Antitrust in China: The Problem of Incentive Compatibility

This paper reviews China's recent efforts to enact a competitionpolicy (antitrust) law. We focus on three issues: (1) What isthe substance of the proposed law, and how does it differ fromexisting antitrust law in other countries, (2) How will thelaw be implemented or enforced, and how will those who mustimplement this law interpret their mandate, and (3) What willbe the likely effects of this law given China's unique historyand cultural heritage. We emphasize China's economic, legaland regulatory contexts in which an antitrust law may be enforced.Our central focus is the problem of establishing a substantiveand procedural legal framework that is incentive-compatiblewith economic efficiency and growth. The draft law could beimproved, both to increase its clarity and to make its enforcementmore consistent with the goal of achieving improvements in economicefficiency. Nevertheless, there is much merit in the draft,especially its strong focus on reducing anticompetitive practicesof state-owned enterprises (SOEs) and other government bodies.However, our major difficulty with the new law is that, in theabsence of a tradition of reliance on the rule of law, Chineseand foreign enterprises will find it very difficult to relyon the antitrust statute or the actions of the courts in Chinaas a basis for predicting the antitrust liability that mightresult from various business practices. Therefore, the principalvector by which antitrust law (or indeed any law) affects economicbehavior is absent from the Chinese scene. Unless the bureaucracythat enforces the new antitrust law actively pursues a policyof consistent enforcement based on written guidelines, staredecisis, or other sources of predictability, the substance ofthe statute itself will have little significance. That outcomewould represent a significant loss for the economic welfareof the Chinese people.     

Market Failure and Non-Standard Contracting: How the Ghost of Perfect Competition Still Haunts Antitrust

Modern antitrust policy has a ‘love hate’ relationshipwith non-standard contracts that can overcome market failure.On the one hand, courts have abandoned various per se rulesthat once condemned such agreements outright, concluding thatmany non-standard contracts may produce benefits that are cognizableunder the antitrust laws.¹ The prospect of such benefits, itis said, compels courts to analyze these agreements under theRule of Reason, under which the tribunal determines whethera given restraint enhances or destroys competition.² At thesame time, courts, scholars, and the enforcement agencies haveembraced methods of rule of reason analysis that are undulyhostile to such agreements.³ In particular, courts and othersare too quick to view such agreements and the market outcomesthey produce as manifestations of market power. This articleseeks to explain why these agreements are still the object ofundue hostility.     

Fertility and migration in the heart of the industrial revolution.

This study examines demographic growth and change in Tilleur in the valley of Meuse in Belgium during 1807-80 during the process of industrialization and urbanization. The proportion of immigrants (foreigners and Flemings) increased from 15% in 1807 to 65% in 1856. After 1856, population and industrial growth stabilized. During 1856-66 the proportion of natives stabilized, and the proportion of Flemings increased. It is argued that in Tilleur there were two phases: a foundation phase of industrial and population growth and a phase of maturation with decreased non-native population and greater similarity between groups. Immigrants contributed to the birth rate in greater proportions than their proportion in the population of Tilleur. During 1847-66 native population increased annually from 2.4% to 3.8%. Migrants' annual increases were diminished by the effects of mortality but expanded by the influence of in-migration. During 1857-66 the proportion of foreigners declined and marked the transition to a new phase. During 1830-66 the sex ratio grew from 93 to 119. During the Industrial Revolution in Tilleur, women shifted from outnumbering to undernumbering men. The iron and coal in the region attracted men. The sex ratio among the Flemish was 214 in 1866. In 1830 the proportion of fertile women was higher among immigrants and declined thereafter. Age at marriage rose for natives and declined for immigrants. The native population structure by sex, age, and marriage did not favor the birth rate. During 1866-80 the birth rate of foreign immigrants and rural natives declined, the birth rate of natives doubled, and the gap between these two groups narrowed. The changes among immigrants during the foundation phase led to fertility decline in the maturation phase. Marriage and migration interactions linked the industrial revolution with the demographic transition.