[author] Li Jian
[content]
The Implementation of Antitrust Law in the Platform Economy: With Economic Efficiency as the Starting Point
*Author: Li Jian, Professor and Vice Dean of KoGuan Law School, Shanghai Jiao Tong University
Abstract: In platform economy, there are great differences between the EU and the US in terms of the enforcement of the Anti-Monopoly Law. China has experienced two stages as well. The differences need to be further explained. Considering the importance of goal for antitrust law, the goal of efficiency becomes a proper starting point, By the welfare standard, a unified and definite framework can be created for the goal of efficiency, Meanwhile, this analytical framework is also determined by many factors, and faces the challenge of platform economy, Although the Anti-Monopoly Law upholds the goal of efficiency, it does not have a clearly defined welfare standard, Currently, the active law enforcement targeting the platforms is the result of pursuing the goal of non-efficiency, which makes the Anti-Monopoly Law aiming to achieve multiple goals, become more responsive to reality. However, to achieve better implementation, it is required to improve anti-monopoly law and to make more thorough reasoning in specific cases.
Key words: Platform Economy; Goal of Efficiency; Welfare Standard; Anti-Monopoly
1. Background and Issues
Regarding how to implement the Anti-Monopoly Law in the field of platform economy, the United States, the European Union and China, the three major legal jurisdictions in the world today, have shown different approaches. As the most leading country in the platform economy, the United States has always been very tolerant of platform companies, but there has been a trend of strengthening supervision in recent years. For example, in 2019, the House of Representatives launched an investigation into the monopoly practices of Google, Apple, Facebook and Amazon; in 2020, the Department of Justice and 11 states including Arkansas jointly filed an Anti-Monopoly Lawsuit against Google for using exclusive agreements on smartphone search engines; in 2020, the Federal Trade Commission filed an Anti-Monopoly Lawsuit against Facebook for acquiring start-ups. However, including the Microsoft case that was settled in the early days, antitrust investigations and lawsuits against platform companies did not ultimately determine that the relevant companies violated the law. The Biden administration recently appointed Tim Wu as the president's special assistant for technology and competition policy and Lina Khan as the chairman of the Federal Trade Commission, intending to strengthen the implementation of the Antitrust Law. However, the implementation of the US Antitrust Law is centered on the judiciary, and the attitude of the Federal Supreme Court is not optimistic.
In contrast, the EU's antitrust enforcement agencies are more stringent on Internet platforms, frequently issuing huge fines. In 2017, the European Commission determined that Google's preferential treatment of its own comparison shopping website was illegal and fined it 2.42 billion EUR; in 2018, the European Commission determined that Google illegally bundled search engines and browsers and fined it 4.34 billion EUR; in 2019, the European Commission determined that Google illegally prevented competitors from posting search advertisements on third-party websites and fined it 1.49 billion EUR; in 2020, the European Commission launched an antitrust investigation into Amazon's logistics and distribution practices; in 2021, the European Commission launched an antitrust investigation into the restrictive terms of Apple's App Store.
The text of China's Anti-Monopoly Law is mainly based on EU competition law, and platform companies should be treated more harshly. But in fact, China was once more tolerant than the United States. For a long time after the Anti-Monopoly Law came into effect in 2008, there were no anti-monopoly law enforcement cases against Internet platform companies, and even no cases were filed for investigation. On December 24, 2020, the State Market Regulatory Administration filed an investigation into Alibaba Group's (hereinafter referred to as "Ali") “forced exclusivity” behavior, which was a landmark incident in the change of the anti-monopoly law enforcement attitude. After the case, law enforcement agencies launched intensive law enforcement, continuously investigated and announced multiple cases, including cases such as Baidu and Tencent's unreported concentration cases, the prohibition of the merger between Huya and Douyu, and Tencent's exclusive licensing of music copyrights. These cases basically have covered the most famous internet companies in China.
As can be seen from the above, although both countries implement the Anti-Monopoly Law, there are huge differences between the EU and the US. Even if China implements the same Anti-Monopoly Law, it also shows two stages. So, how should we understand the differences in the implementation of the Anti-Monopoly Law? Especially for the one in China, what are the underlying reasons for such a sharp change, and how to evaluate it, are of great value to the effective implementation of the Anti-Monopoly Law.
In addition to a large number of analyses of specific cases and types of behavior, domestic research on platform anti-monopoly can be divided into two categories: one advocates less implementation of the Anti-Monopoly Law to create space for the development of platform economy; the other believes that the Anti-Monopoly Law should be actively implemented and even the connotation of the Anti-Monopoly Law should be reformed. For the former, the focus is on the setting of regulatory ideas, such as the emphasis on "prudent supervision" and "modest concept". The latter can be further divided into two categories. One advocates the transformation of the existing Anti-Monopoly Law, including the improvement of antitrust analysis methods while changing the concept; the second emphasizes breaking through the existing antitrust law framework, including the reconstruction of the Anti-Monopoly Law based on the characteristics of data platforms; regulating large platforms as public utilities; and building a new foundation for platform regulation based on the public nature of platforms. As the halo of Internet platforms as "innovators" gradually fades, more radical views are gradually becoming mainstream.
