Ⅱ．Illegality Affirmation of Price Monopoly Agreement in the Automotive Industry
Based on the phenomenon that price monopoly agreement prevails in the automotive industry, it is necessary to employ the applicable basic rules of anti-monopoly law to affirm illegality of the conduct．In this way, illegal behavior will be punished and law-abiding transactions and standards in the industry will be maintained, so as to ensure the coordinated development of industry self-regulation and free competition.
A．Per Se Illegal Rule Applicable to Horizontal Price Monopoly Agreement Under the Guidance of Anti-monopoly Law of the People's Republic of China
In the process of illegality affirmation of monopoly agreements, basic applicable rules include per se illegal rule and rule of reason, fundamental rules for the application of the anti-monopoly law．The per se rule refers to identification of illegality of the behavior immediately after it occurs and direct illegality affirmation of the behavior for the application of anti-monopoly law, regardless of the fact whether it has excluded the restrictions of competition．The per se rule originated in the United States, and thereafter was widely applied around the world．It is mainly applicable to the following four types: (1) horizontal price agreement; (2) non-price agreement, such as market segmentation agreement and production or sales restriction agreement; (3) tying agreement; (4) allied boycott.[1]The reasonable rule refers to the circumstances where an alleged monopolistic behavior is not directly identified as illegal, but is to be examined to determine whether actual anti-competition or the risk of eliminating and restricting competition has been caused by economic analysis, subsidiary restrictions and so on.[2]To developed countries, the horizontal monopoly agreement, also called “the core Cartel”is subject to per se illegal rule．Based on theories and extraterritorial experience, the agreement concerning prices of products and services made between the car dealers under discussion in this thesis is illegal per se, and there is no need to consider whether the exclusion and restriction of competition really exist.
Item 2 of Article 13 of Anti-monopoly Law of the People's Republic of China stipulates that “monopoly agreements in this law refer to agreements that eliminate and restrict competition and any other agreements alike”．The illegality affirmation standard in the Anti-monopoly Law of the People's Republic of China emphasizes the judgment on whether the agreement has the effect of eliminating and restricting competition．While considering Item 1 of Article 13, i.e., illegality affirmation of horizontal monopoly agreement according to the general theory and extraterritorial experience and Item 2 of Article 15, stating that “where a monopoly agreement is in any of the circumstances stipulated in Items 1 through 5 and is exempt from Articles 13 and 14 of this Law, the business operators must additionally prove that the agreement can enable consumers to share the interests derived from the agreement, and will not severely restrict the competition in relevant markets”, the anti-monopoly law enforcement agencies in China have employed “per se illegal rule”to deal with horizontal price monopoly agreement．For the afore-mentioned multiple cases involving the behavior of uniform prices of commodities and services between car dealers, part suppliers., as long as National Development and Reform Commission(NDRC) confirms the fact that the agreement has been made, the presumption would be validated that the agreement has the effect to exclude and restrict competition, unless the investigated party can provide evidence for exemption from violation of law according to Article 15．This is quite likely to cause confusion during the process of the application of the Anti-monopoly Law．In fact, when the court referred the Anti-monopoly Law to the trial of monopoly agreement cases, their opinions already differed from practices of anti-monopoly law enforcement agencies, which is particularly in need of more attention.[3]This phenomenon has also occurred in the United States when the Sherman Act was first enforced; i.e., the conflict between the literal interpretation and the rational interpretation．On the one hand, because the target of the anti-monopoly law is quite complex and the situation is changing swiftly, it is extremely difficult to make an explanation applicable to all types of cases．On the other hand, the application of anti-monopoly law in the earlier period will be confronted with the dispute between the conservative and the radical due to the lack of experience．The solution is to be proposed with further legal practice, and more rules need to be summed up from the experience.
B．Proposed Rules Applicable to Vertical Price Monopoly Agreement Under the Guidance of Anti-monopoly Law of the People's Republic of China
There is a debate on the illegality affirmation of RPM in the academic community due to the complexity of the illegality behaviors and possibility of multiple competitions．Take the United States, with the most advanced and mature anti-monopoly law in the world, it has applied the per se illegal rule to the affirmation of illegality of RPM[4]and experiencing a change to a reasonable rule.[5]Currently, the reasonable rule applicable to RPM has not been completely accepted, and there are still a lot of controversies.[6]In view of this, the author suggests that in the trial of the cases, in addition to considering the legitimacy and rationality of behaviors' effect, we should take the legitimacy of the behavior itself into account as well．To consider whether the manner in which the business operators pursue their legitimate economic goals and the rational management results are lawful is one of the criteria to determine the rationality of vertical price agreements, or a condition for the exemption of responsibility.
