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Distribution Agreements Under China's Monopoly Law and the Hong Kong Competition Ordinance
China Antitrust Law Journal Vol. 1(1), 2017
Year published: 2017
"This paper discusses the use of distribution restraints in China and Hong Kong, and attempts to develop a general framework for their analysis under the Anti-Monopoly Law ('AML') and the Competition Ordinance ('CO'). The (limited) evidence available thus far suggests that vertical restrictions are commonplace in these jurisdictions, and that they may well have adverse effects on competition, particularly when they affect resale prices. However, since economic theory is ambivalent as to their effects, and they may also serve pro-competitive purposes, the chosen approach must aim to control their potential problems while at the same time leaving room for an assessment of their potential merits and justifications. Such a task requires giving up the establishment of clear principles and 'bright lines' in favour of an effects-based approach, and is particularly intricate in new systems where the authorities and courts have limited antitrust enforcement experience. Likewise, established jurisdictions like the United States ('US') and the European Union ('EU') have struggled for decades to find an optimal way to balance the mixed effects of these restrictions, and the issue is far from settled. Importantly, economic analysis was only fully developed once these antitrust systems had ripened, placing a question mark as to whether younger jurisdictions ought to give up a blanket prohibition in the early enforcement years. Part 2 of the paper begins by clarifying the kinds of restrictions typically introduced in distribution agreements, as well as their rationale. It explores the vast literature on the advantages and disadvantages of distribution restraints, and covers the evolution of the treatment of such restrictions in the US and the EU, which has been subject to considerable swings. Part 3 focuses specifically on China and Hong Kong, the enactment of their respective competition laws, the evidence of the effects of distribution restraints in these jurisdictions, and how their antitrust legislations have addressed or have the potential to address the relevant problems. A critical assessment is conducted in Part 4, and Part 5 presents the final conclusions.
Reprinted from China Antitrust Law Journal with permission. Copyright 2017 Matthew Bender & Company, Inc., a LexisNexis company. All rights reserved.