How to Antitrust in 2021: Internet is the focus of law enforcement, law revision may be completed

In 2021, the Internet sector will still be the focus of anti-monopoly law enforcement, and a number of important cases will appear.

“Anti-monopoly” has become a buzzword in China’s economy recently, and it keeps appearing in high-level meetings.

Following the proposal of “strengthening anti-monopoly and preventing the disorderly expansion of capital” at the Politburo meeting on December 11, 2020, this important work was also emphasized at the Central Economic Work Conference a week later, requiring the improvement of platform enterprise monopoly identification, data collection and use management , consumer rights protection and other legal norms.

At the same time, the State Administration for Market Regulation has investigated and dealt with a number of anti-monopoly cases involving the Internet field in accordance with the Anti-Monopoly Law and the Anti-Unfair Competition Law, which has attracted widespread attention.

Regarding the “anti-monopoly” that will continue to be “hot” in 2021, China Business News interviewed Xu Guangyao, a professor at Nankai University Law School.

Professor Xu Guangyao has been engaged in the study of the Anti-Monopoly Law for more than 20 years and is one of the earliest scholars in my country to start the study of the Anti-Monopoly Law. He believes that in 2021, the Internet sector will still be the focus of anti-monopoly law enforcement, and a number of important cases will appear, and the introduction of the new “Anti-Monopoly Law” will be a major event worth looking forward to in the anti-monopoly field in 2021.

How to Antitrust in 2021: Internet is the focus of law enforcement, law revision may be completed

The Internet sector will become the focus of anti-monopoly

Yicai: At the end of 2020, both policies and case judgments indicated that the anti-monopoly force was continuously strengthened. Why do you think it will be so vigorously anti-monopoly at this point in time?

Xu Guangyao: On the one hand, the reason is that the Internet industry is an emerging industry that has developed relatively rapidly in this century. In the early stage of development, due to the vast market space, the main effort of operators is to occupy these spaces as soon as possible, and most of the positive effects displayed during the development process are positive. After a certain stage of development, there will be less room for continued development, and monopolistic behaviors will appear to restrict competition and seek profits.

On the other hand, the reason is that in the early stage of the implementation of the Anti-Monopoly Law, since the operation mode of the Internet business has not been fully developed, it is not easy to grasp the laws of various monopolistic behaviors. This problem exists in all. Therefore, there are not many law enforcement and litigation cases in various countries, but both the theoretical and practical circles maintain their attention to this field and continue to conduct research from various perspectives.

During these explorations, some important cases have become the focus of research by scholars of the Anti-Monopoly Law all over the world. People have gained a better understanding of issues such as the criteria for defining the two-sided market in the Internet field, the method for determining dominance, and the method for analyzing competition effects. Great progress.

At the beginning of the implementation of the Anti-Monopoly Law, we often heard a saying, “We must prudently supervise emerging industries and maintain the modesty of the Anti-Monopoly Law”, so as to avoid improper supervision itself that would cause damage to efficiency, Instead, it violated the original intention of the Anti-Monopoly Law. But today that statement is no longer appropriate. From the current point of view, the monopolistic behavior of the Internet industry has fully demonstrated its harmfulness and hinders the healthy development of the industry. The Anti-Monopoly Law should do more, instead of deliberately being modest.

Yicai: There have been several punishment cases recently, including three mergers and acquisitions that were punished by the State Administration for Market Regulation. The VIE structure is no longer a reason for Internet companies to evade anti-monopoly declarations; ” before and after the unfair price behavior was punished by the State Administration for Market Regulation; investigation of suspected monopolistic behavior such as “choose one from two”. What do you think the current antitrust penalties focus on?

Xu Guangyao: The focus of the next crackdown will be on monopolistic behavior in the Internet field. China’s anti-monopoly law enforcement has a characteristic, that is, after a certain period of time when a certain case is relatively successful, it will continue to strengthen key law enforcement in this field based on the experience gained. the key of. This can give full play to the “scale effect” of existing experience and improve the efficiency of law enforcement.