However, there are two problems with existing research: First, it only emphasizes the regulatory thinking, which makes it difficult to explain the relationship between it and the existing antitrust law system, and it is also difficult to explain why the enforcement method under the same law suddenly changes; second, it basically assumes that the existing antitrust law system lacks sufficient flexibility, so it needs to be reconstructed or seek direct regulatory methods. To make up for these two deficiencies, it is necessary to understand the antitrust law system in a macro and comprehensive way. The goal of Anti-Monopoly Law provides the focus and basis for this understanding, because the legal goal determines the direction and institutional framework of the law. From the perspective of the goal of efficiency of the Anti-Monopoly Law, we can systematically see the reasons for the differences in the implementation of the Anti-Monopoly Law in the United States, the European Union and China: first, even if they all recognize the goal of economic efficiency, there are differences in the judgment criteria and premise assumptions of the goal of economic efficiency; second, whether the goal of economic efficiency is taken as the only goal will also cause differences in the implementation of antitrust law, because non-economic efficiency goals will undoubtedly expand the scope of antitrust law regulation. The inherent theoretical logic of the different implementation effects of the Anti-Monopoly Law also constitutes the basis for evaluating the implementation effect of China's Anti-Monopoly Law. China's Anti-Monopoly Law is a multi-objective system with sufficient flexibility to meet the current needs of platform anti-monopoly. The economic efficiency goal was once the only goal pursued by the anti-monopoly law in the platform economy. However, while the economic efficiency goal has constructed a relatively unified and definite analytical framework, it has also brought huge challenges in analytical technology. Non-economic efficiency goals can well reflect the multi-faceted impacts brought about by the concentration of economic power and better respond to reality, but how to construct a basic analytical framework still needs to be explored.
2. Goals of economic efficiency and their legal significance
In different countries and regions, the goals of the Anti-Monopoly law include market integration, openness, fairness, and control of dominant positions, but the goal of economic efficiency is usually included. The US antitrust law even takes economic efficiency as the only goal. The economic efficiency goal is of great value in understanding the theoretical construction of modern antitrust law. Under the economic efficiency goal, the welfare standard allows for quantitative judgment of the competitive impact of behavior, thereby building a unified and definite analytical framework.
2.1 The connotation and application of the goal of economic efficiency
As the core concept of economic efficiency goals, the word "efficiency" itself has multiple meanings. According to the current academic understanding, efficiency can be divided into three categories: allocation efficiency, production efficiency and innovation efficiency. Among them, allocation efficiency is to allocate resources to the most valuable places from the buyer's perspective. Production efficiency is the production and sales of products by enterprises at the lowest possible cost. Innovation efficiency is the benefits obtained through research and development and innovation, including the manufacture of new products and the creation of new technical processes, also known as dynamic efficiency.
These three types of efficiency also have different meanings in the Anti-Monopoly Law. The Anti-Monopoly Law has both positive and negative attitudes towards production efficiency. On the one hand, antitrust law generally allows behaviors that improve corporate production efficiency, unless such behaviors also increase the company's market power. On the other hand, companies are usually not considered to have violated antitrust law just because they have no production efficiency. In contrast, the reduction of allocative efficiency and dynamic efficiency is often the basis for judging whether a behavior violates antitrust law. However, since innovation is difficult to predict by building an analytical model, even in a relatively broad dynamic analysis, antitrust analysis is mainly carried out in a relatively elementary form of fact-intensive investigation. Therefore, in today's mainstream antitrust law textbooks, the theoretical basis is mainly built on static efficiency, and the competition damage caused by market behavior is understood from the perspective of allocative efficiency. That is, if resources cannot be allocated correctly, it means that there is an "absolute loss"; society can produce more valuable output by reallocating resources. Of course, there are different understandings of allocative efficiency, such as Pareto optimality and Pareto improvement.
The antitrust law measures the efficiency of distribution mainly through the welfare standard. There are also different forms of welfare standards. Generally speaking, the welfare standards considered by the antitrust law are divided into two types: consumer welfare standard and total welfare standard. The consumer welfare standard focuses on the consumer surplus generated in the transaction; the total welfare standard emphasizes the consideration of both consumer surplus and producer surplus. Under the consumer welfare standard, if the behavior of an enterprise leads to a reduction in consumer surplus, it will violate the antitrust law. For example, when other conditions remain unchanged, an increase in product prices will directly reduce consumer surplus, which will constitute a violation of the law. Under the total welfare standard, because both producer surplus and consumer surplus are considered at the same time, there is a situation where the reduction in consumer surplus can be compensated by increasing producer surplus, so simply reducing consumer surplus is not illegal.
There are also different opinions on which of these two welfare standards should be the goal of Anti-Monopoly Law. The reason for supporting consumer welfare is that the consumer welfare standard can encourage companies to better consider their business behavior from the perspective of consumers and protect the interests of consumers; it is more operational in practice because law enforcement agencies can determine whether it is illegal based on a certain foreseeable price change. The view supporting the total welfare standard is that considering both consumer surplus and producer surplus can better support changes that are beneficial to improving the total welfare of society, such as long-term investment in research and development; the increase in producer surplus means the increase in corporate capital returns; companies belong to shareholders, and shareholders are also consumers, and the increase in producer surplus will ultimately benefit consumers. But no matter which standard is adopted, judging the illegality of behavior by calculating surplus is the core of welfare standard analysis. Therefore, when analyzing whether a specific behavior violates the antitrust law, the main consideration is the impact of the relevant behavior on price, output, and quality.
2.2 Legal significance of economic efficiency goals
The adoption of economic efficiency as the main goal of antitrust law, or even the only goal, is one of the most significant changes in modern antitrust law. The internal driving force of this change is that the economic efficiency goal provides specific rules for judging whether a behavior constitutes anti-competitive behavior, clarifies how to conduct case analysis, and provides antitrust law with a coherent, feasible, unified, and objective analytical framework. Under this framework, antitrust law can introduce quantitative tools and distinguish between legal and illegal behavior by analyzing changes in economic welfare.