Article 14 of Anti-monopoly Law of the People's Republic of China is a detailed stipulation for vertical monopoly agreement, i.e．“Any of the following agreements among business operators and their trading parties are prohibited;(1) fixing the price of commodities for resale to a third party;(2) restricting the minimum price of commodities for resale to a third party; or (3) other monopoly agreements as determined by the Anti-monopoly Authority under the State Council．Literally, China generally holds a prohibition attitude toward the vertical monopoly agreement like RPM, i.e．China applies “per se illegal rule”to it．Some scholars argue that Article 14 is not a general prohibition article, RPM probe might result in a sentence that is either legal or illegal．Only the type of RPM that excludes and restricts competition is considered “monopoly agreement”[7]．This judgment complies with the afore-mentioned interpretation of Item 2 of Article 13 and Article 15．In this view, we can draw a preliminary conclusion that China has applied the same criterion to illegality affirmation of RPM as the one to horizontal monopoly agreement, i.e．per se illegal rule．However, in the practical anti-monopoly law enforcement, there is already a different understanding and practice between administrative law enforcement and judicial adjudication．The administrative law enforcement agencies tend to apply the “per se illegal rule”, while the judicial adjudication tends to apply “reasonable rule”．The relevant textual interpretation is rendered as “per se illegal rule”, which in specific cases, causes great confusion to the parties while they are carrying out valid defenses, using evidence and bearing proof burden in accordance with the Anti-monopoly Law．Based on this, the author suggests to clarify the applicable rules to illegality affirmation of RPM．It is conducive to the maintenance of authority and scientificity of the anti-monopoly law as well as to better governance of illegal RPM behaviors.
As for the illegality affirmation of RPM, different countries and regions have experienced the process from the strict implementation of “per se illegal rule”to the application of “reasonable rule”．The EU regards vertical monopoly agreement as “core restriction”type, applying per se illegal rule to it．But at the same time, the EU has repeatedly emphasized the role of economic analysis in the Guidelines for the Application of Competition Law and Treatment Decisions, which means decisions should be based on comprehensive evaluation of the specific circumstances of the case where price restriction is made to facilitate economic efficiency, enhance consumer welfare, or to do more harm than good, i.e．to cause serious effect of excluding and restricting competition．In the anti-trust law enforcement practice in the United States that has lasted almost a hundred years, although per se illegal rule was applicable to RPM for a long time, as to the 1918's “Chicago Trade Association Case”, Justice Brandeis once aired his view on the standards of judging illegality of the price agreements, “The true test of legality is whether the restraint imposed is such as merely regulates, and perhaps thereby promotes competition, or whether it is such as may suppress or even destroy competition．To determine that question, the court must ordinarily consider the facts peculiar to the business to which the restraint is applied, its condition before and after the restraint was imposed, the nature of the restraint, and its effect, actual or probable.”[8]In “Leegin Case”, the Supreme Court of the United States asserted that “The rule of reason is designed and used to ascertain whether transactions are anticompetitive or procompetitive.”[9]This verdict actually amended the simple application of the per se illegal rule in illegality affirmation of RPM and revealed the fact that judges began to consider the reasonable rule applicable to specific cases．It has exerted profound influence on how South Korean Grand Court judged the 2010's “Korea-US Drug Case”, and changed the Korean judiciary's attitude toward RPM rules and regulations who thereafter tended to apply the reasonable rule to the RPM cases.[10]
In this thesis, we shall discuss the illegality affirmation of RPM in the automotive industry in detail．First, the “Leegin Case”in 2007 was a turning point．Considering the nature of internationalization and transnationalization of anti-monopoly law enforcement, we shall follow the grand tendency of applying reasonable rules to RPM cases which are also complaint with the overall trend of current domestic and international economic development and market competition．So, it may be appropriate to relax the severity of the RPM regulation, and pay attention to the rationality and legitimacy of its behavior as well as the economy and efficiency of its effect．In addition, the method of economic analysis is currently the main approach of the application of the anti-monopoly law．We need to have a comprehensive evaluation of both advantages and disadvantages of RPM on economic development from the perspective of economic effects, especially the pros and cons of various types of RPM in the development of China's automobile industry．We cannot overgeneralize them; instead, we need to comprehensively consider the factors such as the relevant market of the competition behavior, regional economic environment and the difficulty level of consumer interests realization, including trading terms and essential services, and then to make a final judgement．This approach itself is a process of applying reasonable rules to affirming illegality of RPM cases.
Second, the reasonable rules conform to practical needs and help to resolve the conflict between the development of the automotive industry and the supervision of the industry's competition．As mentioned above, there are many RPM cases in the domestic automotive industry, which have already developed into an open or semi-open industry routine practice, largely derived from the internal supervision model that has originated during the developmental process of the industry．If we neglect or ignore this reality and indiscriminately apply per se illegal rules to a large number of existent RPM cases, it will strike a serious blow to the development of China's auto industry and hence hinder the upgrade of the international competitiveness of China's automobile industry．In the face of the current overall domestic and international economic development downturn and under the condition that the automotive industry is a pillar industry in our country or even a core industry in some regions, the interests of this industry and its social influence cannot be ignored．We must be clearly aware of the influence of the balance between the diversified targets of the anti-monopoly law enforcement and the periodical target on the application of this rules; therefore, we can judge all types of RPM cases prudently arising from the automotive industry,[11]and apply the reasonable rules to them.
