The Public Interest-Defense in
Cartel Offenses
and
Chinese Antimonopoly Law
Xu LIU
University Heidelberg
Structure
• The cartel regulation in AMLC
• Cases:
1. The rule of an assosiation for companies
eliminating varmints on maintaining a Minimum
Price in Shenzhen
2. Price fixing for the newly published books
3. Structural Crisis Cartels in the industries with
overcapacity and pollution
4. Export Cartel of solar panels
5. Conclusion & Perspectives
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Multiple Aims of AMLC
• Aims (Art. 1 AMLC)
– preventing and restraining monopolistic conducts,
– protecting fair competition in the market,
– enhancing economic efficiency,
– safeguarding the interests of consumers and social public
interest,
– promoting the healthy development of the socialist
market economy.
• perfects macro-control and advances a unified, open,
competitive and orderly market system with the
competition rules in accordance with the socialist
market economy (Art. 4 AMLC)
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The cartel regulation in AMLC :
European principles with German exceptions
• Art. 13 and Art. 14 AMLC similar to Art. 101 I TFEU
• Definition of monopoly agreements：agreements,
decisions or other concerted actions which eliminate
or restrict competition. (Art.13 II AMLC)
• Prohibited monopoly agreements:
– horizontal:
• fixing Price, limiting the output or sales, dividing the markets,
• restricting the purchase or development of new technology,
boycott (not hard core cartels in EU Competition Law)
– vertical: fixing or maintaining the resale price;
– others: determined by the Anti-monopoly Authority under
the State Council (up to now none)
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The cartel regulation in AMLC :
European principles with German exceptions
•
Art. 15 I AMLC (like Art. 101 III TFEU but with exceptions from the old version of
German Act Against Restraints of Competition before 6. amendment ):
–
Efficiency defense : (1) R & D; (2) agreements for rational production and specifications (§ 5 , § 5a GWB old
version) (3) coorperation between small and medium-sized business operators; (like § 5b GWB old version)
– (4) for the purpose of achieving public interests such as conserving energy, protecting
the environment and relieving the victims of a disaster and so on;
– (5) for the purpose of mitigating serious decrease in sales volume or obviously excessive
production during economic recessions; (§ 4 GWB old version)
– (6) for the purpose of safeguarding the justifiable interests in the foreign trade or
foreign economic cooperation; (§ 6, § 7 GWB old version)
–
•
(7) other circumstances as stipulated by laws and the State Council. (§ 8 GWB old version)
Art. 15 II AMLC （ONLY）for items 1 through 5 ：the business operators must
additionally prove that the agreement can
• enable consumers to share the interests derived from the agreement, and
• will not severely restrict the competition in relevant market.
• Article 56 AMLC Exempted Agreements in agriculture (like Council Regulation (EC) 1184/2006)
This Law does not govern the ally or concerted actions of agricultural producers and rural economic
organizations, e.g. production, processing, sales, transportation and storage of agricultural products.
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The cartel regulation in AMLC
implemented by public and private enforcement
• Public enforcement in competitive context:
– Price-relevant Agreements: Bureau for the
Implementation of AMLC in NDRC (National
Development and Reform Commission) and their local
bureaus in provinces;
– Other Agreements: Bureau for the Implementation of
AMLC SAIC (State administration for Industry and
Commerce) and their local bureaus in provinces;
• Private enforcements:
– litigations in local courts, while the reform for the
independce of the local courts from the provicial
governments is still just at the beginning.
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Case: The rule of an assosiation for companies eliminating
injurious insects and other organisms in Shenzhen
The facts:
• In most of cities in south China the citizens have the
obligation of paying the fees for eliminating injurious
insects and other organisms their buildings;
• The guiding price for eliminating varmints calculated by
the government of Shenzhen in 1997= 0.1 Yuan/m2
• Rule of an association: unfair competition, if the price
of services of its members <0.1 Yuan/m2 *80%
• The plaintiff : this rule violated the AMLC
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Case: The rule of an association for companies eliminating
varmints on maintaining Minimum Price in Shenzhen
The judgment of the court of first instance
confirmed by the court of second instance:
• Eliminating varmints is necessary for the safeguard of
the public health and environment as public interest;
• While the costs for the workers have been increasing
since 1997 -> if price <0.1 Yuan/m2 *80% -> unfair
competition -> bad service harms the public interest;
• The members of this association are 268 companies,
32% of 838 companies eliminating varmints in
Shenzhen (population 10 mil.) -> not severely
restricting the competition in the relevant market
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Case: The rule of an assosiation for companies eliminating
varmints on maintaining a Minimum Price in Shenzhen
The questions:
1. Is price fixing necessary for guarantee of a good service?
2. Was the guiding price calculated by the government of
Shenzhen in 1997 market-oriented, e.g. taking the
development of more effective insecticide and the
different scales of buildings and scale effect of the big
conmpanies into account?
3. What is the market share of the 268 members of this
association?
4. Did other companies of the other association on this
market follow the guiding price？
5. Is the big sum of companies in the relevant market in
Shenzhen a sign for lower intensity of competition because
of maintaining a Minimum Price?