2.2.1 Constructed an applicable analytical framework
The significance of the economic efficiency goal, especially the significance of a single economic efficiency goal, should be understood in the context of the development history of modern antitrust law. Before the adoption of the economic efficiency goal, antitrust law judged whether an act constituted a violation based more on whether it would restrict the autonomy of the operator. For example, when judging whether resale price maintenance is illegal, attention is paid to the producer's reservation of the right to determine prices; for tie-in sales, emphasis is placed on whether the operator has coerced consumers. These methods make it difficult to effectively distinguish between competition restrictions and general contractual restrictions. This issue once troubled judicial and law enforcement agencies in the history of antitrust law. Even though Chief Justice White of the U.S. Supreme Court interpreted the trade restrictions prohibited by Section 1 of the Sherman Act as "unreasonable" restrictions and developed the far-reaching principle of reasonableness, the distinction between "reasonable" and "unreasonable" still cannot be clearly distinguished for behavioral judgment.
After the introduction of the economic efficiency goal, this problem has been largely solved. Whether a behavior is an "unreasonable" restriction is no longer based on a relatively subjective judgment, but on whether it has led to an increase in the price of products or services, a decrease in output, or whether it has suppressed innovation and other results that harm consumer welfare, thereby transforming the way of analyzing the illegality of behavior. At the same time, through this analytical method, the economic efficiency goal can also well distinguish between protecting competitors and protecting competition. This is a hotly debated issue in the history of antitrust law. Competition will inevitably lead to the survival of the fittest, and companies with insufficient competitiveness will be forced to exit the market. And the competition process usually includes the participation of competitors, and it is often difficult to reflect competition without competitors. Due to this connection, when competitors exit the market, it is entangled whether it is because they have lost their competitiveness or because they are affected by restrictive competition behavior. With the help of welfare standards, this distinction is relatively clear.
2.2.2 Facilitate the introduction of quantitative economic analysis tools
Since the goal of economic efficiency focuses on welfare issues, law enforcement agencies and courts can use a variety of economic tools to review various market factors and use economic evidence as the basis for judging whether an act is illegal. Because whether it is a true consumer welfare standard or a total social welfare standard, it is necessary to determine whether the welfare caused by the relevant behavior is increased or decreased, and this usually requires quantitative calculation using economic tools to determine. In this regard, Professor Herbert Hovenkamp also believes that the use of the total social welfare standard efficiency in antitrust law means that traditional economic rules must be applied and quantification must be carried out in order to solve the quantitative measurement required to express the total social welfare. The development of economics has indeed provided antitrust law with relatively sufficient analytical tools to accomplish this task.
There are more economic analysis tools for judging whether an act restricts competition than the traditional tools based on tort law and contract law, and the analysis of the effects of the act is relatively more objective. For example, in defining the relevant market, the SSNIP test and critical loss analysis can be used; in analyzing predatory pricing, the Areeda-Turner average variable cost analysis can be used; in analyzing the concentration of operators, the HHI index can be used to analyze market concentration, and upward pricing pressure and merger simulations can be used to analyze the competitive effects of concentrated transactions. Of course, emphasizing the use of more quantifiable economic tools under the goal of economic efficiency does not mean that economic reasoning was not included in the case analysis before this goal was established, but that the application of these methods has a clearer direction and is more systematic, and the focus of the competitive assessment has also shifted from considering whether competitors are harmed to whether competition is not conducive to consumer welfare. The results of quantitative analysis are undoubtedly more certain and objective.
In summary, the welfare standard under the economic efficiency goal can better play the advantages of combining with economic theories and tools, making the analysis and regulation of antitrust law more unified and certain. These advantages are also the important reasons why the economic efficiency standard occupies an increasingly important position in antitrust law. Since the 1970s, the United States has been the most proactive in promoting the construction of this single-goal antitrust law system, and has excluded non-economic efficiency goals such as economic democracy from antitrust law. This process is also known as the "economic revolution" of antitrust law. The European Union began to promote the "more economic approach" reform around 2000, highlighting the economic efficiency goal and introducing economic theories and analytical tools. The US antitrust law regards the total welfare standard as the only goal of antitrust law, while the EU competition law is more inclined to the consumer welfare standard.
Among the platform antitrust cases in China, the Sherpa’s case is a typical example of the methods and results of applying the economic efficiency target analysis framework. For example, when defining the relevant market, the law enforcement agency constructed an economic model and used market survey receipt data to conduct economic econometric analysis to ultimately support the conclusions of the critical loss analysis. In addition, when analyzing the market dominance of the platform, the law enforcement agency analyzed the changes in the market share of the main market participants; when identifying abuse, the law enforcement agency calculated the proportion of commissions of cooperative restaurant merchants, changes in order volume, etc. The case has received very high praise, mainly because under the economic efficiency goal, the law enforcement agency used economic analysis tools to conduct a detailed quantitative analysis of consumer welfare, and the conclusions were more acceptable.
3. Differences in the construction of economic efficiency goals and their practical significance
The coherent, feasible, unified and objective analytical framework brought about by the economic efficiency goal sometimes creates the illusion of convergence in the Anti-Monopoly Law, covering up the differences. In fact, even if the economic efficiency goal is recognized, there may still be huge differences in the construction and implementation of specific systems. Moreover, this difference will be further increased in the field of platform economy.
