A COMPARATIVE ANALYSIS OF UNITED STATES OF AMERICA, EUROPEAN UNION, AND CHINAS COMPETITION /ANTITRUST LAW

The current competition laws have their roots in the Roman Empire, where business practices by traders, guilds had always been subject to scrutiny by the authority. In the 20^th century, the matter of antitrust laws was a global issue. The most influential systems in competition law regulation are European Union competition law and the United States competitive laws. Thus, competition law is a system of rules and laws that seeks to maintain healthy market competition by regulating anti-competitive behavior by the firms in the market. The most eminent antitrust law is that of the United States, born in Ohio’s states with its founding father as John Sherman.

Different legislation exists in various countries to ensure regulation in the market and protect both the producers and consumers. The legislator in most countries is in charge of coming up with the legal documents that affect their respective countries’ law. The common title for this statute is the Competition/antitrust laws. The purpose of this paper is to produce a comparative study of competition regimes in the United States of America, China, and the European Union. The main objective of this being to conduct an evaluation of these countries’ existing competition legislation and their implementation concerning features such as budgets, composition, and structure of the competition authority.

Competition laws served to increase efficiency in the production, distribution, and supply of goods and services. Through competition laws, the market sellers would be regulated to adhere to the set market practices. The producers will produce high-quality goods and services due to the competition economic efficiency will be achieved. The threat of competition and the need to gain more profits will push them. Besides, most countries’ main purpose of competition laws was to protect small enterprises and the public from unjust enrichment from the industry’s titans.

It should be known that antitrust laws only serve to create healthy competition in the business world and are viewed as a law that helps the vigilant and not the indolent. Competition is a tough practice and may sometimes cause a fall of a business enterprise. Thus, in a healthy competitive market, the competition benefits the consumers and not the business or firm.

FACTORS INFLUENCING THE ADOPTION AND EFFECTIVE IMPLEMENTATION OF COMPETITION LAWS

In the recent past, there has been an upsurge of adoption of competition laws in the various countries, with countries such as china following suit and adopting competition laws. However, the adoption of competition laws in these countries does not guarantee the effective implementation of them. In this segment, we will dissect the competition laws to discern what influences the adoption and effective implementation of these competition laws. This will be with a focus on the U.S.A., E.U., and China.

Political Goodwill, U.S.A. was the first country to adopt antitrust laws. The history of competition laws in many jurisdictions cannot be accounted for without the legislature being mentioned. The legislature is the arm responsible for making laws in many jurisdictions such as the U.S.A. The antitrust laws in the U.S.A., the Sherman Act, were introduced to congress by the late Ohio Senator John Sherman. He was the pioneer of the competition laws. In China, the 10th standing committee of China’s National People Congress discussed and passed the Anti-monopoly law. This is the equivalent of the antitrust laws in the country. The representatives of the people are thus the major stakeholders in the adoption of antitrust laws. The political class also plays a vital role in the implementation as they oversee the implementation of the laws they make. This is in their duty as the people’s watchdog, as is the case in most jurisdictions.

The level of Economic Development not only influences the adoption of the antitrust laws but also the effective administration of these laws. Highly developed countries such as the U.S.A. and China have a better economy than low developed countries; therefore, they are available to avail the required resources to ensure that they can achieve the competition laws’ objectives. This includes availing funds for academic research on antitrust issues; the provision of funds for the judiciary and department of justice to efficiently work would also go a long way in achieving this. Lowly developed countries rely on interventionist development policies and have greater problems with competing priorities, which may be more relevant than competition laws, thus inhabiting the effective implementation of the antitrust laws. Economic development is a determinant factor in the effective adoption and implementation of competition laws.

Economic reforms, the countries undergoing this phase are more likely to adopt antitrust laws. This has been attributed to the departure from the central planning system, state-governance of developing, and the new strong adherence to market-based economies. Countries are becoming cognizant that privatization and trade liberalization are not effective enough to increase the efficiency of the economy. To achieve an efficient economy, these mechanisms have to be supplemented by competition law and policies (W.T.O., 1998). Countries that implement economic reforms are concerned with the effective enforcement of competition laws.

The size of the economy influences the adoption and enforcement of competition laws. This is because of two factors: countries with small economies normally have small domestic markets, which hinders numerous firms’ availability from producing at the necessary firm size to use economies of scale. Therefore, mergers and certain concentrations are seen as necessary for efficiency and international competitiveness (Evenett 2003). In summary, the benefits of economies of scale exceed those of antitrust laws. Secondly, they aver that small open economies are exposed to competition from abroad.

The level of industrialization would also affect the adoption and implementation of competition laws in the country. In countries such as the U.S.A., China, and most of the European Union member states, the need to protect competition is paramount to ensure a progressive growth in the industrialization of these countries (Cira, 1982). In pre-industrialized countries, the need for competition is not recognized; thus, there is a lack of antitrust laws, and if any implementation is usually an uphill task.

