Even though the enactment of an Antimonopoly Law could be seen as one of the cornerstones of pro-market economic reform in China, the adoption of the law is just a first step in China's search for ordered competition and pro-market reform. In light of the current Chinese competition climate and the existing legal system and environment, in my view there will be some challenges to the enforcement of the Chinese Antimonopoly Law in its earlier years. One should not be surprised by this likelihood. All countries that have enacted competition laws have faced this struggle.

    A. The Conflicting Goals of the Law

    Article 1 states: "This Law is enacted for the purpose of preventing and curbing monopolistic conduct, protecting fair market competition, enhancing economic efficiency, maintaining the consumer interests and the public interests, and promoting the healthy development of socialist market economy." That means that the immediate purpose of Chinese antimonopoly Law is to guard against and prohibit monopolistic conduct, and to safeguard fair market competition, but it appears that the ultimate goals of the law are to improve economic efficiency, and maximize consumer welfare and public interest.
    In China, what is meant by economic efficiency includes both allocative efficiency and productive efficiency. Without doubt, the use of the antitrust law to preserve competitive market may achieve efficiency of allocation of resources, and achieve efficiency of production in business. These efficiencies may ultimately maximize the consumer welfare due to lower price and better quality. But "public interests" provision in this article is a controversial concept. Some might consider the public interest as a consumer interest; others may consider it a national interest. In the literal meaning of the word "public," in my view, it should be neither for the purpose of a few or for certain business, but instead for the universal good of the Chinese people. In any case, what is the "public interest" is not clearly defined and may be ambiguous. Yet it is a critical part of the law. For example, under Articles 15 and 28, Business Operators may obtain an exception from the law if they can prove that their monopoly agreements or transactions are for the purpose of achieving the public interest.
    But in practice, what kind of Business Operators are more likely to demonstrate such an exemption? State-owned, large companies are the obvious examples. Other provisions in the law may favor such entities as well. For example, Article 7 states: "With respect to the industries controlled by the State-owned economy and concerning the lifeline of national economy and national security or the industries implementing exclusive operation and sales according to law, the State shall protect the lawful business operations conducted by the business operators therein …." Article 5 also provides that "Business Operators may, through fair competition, elect to form associations [joint ventures] and lawfully consolidate in order to expand their operational scope and increase their market competitiveness." It seems that Article 4 provides an industrial policy that may guide the implementation of Articles 5 and 7: "The State shall make and implement competition rules suitable for the socialist market economy, perfect the macro control, and improve a united, open, competitive and well-ordered market system."
    Theoretically, protecting the legitimate interest of Business Operators, even protecting the legitimate interest of monopolists, is not wrong, because any legitimate interest of any one should be protected. But if an antimonopoly Law at same time protects the interests both of the Business Operators and consumers, the enforcement authority would be in a dilemma: who's interest should be privileged if there is a conflict between them? During the first review by the Standing Committee of NPC in June 2006, the word "protecting the legitimate interest of business operators" was deleted according to the suggestion by the NPC. But the adopted law still retains the goal to protect the public interest. Because the consumer interest and the public interest are parallel, it may still be difficult for the Antimonopoly Law Enforcement Authority to make a choice. For example, consumers usually prefer to have choices and hence usually prefer competition. But the Article 5 encourages transactions in order to "expand the business scale" (supposedly to increase efficiencies). Additionally, Article 28 states that any transaction that is "in harmony with the public interests" shall not be prohibited. Yet, a transaction that benefits some public interest may not benefit competition. Thus, it is not difficult to imagine that the goals to protect consumer and to protect the public interest could thus easily conflict with each other. For example, it may be in the public interest for automobiles to be crashworthy, but competition may lead to more inexpensive, and hence less crashworthy automobiles.
    Of course, similar conflicts between different goals exist in other competition laws. For instance, the objective of article 82 is the protection of competition on the market as a means of enhancing consumer welfare and of ensuring an efficient allocation of resources. Thus, is the purpose of EU competition law to protect competition? Or is competition only a tool for the purpose of consumer welfare and economic efficiency? In the EU, the controversy surrounding the goals of competition law may not influence the enforcement of competition law. In the United States, such general policy concerns are may be considered by any court in deciding whether to block a transaction. But in China, laws are more specific and are usually carried out to the letter. Thus, what the law means is fundamental. On the one hand, there are two policies in the law -- industrial policy and competition policy. Thus, any enforcement authority will have to decide which one is preferable. On the other hand, the Chinese Antimonopoly Law Enforcement Authority may lack that level of independence. For example, the Authority may find it difficult to balance its role on the one hand to protect consumers from "monopolistic conduct" and "safeguard fair market competition" or on the other hand to protect the public interests of a State-owned monopolistic enterprise.

