This article empirically measures indicators capturing the role of economics in the antitrust decisions of the Competition Authorities of China from 2010 – 2021. The methodology allows that identification of the legal standards (LSs) adopted in assessing different conduct types and their evolution. The LSs are compared to their theoretically optimal level in order to deduce quality of enforcement. Comparative analysis is undertaken with published results on the role of economics for EC’s DGCOMP, UK’s CMA and Russia’s FAS. The Chinese Authorities’ enforcement record lags behind in quality that of DGCOMP and CMA in abuse of dominance cases though it is already well ahead of countries in which their modern Competition Law enforcement started at about the same time (2008), like Russia.

В данной статье эмпирически измеряются показатели, отражающие роль экономики в решениях антимонопольных органов Китая в период с 2010 по 2021 год. Методология включает в себя определение правовых стандартов (ПС), принятых при оценке различных видов поведения, и их эволюцию. Для оценки качества правоприменения правовые стандарты сравниваются с их теоретически оптимальным уровнем. Исследовани использует опубликованные результаты деятельности DGCOMP ЕК, CMA Великобритании и ФАС России для проведения сравнительного анализа роли экономической науки в процессе принятия ими решений. Выяснилось, что правоприменительная практика китайских властей по делам о злоупотреблении доминирующим положением отстает по качеству от DGCOMP и CMA. Однако по этому показателю они уже значительно опережают такие страны, как Россия, которые ввели антимонопольное законодательство примерно в то же время, что и Китай.

antitrust, economic analysis, legal standards, Per Se, effects-based, enforcement quality

антимонопольное регулирование, экономический анализ, правовые стандарты, Per Se, основанные на эффектах, качество правоприменения.

Gerber (2004) had pointed out that “The European experience in establishing the goals and institutions of competition law may be instructive for Chinese decision-makers as they consider the creation and development of competition law in China.2”. Europe’s considerable experience regarding the purpose and framework of competition law has indeed proved beneficial for China. European competition law serves various legislative purposes, including the establishment and maintenance of the community market. Similarly, China’s Anti-Monopoly Law also encompasses multiple legislative objectives. China enacted the Anti-Monopoly Law in 2008, during which a broad consensus was reached on its legislative goals and scope. The fundamental legislative purpose of China’s anti-monopoly law is to curb the adverse consequences of monopoly power, uphold and promote competition, and protect diverse interests. Nevertheless, given the advancement of the market economy, information technology, and globalization, it has been considered crucial to consider additional requirements for the legislative purpose of anti-monopoly law. The latter must address not only the traditional issues associated with market power but also optimize the market environment and foster competition neutrality. It should not only assume a crucial role in constructing a modern market system but also meet the aspirations and requirements of diverse sectors of society for enhancing the business environment and ensuring fair competition. Moreover, it should clarify the recognition and trade-offs of the fair competition review system while reaffirming the fundamental importance of competition policy.

China and Europe share similarities in terms of their law enforcement agencies and institutions given that China has modelled its antitrust regime on that of the EU, which is closest to its own legal traditions. In Europe, administrative agencies are granted the authority to enforce competition law. This mode of administrative law enforcement not only facilitates the regulation of enterprises that engage in anti-competitive practices but also promotes the development of specialized knowledge in competition law and strengthens public trust in competition protection. Similarly, in China, administrative organs possess significant influence over economic development. The legal tradition and the foundation of Chinese legal culture rely on the interpretation of statutory law, the application of legal provisions, and the enforcement of administrative policies. This framework of legal operation aligns with the legal system in continental Europe.

Starting from the mid- to late- 1990s, the EU competition law has underwent a process of modernization, transitioning from a “form (or, object)-based approach” in assessing business practices to an “effects-based approach” (as the optimal Legal Standard, LS). This shift can be attributed to the continuous evolution of industrial organization theory, which questioned the presumption of many conducts, other than horizontal agreements, considered anticompetitive, explained how significant efficiencies can result from these conducts and thus highlighted the increasing significance of economic theory in practical antitrust enforcement. In the United States too, the earliest clause of antitrust law focused on the “per se illegal” rule for price agreements. However, as economic theory advanced, American judicial institutions were the first to become aware of the diverse impacts on the market of business conducts beyond price agreements and, consequently, they adopted the “rule of reason” (the assessment approach referred to as “effects-based” in Europe) for evaluating most of the other business conductss. China’s analysis framework and criteria for enforcing its anti-monopoly law largely draws upon those of the European Union.

