Legitimacy & effectiveness concerns arising in private antitrust litigation involving SOEs in China

Cahill, Dermot and Wang, Jing (2022) Legitimacy & effectiveness concerns arising in private antitrust litigation involving SOEs in China. In: The Law and Society Association Annual Meeting 2022, 2022-07-13 - 2022-07-16.

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Abstract

Despite the incorporation of European Union-style antitrust principles into China's legal system – via the Anti-Monopoly Act 2007 – nevertheless it appears that acceptance of the Legitimacy of antitrust is not accepted in China's courts. This conclusion is demonstrated by subjecting leading antitrust judgments to Legitimacy & Effectiveness tests, to illustrate how court decisions hearing challenges to the alleged anti-competitive behavior by State-Owned Enterprises (SOEs), repeatedly sideline the application of internationally well understood antitrust principles against these market dominating behemoths. The courts appear go out of their way to not make findings of "dominance" against SOEs, even in cases where SOE market dominance seems clearly present. This in turn deprives plaintiffs of the chance to invoke the Anti-Monopoly Act's abuse of dominance test against SOEs, giving their anti-competitive practices an "antitrust-free pass". Other examples examined include China's courts toleration of the acceptability of price-fixing, to demonstrate how anti-competitive practices, ordinarily prohibited in Europe & USA antitrust, do not attract similar judicial condemnation in China's courts. The paper identifies weaknesses in the 2021 Anti-Monopoly Reform Bill, showing why it will not solve these problems. Suggestions on how to encourage courts in China to overcome deference to SOEs' overly robust anti-competitive practices are made; the adoption of single economic entity theory is considered as a means to equip the courts with appropriate conceptual tools for lifting the corporate veil to expose SOEs group-dominance of key markets; and the need for a collective dominance test is argued. The paper concludes that without reform of the judicial approach to antitrust enforcement in China, the Legitimacy of internationally recognisable antitrust principles, and the granting of effective antitrust violation remedies, will not be accepted in China's domestic legal framework.

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