    B. The Need For An Independent Antimonopoly Law Enforcement Authority.

    The establishment of an effective enforcement authority is a critical and most important precondition for an effective enforcement of the law. Even the Antimonopoly Law itself demonstrates an intent to establish only one agency and give it sufficient authority. But unfortunately, after more than decade of the drafting process, such an outcome is not that clear.

    1. No Unified Authority

    According to Article 10 of the Law, "The anti-monopoly law enforcement agency designated by the State Council (hereinafter referred to as the Anti-monopoly Law Enforcement Agency under the State Council) shall be responsible for the anti-monopoly law enforcement work." However, it is not clear which institution should be responsible for the anti-monopoly law enforcement. The legislative history contained in the explanation on the Draft of China's Antimonopoly Law submitted by the State Council to the Standing Committee of NPC in 2006 indicated that the Antimonopoly Law Enforcement authority may continue to be divided among the different agencies, as is the case today. On the other hand, it would make more sense if the State Council would consider a complete restructuring of existing agencies to make a unified enforcement agency. The Antimonopoly Law is simply not clear on this issue. As it currently stands, three enforcement agencies -- the National Commission for Development and Reform (NCDR), the State Administration of Industry and Commerce (SAIC) and the Ministry of Commerce (MOFCOM) -- have parallel authority to enforce the Antimonopoly Law.
    In my view, having three parallel, competition law enforcement agencies would not only be inefficient, but it may also create conflict and friction between the three agencies. This potential conflict may become even more complex with the inclusion of such diverse authorities as the provincial, regional and municipal enforcement agencies (Art. 10) as well as the government agencies responsible for governing administrative monopolies (Art. 51). Having multiple, conflicting views of competition law will likely result in less authority and independence for any and all of the agencies because no enforcer may have the legal authority to override any decision by an alternative enforcer's decision not to enforce the Antimonopoly law against a specific wrongdoer. A more practical solution would be to have a unified enforcement agency with sufficient authority to enforce the Antimonopoly law. Such an agency could still delegate certain powers to other enforcers but would have the authority to make the final decision regarding enforcement, subject of course to review by the courts.

    2. The Antimonopoly Commission under the State Council

    Article 9 requires the State Council to establish the Antimonopoly Commission, which shall be responsible for organizing, coordinating, and guiding anti-monopoly work, and it shall have the following functions: (i) researching and formulating relevant competition policies; (ii) organizing investigations, assessing the state of overall market competition, and issuing an assessment report; (iii) formulating and promulgating anti-monopoly guidelines; (iv) coordinating the anti-monopoly administrative enforcement work; and (v) performing other functions as specified by the State Council. According to the paragraph 2 of this article, the State Council shall stipulate the composition of and the work protocols of the Antimonopoly Commission.
    With separate antimonopoly enforcement agencies, it is necessary for the State Council to set up an Antimonopoly Commission in order to coordinate and guide the antimonopoly work. In my view, no matter how it establishes this Commission, however, the Commission should also be an institute for promotion and advocacy of competition policy - perhaps like the United States Federal Trade Commission. But according to the draft submitted by the State Council to the Standing Committee of NPC, the Anti-Monopoly Commission under the State Council will likely be composed of the principals of relevant departments and organs of the State Council and certain experts. However, the majority of the departments and organizations of the State Council have experience in implementing only industrial policy and are generally not expert in competition law. For example, the NCDR and the SASAC (State-owned Assets Supervision and Administration Commission of the State Council) have other primary responsibilities. Thus, the Commission may become a coordinator among different organizations responsible for antimonopoly enforcement, but may not likely be as effective in determining or advocating competition policy. Such a Commission may be more effective if it is established as an independent agency that could develop the peculiar expertise necessary for the development of Antimonopoly Law policy and enforcement.

