Antitrust in China 2006: The Problem of Incentive Compatibility

This paper reviews China’s continuing efforts to enact a competition policy (antitrust) law. We focus on three issues: (1) What is the substance of the proposed law, and how does it differ from existing antitrust law in other countries, (2) How will the law be implemented or enforced, and how will those who must implement this law interpret their mandate, and (3) What will be the likely effects of this law given China’s unique history and cultural heritage. We emphasize China’s economic, legal and regulatory contexts in which an antitrust law may be enforced. Our central focus is the problem of establishing a substantive and procedural legal framework that is incentive-compatible with economic efficiency and growth.