THE IMPROVEMENT OF CHINA'S ANTI-MONOPOLY LAW ——ESTABLISH PRIVATE ENFORCEMENT SYSTEM
Since the adoption of the Anti-Monopoly Law of China on August 1, 2008, only a subtle positive shift in demonopolization has been seen in the Chinese business sphere, given that a very small number of cases were ruled in favor of a plaintiff, while most of the cases ended up in reconciliation (Xiaoming, n.d.).
The Anti-Monopoly Law ultimate purpose is a development through legal means of a fair competition on the markets that will boost the establishment of a market economy (Ming, “Fanlongduan Fa de Zuoyong”, n.d.). The Law provides legal imperative mechanism to prevent and solve existing competition problems, ensures competition and protects businesses from unfair competition (Ming, “Fanlongduan Fa de Zuoyong”, n.d.).
One of the major practical flaws of the Anti-Monopoly Law that affects its implementation is its dominating focus on the public enforcement, while the private enforcement provisions are stipulated only in Article 50 of the Law. The current research, inter alia, suggests the drafting, adoption of new laws and amending the existing ones in order to change the situation.
The presented research paper will include four sections, with the first one giving the background information and nowadays situation with the said law; the second section discusses the benefits of improving the private enforcement system; the third section elaborates on the functions of the private enforcement; and the fourth section presents the importance and meaning behind the improvement of the private enforcement from the economic, cultural and legal viewpoint.
A. History of China’s Anti-monopoly Law
Being planned since 1994 by the National People’s Congress regular committee, the Law has been greatly improved during the years before its adoption in 2008 (Hong, n.d.). Multiple discussions and arguments eventually led to the inclusion of such articles as 4th, 5th, 6th, 7th and 8th focusing on the development and refinement of the public enforcement system (Yanlin, n.d.).
B. Summarize China's Anti-monopoly Law
The main content of the Chinese Anti-Monopoly Law repeats the worldwide accepted provisions, including the prohibition of agreements about monopolization of markets, unauthorized creation of business concentration and abuse of domination on markets (Miaomiao, “Zhongguo Fanlongduan Fa de Zhuyao Neirong”, n.d.). A specific feature of Chinese practice is a high level of regulation of economic entities by state, including specifically designed anti-monopoly organs (Xiaoming, n.d.).
C. Current State of China’s Anti-monopoly Law
Chinese anti-monopoly regulation largely covers public enforcement of law, creating unequal allocation of power between public organs and private entities. It is highly advised to even out the situation, but adjusting the Law.
Ⅱ. THE ADVANTAGES OF PRIVATE ENFORCEMENT
The private enforcement helps avoid indirect, time-consuming and costly procedures, which is a great benefit of the system.
- Private Subjects Can Protect Their Legitimate Interests Directly
The private enforcement ensures that those, who suffer most from the breach of the Anti-Monopoly Law, i.e. subjects of private law, particularly, consumers, will be able to protect their rights and get a decent compensation of their losses by directly attending to the issue (Xiaoming, n.d.).
That is to say, the government will create a special legal regulation that will partially transfer powers from the anti-monopoly authorities to the interested parties, as currently the public enforcement covers mostly public interests, and authorities do not have much benefit from the law enforcement. Their task usually lies in detecting unlawful monopolization and punishing the infringers, while compensation of losses of private entities is usually a secondary matter. However, private subjects, whose economic interests are dependent on the quality law enforcement and due compensation of their losses, will make sure that the legal provisions are observed (Xifeng, n.d.). This constitutes a direct nature of the private enforcement.
- Private Subjects Can Protect Their Legitimate Interests Quickly
The private subjects are the main party interested in a timely application of the anti-monopoly legislation and adherence to the set procedures, as their profits directly depend on it (Jian, n.d.). As they observe markets and their competitors’ actions frequently, they possess more valuable information about compliance, legal and illegal activity of other businesses, while the authorities would have to spend much time gathering it. Thus, private entities detect the breach of law by the competitors faster and can speed up the process of law enforcement. Given such situation, the anti-monopoly organs could take advantage of it and cut their investigation spending, encouraging private entities share information. This feature makes the private enforcement a faster tool for solving problems compared to the public enforcement (Jian, n.d.).
- The Cost of Private Enforcement Is Low
As the amount of money allocated to the anti-monopoly organs is limited by budget constraints, unfortunately, the authorities cannot invest them into the investigation of each case of the Law violation (Jian, n.d.). This is where the private enforcement comes into view. In order to increase the number of cases in procedure, it is necessary to close the gap between the public and private interest cases by dividing responsibilities between public and the private enforcement.
Such division will financially help the government, as private subject interested in investigations will invest into them. This time, authorities will still handle public interest cases that would not be financed by private entities due to lack of their interest; however, the burden of private cases would partially lie on the concerned parties that would spent money on the procedures to get a faster result that by seeking resolution from the anti-monopoly bodies that would take much more time to get. As the same practice is proven to be effective in civil law, e.g. in regards to breaches of contracts, it would be highly advised to include it in the anti-monopoly legislation (Xiaoming, n.d.). This constitutes a low-cost nature of the private enforcement.
Ⅲ. THE FUNCTIONS OF PRIVATE ENFORCEMENT
- Private Enforcement Can Guide Operators and Public Enforcement
As the current legislation is quite ambiguous and unclear, only increase in practice of case resolution can clear many disputable clauses of the Law (Jian, n.d.). The private enforcement will add more clarity to understanding standard measures necessary to be taken by private subjects in order to comply with the regulations and avoid breaking the law.
Meanwhile, the public enforcement can also take advantage of looking into the private enforcement practice when trying to grasp the peculiarities of the cases and ruling them out. The examples of the private enforcement practice of other countries provide evidence that the private enforcement is much more valuable in this regard (Jian, n.d.).