Therefore, in the next few years, the Internet field will also become a key area of ​​investigation and punishment for anti-monopoly law enforcement. After long-term law enforcement and long-term exploration of the laws of the Internet, law enforcement agencies have a deeper understanding of legal principles and rules, and it is likely to focus on investigating a batch of cases as efficiently as possible in this field. And the types of monopolistic behavior in the Internet field may be more and more complex. Internet giants have gone deep into the community group buying market and have also received policy attention. What do you think will be the monopoly problems?

Xu Guangyao: What needs to be paid attention to in the Anti-Monopoly Law is whether Internet companies engaged in predatory pricing behavior when they entered the community group buying process, and it is the predatory pricing behavior that needs to be investigated and dealt with, not the market entry itself.

The operation of predatory pricing behavior is divided into two stages: in the first stage, the actor lowers the price below the cost in order to expand its own loss, forcing the competitor to lose money; after the competitor withdraws from the market, the actor will enter the market. In the second stage, raising the price to the monopoly level not only recovers the cost of plunder, but also obtains a profit above the competitive level. Among them, the second stage is the purpose of the behavior.

Article 17 of my country’s “Anti-Monopoly Law” clearly stipulates: “Business operators with a dominant market position are prohibited from engaging in the following acts of abusing their dominant market position: … (2) Selling commodities at a price lower than cost without justifiable reasons; …” Of course, the method of application of this article should be supplemented by supporting legislation, rather than the literal meaning of the article. In particular, there is a theoretical obstacle to the application of Article 17 to predatory pricing behavior: in general, Come on, predatory pricing is a way of creating dominance, not a way of exploiting existing dominance.

The application of Article 17(2) presupposes that the actor has a dominant position, which leads to the logical paradox of “eggs”: when the party’s price is lower than the cost, it does not yet have a dominant position; After gaining dominance, it is no longer priced below cost. In order to eliminate this contradiction, it is suggested that the criteria for determining dominance stipulated in Article 17(2) be further clarified.

Anti-monopoly law revision or completion in 2021

Yicai: What major events do you think will happen in the antitrust field this year?

Xu Guangyao: First, there should be a number of major cases in the anti-monopoly field in 2021; the second is the revision of the Anti-monopoly Law. At the beginning of 2020, the revision of the Anti-Monopoly Law has completed the stage of soliciting opinions, and it has entered the internal deliberation. within the focus of legislative work.

In my opinion, the revision of the Anti-Monopoly Law may be accelerated and is expected to be launched in 2021, and its supporting legislation will also be more comprehensive, including the Anti-Monopoly Guidelines on the Platform Economy (Draft for Comments) (hereinafter referred to as the Anti-Monopoly Law). Guidelines) may also be issued, and law enforcement in the Internet field will be strengthened.

Yicai: What is the focus and difference between the Anti-Monopoly Law and the Anti-Unfair Competition Law, and how to jointly maintain the market economic order?

Xu Guangyao: There is a big difference between the Anti-Monopoly Law and the Anti-Unfair Competition Law. The Anti-Monopoly Law focuses on maintaining the freedom of competition, while the Anti-Unfair Competition Law focuses on maintaining fair competition; “Maintain the competitiveness of the market, that is, a competitive market structure, while the “Anti-Unfair Competition Law” focuses on maintaining competitors. The two complement each other and jointly maintain the operating order of the market economy.

Specifically, the purpose of various monopolistic behaviors regulated by the Anti-Monopoly Law is to create or maintain market power by restricting competitive activities, that is, “the ability to increase profits by raising prices”. For example, competitors constitute obstacles for each other to raise prices, so they reach a monopoly agreement to eliminate competition with each other, thereby jointly forming the ability to raise prices. A monopoly agreement is governed because it creates the possibility of raising prices, which would lead to less output and hurt efficiency.

The “Anti-Unfair Competition Law” maintains the fairness of competition, targets counterfeiting, commercial slander and other unfair competition behaviors, and stops excessive and disorderly competition, thereby forming a fair competition, which is incompatible with market forces. relation.