3.1 The Basic Influencing Factors of Difference
Legal objectives are only the results that the legal system hopes to achieve, but different paths may be considered for achieving them, and there may also be differences in the understanding of the results. From the analysis in the previous article, we can see that under the goal of economic efficiency, "efficiency" can be understood differently, different efficiencies can be emphasized, and different welfare standards can be selected. This will lead to different institutional constructions under the goal of economic efficiency - although a unified analytical framework can still be constructed in the end. Therefore, it is understandable that there are different legal implementation effects under the same goal. Starting from the welfare standard, this problem can be well explained.
3.1.1 Selection of welfare standards
The selection of welfare standards is not only a different understanding of welfare, but also directly affects the judgment of behavior. This influence can be understood from two aspects. First, the direct impact on the identification of illegal behavior. The consumer welfare standard only considers the impact of restrictive competition behavior on consumer surplus, while the total social welfare standard includes the distribution effect. Taking the review of operator concentration as an example, if a concentrated transaction will significantly reduce the cost of the enterprise, but at the same time cause a slight increase in the price of the final product, then it is illegal according to the consumer welfare standard; while the total social welfare standard will allow it to pass. This will result in different results for the same behavior in different countries.
Secondly, the difficulty of implementing the law is different. The total social welfare standard needs to consider both consumer welfare and operator welfare at the same time, which is undoubtedly more difficult, because more evidence is needed to calculate the welfare of both parties. The greater the difficulty, the more difficult it is to determine that the relevant behavior is illegal. The US antitrust law adopts the total social welfare standard. Professor Fox believes that: "The (US) Supreme Court claims to implement the antitrust law in the name of efficiency, but in fact we can show that efficiency is not a guide for the Supreme Court's solution. In the United States today, the Supreme Court's cases are almost all judged for the defendant." The important reason for this is that the total social welfare standard has increased the difficulty of implementing the antitrust law, resulting in fewer behaviors being deemed illegal.
3.1.2 Ability to apply economic theories and tools
Under the goal of economic efficiency, no matter what welfare standard is adopted, it means that a large amount of economic evidence is needed and quantitative calculations are required, which is a big challenge for law enforcement agencies and plaintiffs. The mastery of these capabilities largely determines the effectiveness of law enforcement.
One direct manifestation is the length of administrative penalty decisions. The complex cause-effect relationship and the need to use various evidence for quantitative and qualitative evaluation have made the decisions longer. In the 1970s, the decision documents for cases under Article 101 of the EU Competition Law were about 10 pages of A4 paper; after 2004, the average length of decisions for non-cartel cases was 157 pages. For cases under Article 102, the length of decisions was about 19 pages between 1971 and 1998; after the reform in 2005, the average length was 216 pages. In the 1990s, the average length of decisions for business concentration prohibition cases was 36 pages, while under the new business concentration rules, the average length of decisions for prohibition cases was 465 pages. These longer decisions undoubtedly reflect the requirements for higher ability to use theoretical tools and more empirical evidence.
3.1.3 Degree of trust in the market
The analytical tools required by the economic efficiency goal are difficult to master even for law enforcement officers and judges in the United States. The problem that follows is that this will lead to a certain degree of under-enforcement of the Anti-Monopoly Law. In other words, even if the behavior is restrictive of competition, because only some cases can complete the evidence collection and analysis work well, the number of behaviors that are ultimately determined to be illegal will be less than the number that actually occurred. So, should we let the behavior happen, or adopt a lower standard for identifying behavior? Different countries give different levels of trust to the market, which leads to two different strategies.
The United States has a high degree of trust in the market and requires actual proof of the effects of competition. The Chicago School, which triggered the "antitrust revolution", has four basic theoretical assumptions. First, price theory is the more important economic model. Second, the market rarely fails. Third, " economic man " is a rational decision maker whose goal is to maximize profits; and fourth, when the government regulates economic activities, it can hardly do anything that is actually in the public interest. Such assumptions make the US antitrust law more concerned with the false positive problem of excessive implementation of the law, and believe that false negative problems and problems of insufficient implementation can be corrected by the market itself. Therefore, the US antitrust law has a high standard for identifying illegal acts and emphasizes the actual proof of the effects of competition.
EU competition law pays more attention to the limited functions of the market and has a stricter attitude towards market behavior (with lower standards). EU competition law focuses on the problem of insufficient implementation of competition law and adopts stricter assumptions and systems. Many behaviors that require careful analysis of effects and behaviors that are completely ignored under US antitrust law are assumed to be illegal under EU competition law. For example, EU competition law stipulates common market dominance, regulation of ultra-high pricing, regulation of loyalty discounts, etc. Even some behaviors that lack reasonable explanations are assumed to be illegal. This is related to the fact that EU competition law traditionally pays more attention to form than to effects. The EU's "Digital Market Services Act" determines that some Internet platform companies constitute "gatekeepers" based on the size of the platform companies, which is in fact the result of this model.
3.2 Challenges Brought by Platform Characteristics
The pursuit of economic efficiency goals in the platform economy brings additional obstacles. Simply speaking, the characteristics of two-sided markets pose at least two challenges to antitrust analysis.
Firstly, how to judge the competitive constraints faced by the platform. Since there are influences between different user groups, the two-sided market needs to consider the feedback between user groups at the same time, which directly affects how to define the relevant market and how to identify market dominance. Since the two-sided market involves at least three parties (platform and two user groups), it is difficult to determine how many relevant markets need to be defined. In this regard, some studies have suggested that the market should be defined based on the classification of transactional and non-transactional markets; or determined based on the source of profit; or returning to the unilateral market and understanding the business model through the sale of attention. In addition, some scholars have proposed to recognize that the interests of user groups on different sides are not completely consistent, and both parties are not interested in the net effect of restrictions, and use this to explain cross-market network effects. However, these views have not been widely recognized.