Corruption plays a huge role in the adoption and implementation of antitrust laws. The introduction of antitrust laws in the U.S.A. was intended to curb excessive private influence over republican institutions in the 1890–1914 period. The sponsors were concerned with monopoly, particularly its influence over legislatures and politicians. These laws were seen as a remedy for the runaway corruption and bribery in the U.S.A. (Kovacic, 2001). Those benefitting from this might also play a hand in ensuring that these laws are not adopted or implemented effectively to continue reaping the benefits from the broken system.

HISTORY OF COMPETITION LAWS

1. USA

In the 1800s, there existed giant business enterprises, which were referred to as trust. They controlled every sector of the economy, from the transport sector and industries such as steel and sugar. The most famous trust known today is the Standard Oil trust and the U.S. steel. These two companies or trusts acted as monopolies and dominated the market; they controlled supplies and prices. There existed no free entrance to the market, and the small business that was originally there were denied favorable business environment to flourish. While the trust owners became wealthy due to their unjust enrichment, the public members were angered and demanded the government of the day to take action against the trust-owning class. The government of the day responded to their demands. President Theodore Roosevelt brought down many trusts and enacted laws that do not suit the giant trust enterprises, commonly referred to as “antitrust” laws. The statutes’ main goal was to protect consumers by promoting fair competition in the once dominated market (Gerber 2002).

The United States enacted several legislations to curb unjust enrichment and promote healthy competition with a legal framework (Gerber 2004). Among the legislation that came into force are the Sherman Act, The Clayton Act, and the Federal Commission Act of 1914.

The Sherman  Act is the ancient known legislation that came into force regarding the competition. The Act was adopted from the common law system, a system that was inherited from England. Though the common law did not provide freedom of trade and the admonishment of monopoly, the American common law acted completely differently by giving the space and abhorring monopoly. This was made possible by the drafters of the legislation, and it served as a sign of hope to the general public at large. Since the American people had been oppressed for long and denied justice by the giant trust who were the industries’ titans, there were several protests to disband the trust. Between 1888 and 1890, the first public deliberation was made, and the Sherman Act was brought into force as a positive law governing competition in America (Gerber 2013).

Two decades later, the question of interpretation of the Act after its enactment increased, bringing a warring faction to the Supreme Court. The interest regarding regulation was brought in a tension period between the enacted legislation’s ideology and its reality in practice. The market had now pause a new economic condition with different underlying conditions.

All eyes were on Congress to pass the Sherman Act, which was then used as a litmus test to express a policy using the common law category. With the continuance, use of the common law, the judges saw many defects made by the common law’s drafters. Dissatisfied by the Act, the justices saw it necessary to establish a regulatory system that experts would replace the courts’ unpredictable rulings.  The vital role played by the Sherman act was pronouncing competitors’ agreement that would limit competition illegal. Since the Sherman act did not serve to satisfaction, there were desires to develop laws that deem fit to the dispensing of justice, which led to the Clayton Act’s formation.

The Clayton Act of 1914. Before being enacted, the Bill was propounded by Dr. Lamar Clayton, who saw it necessary that the Sherman Act was to be amended to cater to society’s current needs and heal the mischief caused by the Sherman Act. The amendment further classified the original Act on price fixation, price discrimination, and unfair business practices. The proponent of the Bill had the desire to regulate the titans of the business world. Luckily, the Bill passed was passed by the House of Representatives and came into force as a law in 1914. As of 2016, the Bill had 26 sections that addressed illegal price discrimination and price cutting. Section 3 of the Act stipulates exclusive dealings or attempt to create monopoly dealings. In contrast, section 7 handles mergers and acquisitions and is usually referred to when two or more companies plan to merge to form one entity.

The Sherman Act was the first-ever Act to regulate competition among the giant trust, and it acted as an “antitrust laws” then. However, due to the ambiguity and vague of the language used to construe the Act, there were still malpractices by businesses that engaged in an operation that discouraged competition (Gerber 2006). The Sherman act dealt with illegalizing monopolies, while the Clayton Act banned processes leading to trust formation. The Clayton Act helped protect American consumers by stopping mergers or amalgamations and acquisitions that were likely to limit competition.

The Clayton Act was later amended to the Robinson Patman Act of 1936 and after the Celler Kefauver Act of 1950. The Robinson Patman was brought in force to reinforce laws against price discrimination among the consumers of the various products in the market. The Celler Kefauver Act of 1950 dealt with the prohibition of the transfer of assets in the case of an acquisition.

In 1914, the Federal Trade Commission Act came into force that Congress created. Congress established the federal agency to act as a watchdog in the market, i.e., and the agency was expected to watch over unfair business practices in the market. The agency was also given the power and mandate to investigate and seize any unfair ways of competition.

Today the Federal Trade Commission, alongside the Department of Justices of Antitrust laws, plays three vital roles in antitrust laws. The two work together and in consultation on whom to investigate before opening the investigation. Additionally, every state in the United States of America has its antitrust laws enforced by state attorneys.

