COMPARATIVE ANALYSIS OF MERGER CONTROL POLICY Lessens for China Jingyuan MA Hl intersentia Cambridge - Antwerp - Portland
CONTENTS Acknowledgements Table ofcases Table oflegislation List of Abbreviations List oftables and Figures v xv xvii xxi xxiii Chapter 1. Introduction 1 1. Introduction 1 2. Motivation 3 3. Research Question 4 4. Structure 6 5. Methodology 7 6. Limitations 8 Chapter 2. The Development of Competition Law and Merger Control Policy in China 11 1. Introduction 11 2. The 1978 Market Reform 14 3. Merger and Acquisition between SO Es 17 3.1. Reform ofsoes 17 3.2. Merger Policy for SOEs 19 4. Merger and Acquisition by Foreign Investors 21 4.1. Foreign Direct Investment 21 4.2. Entry into the WTO 24 4.3. Merger Policy for Foreign Investors 25 5. An Overview of the Anti-Monopoly Law and the Merger Policy 29 5.1. Competition Policy before the AML 29 5.2. The Drafting Process of the AML 33 5.3. An Overview of the AML 35 5.4. Enforcement of the AML 36 5.4.1. Three Enforcement Agencies 36 5.4.2. MOFCOM: the Merger Enforcement Agency 38 5.5. Merger Guidelines after the AML 39 5.5.1. Notifikation Guidelines 39 5.5.2. Assessment Guidelines 40 ix
Comparative Analysis of Merger Control Policy 6. Non-Economic Goals in the AML and Merger Policy 42 6.1. The Development of a Socialist Market Economy 43 6.2. Concerns of Protecting SOEs 43 6.3. Promoting Public Interest 43 6.4. National Security Review 45 7. Interpreting the Multiple Goals of the Chinese Anti-Monopoly Law 45 7.1. Academic Scholars 46 7.1.1. Non-Economic Goals versus Economic Goals 46 7.1.2. The Development of a Socialist Market Economy 47 7.1.3. Competition Policy versus Industrial Policy 48 7.1.4. The Considerations of Public Interests 49 7.1.5. Considerations of National Security 51 7.1.6. Efficiency and Weifare Standards 51 7.2. The Legislative Debate 54 7.3. Policy Makers 54 7.4. Conclusion 57 8. Conclusion 58 Chapter 3. Goals of Competition Policy in the US and the EU: A Law and Economics Perspective 61 1. Introduction 61 2. Goals of Antitrust Law in the US 63 2.1. Introduction 63 2.2. Social and Political Goals of Antitrust 65 2.2.1. Populism 65 2.2.2. Influence of Populism in Court 66 2.2.3. Criticism from Academic Scholars 68 2.3. Harvard School 69 2.3.1. The Structure-Conduct-Performance Paradigm 69 2.3.2. Harvard School's View on the Goals of Antitrust Law... 70 2.3.3. Influence of the Harvard School in Court 71 2.4. Chicago School 72 2.4.1. Chicago School's View on the Goals of Antitrust Law 73 2.4.1.1. EfRciency as the Sole Aim 73 2.4.1.2. Rejecting the Goal of'maximizing Competition' 74 2.4.1.3. Bork's Use of'consumer Weifare' 76 2.4.2. Influence of the Chicago School in Court 77 2.4.3. Criticism from Academic Scholars 79 2.4.3.1. Interpreting Legislative Intent 79 2.4.3.2. The Concerns of Distributive Effects 80 2.4.3.3. Protecting Competition as the Goal 82 x
Contents 2.5. The Debate on Weifare Standards in the Post-Chicago Era 84 2.5.1. Consumer Weifare Standard 86 2.5.1.1. Who is the Consumer? 86 2.5.1.2. What is Consumer Weifare? 87 2.5.1.3. Consumer Weifare or Consumer Surplus?... 88 2.5.1.4. Consumer Weifare Maximization 89 2.5.1.5. Consumer Choice 90 2.5.2. Consumer Weifare versus Total Weifare 91 2.5.2.1. Distributive Issues 91 2.5.2.2. Implementation Issues 92 2.6. Conclusion 93 3. Goals of Competition Law in the EU 94 3.1. Introduction 94 3.2. The Market Integration Goal 95 3.3. The Consumer Protection Goal 96 3.3.1. Consumer Weifare versus Total Weifare 96 3.3.2. Defining 'Consumer Weifare' 97 3.4. The Total Weifare Goal and Industrial Policy 99 3.5. The Influence of Ordoliberalism 101 3.5.1. Ordoliberalism 102 3.5.2. The Influence of Ordoliberalism on EU Competition Law 104 3.6. The Evolution of Legal Doctrine 108 3.6.1. Historical Backgrounds 108 3.6.2. The Market Integration Goal of the EEC 109 3.6.3. The Extension of the Policy Goal of the TEU 110 3.6.4. The Social Goals of the TFEU 110 3.7. A Viewpoint from the Competition Commissioners 112 3.7.1. Commissioner Karel Van Miert (1993-1999) 112 3.7.2. Commissioner Mario Monti (1999-2004) 112 3.7.3. Commissioner Neelie Kroes (2004-2010) 113 3.8. Conclusion 115 4. Conclusion 116 Chapter 4. Integrating the Efficiency Goal in Merger Control Policy: A Comparative Perspective 119 1. Introduction 119 2. Economic Theories of Efficiency 122 2.1. Productive Efficiency 123 2.2. Allocative Efficiency 123 2.3. Dynamic Efficiency 124 xi
