Trade Associations and Private Antitrust Litigation in China

Abstract

Trade associations present a peculiar issue in China’s competition law, due to their unusual origin and development. To facilitate the still on-going government restructuring during the past three decades, most of China’s trade associations were created primarily to take over the redundant/retired officials and regulatory functions that reorganized administrative agencies had to divest. The inherent semi-government role of the trade associations in China often enables them to exert a greater influence on the market competition than their counterparts in mature market economies. Trade associations have figured largely in China’s competitive landscape. In the drafting process of the Anti-Monopoly Law (AML), cartels orchestrated by trade associations already posed a major concern regarding private monopolies. Since the AML entered into force in August 2008, trade associations have remained in the spotlight in enforcement activities.

However, at the same time, not many private antitrust suits have been brought against trade associations. In fact, Article 50 of the AML generally states that a business operator “shall bear civil liabilities” if its monopolistic conduct causes losses to aggrieved parties. In the Provisions on Several Issues concerning the Application of Law in the Trial of Civil Dispute Cases Arising from Monopolistic Conduct published in May 2012, the Supreme People’s Court further lists “articles of association in violation of the AML” as a cause of civil action against trade associations. These provisions seem to have paved the way for private parties to bring a civil lawsuit against trade associations violating the AML. Yet they also leave much room for interpretation and point to general issues in civil law and procedure, the application of which in relation to the AML remains largely unexplored. In contrast to administrative sanctions on trade associations pursuant to Article 46(3) of the AML, the legal basis for enforcement activities, it is unclear in the law whether or to what extent in a civil lawsuit a trade association should be held liable for losses caused by monopolistic conduct by its members but organized by the association.

As a result, so far private antitrust suits against trade associations have not appeared to be a desirable option. On the other hand, the limited number of antitrust cases in which a trade association was indeed sued for civil damages sheds important lights on how the courts have tackled ambiguities in the law. This paper examines some of the major issues that the courts have addressed in several reported court judgments of such cases, in the context of both the AML and relevant laws, in order to analyze the emerging legal rules applicable in civil suits against trade associations for AML violations.

Keywords: China, anti-monopoly law, trade association, private antitrust litigation

JEL Classification: K21