Finally, in the first RPM case accepted by the court in China—Reborn vs．Johnson, Shanghai High People's Court pointed out in the verdict that “Monopoly agreements should have composing items of excluding and restricting competition and hence resale price maintenance agreements are not considered per se illegal.”[12]The verdict also confirmed the application of “reasonable rules”to illegality affirmation of RPM cases, which was in compliance with the international trend of how anti-monopoly law was applied to RPM cases.
[1] See Chen Bing, Early Characteristics of Per Se Illegal Rule and Its Enlightenment to the Legislation of Anti-monopoly in China, Law Science, 2006(2).
[2] See Chen Bing, An Interpretation of the Reasonable Rules in the Application of the Antitrust Law in the United States—A Discussion on the Treatment Mode of Cases of “Trade Restriction Contracts”in the Anglo-American Law, Pacific Journal, 2010(5).
[3] In this regard, scholars have discussed in detail．See Liu Xu, The Distribution Industry in the “First Year”of Anti-monopoly Law Enforcement, Oriental Morning Post, August 27, 2013, p.4; Liu Xu, Deficiency in Application of the “Anti-monopoly Law”, Oriental Morning Post, August 27, 2013, p.6; Li Jian, Systematic Conflict and Resolution in the Implementation of Anti-monopoly Law of the People's Republic of China, China Legal Science, 2014(6).
[4] In 1911, in the case of “Dr．Miles”, RPM was first announced as “per se illegal”．This verdict, in the Anglo-American legal system, regarded unreasonable restriction of transfer transaction as illegal “alienability of property rights”, which was used as legal judgment basis in the case．Any restriction of independent operators' free pricing is considered illegal ［See Dr．Miles Medical Co．v．John D．Park ＆ Sons Co., 220 U.S.373 (1911)］．According to Anglo-American law, after commodities are sold, the ownership transfers to the circulation business, and hence prices of the commodities should be decided by circulation business．After the “Dr．Miles Case”, in the year 1968's “Albrecht case”, per se illegal rule was applied to maximum resale price maintenance ［See Albrecht v．Herald Co., 390 U．S.145(1968)］.
[5] Since 1970, with the rise of the Chicago school, the application scope of the per se illegal rule has gradually been reduced．The representative cases are the 1977's “Sylvania Case”where “reasonable rule”was applied to vertical non-price restriction ［See Continental T．V．Inc．v．GTE Sylvania, Inc.433 U.S.36 (1977)］; the 1997's “Khan's Case”where the reasonable rule was applied to the maximum resale price maintenance, overthrowing the verdict of the “Albrecht Case”［See State Oil Co．v．Khan, 522 U.S.3 (1997)］ and the 2007's “Leegin Case”where the reasonable rule was applied to the minimum resale price maintenance, overthrowing the verdict of “Dr．Miles Case”made by the United States Supreme Court that applied per se illegal rule to RPM ［See Leegin Creative Leather Products Inc．v．PSKS Inc., 551 U.S.877 (2007)］.
[6] On June 13, 2015, at “the Tenth China Economic and Law Forum—Economic Law and Competition in the Context of Comprehensively Promoting the Rule of Law”held by Nanjing University, scholars made theme speeches on the issue of illegality affirmation of RPM, expressing the point that the basic application rules of the Anti-monopoly Law include per se illegal rule or reasonable rule applied to RPM illegality affirmation were problematic and they suggested amendments to the existing legislation to address the issue.
[7] See Huang Yong, Liu Yannan, On the Law Applicable to the Resale Price Maintenance Agreements Based on Anti-monopoly Law of the People's Republic of China, Social Science, 2013(10).
[8] Chicago Board of Trade v．United States, 246 U.S.231 (1918).
[9] Leegin Creative Leather Products Inc．v．PSKS Inc.551 U.S.877 (2007).
[10] See Chen Bing, Jin Hanxin, On the New Development and Its Enlightenment of South Korean Rules and Regulations of RPM Illegal Cases—The Transition from Per Se Illegal Rules to the Reasonable Rules, Law School of Jilin University, 2012 Economic PhD Forum Report.
[11] The Multi-value and Change of Anti-monopoly Law Enforcement, See Han Tie, The Historical Discussion on the Cause of the Formation of the Multi-targets of American Anti-trust Law, History Monthly, 2004(6); See Rein Wesseling, The Modernization of EC Antitrust Law, Hart Publishing, 2000, pp.10-50.
[12] Xin Yang, Is Fixing Minimum Resale Price Agreement Per Se Illegal?—A Discussion With Zhu Dan, President of the Third Court of Shanghai Higher People's Court, Hebei Law Science, 2014(8).