2. EUROPEAN UNION

The European Union traces its origin to the European Coal and The Steel community. It is a political and economic union comprised of 27 member states that are primarily located in Europe. Among the founding fathers of the Union are Jean Monnet and Robert Schuman, who had a dream of achieving a free market to complete a single internal market. Its member states have a combined population of about 447 million. In the Union’s formation, the member states agreed to formulate a system of laws that will bound them, and the members decided to work as one. The European Union policies aim to achieve goals such as the free movement of people, goods and services, and capital movement among its member states. These were to be performed by the formulation of legislation in justice and home affairs that aimed to maintain common policies in the trade, agriculture sector, and regional development. In 1999, the Union established a monetary union that came into operation in 2002, and it comprises 19 European Union states, which used euro currency as a medium of exchange. The Union has been described as a sui generis political entity, characterized by its unique nature.

After World War II, powerful sovereign countries have subscribed to treaties to harmonize their policies, commonly referred to as the European Integration project or Europe’s construction.

With its objective of having a single internal market, the E.U. formulated the European competition laws that came into force in the 1960s, adopted from the Council Regulation commonly referred to as 17/62. At first, the competition laws played a vital function of integration as per the Roman Treaty of 1957 to achieve a common market and fundamental principle of free movement of people, goods, services, and capital among the member states, which underscored the European community. The European competition law aims to promote the European Single Market by regulating anti-competitive conduct by the titans of industry to ensure no cartels and monopolies damage the public’s interest.

In 1966, the European Court of Justice was faced with deciding over their first-ever case between Constant v Grunding Commission (1966). Grinding, a german manufacturer of household appliances, had acted contrary to the principle of legality by granting exclusive dealership rights to Constant, a French manufacturer. The European Court of Justice upheld the earlier decision by the commission. It went ahead to expound what amounts to measures affecting trade, which they stated to include “potential effects” and echoed its position in competition law enforcement.

The second matter dealt with by the E.C.J. was underpinned in United Brands v Commission {1976}. United Brands being a leading producer of bananas, was accused by the commission of abusive practices and acted contrary to Article 102. The commission brought a matter urging that the relevant market as per the case was the Banana. In response, the United Brand company argued that the relevant market was not Banana, but it included fresh fruits in general and that the matter is to be construed broadly. The court held that the essential issue to define a market was interchangeability.

In 1986, the Single European Act had made progress in achieving the single market open-up competition in new markets. This gave birth to the second function of the  European competition law, which was regulation.

As time went by, there was a need for adjustment to the model. The commission made key amendments that include the restoration of the law provision allowing business firms to self-assess their practices’ compatibility per Article 10 (1) TFEU. Adjustments that the latter followed were informal. Due to difficulties in adopting every issue brought to the commission, the commission issued comfort letters declaring that Article 101(1) TFEU obtained the information and the agreement. Neither did it satisfy the conditions in  Article 101(3)TFEU. Over the years, the European Commission has supported the enforcement of the E.U. antitrust laws at the national level in their member states. In 1999, the commission proposed a sway from the incremental approach by championing a new decentralized model in its modernization in the white paper. The new policy was later enshrined in Regulation 1/2003.

Moreover, the effect of this is that the commission is no longer having jurisdiction to outline if the conditions set out in Article 101(3)TFEU is satisfied. In as much as all these changes were done, the new approach was designed so that the commission could still exercise its discretion on whether to adopt a formal decision. These acted as a method of controlling its caseload.

Following the adoption of Regulation 1/2003, the issue of specific paradigms which mainly surrounded the trade enabling enforcement has virtually disappeared. The observed shift in enforcement is linked to the fact that in the 1980s and 1990s, the European Commission underwent an integration process, which mainly focused on bringing down cross-border barriers in terms of trade and movement of goods and services. After this was achieved, the E.U.’s interest shifted from bringing down trade barriers and focusing on injecting competition on markets formerly dominated by exclusive rights. The new system’s regulatory measures were seen as a turning point to reshape markets by undermining business enterprises’ dominant positions across the value chain.

Against all odds it encountered, the E.U. competitive laws have been enforced to achieve the commission’s two vital goals.  To preserve the fruit of liberation by preventing monopolization and re-monopolization of firms in the market and secondly, there-shaping of needs to accommodate “business rivalry” through secure enforcement.

3. CHINA

China, a country in the Asian continent, is known for being the world’s largest manufacturing economy and exporting goods. China’s gross national income was estimated to be 23.47 trillion (“People’s Republic Of China – Place Explorer – Data Commons” 2021). It is among the countries that have anticipated the antitrust laws in this modern time. On August 1, 2008, the Peoples Republic of China enacted her first-ever Anti-monopoly Law (A.M.L.).The enactment of the A.M.L. was viewed as landmark progress in improving the socialist legal system and the socialist market. The law plays a significant role in protecting competition, protecting the consumers’ interest and the public, and ensuring healthy development in the socialist market. The antitrust laws were passed on August 30, 2007, after 13 years of strenuous years of efforts to enact the Anti-monopoly laws. The drafting of the statutory laws governing monopolies followed a stage of non-existence to existence. The principle of double–conformity was upheld during the drafting of the A.M.L. This means that there was a combination of international experience and the country’s practice and expectations. The A.M.L. has incorporated essential ingredients in other nation’s antitrust laws, such as monopoly agreements, abuse of dominant markets, and anti-monopolistic institutions. The most significant feature is the regulating abuses of administrative power that restrict trade and competition. The law takes into account the needs of the people of China and their preferences and characteristic. The most critical way in applying A.M.L. is defining exemptions to A.M.L.s application and its extraterritorial application. Instances where markets’ immunity have been observed, including introducing competition initially viewed as natural monopolies and permission of new competitors in the market. Based on today’s economic condition in China, the A.M.L. prohibits horizontal monopoly agreements such as price fixation, limits of outputs, partitioning sales markets, and provides important evidence to the Anti-monopoly law enforcement. The following are functions of the A.M.L.

