcement authorities lack sufficient authority due to their lower positions in the administrative system. Although according to the scale of this telecom merger case it should have been notified to the MOFCOM for approval, the MOFCOM officials admitted that they did not receive such merger notification from the parties.305_While

the undertakings claimed that the merger was already approved by their supervisory authority – the Ministry of Industry and Information Technology which is at the same administrative level with MOFCOM, it was difficult for the Anti-Monopoly Bureau (a division under the MOFCOM), or even the MOFCOM itself, to challenge another ministry’s decision.306

Another reason resulting in MOFCOM’s reluctance to take action might be that the parties to the transaction are central-administered SOEs whose principals are at the same (or similar) administrative level with the minister of the MOFCOM in the Chinese administrative

302_{Angela Huyue Zhang, ‘The Enforcement of the Anti-Monopoly Law in China: An Institutional Design}

Perspective’ (2011) 56(3) The Antitrust Bulletin 631, pp.644-645.

303_{See Bruce M. Owen, Su Sun and Wentong Zheng, ‘China’s Competition Policy Reforms: The Anti-Monopoly}

Law and Beyond’ (2008) 75 Antitrust Law Journal 231, pp.261-262; Jared A. Berry, ‘Anti-Monopoly in China: A Socialist Market Economy Wrestles with Its Antitrust Regime’ (2005) 2 International Law and Management

Review 129, p150; Nathan Bush, ‘Constraints on Convergence in Chinese Antitrust’ (2009) 54(1) The Antitrust Bulletin 87, p99. See chapter 5 for more detailed analysis in this respect.

304_{Xiaoye Wang, ‘The New Chinese Anti-Monopoly Law: A Survey of a Work in Progress’ (2009) 54 The Antitrust} Bulletin 579, p590.

305_{See MOFCOM confirmed that China Unicom / China Netcom merger is suspected of infringing the}

Anti-Monopoly Law, Economic Observer, 1 May 2009, available at

http://money.163.com/09/0501/09/587HV23500252KFB.html (in Chinese), last visited on 20 January 2014.

306_{See Angela Huyue Zhang, ‘The Enforcement of the Anti-Monopoly Law in China: An Institutional Design}

system.307_{Similar challenges will also confront the NDRC and the SAIC when powerful}

SOEs are involved in cases related to anti-competitive agreements or abusive behaviour.

In the second place, the decisions delivered by Chinese enforcement authorities lack transparency and intra-authority consistency. It is vital that undertakings should be informed of the enforcement authorities’ decisions in order to establish their clear expectations as to how the AML would be enforced. Article 30 of the AML requires the MOFCOM to publish, in a timely manner, its decisions prohibiting or conditionally approving the concentrations notified.308

Apart from these cases, the MOFCOM has the discretion to determine whether or not to publish its unconditional clearance decisions. For other two enforcement authorities, they are even entitled to selectively publish their enforcement decisions since article 44 of the AML provides that they “may publish” their decisions rather than “must publish”.309_{Moreover, for the}

decisions published, the written decisions released are normally brief, conclusory, with little substantive legal reasoning and analysis – although being progressively improved to some extent.310_{In the absence of concrete analysis articulating the rationale for specific decisions, it}

is impossible for the outside observers to evaluate how the authorities understand the AML, interpret the rules into specific cases, and connect available evidences with their published

307_{See MOFCOM confirmed that China Unicom / China Netcom merger is suspected of infringing the}

Anti-Monopoly Law, Economic Observer, 1 May 2009, available at

http://money.163.com/09/0501/09/587HV23500252KFB.html (in Chinese), last visited on 20 January 2014.