    C. The Relationship with the Regulators

    The prohibition of abusive conduct in the Antimonopoly Law is specifically directed at the Business Operator with a dominant or monopoly market position. But in China, there are numerous incumbent monopolists in the sectors of telecommunication, post, railway, electricity, banking and etc. Moreover in China, almost every State-owned monopolist is under supervision and administration of an industrial regulator according to a law or regulation related to that specific industry. For example, the Telecommunication Regulation stipulates "the supervision and regulation of the telecommunication industry shall be based on the principles of separation of government administration from enterprise management, elimination of monopoly, encouragement of competition and promotion of development, as well as the principle of openness, fairness, and impartiality." That means that when the relevant antimonopoly enforcement authority has the jurisdiction over the anticompetitive conduct in a regulated sector, any antitrust enforcement could raise difficult political questions.
    According to the draft submitted by the State Council to the Standing Committee in 2006, "If there are relevant laws and administrative regulations stipulating that the monopolistic conducts prohibited by this Law shall be investigated and handled by the relevant departments or supervisory organs, the laws and regulations are to be applied." In view of the doctrine of "regulatory capture," in particular in view of that fact that the State-owned economy in these regulated sectors, it is possible that many regulators may find it difficult to be neutral and independent when they are facing disputes between consumers and Business Operators in the sectors regulated by them. Additionally, the industry regulators normally focus on typical issues like technical problems or product safety and have little experience with competition policy or enforcement.
    Thus, I propose that the antimonopoly enforcement agency or agencies that result from the State Council's regulations be given decisive authority to enforce the Antimonopoly Law, even when it may be applied to regulated industries. For example, under the German Telecommunication Law, the regulatory authority for the telecommunication and the postal sector is responsible for preventing abusive behaviors in these sectors. But the Federal Cartel Office liaises closely with the regulatory authority in matters of market definition and market position. Additionally, competition enforcement in other regulated sectors, like electricity and gas, is still the responsibility of the Federal Cartel Office. In other countries, like the United States, the relationship between competition laws and regulated (or formerly regulated) industries has proved to be a difficult topic for the courts to handle. If possible, it would be preferable for these issues to be more clear in the new regulations that the State Council will promulgate next year.
    In the adopted Antimonopoly Law, there is no explanation about the relationship between the Antimonopoly Law Enforcement Authority and other regulators. This does not mean that this problem has been resolved. Instead, it may be determined by the State Council in the near future along with other issues related the enforcement authority as a whole. In the end, for the Antimonopoly Law to be effectively enforced, however, it is my recommendation that the State Council make the authority of the Antimonopoly Law Enforcement Authorities clear. If, however, the Council decides not to grant the Antimonopoly Law Enforcement Authority clear and decisive jurisdiction over the anti-competitive conduct of regulated industries, the resulting uncertainty may keep a large sector of the market outside of the effective scope of the Antimonopoly Law.