Prohibiting abuses on the dominant market. Antitrust laws aim to prevent the misuse of the prevailing market that tends to limit competition. Besides, the A.M.L.s provide ways to establish an undertaking in the dominated market, which is crucial in finding an abuse of the dominant market. This promotes competition, does not only prevent monopolistic conduct but also helps to establish a competitive market structure.

Prohibiting monopoly agreements. This is among the key principles of A.M.L.s. The A.M.L. does not only recognize other antitrust practices, but it also takes into consideration the country’s situation and the state of its economic development. Article 46 of the A.M.L. provides for undertaking involved in monopoly agreements and evidence by the Anti-monopoly Enforcement Authorities.

The control of concentration in undertakings by firms. According to A.M.L., concentration undertakings by firms include mergers, acquisition of controlling rights. Under the global antitrust laws and enforcement practices, the first feature to be observed in establishing concentration undertakings is the notification of the system regulating it. China has adopted the pre-merger notification system. This is provided for in Article 21 of the A.M.L. and also Article 4 of the same law.

Prohibition of administrative monopolies. Administrative monopoly refers to executive authority’s conduct to perform a function by acting ultra vires to eliminate competition. In our case, the A.M.L. in Article 32 to 37 underpins the types of prohibited administrative conduct, which include restriction in tenders, restriction to free-market entry, forcing undertakings, among other behavior. The liability of administrative monopolies is stipulated in Article 51 of the A.M.L.

The A.M.L. also provides for the anti-monopoly commission under the state council, which is provided in Article 9 of the A.M.L. Article 10 of the A.M.L. stipulates the authority appointed to be in charge of the anti-monopoly enforcement task. The rules are designed to achieve the “Three designation plan” specified by the council. The three authorities include MOFCOMs, NDRCs, and SAICs. MOFCOMs is in charge of reviewing the antitrust laws on concentration between undertakings. NDRC carries out investigations and sanctioning of the monopoly firms, and lastly, SAIC is in charge of anti-monopoly conduct by carrying out the enforcement.

Antitrust laws and their enforcement are always grounded on the underlying principle that each country’s specific economic foundation basing on the needs to be served, the size of the market, and the level of development in every country. For instance, China antitrust laws cannot sway away from the above rule and are expected to give the maximum best result. Lastly, China’s Anti-monopoly laws are subjected to change as needs arise that need to be addressed.

MERITS OF ANTITRUST LAWS

The advantages accrued by the countries with competition laws can be classified into three; consumers, the business, and the government.

The cardinal rationale for the formulation of competition laws is the protection of consumer welfare. Lawmakers recognize that producers and consumers are at an uneven level in the field. To bring about uniformity, there was a need to ensure that consumer welfare is the principal object of the laws. Consumers are protected by putting in place minimum quality specifications and safety standards for goods and services. To ensure this is achieved, mechanisms of achieving redress for this are also provided. The advantages that consumers get from all these are:

Better quality goods, the competition encourages businesses to improve the quality of their goods and services. The producers do this to comply with the set rules. As a result, the buyers benefit since there will be a lot of quality goods and services to choose from in the market.

Lower prices for the goods, in a competitive market, the producers will strive to sell their products at the most affordable prices and as per the minimum accepted prices and not above the maximum price limit. The availability of the goods at low prices will aid them in that they will be able to buy the goods.

An increase in the market choices, one of the advantages of competition, prohibits total dominance in the market by one company. The availability of diverse sellers in the market provides the buyer with an advantage to decide based on their preferences from the available products.

The availability of sound competition policies enables the businesses to gain the following advantages.

Provision of a level playing field in all markets and sectors and promote increased innovation and efficiency among the producers. This leads to better utilization of the available resources and fosters innovation among the competing producers.

They provide them with an opportunity to air their opinion on the competition laws; being one of the market’s main stakeholders, the producers have a say on the competition laws. This opportunity to air their opinions serves as a benefit to them since they can become sources of future amendments to the rules.

It results in greater productivity and increases the ability of the firms to compete internationally. The competition laws enable the producers to increase production efficiency; besides, they can conform to international competition practices since they are not novel.

The governments gain the following from the availability of competition laws.

Increased competition creates opportunities for businesses, including small and medium-sized firms, to enter markets and grow. This, in turn, serves as an advantage as it enables the government to collect more taxes and creates employment opportunities, which leads to economic growth.

The governmental agencies can regulate key players in the market. The government constantly monitors the activities in the market. Through this role, it can achieve one of its fundamental duties as per the social contract, protecting the citizenry. That is the regulation of the market for the benefit of the consumer.

INTERCONNECTION OF THE COMPETITION LAWS

The Chinese antitrust laws came into force on August 1, 2008; it has been referred to as the modern antitrust laws since its inception. The Antitrust laws have been formulated so that three administrative agencies have been organized to perform the specific function of the law.