Secondly, the calculation of welfare effects. Two-sided platforms not only have two different types of customers, but also their needs are interdependent, their prices are interdependent, and therefore their welfare is also interconnected. Therefore, when evaluating welfare effects, customer interactions need to be taken into account. But this is difficult. Two-sided markets involve at least three parties: the platform and two user groups. For example, Meituan is a platform that hosts both food delivery merchants and users who place orders. So, who are the "consumers" that should be considered in the consumer welfare standard? There are at least three different understandings: one is to regard both merchants and order-ordering users as consumers; the second is to regard merchants and platforms as producers and order -ordering users as consumers; the third is to regard merchants as producers and order-ordering users as consumers. Not only is there controversy, but different considerations will inevitably lead to different results.
In the recent and very influential case of Ohio v. American Express Co., the non-diversion clause stipulated by American Express is to provide substantial discounts to cardholders on the one hand, and to increase fees for merchants on the other hand. How to apply the welfare standard is a difficult problem. How to define the welfare effect and the market is closely related to how to understand the nature of the various parties on the platform. Because according to the common understanding, the evaluation of the welfare effect is carried out in a specific relevant market, rather than considering the welfare of one relevant market participant and the impact of the behavior on the welfare of another relevant market participant. There is no consensus on how the antitrust law should deal with this.
It is precisely because of the many problems brought about by the two-sided market theory that David S. Evans, an economist famous for his research on the two-sided market theory, believes that "the economic theory of multi-sided platforms itself cannot provide clear guidance for courts. Unlike economists, courts must deal with practical issues such as the manageability of rules, balancing the costs of errors, and complying with the Anti-Monopoly Law. Although economic theory proves the importance of accounting for interdependent needs, courts may determine that doing so does not work in practice or will result in too many errors or delays." Michael L. Katz has the same conclusion. It can be said that although the two-sided market theory is difficult to provide more practical guidance, it has successfully created problems that "did not exist" before.
As a result, the general welfare standard is more likely to be adopted, and there is a greater reliance on direct analysis of competitive effects. The more extensive the introduction of economic analysis tools is, the more likely it is that the antitrust law will face challenges from the characteristics of the platform economy in its implementation, and it will be difficult to determine whether an act is illegal. This can help us understand the differences in the implementation of the US antitrust law and the EU competition law.
3.3 Evaluation of the implementation of Chinese law based on the goal of economic efficiency
Economic efficiency is of course also an important goal of China's antitrust law. However, the Antitrust Law shows great ambiguity and theoretical logic conflicts in the process of pursuing economic efficiency. Especially considering that the text of China's Antitrust Law refers more to EU competition law and should be closer to EU practices in terms of basic theoretical framework, the above problems are more prominent.
Firstly, it is unclear what welfare standards are used in China's Anti-Monopoly Law, and they conflict with each other in many cases. Neither the Anti-Monopoly Law nor the relevant supporting regulations and judicial interpretations clearly state what welfare standards will be used to determine whether an act is illegal. This requires law enforcement agencies and judicial agencies to clarify it in individual cases. Unfortunately, perhaps because of problems in understanding the welfare standards and related systems and theories under the goal of economic efficiency, in some cases, law enforcement agencies and courts either do not analyze relevant behaviors from the perspective of welfare standards, or adopt conflicting welfare standards, and in even more cases, it is difficult to see welfare standard analysis.
The Sherpa’s case mentioned above strictly followed the welfare standard analysis, but the two more influential cases in the same period, the Ali case and the Meituan’s case, did not conduct detailed analysis and conflicted with each other. In the Ali case, the law enforcement agency determined that Ali's behavior "…reduced the platform's operating efficiency, hindered the platform's business model innovation, hindered potential competitors from entering the market, improperly reduced the intensity and level of market competition, affected the continuous optimization and development of online retail platform services in full competition, and the damage effect will be transmitted to the consumer terminal, not only damaging the actual interests of consumers, but also damaging the expected interests of consumers, and reducing the overall welfare level of society." In the Meituan’s case, the law enforcement agency determined that Meituan's behavior "…reduced the platform's operating efficiency, barriered the platform's model innovation, hindered potential competitors from entering the market, weakened the intensity and level of market competition, affected the continuous optimization and development of online catering takeaway platforms in full competition, and reduced the long-term welfare level of consumers." One approach emphasizes overall social welfare, while the other focuses on consumer welfare. As discussed earlier, these two standards have substantial differences.
Secondly, there are also contradictions in the assumptions about market trust. Different assumptions about market functions have been clearly reflected in resale price maintenance. The courts and antitrust enforcement agencies support different analytical models. Among them, the antitrust enforcement agencies adopt strict standards similar to those of the European Union and adopt a "prohibition + exemption" approach to resale price maintenance. This implies an assumption of distrust in the market. The courts are the opposite. However, in the Hainan Yutai case, the Supreme People's Court reconciled the contradiction between the judicial and administrative law enforcement agencies and mentioned that "under the current circumstances where China's market conditions are not perfect and the market's own ability to correct deviations is weak, the restrictive competition effects of vertical monopoly agreements need to be paid more attention and regulated. The regulation and punishment of such agreements are the focus of current antitrust law enforcement work." This can be seen as a compromise and confirmation of the market function assumption by the highest judicial body, which is consistent with the views of the administrative authorities.
