The State Council document requires that policies and measures should not be introduced without a fair competition review.
So far, at least 91 cities have issued detailed regulations on ride-hailing, but no administrative agency has taken the initiative to say whether a fair competition review has been carried out. Will the State Council’s policy of fair competition censorship be forgotten?
On June 6, at a special seminar held by the Competition Law Research Center of Peking University, participants, including several members of the Expert Advisory Group of the State Council Anti-Monopoly Commission, raised the same question.
The fair competition review is a legal process
Administrative organs shall conduct fair competition review when formulating rules, normative documents and other policies and measures related to the economic activities of market entities, such as market access, industrial development, and qualification standards. This is a new system established by the "Opinions of the State Council on Establishing Fair Competition Censorship in the Construction of the Market System" (hereinafter referred to as Document No. 34) in June 2016.
The system has been in place since July 2016 in provincial-level governments and their subordinate departments, and has been gradually rolled out to municipal and county-level governments and their subordinate departments since 2017. Article 34 requires that "those who have not conducted a fair competition review shall not be introduced."
In order to prevent the administrative organs from introducing policies and measures to exclude or restrict competition, Circular 34 listed 18 review criteria, known as "18 inhibitions", such as: unreasonable and discriminatory entry and exit conditions shall not be set, foreign and imported goods and services shall not be restricted from entering the local market, and the price level of goods and services subject to market-regulated prices shall not be illegally interfered with.
Online car-hailing details collision "18 no"
In comparison with the above "18 no", the Peking University Competition Law Research Center formed a nine-person research team to analyze the detailed rules of online car-hailing issued by 77 cities above the prefecture level, and found that there are widespread violations of the "18 no" provisions. If there are few violations, one or two violations; if there are many, all violations.
The requirements for vehicle registration and driver household registration in the local implementation rules restrict the entry of foreign goods into the local market, affect the free flow of goods, and form a regional blockade;
The restrictions on wheelbase, displacement, length, width and age will make it impossible for some brands and models of vehicles to continue to engage in online car-hailing operations. As the largest fixed-cost input for online car-hailing self-operators, the price elasticity is extremely weak. Restrictions on models and vehicle ages will significantly increase the operating costs and exit costs of operators and potential operators in the market.
Limiting the price of online car-hailing has led to the "exclusion" of certain car brands or series that are positioned as cheap cars or focus on cost-effectiveness, essentially resulting in discriminatory or differentiated treatment of certain car manufacturers.
Nearly half of the cities have implemented market-adjusted prices while giving local governments the power to implement government-guided prices when necessary. And the "18 No" clearly states that the price level of goods and services subject to market-adjusted prices shall not be illegally interfered with.
"Exceptions" are allowed but the reasons should be given
Crashing "18 no" does not amount to illegal, because Article 34 provides for exceptions. Some policy measures can be implemented under certain circumstances even if they have the effect of excluding and restricting competition.
However, for exceptional circumstances, Article 34 stipulates stricter application conditions, which can only be applied to the following situations and cannot be expanded without authorization: 1. Safeguarding national economic security, cultural security or involving national defense construction; 2. To achieve social security purposes such as poverty alleviation and development, disaster relief and relief; 3. To achieve social and public interests such as energy conservation and protection of ecological environment; 4. Other circumstances stipulated by laws and administrative regulations.
At the same time, Document No. 34 has special requirements for exceptional circumstances: it should be stated that the relevant policy measures are indispensable to the realization of the policy purpose, and will not seriously exclude or restrict market competition, and the implementation period should be clearly defined. In addition, even if it is an exception, the policy-making authority should evaluate the implementation effect of the relevant policy measures year by year. Policies and measures that have expired or failed to achieve the expected effect should be stopped or adjusted in a timely manner.
Xiao Jiangping, director of the Center for Competition Law at Peking University, pointed out that so far, no agency that sets the rules for online ride-hailing has admitted to the application of "exceptional circumstances", nor has it taken the initiative to explain the reasons for the "exception".