In recent literature (Katsoulacos & Ulph, 2009; Katsoulacos & Ulph, 2016; Katsoulacos & Ulph, 2017) the optimal LSs are defined as the social welfare maximizing LSs, taking into account a number of factors: decision errors, deterrence effects and legal uncertainty. While horizontal agreements (cartels), leading to obvious restrictions on competition, are best dealt with by the principle of Per Se illegality, for vertical agreements and abuses of dominant market positions, for which, in addition to their potential anti-competitive effects, there are also under certain conditions welfare enhancing efficiency effects, the Per Se illegality principle is not generally justified.

The optimal LSs for evaluating certain violations, particularly vertical agreements and abuses of dominant market positions by individual firms, has for a long time been controversial. During this time, the economic analysis of antitrust has developed greatly, especially with regard to the welfare effects of these actions. Advancements in industrial organization theory indicate that, regarding vertical agreements and exclusive behaviors of individual firms, competition agencies should adopt the legal standard of rule of reason. The analyses of Katsoulacos and Ulph mentioned above, aim to explain and formalize under what circumstances economic analysis, based on this standard, can enhance social welfare and strengthen the deterrent effect of anti-monopoly laws by reducing decision error costs. What had been missing until recently were empirical investigations about whether the actual law enforcement practice reflected the suggestions of economic theory. Our empirical investigation in this paper aims to determine if the economic analysis and legal standards implemented by Chinese anti-monopoly authorities are near or significantly diverge from the optimum level, and how they have evolved over time.

In China, disputes on LSs have mainly focused on vertical agreements (Weiping, 2018; Ping, 2022). For example, the Shanghai High Court clearly insisted on the use of rule of reason for assessing resale price maintenance (RPM) in Ruibang case in 2013, while the Hainan High Court stressed that it was not necessary to verify “whether RPM has the effect of excluding and restricting competition” in the Yutai case in 2018. In 2016, in the latter case, the Hainan Price Bureau considered that the Feed Product Sales Contract signed by Yutai Company and its distributor was illegal in reaching an agreement of “fixing the price of reselling commodities to a third party”. However, the court of first instance held that the decision on Administrative Punishment made by Hainan Price Bureau should be revoked. The court of first instance held that the determination of liability of vertical agreements in the Anti-Monopoly Law should not only be based on whether the operator and the transaction counterpart have reached a fixed or limited resale price agreement, but should further comprehensively consider whether the relevant price agreement has the effect of excluding and restricting competition. However, the Hainan High Court rejected this reasoning.

Such controversies have also characterized enforcement in Europe and the United States in the past. For example, the United States has experienced many iterations in the application of the antitrust Per Se Illegality LS to vertical constraints, especially vertical price constraints. Even after the Supreme Court of the United States established the rule of reason LS in assessing RPM in the Leegin case in 2007, some states still insist on the Per Se illegality LS in RPM cases.

This paper’s main objective is to empirically investigate the role of economics in antitrust enforcement for the case of China. Specifically, whether China’s CAs adopt the economic approach whenever this is the appropriate assessment approach. This is achieved by constructing and then measuring indicators capturing the extent to which the relevant economic analysis and evidence is used by the agency in order to identify anticompetitive behaviour, in the period 2010-2021. The deviation of the Chinese CAs performance is examined, for all the main antitrust conduct categories, from the optimum level, as proposed by economic theory and evidence in at least the last 2 decades (following the developments in theoretical and empirical Industrial Organisation3), thus obtaining a measure of the quality of enforcement. Subsequently, an indicator is constructed that measures the “total economic analysis” undertaken in the assessment of the cases “irrespective of burden of proof”, i.e. an indicator that also incorporates, apart from the CAs performance in assessing whether conduct is anticompetitive, the efficiency arguments proposed by defendants and assessed by the CAs. Finally a comparative analysis of our results is undertaken with the results obtained for the EC antitrust decisions in Katsoulacos and Makri (2021) and for other countries (mainly Russia) in Katsoulacos et al. (2021).

The measurement of these indicators relies on an updated version of the methodology originally developed by Katsoulacos, Avdasheva and Golovanova (2019)4 and revised by Katsoulacos and Ulph (2022) and Katsoulacos (2023a, 2023b). This is applied on a dataset constructed by the authors that consists of the judgment documents of all the 127 antitrust infringement decisions by by antitrust enforcement agencies of China from 2010 to 2021. We also utilize the dataset in order to identify the legal standards (LSs) adopted by the agencies when assessing different conducts. There is close relationship between the LSs and the indicators mentioned above.