Comparative Analysis of Merger Control Policy 2.4. Conflicts between Allocative, Dynamic and Productive Efficiencies 128 2.5. Unsolved Issues 130 3. Economic Analysis of Merger Effects 131 3.1. Economic Effects of Mergers 131 3.2. The Williamson Tradeoff. 132 3.3. Impact on the Choice of Weifare Standards 133 4. Integrating Efficiency Goals in the US Merger Control Policy 135 4.1. Introduction 135 4.2. Academic Debate 137 4.2.1. Concerns of Legal Uncertainties 137 4.2.2. Economic Techniques to Measure Efficiencies 138 4.2.3. Efficiency Defense 139 4.3. Merger Guidelines 139 4.3.1. 1968 Horizontal Merger Guidelines 139 4.3.2. 1982 Horizontal Merger Guidelines 140 4.3.3. 1984 Horizontal Merger Guidelines 142 4.3.4. 1992 Horizontal Merger Guidelines 142 4.3.5. 1997 Horizontal Merger Guidelines 143 4.3.6. 2010 Horizontal Merger Guidelines 144 4.4. Judicial Treatment 145 4.4.1. Hostility toward Efficiency Claims 145 4.4.2. Cautiously Accepted Efficiency Claims 147 5. Integrating Efficiency Goal in the EU Competition Policy 149 5.1. Introduction 149 5.2. Merger Regulation 151 5.2.1. Merger Regulation 4064/89 151 5.2.2. 2004 EC Merger Regulation (ECMR) 152 5.3. Case Law 153 5.3.1. Negative View on Efficiency Claims 153 5.3.2. Cautiously Accepted Efficiency Claims 154 6. Conclusion 155 Chapter 5. The Impact of Competition Goals on Merger Cases: A Comparative Perspective 157 1. Introduction 157 2. An Overview of Merger Cases in China 159 2.1. Merger Policy in China: Five Years' Implementation 159 2.2. A Brief Overview ofmofcom's Merger Decisions 161 2.2.1. An Overview of the MOFCOM Published Cases 161 2.2.2. Observation: How Does the MOFCOM Investigate? 165 2.2.3. Observation: The High Use of Behavioral Remedies 165 xii
Contents 2.2.4. Observation: The Focus on Market Share 168 2.2.5. Summary 168 3. The Economic Theories and Techniques for Horizontal Merger Analysis: A Brief Summary 175 3.1. Market Power 175 3.2. Indirect Assessment of Market Power 177 3.2.1. The Definition of the Relevant Market 178 3.2.2. Market Concentration 180 3.2.3. Market Share 181 3.2.4. The Consideration of Efficiency Gains 182 3.2.5. Entry 184 3.2.6. Buyers' Power 185 3.2.7. Remedies 186 3.3. Direct Assessment of Market Power 187 3.3.1. Introduction 187 3.3.2. Merger Simulation Techniques 190 4. Comparing Merger Policy in the US, the EU and China 192 4.1. Introduction 192 4.2. Comparing Merger Policy in the US and the EU: A Theoretical Debate 192 4.2.1. The Concepts of'monopolization versus 'Dominance'... 193 4.2.2. The Definition of Relevant Market 194 4.2.3. The Treatment of Econometric Techniques 195 4.3. Comparing Merger Policy in the US, the EU and China: Empirical Evidence 196 4.3.1. Comparing Merger Decisions in the US and the EU 196 4.3.2. Empirical Evidence on EU Merger Policy 198 4.3.3. Empirical Evidence on Merger Policy in China 202 4.3.4. Conclusion 211 4.4. Comparing Merger Policy in the US, EU and China: Two Gase Studies 211 4.4.1. Panasonic/Sanyo Case 212 4.4.1.1. Case Summary 212 4.4.1.2. A Comparative Study on Economic Analysis of Merger Effects 213 4.4.1.3. Conclusion 214 4.4.2. Seagate/Samsung and Western Digital/Hitachi Case 215 4.4.2.1. Case Summary 215 4.4.2.2. A Comparative Study on Economic Analysis of Merger Effects 216 4.4.2.3. Conclusion 219 4.5. Summary: What Can the Evidence Teil? 220 xiii
Comparative Analysis of Merger Control Policy 5. Does Goal Matter? A Discussion on Competition Goals and Merger Policy 221 5.1. Different Goals, Different Results? 221 5.2. Moving Towards Economic Goals? 223 5.3. Implications for Chinese Policy Makers 225 6. Conclusion 228 Chapter 6. Conclusions 231 1. Different Goals in the US, the EU and China 231 2. Competition Goals and Merger Analysis 233 3. Lessons for China 233 4. Future Research 234 References 237