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Case: Price fixing for newly published books
2010, the associations of the publisher and book shops made a selfdisciplining rule to give up discounts for the new published books within
first year, whereas the ministry of press and publishing supported them.
– Reaction of NDRC:
ordered these associations to stop the application of their rule, but
without publishing official announcement of the punishment for these
associations and their members who have followed this rule
In 2012, based on Art. 15 AMLC these associations have applied for an
exception for the agreement between the publisher, bookshops and
online sellers of books to restrict the resale discounts of the books within
the first year after publishing in order to guarantee variety in publications
– Reaction of the NDRC:
• have researched the english, german and EU Law,
• but have no public official announcement on their reaction to this
application, meanwhile, there is no indication for the
implementation of this agreement. It suggested NDRC has denied
the application.
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Structural Crisis Cartels in the industries with overcapacity
and pollution
Background:
1. The real estate bubbles burst in small and medium-sized
cities in China
2. The promotion of local governors depends mainly on the
increasing GDP of their provinces,
3. Weak supervision in enviromental protection and state
aids over the local governments which have big influence
on the state- or province-owned banks and can give the
rights of usage of lands at low price
4. The pressure from the central government on the
manufacturing industries for energy conservation and
pollution reduction, especially SO2, CO2 ,NO2 and very
fine dust (PM 2.5/PM 10)
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Structural Crisis Cartels in the industries with overcapacity and
pollution
1.

–
–
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Cement cartel in Province Liaoning
In 2010 the association of cement industry in Province Liaoning made a self-disciplining rule:
•
Stop producing cement from December to February; if production continues, just for the
consumers outside of Province Liaoning
•
Price fixing to complement the loss because of their break in winter to ensure that all of their
members can afford the cost of changing the facilities to meet the requirements of
enviromental protection.（from 260 Yuan/t increased to 380 Yuan/t ）
•
Reaction by Administation for Industry and Comerce in Province Liaoning
– This rule as price and quantity cartel violated the Art. 13 I Nr. 1 and Nr. 2 AMLC, whereas
it was good for protecting the environment; did not meet the requirements of Art. 15 II
AMLC, restricted the competition seriously and harmed the consumers.
– Fine: 16.37 Mil. Yuan
From December 2012 to April 2013 cement producers in three provinces (including Liaoning) in the
northeast China stopped their production again
•
Reaction by NDRC: has not punished “since this anticompetitive agreement lasted shortly and
these companies had low income in 2012 because of the overcapacity.“ (answer by the
speaker of NDRC for journalist)
In 2013 the application based on Art. 15 AMLC by the Chinese Association of Cement Industry for
an exception for the agreement among their members to maintain price with reduction of the
production
•
denied by NDRC
12
Structural Crisis Cartels in the industries with overcapacity
and pollution
1. Coal-Electricity syndicates instead of the cartels of sellers
and buyers in Province Shanxi
• Before 2013: Because of the overcapacity in coal industry in
Shanxi after that the private companies can mine since 2003, the
coal sellers have negotiated every year together with the group of
main electricity companies as buyer;
• 2013: The government of Province Shanxi promoted the 4
groups of bankrupt mining companies to establish joint ventures
with the main electricity companies respectively.
2. The capacity trade-off between the steel manufacturers
on different relevant geographic markets
Trade between Chongqing Steel Groups corp. in mid-west China and
Hebei Steel Groups corp. in east China with capacity, but promoted
by local governments
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Export Cartel of solar panels
 An company in USA, Solyndra, which filed for bankruptcy last year,
filed an antitrust suit against three Chinese solar companies —
Suntech Power Holdings, Trina Solar, and Yingli Green Energy —
charges include price fixing, predatory pricing, and a conspiracy to
monopolize, U.S. District Court in San Francisco
 A Director of Suntech Americas told Bloomberg that the allegations
are “baseless.”
This suit is at least an alarm for the interpretation of the exception for
the anti-competitive agreements in international trade Art. 15 I Nr. 6
AMLC,
even they will be good for the environment and can help them to overcome the
overcapacity, but the price fixing which harmed the competition in oversea
markets could lead to distortion of the competition between Chinese competitors
and distortion of trading results by Chinese financial institutions, thus, the case
would become political, if the claimed conducts was true.
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Conclusion on the practices of Chinese authorities and
courts in the cartel cases with public interest defense
• Approval by Chinese authorities:
– no exception for price fixing in most of the cases with “public
defendse“, e.g. protection of environment, overcoming the structural
crisis
• Critics:
– divisive inplementation of AMLC by the different authorities and
courts
– less transparency
– shortage of guidance for the undertakings on the inplementation of
Art. 15 AMLC and clearly distinguish the public interest from the
economic interests of the participants in the cartel
– shortage of using economics methods
• Experimental alternative for the cartels with public interest defense:
– vertical intergation
– horizontal cooperation based on overcapacity trade-off
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Perspectives:
What can be learned from ACM?
1. Making procedures transparent;
2. Using more economic approach;
3. Taking the influence of the exception on the
international trade and the foreign potential
competitors´ influence on the domestic
consumers into account;
4. Comparing the effects of the cartels with the
effects of the fusions, especially joint-ventures,
which are the alternatives for the participants in
cartels.
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Thank you very much for your
attention！
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