The Anti-Monopoly Law (AML) of the People’s Republic of China has been amended for the first time since its introduction 14 years ago. On June 24, the Standing Committee of the 13th National People’s Congress, China’s top legislature, decided to approve the new AML at its 35th session. The amended AML will come into effect on Aug. 1, 2022, and it’s essential to review its original intention.
There are many comprehensive revisions to the AML, such as the introduction of new systems, well-defined platform-specific rules on the economy, refinement of punishment and the overhaul of the chapter ‘Legal Liabilities.’ These changes address concerns of all sectors and makes institutional arrangements for practical problems. As there has been extensive revisions, it is important to have a comprehensive understanding the law.
In recent years, there has been an excessive public scrutiny on platform business monopoly and the dollar amount of the fine amount imposed, but these topics should not be the focus. Article 1 of the amended AML states that the purpose of the Law is to prevent monopolistic activities, protect fair market competition, encourage innovation, enhance economic efficiency, safeguard the interests of consumers and society, and promote the healthy development of the socialist market economy. Protecting fair market competition is undoubtedly the top priority. An impartial competitive environment nourishes innovation and protects consumer interests and social welfare. To measure the effectiveness of the law, we must look at its ability to achieve its original legislative goal. Article 4 stipulates that the state adheres to the principles of marketization and the rule of law and strengthens the basic role of the competition policy, which directly reflects the legislative goal of protecting fair market competition. The competition policy is closely related to competitive neutrality and ownership neutrality and is important to China’s long-term economic prosperity. This is why fair competition, along with property rights protection, has been highly valued by the country’s decision-makers.
The AML first came into force on Aug. 1, 2008, with high expectations. Over these 14 years, we have gained rich experience and learned many lessons. The legal provisions have been too principled and general, and the law enforcement has been insufficient, failing to eliminate monopoly practices. In a sense, the amended law resolves long-standing arrears. The biggest enlightenment of law practice is that only by implementing the law from the perspective of protecting fair market competition can we overcome specific problems or disputes and effectively prevent and stop monopolistic behavior.
“Fair competition” is not just empty words. Article 5 confirms that the state’s role is to establish and improve a fair competition review system in the form of laws. This system aims to, in the shape of prior reviews, regulate the relevant behavior of the government and prevent it from introducing policies and measures to eliminate and restrict competition. The new provision is expected to function as an important lever against administrative monopoly, which has always been the weakest link in China’s anti-monopoly efforts. Seeking monopoly profits via power undoubtedly shakes the fair market competition to its foundations. The “Implementation Outline for Building a Law-based Government (2021-2025)” issued by the Central Committee of the Communist Party of China and the State Council was aimed at effectively preventing the abuse of administrative power. The amended AML emphasizes the neutrality of competition for business activities such as tendering and bidding, treats market entities equally and brings abstract administrative acts into competition constraints. These amendments are highly supported in academic circles and are expected to produce practical results.
By reviewing the original legislative intention, we can clearly see the argumentation behind it. In recent years, anti-monopoly practice in the platform economy has been in the spotlight. Some argue that the amended law is “tailor-made” for the platform economy. This is a very one-sided view. Anti-monopoly in the platform economy is not unique to China. For example, the European Union has introduced an AML specifically aimed at technology giants. Leveraging the dominant position, algorithm and big data, the platform economy has become increasingly prominent and even made rampant infringements on fair competition. This must be taken seriously and corrected before it is too late. We should also be aware that rules are not made purely for punishment. The amended AML sets a red line for the platform economy, provides it with stable expectations and is beneficial to its exploration and innovation. This will surely promote the long-term and healthy development of the platform economy.
An accurate grasp of the intention of the AML will put forward higher requirements for its enforcement and judicature. The law is by no means a tool serving the selfish interests of some authorities. Law enforcement agencies should decisively deal with any violation of fair competition. Stepping away from tackling tough issues or carrying out short-lived law enforcement are both deviations from the original intention. Future administrative law enforcement should be taken more seriously and improved, especially the disclosure system. The facts of each case, specific evidence and the arguments for punishment should be fully transparent. Every time-tested anti-monopoly case shines its spotlight on the protection of fair competition. The more open the procedure and the more detailed the disclosure, the greater the significance of the warning is to other subjects. Details and transparency will make the AML more authoritative.
These new amendments mark a new start, but how relevant rules and systems should be adopted depends on specific rules. For violations that lead to particularly serious circumstances or causes negative serious consequences, the new AML stipulates that enforcement agencies under the State Council may determine fines that are up to five times the amount stipulated in the corresponding provisions. This rule has sparked heated discussions. If the maximum penalty according to the annual sales is imposed, the fines are likely to account for half of the sales, which would jeopardize the business’s survival. Experts and scholars have discussed how this should be done practically, but the details remain unclear. How we should ensure the connection between law enforcement and judicature also needs to be further explored and improved in practice.
From deliberation on the formulation of the AML in the 1980s and 1990s and its implementation 14 years ago to the first revision of the AML, China’s anti-monopoly course is improving with the development of the country’s market economy, and people’s anti-monopoly awareness is entrenched in market economy practice. The scope of this revision is limited, and further revision requirements will be raised in the future. Positive and negative experiences make us increasingly aware that fair competition is the soul of the market economy and the quintessence of the AML. It’s only by ensuring fair competition that we can assure of a law-based, fair environment for doing business.
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