Competition laws between the E.U., U.S.A., and China are closely related. Their repercussions are seen when one law in a certain country affects a business entity registered in a specific country that operates in another nation. For instance, American businesses may be negatively or positively affected by the laws in China concerning mergers. This is because China requires that before companies merge, there has to be a pre-merge notification to the relevant authority based on the companies total sales in China. A report by the Decree of the State Council of the Peoples Republic of China reveals that by A.M.L., more than fifty transactions were reviewed during the first year of operation. Of the total number, one merger was rejected, and five others were accepted on conditions. All these transactions involved foreign firms merging, for instance, Coca – Cola/Huiyan Company.

On the other hand, American antitrust laws discourage monopolization, prohibiting the abuse of dominant markets in the economy. The A.M.L. provisions, too, forbid the abuse of dominant markets. This is achieved by the “Three Designation Plan,” specifically SAIC, an authority body in charge of anti-monopoly conduct carrying out the enforcement. This promotes competition, not only prevents monopolistic behavior but also helps establish a competitive market structure. MOFCOM, on the other hand, has played a vital role in the regulation of threshold monetary funds for pre-merger notification. This can be cemented by the words learned by Justice Holmes, who was in the view that the life of the A.M.L. governed by its rules and regulation is revealed when determining cases.

Over the years, the privatization and liberation of thousands of firms commonly known as State-Owned Enterprises (S.O.E.s) account for more than half of the economy. These firms are mainly Chinese enterprises, which have dominated the traditional utilities and the industrial sector of the economy. Although the firms meet the threshold definition of a business entity under the Anti-monopoly laws, they are subjected to other standards even if they possess shares in the market. Article 32 to 37 of the A.M.L. provides for the prohibition of abuse of administrative powers.

Another field to look at when studying the interconnection of antitrust laws in dealing with intellectual property rights. Under Article 55 of the A.M.L., it stipulated that mere exercise of intellectual rights is not subject to prohibition, and neither is it a violation of the statutes. This stipulation is subjected to two interpretations: legal protection of property rights and the recognition that intellectual property rights do not constitute a power to abuse the dominant market. However, there are emerging issues concerning intellectual property courts’ formation, which will specifically deal with the matters surrounding intellectual property law disputes. Under the U.S. antitrust laws exercising intellectual property rights is not prohibited, same as the A.M.L. provisions.

In conclusion, the A.M.L. through the life theory by Justice Holmes signifies a bright future in the regulation process founded on a strong foundation of justice administration through the improvement of social welfare.

COMPETITION LAWS IN THE DIGITAL ERA

The evolution of technology in this new era has been seen as a game-changer in the ever-competing world. The competition law that applies to digital matters recently is described as a litmus test or experiment just like the digital market itself. There is a risk that ignorance and reckless fiddling can lead to the destruction of the competition’s very goal and its dynamic nature, which the antitrust laws themselves ought to preserve. However, there are mitigating factors to the dangers posed: a well-designed legal framework, stakeholders’ involvement in the industry, and the creative approach to achieving remedies and enforcement. Competition law is seen as a key player in I.C.T. patent licensing and plays the same role in the data protection market.

Antitrust laws have declared void and null part of the pertinent (Intellectual property) and data protection practices. The competition law involving digital markets is a broad area of proposed instruments. An example of the proposed mechanisms is the E.U. rules on digital platforms, which requires geo-blocking measures, and the regulatory proposals which aim to limit access to connected mobility data.

It is up to the legal scholars, attorneys, courts, and lawmakers to ensure that these challenges are conquered. The following case laws illustrate the challenges faced and talked about by modern competition laws to give effect.

In the case of Federal Cartel Office v Facebook 2019, the Bunderskartellamt court granted one of the most laws by finding Facebook’s actions amounting to the abuse of dominance. The court held that the competition authority should refrain from incorporating contents and related concepts for data protection law without further assessment. This ruling plays a vital role in classifying data as a competitive factor in the market.

In Dusseldorf Higher Region mater concerning dating sites and bookings, the court had to set aside the ban on the narrow best-price exclusion clause. It went ahead to fining Google 1.49 billion Euros for abusive practices on online advertisements.

ANTITRUST IMPLICATION OF USING PRICING ALGORITHMS.

The use of pricing algorithms has been subject to scrutiny by the antitrust authorities globally. This is because its use has been attributed to providing a framework for horizontal and vertical collusion between entities. This is because price collusion is forbidden by E.U., U.S.A. antitrust laws, and other competition laws in other jurisdictions. Can price Fixing be based on Algorithms? What are price algorithms? The impact of price algorithms on competition laws?

A price algorithm is a computer procedure based on a set of rules to solve certain pricing tasks. This allows fast responses to market changes, adjust prices and thus optimize business rules. Price algorithms are common with online merchants. Their usage attracted the courts’ attention as they are claimed to be used in facilitating overt collusion. The following cases tested the strength of Antitrust laws in the digital era. In U.S. V TOPKINS (2015), the defendant was a company director dealing with online poster sales. The defendant had agreed with other traders on the levels of prices and the explicit algorithm to be used. He wrote a code for his company’s algorithm to set price on the posters as they had agreed with the merchants. The court found him liable for horizontal price-fixing.