However, in the field of platform economy, this premise is completely reversed. Before 2020, there were no antitrust enforcement cases against platform economy in China. The regulatory thinking followed the principle of "inclusive and prudent supervision" and fully trusted the market. Although the regulatory thinking subsequently switched to "strengthening and improving antitrust supervision", if we carefully examine the provisions of the Anti-monopoly Guidelines of the State Council Anti-Monopoly Committee on the Platform Economy (hereinafter referred to as the "Guidelines"), we can find that the previous thinking is largely continued. For example, compared with the version for public comments, the official version of the "Guidelines" emphasizes that "it is usually necessary to define" the relevant market, which is a change from the previous attitude of "no definition". In addition, high requirements are also set for the composition of predatory pricing. In any case, in terms of the basic assumption of market function, there is a lack of logical consistency in giving the platform economy a break. After all, other economies and industries outside the platform economy also have innovation problems and the problem of creating greater development space.
However, there is a possibility that the above attitude is due to the technical analysis difficulties brought about by the characteristics of the platform economy, and it is the technical barriers that lead to the loose implementation of the law. For example, the operator concentration review case of Didi's acquisition of Uber. This case is the first case that China's antitrust law enforcement agency has taken the initiative to review, but the results of the review have not been made public since 2016. In this regard, it should be acknowledged that China's antitrust law enforcement agencies are still less capable of mastering theoretical tools than their counterparts in the United States and the European Union, which limits the implementation of the law.
Of course, there is another possibility, that is, the change in the implementation of China's antitrust law in the field of platform economy is not a change under the goal of economic efficiency, so the relevant judgment cannot be made according to welfare standards, market function assumptions and other aspects. In fact, the antitrust law enforcement for the platform economy is accompanied by the tightening of the overall supervision of the platform economy. In terms of the usual investigation period of antitrust cases, the handling of related cases is also a bit too fast. For example, it took about 4 months from the filing of the Ali’s case to the announcement of the penalty results, and about 5 months from the filing of the Meituan’s case to the announcement of the penalty results. Considering the huge market size of these companies and the difficulties of antitrust analysis, especially the difficulties based on quantitative requirements, the speed of case investigation is particularly fast. After all, the time spent by the European Commission on cartel investigations ranges from 2 to 7 years, with an average of 4.3 years. Therefore, the penalty decisions of these cases tend to be generally stated as a whole, and there is no quantitative analysis of welfare standards even if they are involved. Based on this, there is reason to believe that the change in the implementation of China's antitrust law in the platform economy is driven by non-economic efficiency goals.
4. Implementation Differences and Practical Significance under Non-economic Efficiency Goals
Observations based on non-economic efficiency goals can provide a dimension of understanding for the drastic change in law enforcement attitudes. China's Anti-Monopoly Law is a multi-objective law. According to Article 1 of the Anti-Monopoly Law, the goals of my country's Anti-Monopoly Law include preventing and stopping monopolistic behavior, improving economic efficiency, safeguarding the legitimate rights and interests of consumers, and safeguarding the public interest. Economic efficiency goals are only one of them. Therefore, there is a legal basis for considering non-economic efficiency goals in cases. Moreover, non-economic efficiency goals actually make the Anti-Monopoly Law more responsive and more flexible to deal with various problems brought about by the concentration of economic power.
However, as antitrust law analysis increasingly tends to pursue economic efficiency goals, there is great controversy over whether and how to consider non-economic efficiency goals in antitrust law. The mainstream view in China is that antitrust law should support a single economic efficiency goal. The main reasons are: antitrust law is a law that takes economic efficiency as its goal, and should not consider goals other than economic efficiency; non-economic efficiency goals are very difficult to evaluate and difficult to analyze after being included. However, the development of the platform economy has produced a large number of impacts other than efficiency, and there is a realistic need for antitrust law to respond.
4.1 Practical needs of non-economic efficiency goals
Legal systems are the product of social needs, and the same is true for antitrust law. Although the goal of economic efficiency is the main or even the sole goal of contemporary antitrust law, the factors that have historically driven the introduction of antitrust law are not limited to this, and the impact of the concentration of economic power is not limited to economic efficiency. In this regard, the legal system cannot only focus on the consistency of its own logic, but must also respond effectively to real needs.
4.1.1 Non-economic efficiency goals drove the birth of antitrust law
Modern antitrust law was born out of the pursuit of non-economic efficiency goals and in response to real needs. In 1890, when the Sherman Act was introduced, trust organizations were very common in important industries such as railways and oil. The concentration of economic power has greatly affected all aspects of the economic, political and social life of the United States. Therefore, the purpose of the Sherman Act is to control the power of large trusts. Two major legislations in 1914 and 1950 expanded the scope of antitrust law to control the exclusive behavior that had become rampant and to prevent the rising wave of economic concentration that was considered a threat to democracy. For most of a century, US antitrust law pursued market economic democracy. It was after the 1970s that US antitrust law shifted to a single goal of economic efficiency.
EU competition law was born in the Treaty of Rome in the 1950s. Its original intention was to prevent war from breaking out again in Europe. After the First World War, Europe tried to build peace through contracts and other means, but it was unsuccessful. Therefore, after World War II, Europe hoped to establish a mechanism that could effectively prevent the outbreak of war. From the European Coal and Steel Community, the European Atomic Energy Community, to the later European Union, European countries have established a close cooperative relationship. The premise of these efforts is that the interweaving of international economies will cause military conflicts to bring disastrous economic consequences to member states, which is also a deterrent to member states and their citizens. With the gradual establishment of a unified market, the EU began to transform into "more economics", and economic efficiency goals took a more core position.
