Study Of The Antitrust Laws Of The Abuse Of Market Dominance Rules

The Anti-monopoly Law of China is currently under review. Due to the lackof a competition culture and the insufficiency in the experiences of lawenforcement, more researches are still needed for quite a few theoreticalissues as well as law enforcement issues, among which, prohibition onabuse of dominant market position is one critical topic. In consideration ofthe aforesaid, the present Author makes an in depth study into this areafrom six perspectives.Starting from the fundamental principle of prohibition on abuse of dominantmarket position, the Author addresses the issue of "relevant market" in thefirst place. "Relevant market" is not only the carrier of competition but alsoa critical factor to be considered by the law enforcers when making analysis,defining the scope of competition and ascertaining the competition relations.Following a comparison of various legislations and judicial judgments inrelevant jurisdictions, the Author studies in greater detail the concept andimplications of "relevant market" and the approach of determining the"relevant market". Based on a further legal and economic analysis into thevarious key elements of "relevant market", a conclusion is drawn thatproduct, territory and time shall be the major factors in defining thecoverage of the "relevant market", while, as the individual case may be,other economic indicators may also need to be taken into account for a morecomprehensive assessment. Excessively broad or narrow definitions ofrelevant market will both lead to discrepancies in the law enforcement. TheAuthor recommends that, in the future enforcement of China'sAnti-monopoly Law, importance shall be attached to the function ofeconomic indicators when defining "relevant market" and substitutabilitymay be used as a main vehicle in analyzing the relevant market. Necessaryadaptations shall be made, as the case may be, in order to make properjudgments which are compatible with the real circumstances in China.Chapter 2 is a discussion on the "dominant market position", which is apre-condition for abuse. The Author studies in this Chapter the debates andconvergence on "dominant market position" in the international communityas well as the origin, pros and cons of dominant position. The Author argueson the characteristics, contents and extensions as well as the differentinterpretations of this concept respectively under economics and law. Noconsistent and clear conclusion can be found on this issue under economicsand law, which seems rather confusing. The Author makes a more detailedanalysis by invoking such well-known cases as Microsoft and EU'sContinental Canned Food, and well proves and makes up for the defects andshortages in the clauses of legislation. The Author comes to the conclusionthat the "dominant market position" is understood differently undereconomics and law. What are emphasized under law are the market powerconstituting the dominant position, the nature of law-breaching and theconsequence of damage. After analyzing the shortcomings in China'slegislation, the Author comes up with the proposal that it be made clear inour legislation that the conditions of "market power" and "impact oncompetition" shall be both satisfied before any dominant position can bedetermined;in the mean time, the issue of relative market advantageousposition shall also be taken into account in particular.Chapter 3 addresses the issue of determining "dominant marketposition" from both perspectives of economics and law, a set of rules arerequired for determining any dominant position. Economic analyticalapproaches shall be resorted to in reasonably determining the existence ofany dominant position, which shall start from the measurement of the size ofmarket power. In this Chapter, the Author studies the significance andindexes of determining dominant market position using such measurementvehicles in economics as CRn, HHI, etc. and the theories of marginal cost,elasticity of demand, multiple price analysis;the Author clarifies that"market share" plays a pivotal role in determining any dominant marketposition. Also taking into account the laws and practices in otherjurisdictions, the Author summarizes that market share shall be the core inthe determination of dominant market position while other economicindicators are also considered as an integral part. To redress thediscrepancies in market share, such reference factors as timing, ability toinfluence the market prices and quantity, ability to control purchase andsales market, possibility of market access of other competitors as well asthe import and export of the products all carry important value. Using anempirical analytical approach, the Author makes an analysis of the marketconcentration and market structure of major industrial and commercialsectors in recent years in China;given the legislations and the shortages inthe resources of law enforcement, the Author recommends that marketshare shall be the principal consideration in determining dominant marketposition, approaches of determination and construction shall be bothemployed;at the same time, considering the characteristics of current Chinamarket, extent of market reliance shall be a way of assessment in someparticular situations.Abuse of dominant market position is a special concern in the