When the “Anti-Unfair Competition Law” was revised in 2017, provisions on unfair competition on the Internet were added to regulate acts such as malicious incompatibility by operators, and cooperated with anti-monopoly in the Internet field, from prohibiting unfair competition and prohibiting restrictions. From the perspective of competition, standardize the market competition order and promote the healthy development of the Internet industry. However, it is not enough to add clauses. It is also necessary to provide necessary standards and methods for the evaluation of “maliciousness”. The Anti-Monopoly Law has been implemented for more than 12 years since it came into effect on August 1, 2008, and needs to be revised according to the new situation in economic life. In 2020, the Anti-Monopoly Law (Draft Amendment) has also completed the public consultation. What do you think will be the highlights of the revision of the Anti-Monopoly Law? What are your suggestions for the revision of the Anti-Monopoly Law?

Xu Guangyao: The Draft Amendment (Draft for Comments) focuses on the Internet field, adding anti-monopoly provisions in the Internet field for the first time. When determining that operators in the Internet field have a dominant market position, network effects, economies of scale, lock-in effects, mastery and handling of related issues should also be considered. capacity of the data. This helps to demonstrate the importance attached to the Internet domain. However, a more detailed explanation of the criteria and methods for determining dominance is still needed, in order to provide the necessary guidance for examining methods such as network effects and economies of scale.

In addition, the core question that needs to be answered most in the revision of the Anti-Monopoly Law is the relationship between efficiency and competition, that is, the legislative purpose of the Anti-Monopoly Law.

The Anti-Monopoly Law is not essentially a law to maintain competition, but a law to promote efficiency. Under a competitive market structure, competitors are unable to raise prices and can only increase profits by expanding output, thus increasing efficiency; however, in some cases, imposing necessary restrictions on competition can lead to an increase in output. Efficiency should be given top priority, and these competition restrictions should be allowed, rather than unilaterally maintaining competition for the sake of maintaining competition. The so-called efficiency includes two types of output maximization and innovation acceleration. The former is called static efficiency and the latter is called dynamic efficiency.

Article 15 of the Anti-Monopoly Law stipulates the exemption conditions for monopoly agreements, including those for improving technology, researching and developing new products; for improving product quality, reducing costs, increasing efficiency, unifying product specifications and standards, or implementing specialized division of labor, etc. 7 items.

This provision makes it difficult to understand the relationship between the seven categories of exemption grounds. In EU law, efficiency is collectively referred to as “promoting the production and sales of products, or promoting economic and technological progress”, which includes two types: “output efficiency” and “innovation efficiency”. Articles can also use this generalization method, rather than the above-mentioned enumeration, which not only misses, but even makes mistakes.

For example, if there is competition between enterprises in terms of specifications, an agreement with uniform specifications may constitute a monopoly agreement, which is the object of review itself, not the reason for exemption. Therefore, in Article 15, “unifying product specifications and standards or implementing specialized division of labor” should be deleted.

Yicai: On November 10, 2020, the State Administration for Market Regulation issued the Anti-Monopoly Guidelines. What role do you think the Guidelines will have?

Xu Guangyao: The Anti-Monopoly Guidelines will become a guiding document for anti-monopoly compliance in the Internet industry. The combination of the Anti-Monopoly Law and the Anti-Monopoly Guidelines shows the attitude of regulators to strengthen law enforcement against Internet companies, and it also gives companies a wake-up call.

However, some presentations of the guidelines also need to be further refined. For example, the “Anti-Monopoly Guide” clearly expresses its negative attitude towards “choose one” behavior. “Choose one of two” is a popular saying, and its terminology in the “Anti-Monopoly Law” is “exclusive transaction”, including two types of exclusive purchase and exclusive sale. Exclusive transactions may constitute abuse of dominance, may become a tool of monopoly agreement, or may not constitute monopoly. The specific situation should be determined according to the circumstances of the case, and it needs to be proved that it satisfies the monopoly agreement or abuse of dominance. elements.

At the same time, exclusive transactions can sometimes have efficiency consequences such as preventing free-riding, preventing lock-up, and maintaining the unity of product and corporate image. Even if it constitutes a monopoly, if it is necessary to achieve these efficiencies, it can usually be legal. Therefore, exclusive dealing is not always prohibited. The content of the guide should be more detailed.

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