May 13 2009
NERA seminar: MOFCOM and antitrust in china
I figured I would get around to this eventually. But it took a while to finally find some time to post my notes from the NERA Antitrust and Litigation in China seminar. There were 3 speakers, so I will post multiple blogposts—because they each had a different focus.
Greg Leonard presented about the role of MOFCOM. After giving an overview about the development of the legal and judicial system in China, he launched into an overview of MOFCOM and talked about the Coke-Huiyuan scenario. More after the jump.
After observing that the role of antitrust enforcement in China was broken up into three roles (MOFCOM does mergers, SAIC does non price exclusionary behavior, NDRC does price related like cartel investigation), he made the observation that MOFCOM knows a lot about the principles of antitrust but knows very little about the actual practice of antitrust regulation. So what’s the implication? MOFCOM does basics well, but cannot handle complex and subtle cases. (and that it helps to bring an economist for that—the NERA sales pitch of course)
But that is something interesting to consider if you are an antitrust practitioner with experience in the US or EU, but want to expand into China. (like everyone else) Because it means that your killer or profound arguments might not work here. But money and economics apparently talks.
Greg used the Coke-Huiyuan deal to illustrate. MOFCOM recognized that Coke was dominant in carbonated soft drinks, and would try to use its market power to bundle and tie into the juice drink sector. (how would it actually do that practically speaking is another matter) But because of that, somehow the deal would harm local juice drink companies. So long story short, they nixed the deal.
The problem? MOFCOM didn’t look at anticompetitive bundling analysis well. Never discussed: (1) would bundling foreclose competition or (2) would Coke increase juice prices. Never did a SSNIP test. Nada. It was just a lot of theory without deep analysis.
And so NERA’s advice? MOFCOM won’t be able to go deep. But what talks is economic analysis. So hire an economic consultant if you plan to do any antitrust work in China.
Do I agree? Sure, if its complex enough. (you would be crazy if you didn’t have some economist on your side for a complex antitrust round) But my impression was that NERA thought that the economist meant everything in a case before MOFCOM. I don’t know if I can agree with that. Because China’s legal and regulatory bodies will get better at this. This was one case with some very nationalistic public opinion at stake… and so my cynicism tells me that either the decision was manufactured, and if it wasn’t and MOFCOM is truly that unskilled, it won’t remain that way. (Think China before the WTO) China will become more and more sophisticated. It might take time, but don’t think an economist will necessarily save you.