China also has its own history. Since China implemented a planned economy before reform and opening up, there was no room for the Anti-Monopoly Law to play a role. The transition from a planned economy to a market economy is the historical background for understanding the introduction of China's Anti-Monopoly Law. The problems of corporate restriction of competition arising from the continuous development of the market economy, the irregular competition of large state-owned enterprises directly transformed from industrial sectors during the planned economy period, the administrative monopoly caused by improper government intervention, and some other factors have jointly given rise to the Anti-Monopoly Law. Therefore, from then to now, China's Anti-Monopoly Law has generally expressed a variety of anti-monopoly law objectives.
It can be seen that antitrust law is the product of real needs. Whether it is concerns about economic democracy, building a unified market, or regulating government and market behavior, it all reflects such needs.
4.1.2 The multi-dimensional impact of the concentration of economic power
The concentration of economic power will affect social income fairness, freedom of speech, labor security and other aspects besides economic efficiency. Although there are disputes over the degree and interpretation of the impact of the concentration of economic power, many studies believe that there is a correlation between industry concentration and wealth inequality, and concentration will lead to unequal growth. Empirical studies have shown that companies have gained more profits due to the increase in market power and the decrease in competition constraints. It is generally believed that the new business model developed by social media has redefined power relations and affected the labor market or political system. Some American scholars believe that the increase in industry concentration and the interaction between corporate power and politics will threaten the operation of the free-market economy and democracy. From a more macro perspective, global income inequality itself is also increasing, and the social problems brought about by this undoubtedly need to be taken seriously. All of these constitute the need for an antitrust law system.
Although the US antitrust law claims to have a single goal, it has not actually given up on the consideration of "fairness". The Federal Trade Commission Act is an important source of antitrust law, and its Article 5 on "unfair trade methods" is clearly outside the basic analytical framework of antitrust law. In the field of platform economy, China's repeatedly mentioned concept of "preventing the disorderly expansion of capital" is also to incorporate the social impact of economic forces into policy formulation and implementation. Therefore, there is a need to incorporate non-economic efficiency goals into reality for antitrust law.
4.1.3 Risk of Antitrust Law Being Replaced
Modern antitrust law emphasizes the goal of economic efficiency. This development meets the requirements of unity and coherence in antitrust analysis. If the non-economic effects brought about by the concentration of economic power are excluded, in addition to being unable to effectively respond to real needs, it may also lead to the inappropriate replacement of antitrust law by other laws. This situation has already appeared in the field of platform economy. For example, the eight member units of the Inter-ministerial Joint Conference on Coordinated Supervision of New Transportation Business Forms, including the Ministry of Transport, jointly interviewed ten new transportation business platform companies such as Didi Chuxing and Shouqi Car-hailing , requiring platform companies to take the initiative to reduce the commission ratio and guarantee the labor remuneration of drivers; online freight platforms reasonably set and take the initiative to reduce the level of information service fees and membership fees. Even the antitrust law enforcement agencies themselves evade the direct application of the antitrust law, and adopt a large number of administrative guidance and interviews to directly require relevant companies to make commitments and rectifications.
The widespread use of interviews reflects the contradiction between the strong desire of law enforcement agencies to govern the platform economy and the limited means of governance. As mentioned above, the goal of economic efficiency faces challenges in the field of platform economy, which inherently leads to insufficient implementation of the Antitrust Law. Similar to the practice of regulatory talks, some scholars have proposed seeking relief through the Consumer Rights Protection Law to avoid the problem that the Antitrust Law is difficult to deal with the characteristics of the two-sided market. However, these methods not only fail to truly solve the problem, but may also create new problems. For example, antitrust administrative guidance has unclear application boundaries, illegitimate administrative guidance procedures, and unqualified subjects’ overstepping of their authority. In this sense, the Antitrust Law’s response to reality is also urgent.
4.2 Realization of non-economic efficiency goals
The "anti-monopoly" storm launched by China in the platform economy is the product of implementing the anti-monopoly law based on non-economic efficiency goals. This positive response attitude deserves recognition. However, the implementation effect is not very successful. The reason is that the relevant cases and administrative guidance neither clearly explain the damage to economic efficiency goals nor the damage to non-economic efficiency goals.
Since non-economic efficiency goals are often broad, it is difficult to conduct quantitative analysis with the help of welfare standards like economic efficiency goals. However, non-economic efficiency goals can be incorporated into the goal system for consideration by balancing interests based on reasonable reasons. In this regard, the basic relationship between economic efficiency goals and non-economic efficiency goals can be divided and then reflected in relevant systems. As a law that controls economic power, although economic efficiency goals face challenges, there is a mature analytical framework and they should still be used as the basis for antitrust law analysis, on which non-economic efficiency goals are considered. This consideration can be divided into two aspects: one is to consider it in the exemption reasons; the other is to directly determine that the behavior of enterprises is illegal based on non-economic efficiency goals. This requires combining individual case reasoning while improving the antitrust law system. In terms of these parts, China's antitrust law has a lot of room for improvement.