At the European Union, the Court of Justice of European Union (CJEU) heard the case involving price algorithms. The case, U.A.B., and others v Lietuvos Respublikos Konkurencijos Taryba (2016) was an appeal from a Supreme Administrative Court ruling request Lithuania in the context of an appeal against an infringement decision of the Lithuanian competition council (L.C.C.). Eturas was investigated by L.C.C., upon which they came up with the consolidated facts of the case. Eturas, an online booking system, had engaged in concerted practices on discounts applicable to bookings made on the platform. Eturas had sent messages to its various travel agents through the online system announcing technical restrictions to its pricing algorithm, capping discount at 3%. The CJEU held that the mere sending of an email to the commercial users of an online booking platform could not result in the deduction that these users should have been aware of the email’s anti-competitive contents. The Eturas court decision brought a lot of jurisprudence regarding antitrust laws and the burden of proof. It was a pioneering case whereby the court applied the principle of concerted practices to online platforms and, more so, in the context where no direct horizontal communications had taken place. Competition authorities acknowledged deductions from the ruling in favor that in the future, they would have to take into account the modern features of communications in the current world and introduce substantial evidence that the companies and knowledge and agreed to the unlawful practices.

 

ANALYSIS OF THE COMPETITION LAWS IN THE USA, E.U. & CHINA

Highlights of the competition laws in China

• Prohibition of Monopoly Agreements as Envisaged in chapter two of China’s A.M.L.

It separates vertical agreements from horizontal agreements. As per article 13, the following monopoly agreements are prohibited; setting or fixing of minimums for product prices; allocating market, restricting the output or sales volume of the product; restricting the purchase of new technology or new facilities or development of new technology or new products; jointly boycotting transactions; and other monopoly agreements which the Anti-Monopoly Enforcement Authority will determine. Monopoly agreements have further been described in the second paragraph of article 13 as those agreements, which eliminate competition. In matters dealing with vertical monopoly agreements, article 14 forbids fixing the resale price, restricting minimum resale price, and other monopoly agreements determined by Anti-Monopoly Enforcement Authority.

Article 15 further contains exceptions for horizontal and vertical agreements on the prohibitions prescribed in articles 13 and 14.  The exempted agreements include those that deal with technology improvement or research and development of new products and others as prescribed in the article. In paragraph 2 of the article, the respondent must prove for the exemptions listed (1) to (5) that they do not limit competition and enable consumers to share the benefits derived from such agreements.

• Prohibition of the Abuse of a dominant position.

As per article 17, business operators holding a dominant position in the market prohibited from getting involved in the practices stipulated therein. These are selling and buying of products at an unfairly high or low price, failure to supply with a justification, sale of products at a price below the cost without any explanation, exclusive dealing without any rationale, tie-in sales without any rationale, discriminatory pricing or terms without any reason or other abuse of their dominant position as determined by the Anti-monopoly Enforcement Authority.

As per article 17, paragraph 2, a dominant market position refers to a market position held by a business that can control pricing and quantity of commodities and other relevant conditions in the relevant market or block or influence the entry of another business into the market. This definition of a dominant market position is similar to the one in the U.S.A.

Article 18 provides an exhaustive list of the factors for verifying the existence of a market position. Article 19 contains three presumptions of the market-dominant position of business operations based on market share thresholds.

• Mergers and Acquisitions.

Article 20 defines concentrations as; mergers, acquisition of control over another business operator by acquiring their voting shares or assets to an adequate level, or acquiring control through a contract or other means. Article 21 avers that business owners should notify the Anti-monopoly Enforcement Authority concerning transactions that meet the threshold of notifications stipulated by the state council. Article 23 supplements article 21 by including the list of documents required when notifying the state council. A notification lacking these documents would not amount to a valid notification and would not be considered.

Articles 25 and 26 provide a two-stage schedule used by the Anti-monopoly Enforcement Authority in reviewing the transactions. The authority has the discretion to accept or prohibit the transaction; however, these must be backed up with a justification sufficient enough.

Since the inception of the Guidelines on Assessment on Horizontal Merging, the E.U. subscribed to the American Horizontal Merger in structure and its economic principles. This makes the E.U. and U.S. act similar when enforcing the mergers.

• Highlights of Competition laws in U.S.A. and E.U.

The U.S.A. Antitrust laws can be linked to various statutes, having different objectives. As a general rule, the U.S.A. Antitrust laws are formulated to ensure consumers’ welfare is protected and to enhance competition in the market. The U.S.A. agencies responsible for ensuring consumer welfare and courts have been very concerned to address the claims raised.

• System of Enforcement

The U.S.A. system of enforcement is so sophisticated and complicated at the same time. This is attributed to its nature in that it is more policy and litigation-oriented. Policy orientations come at the federal level; the state operates under the antitrust division of the department of justice and the federal trade commission, commonly referred to as F.T.C. The same laws do not guide the two organs, and each has the specific functions that it should fulfill. Moreover, other bureaucracies influence competition policies in the U.S.A., this includes the Department of Defense, the Federal Commissions on Communication. The complication between policy agency and litigation comes when an injured party approaches the courts, which is inconsistent with the federal policy.