- Private Enforcement Can Deter Violation
As the private entities are more vulnerable to violations of the anti-monopoly legislation, as said before, they are more informed about the competitors’ activities. Therefore, the governmental bodies can seek cooperation with affected private subjects to detect violation and punish the infringers (Jian, n.d.). Thus, the development of the private enforcement will increase the number of investigations and lawsuits, which will have more dishonest businesses bear huge costs and deter them and other companies from similar actions in future (Yicongkuan, 2000, p. 423).
The forced compensation and more cases, where compensation will be a part of an investigation result, will also increase deterrence of companies from violating the law (Jian, n.d.). The adjustment of compensation provisions, increase of their amount (as in the United States) and adoption of prejudgment interest clauses (as in the European countries) will greatly increase the risks of the companies planning to engage in illegal competition (Jian, n.d.).
C. Private Enforcement Can Supervise Public Enforcement
As private companies and government have regular interaction, strong ties and beneficial cooperation to ensure that the interests of both parties are met, it is necessary to create supervision over the governmental regulating activity, as it may sometimes be subject to the negative influence of businesses that try to promote their interests through various tempting options like bribes or reciprocal favors and through lobbying (Jian, n.d.). The lack of economic interest of governmental staff in resolving the case can lead to their negligence or acceptance of bribes from the affected companies.
Although there is a possibility of private settlements emerging due to the high efficiency of enforcement, balancing out the powers between private and public enforcement will help reduce the problem.
Ⅳ. THE SIGNIFICANCES OF PRIVATE ENFORCEMENT
The private enforcement has three reasons to exist: for economic, cultural and legal development.
- The Economic Significance
The increase in power of the private enforcement can have a significant impact on the development of competition and China’s economy as a whole.
Shifting to a market economy, the Chinese government agreed to transfer its regulating power to the private sector of economy, i.e. to businesses (Hong, n.d.). As it no longer fully controls the market activity of the companies, the latter often abuse their economic freedom by breaching the fair competition regulations in order to increase personal power and gain. Unfair competition, illegal concentrations and other negative practices prevent other market players from equal presence and participation in the trade, as the perfect market economy concept of optimal resource allocation is breached (Hong, n.d.). Reducing the number of state-owned property and privatization of large companies can lead to a creation of the domination of one or several players on the market, which might in turn lead to unfair practices. By introducing a working private enforcement system, the government can deter companies from violations, guide them in regards to fair and legal practices and supervise the adherence of all parties to the law. This all will help China create a strong, competitive and attractive market, especially now that the country has become one of the global superpower. International investments, creation of joint ventures, and mergers and acquisitions usually follow the development of the market economy and increase the country’s market activity (Miaomiao, “Fanlongduan Fa Yiyi Zhongda”, n.d.). The private enforcement system will only be of a great help to the public one during the times of growth.
B. The Cultural Significance
The impact of private enforcement on culture can be traced through the system’s active contribution to the development of the competitive way of thinking and viewing the market processes and other aspects of life.
Competition does not only regulate the market, it also instills within the individuals a specific understanding of what is means to compete. To compete means to be as strong as others, or stronger. Fair market economy destroys companies that either create low-quality goods and services, or use non-effective methods of production or management (Ming, “Fanlongduan Fa de Zuoyong”, n.d.). To keep their place on the market, business entities need to make effort to stay by inventing new methods, thinking in a new way, making investments in development of new products or methods, improving processes and products, while cutting the costs and at the same time being available to the consumers. Such development aimed at survival of the company gives boost to the improvement of the country’s economy, which in turn leads to improvements in all aspects of life.
C. The Legal Significance
The private enforcement will help public authorities better understand gaps in the legislation, peculiarities of law implementation and possible adjustments that are needed to be made not only in the Anti-Monopoly Law, but in other legislation acts.
As unlawful monopolization of the market can lead to drastic effects on the society, market economy, business entities present on the market, and even simple citizens, the private enforcement will help identify and address the issues faster and in a more effective way by turning attention of anti-monopoly authorities and public in a timely manner before the negative impact has created a danger situation on the market (Miaomiao, “Fanlongduan Fa Yiyi Zhongda”, n.d.). The fair market competition is the main provider for the country’s economy, as the competitors cannot have the opportunity to allocate the economic power in their hands and abuse it in their interests. And although many articles of the Anti-Monopoly Law seem to limit the competition abilities of the market players, such measure can be taken to meet the goal of the Article 1 of the Law, which is to protect consumers and society from illegal competition practices and their effects (Miaomiao, “Fanlongduan Fa Yiyi Zhongda”, n.d.).
Along with the Anti-Monopoly Law, there are several other laws, whose main subject is competition. One of such law is the law on unfair competition (Miaomiao, “Fanlongduan Fa Yiyi Zhongda”, n.d.). However, the main difference between the regulations of the latter and the discussed law is the level of regulation development. The features that the other laws lack are, inter alia, developed systems of enforcement, countermeasures, and respective government organs to implement the laws. For this reason, the Anti-Monopoly Law can serve as an example and a framework for the improvement of other competition laws, which, after being duly altered, will form a single consistent competition regulation system of the country.
Any imbalance in power allocation between the government and private sector can lead to negative effects. While both public and private enforcement systems are equally important for the effective regulation of market competition, the private enforcement is currently less developed and active (Xiaoming, n.d.). Its urgent improvement and implementation can help to change the existing situation in China, where public sector is currently widely abusing its power through bribes and power monopolization (Xiaoming, n.d.).
Eventually, the private enforcement will balance out and complete the anti-monopoly regulating system of China.
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