The dataset distinguishes decisions according to the main conduct types associated with the enforcement of Competition Law. It also contains information about the decisions appealed and about whether or not the decisions were finally annulled by the Appeal Courts.

The structure of the paper is as follows. First, we describe briefly our methodology and the mapping between the assessment screens and the different LSs that we aim to identify using our antitrust infringement decisions database. We distinguish among 8 LSs each one corresponding to a specific level of economic analysis applied in the assessment procedure (including efficiency arguments), as explained in the next section. Then we construct Cumulative Economic Analysis Indicators (CEAI) associated with each decision i.e. indicators that measure the quantity of economic analysis used by the agency in examining anticompetitive effects. We distinguish among four CEAI depending on the extent and type of economic analysis utilised. Decisions are categorised into four main conduct types or groups: hard-core horizontal agreements (G1), other horizontal agreements and concerted practices (G2), vertical agreements and restraints (G3) and abuse of dominance practices (G4). Next, we measure a number of indices. We measure the Weighted Cumulative Economic Analysis Indicators (WACEAI) adopted for each conduct type (the weights being the share of each CEAI used in assessing decisions for each conduct), and the degree of concentration of the agencies’ decisions of each conduct type5. The higher the concentration on a specific CEAI when assessing specific cases of a conduct type the greater the certainty with which it can be anticipated that a specific amount of economic analysis will be used in the future for a conduct of that type.

We also present indices of the quality of enforcement measuring the extent of deviation of WACEAI from its optimal (i.e. its error minimizing) level for each conduct type relative to the maximum theoretical deviation, as well as an overall index of quality of enforcement by the agencies across all conduct types. With regard to the optimal level of LSs, following the theoretical literature reviewed above, a very broad consensus has emerged in the last two decades among economists that the optimal LS for G1 (hardcore horizontal agreements6) is strict Per Se Illegality, or, more accurately, for EC, a by-object restriction, while the optimal LS for G3 (vertical agreements and restraints) and G4 (abuse of dominance practices) is full effects-based (or rule-of-reason), which require a significant increase in the quantity of economic analysis and evidence examined. For G2 (concerted practices), the optimal LS is considered to be a by-object restriction for information exchanges involving future prices and full effects-based otherwise .

Finally, we calculate an indicator that captures the Total Economic Evidence (TEE) considered on average during the assessment of decisions in a given conduct type, irrespective of the burden of proof, i.e. taking into account both the quantity of economic evidence used by the agencies to assess anticompetive effects, as well as efficiency defence arguments by the defendants if the latter are assessed by the agencies. Therefore, TEE is measured as the weighted average of the LSs adopted in the assessment of the decisions of a particular conduct type.

Our analysis shows that, on average, economic analysis has played a relatively small role in the decisions made by Chinese law enforcement officials from 2010 to 2021, and there was little analysis of consumer welfare effects and potential efficiency effects in vertical monopoly agreements and illegal activities that were considered to abuse market dominance. We have found that the quality of law enforcement by China’s antitrust law enforcers needs to be improved. Also, considering the evolution of law enforcement standards over time, we found that there has been no sustained and significant improvement in the quality of competition law enforcement in cases of abuse of dominant positions (enforcement under Article 17 of the Anti-monopoly Law7). Finally, comparing in detail the quality of enforcement, across different conduct categories and overall, between Chinese Authorities, DGCOMP (EC) and CMA (UK), we show that while the Chinese Authorities’ enforcement record lags behind in quality on average that of DGCOMP and CMA in the assessment of abuse of dominance cases it is well ahead of countries established at about the same time like Russia8.

As already noted, our methodology, begins with the premise that there are variations in the LSs adopted in competition law enforcement, encapsulating the idea that it is best to think of LSs as forming a continuum9 at the extremes of which are the strict Per Se (or object based) and the (‘full’) Effects-Based (or rule-of-reason) standards. The progression towards LSs closer to full effects-based requires that additional ‘blocks’ or components of economic analysis are applied in order to assess a number of screens. These are associated with the definition of the relevant market, the assessment of market power, the assessment of whether market power raising or exclusionary effects are present, the articulation of a theory of consumer harm, the assessment of efficiency effects and the assessment of what is, ultimately, the net welfare impact of the conduct. These screens are shown below.

We can then distinguish 8 different LS between strictly Per Se and Quick Look III, as shown in Table M2 below.