Elsewhere in the E.U., the laws are moderate since the E.U. regulations are quite similar to the U.S.A. statutes.

• Enforcement Against Cartel Behaviour

The antitrust laws both in the U.S.A. and E.U. are similar on cartels. In both, this behavior is treated punitively. Price-fixing is forbidden regardless of the size of the firm and its impact on the market. However, in the U.S.A., the assertion of price-fixing is treated with an exception. The courts have the duty and mandate to determine the exceptions at their discretion based on a case-to-case basis. In some instances, whereby price-fixing is a result of indirect action, it is accepted. Price fixing and cartels are highly discouraged as they compromise on the principles of competition in the market.

In the E.U., the laws regarding cartel behavior are similar to those in the U.S.A. This is covered in article 85(1) of the E.U. laws, which deals with cartel operations. However, there exist differences that are not applicable in the U.S.A. For example, small firm agreements are allowed, where the small firm may agree on specialization to specialize in manufacturing certain goods and stop production of the other in the market. This would be to allow the other small firms to have a substantial stake in the market.

The difference between the U.S. and E.U. laws on enforcement of cartels is the level and mechanisms for enforcement. In the U.S.A., enforcement is conducted by the U.S.A. Department of Justice, while in the E.U., it is done by the European Union Commission. In the E.U., there is no investigative body, and mostly the cartels are usually uncovered by the complainant who lodges the complaints with the commission.

• Dominant Firm Behaviour

The question of what constitutes a dominant firm in both the U.S.A. and E.U. varies. What conduct constitutes a violation of the dominant firm in the market remains on an equilibrium of probability.

The U.S.A. antitrust laws are mute on point, and it is only case laws that try to elaborate on the features of firms that control more than 2/3rd of the market as a monopoly. However, monopoly power alone does not violate the statute and the conduct to achieve or maintain the dominant market. In the E.U., article 86 of the laws declares illegal any abuse by the dominant firm. Article 86 declares illegal any abuse; this includes the imposition of unfair purchases, limiting production, among other conduct.

• Predation

This is a strategy where competitors lower prices to face rivals to bear the cost that the competing firm does not incur. In most cases, predation involves firms reducing costs to extremely low prices.

The E.U., through the European commission law, suggests a method of protecting the competitors and also the consumer by ensuring there is no room for future exploitation abuses. To determine whether there is predation, the following tenets have to be satisfied: lower prices than the normal/appropriate price prevailing in the market. The lower prices are used to show monopolistic intentions by the business. In the U.S.A., to prove predation in a court of law, the evidence should show the party accused charged prices below what is reasonably anticipated. In some states in the U.S.A., the overpricing can also constitute a violation, especially where it is proved that there is an intention to reduce/shun competition. In Group Brown v Williamson Tobacco (1993), the supreme court in its ratio decidendi avered that the ability to recoup is an essential factor in determining where there is predation.

The European Union uses a different approach to discern the standards for predation. This was crystallized in Akzo Nobel Chemicals Ltd and Akcros Chemicals Ltd v European Commission (2010). The European court of justice focused on eliminating competitors, which was contrary to the U.S. Antitrust Laws, which reflected that legal protection against a competitor is likely to be costly to consumers who have been denied the lower price advantage.

• Enforcement Level

The enterprise laws in both the U.S.A. and E.U. are alike. However, the substantive laws on the enforcement level pass numerous differences, and the enforcement system is different. In the 1980s, the U.S.A. had about 5000 lawyers and economists in the Department of Justice competition division. The U.S. enforcement system was an area dominated by minimal enforcement attitude.

On the flip side, the European Union enforcement level against cartels is minimal. There are more proceedings by the competitor’s complainers to the European Union Commission than those dealing with mergers. All mergers that pass with a high threshold of community dimension are subjected to revision by the commission.

There exists no provision under the European Commission laws that deals with private antitrust actions. However, Article 85 and 86 allows suits in the member state to be awarded damages or injunctions basing on remedies and procedures available on the member state.

• Agreement between Firms

In the U.S., this is stipulated in Section 1 of the Sherman Act, which underpins what amounts to restrain trade, and this includes agreements by firms to form cartels who control the prices in the market division and price fixation. Article 81 of the Treaty of Rome, which forms part of the E.U. antitrust laws, is similar to Section 1 of the Sherman Act. Article 1 prohibits affecting trade between countries, and it goes ahead to initiate voids agreement anchored in Article 81(1).

• Issues concerned with monopoly

American antitrust laws do not recognize monopoly unless there is an actual or potential exclusionary conduct by the monopolist. This is also underscored in Section 2 of the Sherman act, where it is stated that conduct by a dominant enterprise that makes economic sense is not prohibited.

Article 82 of the Treaty of Rome sanctions the abuse of dominant market positions either by their efficient or inefficient conduct. The Chinese antitrust laws, as was discusses herein, do not prohibit mergers, but it requires that before merging is done, the relevant authority has to be notified.