According to public media reports, after receiving the relevant information disclosure application, the Beijing Municipal Transportation Commission replied that the Beijing online car-hailing rules conducted a fair competition review. The review "took into account the current situation of the city of Beijing, the requirements of the carrying capacity of the population and the positioning of the city’s development". This reason is closer to the third of the above-mentioned exceptions: "Save energy resources and protect the ecological environment." But the Beijing Municipal Transportation Commission did not explicitly state that the "exception provisions" of Article 34 were applied.
Should the policy-making organ take the initiative to announce whether a fair competition review has been conducted and the results of the review? At what stage should it be announced? Shi Jianzhong, an advisory member of the expert group of the State Anti-Monopoly Commission and a professor at China University of Political Science and Law, pointed out in an interview with the Legal Daily earlier that the policy-making organ should disclose whether a fair competition review has been conducted. Circular 34 requires that when conducting a fair competition review, the opinions of interested parties should be heard, or opinions should be publicly solicited from the public. Accordingly, the policy-making organ should disclose relevant information on the fair competition review before the official introduction of the policy measures.
But there are also opinions that Circular 34 does not require policy-making organs to take the initiative to publish fair competition review information. However, according to the government information disclosure regulations, policy-making organs should disclose the application after receiving the application.
Xiao Jiangping said that so far, there is no active disclosure of fair competition review information by any online car-hailing detailed rules. Fair competition censorship requires policy-making organs to self-censor the policies and measures they formulate, and policies and measures that have not been reviewed for fair competition shall not be introduced. However, it is not difficult to see through the sorting of the various access conditions stipulated in the local online car-hailing detailed rules that the introduction of the online car-hailing detailed rules may not really conduct fair competition review.
The implementation of the system requires procedural constraints
The implementation of a system is inseparable from the guarantee mechanism, especially the law enforcement supervision and accountability mechanism. In order to ensure the implementation of fair competition censorship, Document No. 34 requires strengthening law enforcement supervision and strengthening accountability:
"Any unit or individual has the right to report policies and measures suspected of violating fair competition review standards, and the relevant departments shall deal with them in a timely manner. Those suspected of violating the Antimonopoly Act of the People’s Republic of China shall be investigated and verified by the anti-monopoly law enforcement agency in accordance with the law, and shall make recommendations to the relevant higher authorities. The case situation and handling suggestions shall be made public to the public. Policy-making organs shall promptly correct policies and measures that exclude and restrict competition, and maintain a market order of fair competition."
"Local governments and departments that fail to conduct fair competition reviews or violate fair competition review standards and introduce policies and measures, as well as fail to correct relevant policies and measures in a timely manner, shall be dealt with seriously after verification in accordance with the law. If the relevant personnel need to be held accountable for party discipline and government discipline, such as dereliction of duty, the relevant situation shall be promptly transferred to the discipline inspection and supervision organs."
In the opinion of the experts attending the meeting, these regulations are too principled. "Who should I report to? Should I give feedback on the investigation and punishment results? Is the agency that accepts the report a law enforcement agency or a joint meeting? What are the powers of the joint meeting and what are the differences between the review powers of the local people’s congress? These must be made clear. We must improve the procedures and clarify a reporting review mechanism." Xu Guangyao, a professor at Nankai University Law School and an advisory member of the expert group of the State Anti-Monopoly Commission, said.
Liu Jifeng, a professor at China University of Political Science and Law, agrees: "Whether public competition censorship can be carried out well, the procedural system is the most important."
Document 34 also has a plan for this: "The National Development and Reform Commission, the Legislative Affairs Office of the State Council, the Ministry of Commerce, and the State Administration for Industry and Commerce should work with relevant departments to study and draft detailed rules for the implementation of fair competition reviews, and further refine the content, procedures, and methods of fair competition reviews."
The Legal Daily reporter learned from the seminar that the "Detailed Rules for the Implementation of Fair Competition Censorship (Interim) " have been soliciting opinions for many rounds and have responded to the above questions.