Our dataset consists of the judgment documents of 127 antitrust infringement decisions by antitrust enforcement agencies of China from 2010 to 2021, specifically, from four Chinese antitrust agencies: State Administration for Market Regulation (SAMR; after 2018), the Development and Reform Commission, the Administration for Industry and Commerce, and the Market Regulation Bureau. We also collected data on whether cases are appealed and whether they are reversed (or annulled) by Appeal Courts. Table 1 below lists the total number of infringement decisions by group (or type of conduct), the decisions appealed, and the decisions reversed on appeal.

China’s antitrust law enforcement has achieved a very significant progress in the 15 years since its inception in 2008. Of course, it is still in a period of learning and transformation: institutions have been adjusting, so much so that after maintaining a decade long tripartite enforcement structure, the three former agencies were consolidated in 2018 forming a brand new agency (State Administration for Market Regulation, SAMR). Given that competition law legislation was only recently put into place, and the lack of case assessment experience, it is inevitable that when enforcement record is judged in terms of the quality of assessment procedures (as we have tried to do in this article) the “quality” of enforcement will lag behind two of the most advanced and experienced agencies in the world, DGCOMP and CMA. In comparisons with the antitrust enforcement record of DGCOMP, France, Greece and Russia, all 3 countries lag behind DGCOMP (Katsoulacos et al, 2021). But most importantly, China’s agencies are clearly ahead of FAS (the Russian agency) that also started in 2008. The value of Q for conduct group G4 (abuse of dominance) which is low in China, at 0,45, is just 0,27 in Russia. Concerning the overall quality index WAEQ which is 0,72 in China, is just 0,54 in Russia.

There are some more reasons that could be responsible for slowing down the adjustment to using more economic analysis for assessment of conduct group G4 in China. The first is that the competition law in China primarily follows the European law and so for enforcement practice Chinese enforcers are likely to be influenced primarily by the EC and EU enforcers (Zhang, 2021). Now, in Europe the application of a more-economic approach to abuse of dominance practices started slowly after 2008 and became more dominant in the last ten years (as shown clearly in Katsoulacos and Makri (2021) DGCOMP’s enforcement record in abuse of dominance case improved considerably over time only after 2008. When Chinese enforcers started implementing the law in 2008, the approach used on older EC cases that were already decided was much less based on economic analysis than it has in more recent years. This factor has also influenced the lack of efficiency analysis in Chinese cases.

Another factor is that, as noted above, in China administrative agencies are not constrained by the judicial review system in a way that induces them to adopt assessment procedures in order to satisfy standards, for reaching liability decisions, considered optimal from the point of view of minimizing decision errors, as are the DGCOMP and EU member state or US agencies. This is also reflected in the very low appeal rate, as judged by international standards (i.e. as compared to countries we have examined: EC, UK, France, Greece and Russia) and the zero reversals in the (limited number) of cases appealed (Zhang, 2021).

Finally, account has to be taken of the fact that the creation of economic analysis capabilities in antitrust case assessment is a slowly developing process. And, the lack of economic analysis capability means that the cost of obtaining economic analysis evidence is too high, which tends to force antitrust agencies to an approach of Per Se illegality replacing high administrative costs with relatively high positive error costs, resulting in de facto strict law enforcement. Since the establishment of the State Administration for Market Regulation (SAMR) in China, the enforcement capacity and level of law enforcement have improved. However, the experience and level of law enforcement by various provincial regulatory bureaus are uneven, and their grasp of and ability to implement competition law enforcement standards inevitably varies.

On average, economic analysis has played a relatively modest role in the decisions made by the Chinese antitrust law enforcement agencies from 2010 to 2021, and there was little analysis of exclusionary and consumer welfare effects and potential efficiency effects when assessing conduct for which it is considered important, in the last 2 decades at least, to incorporate this analysis before reaching liability decisions. Thus, after constructing a series of indicators to measure the quality of law enforcement, we found that the quality of antitrust law enforcement by China’s enforcers needs to be improved in the case of conduct types for which it is essential to rely for case assessment on the examination of economic screens that requires the application of economic theoretical and empirical analysis. Considering the evolution of law enforcement standards over time, we found that, unfortunately, there has been no sustained and significant improvement in the quality of law enforcement in the important case of abuse of dominant positions for which the level of economic analysis and quality has been found especially low in the period under examination. Nevertheless, our analysis shows that China’s agencies have been improving their assessment procedures faster than agencies like FAS (the Russian agency) that also started antitrust enforcement at the same time.