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A Judicial Approach to the Grant of Exemptions to Administrative Monopolies in Chinese Competition Law – With Comparative Reference to Article 106(2) TFEU

With economic liberalization, State intervention in the economy has to comply with competition law in China, as is also the case in the EU. However, certain State monopolies are exempted from competition regulations for certain reasons. This project focuses on how exemptions could be granted under competition law.

Last Update: 22.08.18

In the EU, undertakings granted special or exclusive rights must comply with competition law: Article 106(1) TFEU provides that public undertakings and undertakings to which EU Member States have granted special or exclusive rights may not restrict or distort competition. At the same time, compliance with competition law should not obstruct the effective operation of certain tasks in the EU, as is for instance set out in Article 106(2) TFEU, for example, the provision of services of general economic interest (SGEI).

Like the EU, the strict prohibition of administrative monopolies in China has been balanced by exceptions granted by Article 7 of the Chinese Anti-Monopoly Law (AML).

The exemptions in Article 106(2) TFEU and Article 7 of the AML are, however, based on different requirements. Under Article 7 AML, State control is permissible with regard to industries to which the lifeline of the national economy and national security are concerned, and where the monopoly status or privileges are granted for purposes of consumer interests and technological advancement. In contrast, although Article 106(2) TFEU fails to provide a definition of SGEI, the EU Court and the Commission have acknowledged exemptions, for instance, in relation to certain postal services, health services, and electricity distribution. Nevertheless, the CJEU has never expressly defined what amounts to SGEI.

Similarly, the grant of monopoly status or privileges in given industries under Article 7 might change over time according to the changes in some factors such as technological advancement. Therefore, a dynamic approach should be taken to limit the scope of the activities relevant to the lifeline of the national economy or national security, for example, by providing a non-exhaustive list of such activities, because the activities which are assumed to be exempted today from the AML might be considered differently in the future.

Although the requirements according to which an exemption could be granted to a State monopoly under Article 106(2) TFEU are different from that of the AML, the method of analysis as to whether the immunity has been granted justifiably is likely to be relied upon by Chinese courts. The approach of the CJEU to granting exemptions under Article 106(2) is in effect the principle of proportionality. However, the CJEU’s approach to the proportionality test has not always been consistent in its previous State measure cases, which is reflected in its strict approach taken in the Höfner[1] and Dusseldorp[2] cases, whereas a more flexible approach has been taken in cases like Corbeau.[3]

In this respect, although Article 7 of the AML provides some exceptions from compliance with competition law, for example, national security, technological advancement, and consumer interests, on the other hand, the AML lacks a criteria or benchmark to assess whether Article 7 could be applied to the administrative monopoly in question. Therefore, a workable test will be explored in order to analyse the grant of administrative monopoly under Article 7 AML in a definite and transparent way, by referring to the proportionality test adopted by the EU.

[1] Case C-41/90, Klaus Höfner and Fritz Elser v. Macrotron GmbH, [1991] E.C.R. 1-1979.
[2] Case C-203/96, Chemische Afvalstoffen Dusseldorp BV v. Minister van Volkshuisvesting, Ruimtelijke Ordening en Milieubeheer [1998] E.C.R. I-4075.
[3] Case C-320/91, Criminal Proceedings against Corbeau [1993] E.C.R. I-2533.


Doctoral Student

Xue Gan

Doctoral Supervisor

Prof. Dermot Cahill

Main Areas of Research

III.2 Rechtsentwicklung in außereuropäischen Rechtsordnungen