308_{AML, Supra note 9, Article 30.}

309_{Ibid, Article 44. Among the three Anti-Monopoly Law enforcement authorities, the MOFCOM does the best on}

the information release as it already has established its enforcement information disclosure mechanism. For the merger cases that have been cleared without conditions, the MOFCOM will release a list per quarter since the fourth quarter of 2012 (information updated on http://fldj.mofcom.gov.cn/article/zcfb/); for the merger cases that have been cleared subject to conditions or have been banned, the MOFCOM will publish the full text of its decision on its official website (information updated on http://fldj.mofcom.gov.cn/article/ztxx/). The SAIC has also made a major step forward on the enforcement information disclosure as it published the decisions (in full text) of 12 closed anti-competitive agreements cases (out of 24 cases in total since the effective of the AML) on July 26 2013 before the fifth anniversary of the implementation of the AML, available at

http://www.saic.gov.cn/zwgk/gggs/jzzf/, last visited on 20 January 2014. As to the enforcement of the AML by the NDRC, on 2 September 2014, the NDRC for the first time published the full decisions in Zhejiang Car Insurance Catel case imposing combined fines of RMB 110 million (USD 17.89 million) on a local trade association in Zhejiang province and 23 property insurance companies for their price fixing behaviour, decisions (in Chinese) are available at http://jjs.ndrc.gov.cn/fjgld/index.html, last visited on 10 October 2014.

310_{See Nathan Bush, ‘Constraints on Convergence in Chinese Antitrust’ (2009) 54(1) The Antitrust Bulletin 87,}

pp.123-124; Angela Huyue Zhang, ‘The Enforcement of the Anti-Monopoly Law in China: An Institutional Design Perspective’ (2011) 56(3) The Antitrust Bulletin 631, pp.652-653; Mark William, Chapter 4 ‘China’ in Mark William (ed) The Political Economy of Competition Law in Asia (Edward Elgar 2013) 88, p114.

findings.311_{It is understandable that it is not a tradition for the officials of Chinese}

administrative authorities, like the judges in Chinese courts,312_{to write long decisions and to}

explain how the decisions are made in details. But the public oversight on administrative decision-making and predictability of undertakings’ commercial behaviour would thus be jeopardized if the enforcement authorities continue disclosing insufficient information merely with the purpose of avoiding the exposure of any mistake that might be used against the authority in future cases.313_{In addition, to allow undertakings to estimate potential public}

intervention beforehand, each enforcement authority should keep its decisions consistent. In other words, the AML enforcement authorities should “to some extent be bound by its prior decisions and reasoning.”314_{Otherwise, undertakings could not predict the possible}

consequences of their commercial decisions if the authorities can decide a case disregard the prior decisions in which similar facts have been analyzed in the recent past.

In the third place, the shortage of personnel serves as another main reason for the unproductive enforcement of the AML. In the US, in 2006 there were 779 employees, including 565 professional staff members such as attorneys and economists, working for the Antitrust division of the Department of Justice.315_{In the Federal Trade Commission, by the end of 2012 there}

were over 1100 employees, including 613 attorneys and 77 economists.316_{As to the EU}

Commission, in 2011 there were around 900 staff members working in the DG Competition responsible for monitoring competition issues in the EU market.317_{Japan’s Fair Trade}

Commission had 799 staff members including 456 investigators in 2012.318_{South Korea’s Fair}

Trade Commission had more than 500 employees in 2011.319_{However, the most well-equipped}

Chinese enforcement authority is the MOFCOM, which has only around 30 staff members in

311_{See Nathan Bush, ‘Constraints on Convergence in Chinese Antitrust’ (2009) 54(1) The Antitrust Bulletin 87,}

p124.

312_{See infra note 330.}

313_{See Angela Huyue Zhang, ‘The Enforcement of the Anti-Monopoly Law in China: An Institutional Design}

Perspective’ (2011) 56(3) The Antitrust Bulletin 631, pp.653-654.

314_{Bruce M. Owen, Su Sun and Wentong Zheng, ‘China’s Competition Policy Reforms: The Anti-Monopoly Law}

and Beyond’ (2008) 75 Antitrust Law Journal 231, p263.