anti-monopolylaw as well as the focus in Chapter 4. The wrongdoer of abusing is always aparticular entity and the victims of the abuse are enterprises and consumers.Importantly, such abuses will result in anti-competition consequence. Aftera comparative study of regulatory rules and precedent cases of abuse inrelevant jurisdictions, it's found that the approaches of defining "abuse"vary from one jurisdiction to another. The general style legislation (the bestexample of which is US) is in fact not laissez-faire, such legislation isactually supported by case law. The seemingly loose legislation is in factpretty water-tight. The criteria of applying the principles of "rule of reason"and "per se rule" are derived from the attempt to monopolize. In civil lawjurisdictions, the definition of "abuse" is normally followed by anenumeration of specific abusing acts and their appearances, such asmonopoly price, predatory pricing, price discrimination, etc., which is adefinite and foreseeable approach, though it might fall short of expectationsin some cases as well. In the light of the laws and practices of US, EU andinternational organizations, the Author conducts a special study on theconnection between intellectual property protection and anti-monopoly, andbelieves that intellectual property law and anti-monopoly law share thesame objective of law;anti-monopoly law will not take special care ofintellectual property issues, should any holder of intellectual property rightsabuse his rights, however, the anti-monopoly law will not be an onlooker.Lastly, taking into consideration of the actual situation of abuses in China,the Author analyzes that the drawbacks of our legislation are mainlyreflected in the lack of operability and the insufficiency in the liabilityassumption. Hence the Author suggests that it be made clear in thefundamentals of our legislation that "dominant market position per se is nota sin, what is punishable is the abuse of such position", people shall lookmore at the acts rather than the structure itself when judging if there is anyabuse. On the top of the basic definition, acts of abuse and their appearancesshall be enumerated in the legislation as much as practical. Meanwhile, thelaw shall refrain from going excessively harsh and absolute;the principle of"reasonableness" shall normally be applied in determining the existence ofany "abuse".The Author discusses in Chapter 5 the regulation of dominant marketposition by anti-monopoly law in an attempt to address the legal concernswith the abuse. The Author studies in depth into two major regulatoryapproaches which are internationally accepted: "theory of structure" and"theory of act". Looking at their theoretical fundamentals, the evolution ofUS anti-trust law and the regulatory approach, as well as the legislationobjectives of EU, UK, Germany and Japan, we may observe that the twotheories are learning from each other, though the "theory of act" remainsprevailing at the moment. Japan has the harshest legislation and adopts dualprohibitions on both act and structure. "Economy of scale" still appears tobe something scarce in China, hence the mission of combating monopolyshall be to promote market competition rather than to eliminate theeconomic scale. It's therefore recommended that China shall adhere to the"theory of act" as its fundamental theory in regulating abuses, wherebythose anti-competitive acts shall be regulated in particular.As the consequence under law of those issues addressed in the forgoingChapters, legal liability is the theme of Chapter 6. In this Chapter, the Authoranalyzes the jeopardy of abusing the dominant market position through aneconomic model, based on which the Author makes a comparative researchinto the liability models in the two major legal systems in the world,discusses in particular the principles of assumption of legal liability as wellas the main components thereof and voices his own thoughts on the legalliability for abusing dominant market position in China's Anti-monopoly Law.Under US law, illegal monopoly is regarded as a severe criminal offensewhich is detrimental to the interests of the public, competitors andconsumers. Legal liabilities shall be imposed corresponding uponwrongdoers, as the nature of each individual case may be. The punishmentsare both of a punitive nature and a compensation nature with triple financialcompensation being the core;the legislation in civil law jurisdictionsfeatures the division of legal liability into administrative, civil and criminalliabilities according to different segments of law, and the ways of sanctioninclude removal of hindrance, fines, damages, prosecution of criminalliability which may be accompanied by criminal fines. Following an analysisof the problems in China's present legislation and law enforcement in thearea of abuse of dominant market position and on the basis of the researchachievements in the present Article, the Author makes his recommendationsaccordingly for our legislature as follows: in the light of the experiences ofcivil law jurisdictions in their legislation, legal liability shall be a reflectionof penalty as well as compensation;discontinuing law-breaching acts, fines,damages shall be the basic ways of undertaking legal liabilities by thewrongdoers, while criminal liability is mostly taken as a deterrent and theultimate remedy.