• Mergers and Acquisition

The levels of enforcement of antitrust laws in the USA have undergone extreme evolution from lax measures set in the 1920s and 1980s to strict laws. Prevention of mergers and ventures is a threat in the anti-competitive changes in the market, which has been the pinnacle of America’s Antitrust laws.

Generally, there is a belief that industries in the USA are less concentrated than those in the European Union because of the different enforcement and antimergers restrictions.

 

In the EU, the history of merging and the restriction is different. During the formation of the EU, the mergers’ formation and their restrictions were not seen as a threat. The pioneers of the EU, Jean and Robert Schuman did not view the firms’ size as a potential threat to competition laws. Rather they were bothered with the small firms, which could lead to inefficiency due to the market’s size.

Mergers were highly encouraged, especially inter-countries mergers, which would integrate the common market. In 1959, the EU council formulated the merger regulations that focused on a single firm’s dominance.

The USA guidelines regarding mergers are primarily a concern that mergers may lead to undue concentration, which facilitates the exercise of market power. There are three types of mergers that the USA case laws jurisprudence tend to establish the violation. These are; Direct horizontal mergers between competitors, mergers between customers and suppliers, and conglomerate mergers.

Direct horizontal mergers between competitors

According to the USA department of Justice and FTC of 1992; this occurs where the total shares of merging parties/ firms is more than 20% of the concentrated market.

Mergers between customers and suppliers

There examination commences when each firms accounts for 20% or more of the market value.

 

EMERGING TRENDS IN ANTITRUST LAWS

The following areas have been in the spotlight by many jurisdictions on matters dealing with antitrust laws.

• Pricing Algorithms

Anticompetitive use of price algorithms has been on focus and a heated debate in many jurisdictions. This has been the focus of many antitrust enforcement authorities in the USA and EU. As discussed, price algorithms are designed to collect and analyze a wide variety of market data and come up with prices of products and services based on these factors. A business can use a price algorithm to react promptly after a change in the prices of these products by the competitor. With the use of algorithm market monitoring functions, a firm would observe and respond to competitors’ pricing changes.

There has been recent enforcement in the USA whereby the Department of Justice prosecuted David Hopkins and his co-conspirators for the allegations of using price algorithms. This case helped the enforcement agencies to focus on these practices of collusion by firms to avoid competition. The Robinson-Patman Act is the primary legislation in the USA dealing with price discrimination. The use of algorithms, in this case, should thus be designed to ensure compliance with the act.

In the European Union, the European Commission is revising its competition rules to ensure they are fit for use in this digital era.

• Vertical Mergers

This is when two companies engaged in the same business line agree to integrate their operations on a co-equal basis. The two companies usually are at different levels of production of a certain product in the production process. Most of these mergers’ rationale is usually to create synergy among the two companies and increase efficiency. In the USA, the Department of Justice and FTC have stopped potential vertical mergers based on the competition laws. The FTC and antitrust division are drawing policies on the area.

Vertical mergers may lead to anti-competitiveness because their entrenched market stake may hinder other firms in the market. The case of Brown Shoe Co. v. United States (1962) remains the leading decision in this area. The Court stated that vertical mergers’ results act as a clog on competition, thus depriving the rivals of a fair chance of competition.

 

CHALLENGES IN ENFORCEMENT OF ANTITRUST LAWS

Lack of an international framework for enforcing competition laws, as is the case with the European Union. Most international companies and may thus be susceptible to different competition laws available in the various jurisdictions. The lack of a global agency that would deal with this type of company has brought many challenges since what may be legal in one domicile may be illegal in another.

Failure of amendment of laws to suit the current needs and times. Recent cases on competition have exposed many inadequacies in the area of competition law as far as the digital era is concerned. In the past, the rules were created to remedy traditional antitrust cases mostly involving price competition. In the digital economy, the situation has changed; many businesses are now using online platforms as their medium for interaction.

Lack of resources, more resources need to be availed to create academic research provision on competition and ensure compliance and enforcement of the antitrust laws. With the digital age’s birth, antitrust laws have to be amended and reviewed to cater to the practices currently in play in the market. The best way to do this would be by encouraging research on antitrust issues in the digital age to get informed insight on the topic.

CONCLUSION

There are notable similarities between the USA, China, and the European Union than differences. The European Union antitrust laws are derived from the market integration, and they are closely related to the goals and principles of free movement in the market. The laws in the E.U. and China are less technical than those in the USA. This is because the E.U. is less technical than those in the USA. This is because the commission and the court determine dominance basing on perception rather than factual records presented.

The degree of enforcement in the USA is lower than the E.U. This is because, in the E.U., the competitor’s complaints play a vital role in triggering official motives.

From the foregoing, it is apt to aver that the heart of any national economy long has been faith in the value of competition. The legislation of different competition/antitrust laws herein discussed was aimed at protecting the public interest in free competition. This protection is afforded by barging out any practices that limit or reduce competition in the market.

As was stated in United States v. Topco Assocs., Inc., 405 U.S. 596 (1972). Antitrust laws are the Magna Carta of free enterprise. They are as important to preserving economic freedom and our free-enterprise system as the Bill of Rights is to the protection of our fundamental personal freedoms.