315_{See Xiaoye Wang, ‘Three Year’s Enforcement of Anti-Monopoly Law in China and the Rule by Law’, in}

316_{Data from}_{http://www.ftc.gov/opp/gpra/2012parreport.pdf}_{, last visited on 20 January 2014.}

317_{Data from}_{http://ec.europa.eu/dgs/competition/factsheet_general_en.pdf}_{, last visited on 28 November 2013.} 318_{Data from}_{http://www.jftc.go.jp/en/about_jftc/statistics.html}_{, last visited on 20 January 2014.}

319_{Data from 2012 Annual Report of Fair Trade Commission of Republic of Korea, available at}

the Anti-Monopoly Bureau.320_{Though it is worth noting that an economic division has been}

established under the Anti-Monopoly Bureau and it undertakes the economic analysis in reviewing merger cases, the profiles of the staff members have not been disclosed.321_The

NDRC’s Bureau of Price Supervision and Anti-Monopoly has more than 20, but less than 30 staff members.322_{The situation of the SAIC is even worse. There are less than ten full-time}

personnel in the Anti-Monopoly and Anti-Unfair Competition Bureau at the national level.323

Top officials of Chinese competition law enforcement authorities admitted that up to September 2014 there are merely around fifty full-time competition law staff members in total whinin three authorities.324_{Even these full-time staff members are equipped with requisite competition}

skills and sufficient economic knowledge, it would be too difficult for them, if not impossible, to handle the heavy workload and analyse each case, particularly those complicated and novel issues, with adequate caution. Take merger control for example, until August 2014 – six years enforcement since the enactment of the AML in August 2008, there are 945 merger cases registered in the MOFCOM of which the number of cases the MOFCOM completed the competition review is 875.325_{Apparently the workload would be too heavy for a bureau with}

320_{See Xiaoye Wang, ‘Three Year’s Enforcement of Anti-Monopoly Law in China and the Rule by Law’, in}

321_{See Interview with Ming Shang, Director General of the Anti-Monopoly Bureau under the MOFCOM,}

February 2011, available

athttp://www.americanbar.org/content/dam/aba/migrated/2011_build/antitrust_law/feb11_shangintrvw2_23f.authch eckdam.pdf., last visited on 20 January 2014, at 4.

322_{See Xiaoye Wang, ‘Three Year’s Enforcement of Anti-Monopoly Law in China and the Rule by Law’, in}

Professional Committee on Competition Policy and Law (PCCPL) China Society for World Trade Organization Studies (CWTO) (ed.) Report on Competition Law and Policy of China 2011 (Law Press, China, 2012) 30, p37. The Bureau of Price Supervision and Anti-Monopoly was authorised by the State Commission Office for Public Sector Reform on 27 July 2011 to increase its personel from current 26 to 46 (maximum), see Beijing Bar Association (ed.) Legal Practice of Anti-monopoly and Anti-unfair competition (‘反垄断与反不正当竞争法律实 务精解’) (Peking University Press 2012), p243. As mentioned above, the NDRC in general authorizes its subordinate provincial agencies to enforce the AML in their administrative regions, therefore these provincial agencies are allowed to increase in total 150 personnel, see Kunlin Xu, ‘New developments in Price-related enforcement of the Anti-monopoly Law’ in Professional Committee on Competition Policy and Law (PCCPL) China Society for World Trade Organization Studies (CWTO) (ed.) Report on Competition Law and Policy of

China 2012 (Law Press, China, 2013) 7, pp.7-8. 323_Ibid.

324 _{See Chinese competition law authorities’ briefing on 11 September 2014, available at}

http://www.china.com.cn/zhibo/2014-09/11/content_33487367.htm?show=t (in Chinese), last visited on 12 September 2014.

325_{Data from the briefing jointly held by three Chinese competition law authorities on 11 September 2014, available}

merely about 30 staff members, if compared to other advanced economies, such as the EU. The EU Commission received more than 1400 notifications from 2009 to 2013.326_{Though it}

exceeds the figure in China by about 450 – which is not a small number, the personnel shortage of the MOFCOM is evident, considering the wide manpower gap between EU commission and Chinese merger reviewer and the (still) increasing number of concentration notifications in China.

In document EU Antitrust review of refusal to license IPR: its potential for China (Page 78-82)