Assessing Unfair Pricing Under China's Anti-Monopoly Law for Innovation-Intensive Industries

57 Pages Posted: 2 Mar 2014 Last revised: 4 Mar 2014

David S. Evans

Global Economics Group; University College London

Vanessa Yanhua Zhang

Global Economics Group, LLC; Renmin University of China

Xinzhu Zhang

Chinese Academy of Social Sciences (CASS) - Research Center for Regulation and Competition

Date Written: March 1, 2014

Abstract

China, like a number of other antitrust jurisdictions, has a law concerning unfair pricing. This article develops an economic framework for applying the unfair pricing law in China. The framework draws on the experience of courts and competition authorities in other jurisdictions and the writings of various commentators, particularly economists, on unfair pricing in those jurisdictions. It shows that virtually all jurisdictions have decided to consider unfair pricing claims only in exceptional circumstances, and rarely, if ever, in innovation-intensive industries. For those cases that pass this screen and receive consideration, the courts and competition authorities then, under the leading test, insist on substantial evidence that the price is significantly higher than cost and is unfair given the value provided to the buyer. This article shows that the exceptional circumstances screen and the rigorous unfair pricing test are motivated by a recognition, supported by substantial empirical evidence, that successful firms must have the assurance of receiving significant rewards to induce them to invest time and capital in highly risky innovation that is the source of economic growth and welfare. It concludes by showing that this approach is consistent with modern Chinese economic policy.

Keywords: Anti-Monopoly Law, excessive pricing, unfair pricing, dynamic competition, antitrust, antitrust in high-technology industries, FRAND, China antitrust, unfair pricing, antitrust in innovation industries

JEL Classification: K21, K23, K40, L44, L43, L40, L51, L53, O21, O3, O31, O34, O38, P10, P22, P31

Suggested Citation

Evans, David S. and Zhang, Vanessa Yanhua and Zhang, Xinzhu, Assessing Unfair Pricing Under China's Anti-Monopoly Law for Innovation-Intensive Industries (March 1, 2014). University of Chicago Coase-Sandor Institute for Law & Economics Research Paper No. 678. Available at SSRN: https://ssrn.com/abstract=2403159 or http://dx.doi.org/10.2139/ssrn.2403159

David S. Evans (Contact Author)

Global Economics Group ( email )

111 Devonshire St.
Suite 900
Boston, MA 02108
United States

University College London ( email )

Gower St
London WC1E OEG, WC1E 6BT
United Kingdom

Vanessa Yanhua Zhang

Global Economics Group, LLC ( email )

1400 S. Dearborn, Suite 1000
Chicago, IL 60603
United States

Renmin University of China ( email )

Room B906
Xianjin Building
Beijing, Beijing 100872
China

Xinzhu Zhang

Chinese Academy of Social Sciences (CASS) - Research Center for Regulation and Competition ( email )

Beijing, 100732
China

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