4.2.1 Exemption conditions and non-economic efficiency objectives
How to consider non-economic efficiency goals on the basis of economic efficiency goals involves the issue of system construction and implementation. The exemption system of the Anti-Monopoly Law is the best starting point for understanding this relationship. The exemption provisions in China's Anti-Monopoly Law are reflected in Article 15. According to the provisions of this article, to exempt the responsibility of monopoly agreements, three conditions must be met: First, it belongs to the circumstances clearly listed in Article 15, paragraph 1. Specifically, it includes: to improve technology, research and develop new products; to achieve social public interests such as energy conservation, environmental protection, disaster relief, etc.; second, the agreement will not seriously restrict competition in the relevant market; third, it can enable consumers to share the resulting benefits. Although it is very specific, there are at least several aspects of the problem:
Firstly, the exemption reason does not take into account the relationship between economic efficiency goals and non-economic efficiency goals. If the economic efficiency goal and its welfare analysis are the basis for analyzing whether an enterprise's behavior is illegal, then the fact that the behavior constitutes an illegality already implies the consideration of economic factors. At this point, it is logically contradictory to use "reducing costs, improving efficiency" and other reasons for exemption in the exemption. Therefore, using non-economic efficiency factors, such as public interest, as reasons for exemption can better achieve the integration of different goals.
Secondly, the exemption is only provided for in monopoly agreements, and does not involve the abuse of market dominance. Exemption is the exemption from legal liability on the premise of antitrust violations. If monopoly agreements can be exempted from liability, the same logic should of course apply to abuse of market dominance. Although the provisions on abuse of market dominance in the Anti-Monopoly Law require that the behavior be "without legitimate reasons", this requirement is a constituent element of abuse of market dominance, or a defense, rather than a requirement for exemption from liability after liability is determined, and should not be used as an exemption condition. The composition of "legitimate reasons" is also the same as the exemption of monopoly agreements. There is a problem of not distinguishing between economic efficiency and non-economic efficiency factors.
Finally, the exemption conditions are too strict. According to the three conditions currently required for exemption, it is very difficult for the punished object or defendant to obtain exemption. In the more than ten years since the enforcement of China's antitrust law, there has been no successful exemption in public cases. In the Ali’s case and the Meituan’s case, the punished person even gave up the right to defend himself. There may be many reasons for this result, but the strict application conditions are undoubtedly one of them. It is not emphasized here to ensure that the case is exempted, but excessive exemption conditions will result in non-economic efficiency factors actually not being able to enter the antitrust analysis. In addition, this also implies that the consideration of non-economic efficiency factors will weaken the intensity of the implementation of the antitrust law.
4.2.2 Directly determine illegality based on non-economic efficiency goals
The inclusion of non-economic efficiency goals also means that related behaviors can be directly determined to be illegal based on this. However, due to the extensiveness of non-economic efficiency goals, it is not easy to determine which non-economic efficiency factors are suitable as the goals of antitrust law, and how to construct an analytical framework for these factors. The US antitrust law emphasized the protection of small businesses or political decentralization by dispersing economic power, which was considered too subjective, leading to unpredictable rules and corruption. The best way to solve this problem is still practice. That is, by analyzing and fully reasoning in different cases in combination with specific circumstances, we can gradually abstract applicable principles or specific regulations. This is actually how the economic efficiency goal gradually develops.
The current Anti-Monopoly Law also has provisions for direct determination of violations based on non-economic efficiency factors. For example, the "unfair" high prices and "unreasonable" trading conditions emphasized in Article 17 all emphasize the legitimacy of the operator's behavior and the multiple impacts that the behavior may bring, which itself has an open analytical framework. However, in specific cases, there is often a lack of detailed and sufficient analysis of factors such as "unfairness" and "unreasonableness", and more often they are simply directly applied to the behavior of the relevant operators. This also leads to limitations in rationalizing the punishment results and optimizing the system.
When determining the illegality of the "forced exclusivity" behavior of Ali and Meituan, China's antitrust law enforcement agencies emphasized fair competition, business autonomy and other content, reflecting the pursuit of non-economic efficiency goals. However, the reasoning of these two cases is too brief. For example, in the Ali’s case, the antitrust law enforcement agency determined that the relevant behavior of the parties restricted consumers' right to free choice and fair trade, and harmed consumer interests. Among them, the restriction on consumers' right to free choice is because the relevant behavior of the parties reduced the brands and products available on other competitive platforms, limiting the range of brands and products that consumers can access; and the restriction on consumers' right to fair trade is that consumers can only passively accept the transaction conditions of the parties and cannot enjoy more competitive prices and services on other platforms. In the Meituan’s case, the law enforcement agency also had a similar analysis. Due to the lack of detailed reasoning, these two conclusions can easily find counterexamples. For example, because the operator's product innovation is more in line with the needs of some consumers, competitors are forced to withdraw from the market, which will inevitably lead to fewer choices for consumers, but this is one of the positive effects of competition and is not illegal.
Therefore, although there is currently a lack of analytical framework for non-economic efficiency goals, China's antitrust law has not attempted to enrich arguments and accumulate experience through reasoning in individual cases. The result is that social needs have driven the change in the platform's antitrust attitude, but the pursuit of non-economic efficiency goals has not been clearly presented in relevant cases. The immaturity and uncertainty of the analytical framework, as well as the possible lax law enforcement that may result from it, are areas that need to be improved in future antitrust law enforcement in the platform economy.
5. Conclusion
How to effectively fight against monopoly in the platform economy is a very controversial issue worldwide. The drastic change in the implementation of China's antitrust law is a phenomenon that needs to be explained. With the help of the goals of the antitrust law, we can better understand the logic of the antitrust law system and thus understand the reasons for the change. On this basis, we can also better evaluate the problems in the implementation of the antitrust law and provide a basis for institutional improvement. More importantly, this also shows us that the antitrust law is a product of real needs and a product of systematic construction, and there is no unchanging model. Changes in social needs will also lead to changes in the antitrust law, and differences in these needs will lead to institutional differences. Seeking a more appropriate path in the differences is a task that China's antitrust law needs to constantly reflect on.