    D. Enforcement Mechanism for Administrative Monopoly
    Under the Antimonopoly Law, an "administrative monopoly" refers to the acts of the governments and their subordinate agencies that abuse administrative power to restrict competition. For instance, local governments may refuse to issue business licenses to enterprises that engage in transactions of commodities originating in other regions, and even confiscate their products or impose fines. With respect to departmental monopoly, the petroleum products market is a good example. In 1999, certain departments under the State Council issued a document to prohibit any other companies from wholesaling petroleum products except Sino hem and Patrician; this prohibition was renewed in 2001. The critics refer to this phenomenon as "doing business by abusing administrative power," even make comments that administrative monopoly is the most serious problem in today's China.
    Along with the gradually deepening economic reform, the State Council released "The opinions on encouraging and guiding development of non-public economy" in the beginning 2005. According to the opinions, the non-public economy should enjoy equal treatment with the state-owned enterprises in investment, tax, use of land and foreign trade. Obviously, eliminating administrative monopoly is the most important precondition for the realization of fair competition and equal treatment between different business ownership. Out of this consideration, the strongest appeal for breaking administrative monopolies comes from non-public enterprises. Accordingly, the provisions of Article 51 on administrative restraints on competition are not only desirable but also indispensable. This Article presents a clear rule that resolves such complex matters that under United States would be dealt with by Commerce Clause, or the state-action or filed-rate doctrines - certainly not easy issues to resolve under a common-law tradition and even more difficult to deal with absent the clear provision of Article 51.
    But unfortunately, Article 51 adds a provision that could detract from the clarity of the main provision: "Where any administrative agency or organization empowered by laws or regulations with responsibilities for public affairs administration engages in conducts that eliminate or restrict competition in abuse of their administrative powers, its superior agency shall order it to make correction." In my opinion, there are at least two reasons why the governmental agencies at the highest level may find it difficult to supervise and inspect the administrative restrictions created by the governmental organizations at a lower level. First, any administrative restriction on competition usually reflects treatment in favor of the State-owned entity, and behind that favoritism there always exists significant economic benefit for local, government-owned businesses or large State-owned enterprises. This situation makes it difficult for superior agency to keep a neutral attitude in a dispute between its inferior agency and the non-State owned enterprises or competitors from another region. Second, we have to think about the ability of the governmental agencies to deal with the restrictions on competition. Because the so-called "higher-level agency" could be any agency, it is not likely that it would have an experienced understanding of competition law or policy. Moreover, having numerous agencies determine what should be the competition policy of the State may yield conflicting goals that could be difficult to resolve, absent additional Antimonopoly regulation.
    I believe that it is likely that some administrative monopolies will be challenged by the Antimonopoly Law Enforcement Authority. But, absent clear authority or policy guidelines or recourse to a higher authority, such enforcement may be futile. I expect that the State Council will consider these issues, however, and hope that it will spell out such guidance and authority in the regulations that are expected to be promulgated in the next year.

    E. Conclusion

    In view of the challenges mentioned above, I believe that the initial enforcement of the Chinese Antimonopoly law will not be smooth. But that should not be surprising. It took decades for the United States to iron out its enforcement mechanisms and its laws to develop a coherent antitrust policy. But a deliberate and rapid resolution of the issues facing China in its Antimonopoly Law will be critical to the success of China in interfacing with the global market economy. On the one hand, without a unified Antimonopoly Enforcement Authority, the law will be difficult to enforce. On the other hand, without an effective prohibition of administrative monopoly, the law will have limited effect in today's China. It may thus become necessary to fully complete this competition law reform for China to promote and realize a greater separation of government administration of State-owned entities from competition management. Additionally, due to fact that the Antimonopoly Law lacks many of the implementation guidance and processes necessary for implementation of the law, the Antimonopoly Commission should formulate relevant guidelines or detailed rules for the implementation of the law as soon as possible, including guidelines for the definition of relevant market, for horizontal and vertical restraints, for technology transfer agreements, and for merger/acquisition control.
    Even though the implementation of the Antimonopoly Law faces challenges that should be expected with such a critical change in law, the promulgation of this Law should still be deemed as a significant milestone in the history of China, because this a very important step directed at pro-market reform. Along with the first step, there will be the second and the third steps, of course. I am very confident that China's growing and developing economy requires a strong watchdog to maintain free and fair competition in the world's fastest growing economy. In the end, economic globalization will certainly motivate China to continue down this path to establish an effective competition policy.