Private Antitrust Enforcement of Resale Price Maintenance in China: What Lessons Can China Learn from the United States? Jingmeng Cai* I. INTRODUCTION ..................................................................................... 2 II. PROFILE OF PRIVATE ANTITRUST ENFORCEMENT IN CHINA .................. 5 A. Definition ...................................................................................... 5 B. Roles of Private Antitrust Enforcement ........................................ 6 C. Status Quo of Private Antitrust Enforcement ............................... 8 D. Typical Cases of Resale Price Maintenance (RPM) ................... 10 1. Rainbow v. Johnson & Johnson .......................................... 10 2. Infant Formula Milk “Follow-on” Case .............................. 13 III. RAISING QUESTIONS – REASONS FOR THE PROBLEMS ......................... 15 A. Reform of Civil Process in China ............................................... 17 B. Regulations of Civil Procedure Law ........................................... 18 1. Plaintiff’s Difficulties of Discovering and Obtaining Evidence .............................................................................. 19 2. Limitations of Court-Conducted Investigations .................. 20 C. Lack Support from Public Antitrust Enforcement—Conflict and Ambiguity ............................................................................. 22 1. Prima Facie Evidence ......................................................... 23 2. Commitment and Leniency ................................................. 24 IV. FINDING SOLUTIONS—WHAT CHINA CAN LEARN FROM THE U.S. ..... 26 A. Fundamental Issues—Roles and Purposes ................................. 26 1. The U.S. Law ...................................................................... 27 2. Lessons from the U.S. Law ................................................. 29 B. Specific Rules and Mechanisms—Effects on the Plaintiffs’ Burden of Proof .......................................................................... 31 1. Standing Test of Antitrust Injury ......................................... 31 2. The Indirect Purchaser and “Passing-on” Doctrines ........... 32 3. Class Action ......................................................................... 34 C. Seek Support from and Resolve Conflicts with Public Antitrust Enforcement ................................................................................ 39 1. The U.S. Laws ..................................................................... 40 2. Lessons from the U.S. ......................................................... 41 V. CONNECTIONS WITH ON-GOING PUBLIC ENFORCEMENT .................... 44 VI. CONCLUSION ...................................................................................... 45 * J.S.D., IIT Chicago-Kent College of Law. For helpful comments and discussions, I thank Professor David J. Gerber. Any errors or omissions are my own. Contact information: [email protected]/[email protected]. 2 Asian-Pacific Law & Policy Journal Vol. 18:2 The reception of foreign legal institutions is not a matter of nationality, but of usefulness and need. No one bothers to fetch a thing from afar when he has one as good or better at home, but only a fool would refuse quinine just because it didn't grow in his back garden.1 — Rudolf von Jhering, 1818–1892 I. INTRODUCTION Many countries are following the U.S. model to expand private antitrust enforcement or are actively discussing this model;2 however, American academics and legal practitioners are beginning to review their model with considerable skepticism.3 Professor Daniel Crane even warns developing antitrust law jurisdictions to avoid the “pitfalls” of the U.S. system, and encourages these jurisdictions to conduct “robust experimentation,” which may be hard to carry out in the United States.4 1 RUDOLF VON JHERING, GEIST DES RÖMISCHEN RECHTS (9th ed. 1955), in KONRAD ZWEIGERT & HEIN KÖTZ, INTRODUCTION TO COMPARATIVE LAW 17 (Tony Weir trans., Clarendon 3d ed. 1998). 2 For example, the European Union released a Green Paper in 2005 and a White Paper in 2008 successively to clarify some issues of private antitrust enforcement in order to promote private litigations within the European Union, see Claire Korenblit, Quantifying Antitrust Damages—Convergence of Methods Recognized by U.S. Courts and the European Commission, CPI ANTITRUST CHRONICLE (2012), https://www.competitionpolicyinternational.com/assets/Uploads/KorenblitMAR-121.pdf. Also, in 2000, Japan has modified its antitrust law and expanded private enforcement as well. See Toshiaki Takigawa, The Prospect of Antitrust Law and Policy in the Twenty- First Century: In Reference to the Japanese Antimonopoly Law and Japan Fair Trade Commission, 1 WASH. U. GLOBAL STUD. L. REV. 275, 298-299 (2002). 3 See Edward D. Cavanagh, The Private Antitrust Remedy: Lessons from the American Experience, 41 LOY. U. CHI. L. J. 629 (2010) (this article states that private antitrust remedy is not effective in the United States, and analyzes under such a circumstance what other countries could learn from the U.S. experience); see also Daniel A. Crane, Optimizing Private Antitrust Enforcement, 63 VAND. L. REV. 675 (2010) (this article argues that private enforcement is not very effective at advancing either of the antitrust law’s purposes—competition and deterrence.); see also Harry First, Is Antitrust “Law”?, 10 ANTITRUST 9 (1995) (this article points out that in recent years, antitrust has come to be seen more as policy and less as law, the enforcement of which increasingly relies on bureaucratic regulatory; and the author thinks that this shift will be detrimental to U.S. antitrust enforcement eventually). 4 Crane argued that, although there are several problems of the US private antitrust enforcement, it “is not so obviously broken,” so the US system may need a “modest, incremental reforms.” However, Crane suggested that “more robust experimentation” could be taken place in the developing antitrust world. For example, these jurisdictions can “start with a different set of premises about what private enforcement is and why it should exist.” Moreover, these jurisdictions can also adopt a “problem-solving approach to implement in jurisdictions that do not generally regulate commercial behavior through 2017 Cai 3 In China, movements and discussions about private antitrust enforcement reflect ambivalence toward the U.S. model.5 When China considers expanding private antitrust enforcement, it may be wise to neither blindly follow nor to completely reject the U.S. model. Only a clear analysis of predicaments faced by China and a comprehensive understanding of both the merits and the defects of private antitrust enforcement in the U.S. can help China avoid the “pitfalls” and find the “Midas touch” from the U.S. experience. This article focuses on China’s private enforcement of resale price maintenance (RPM), but discussions and conclusions can also be generally applicable to larger issues concerning private antitrust enforcement. Through discussing the status quo of private antitrust enforcement and typical RPM lawsuits in China, this article argues that the most serious problem that has hindered the development of private antitrust enforcement is the plaintiffs’ heavy burden of proof, because it greatly discourages people from filing lawsuits in courts. Thereafter, this article raises a question: what has caused the antitrust plaintiffs’ heavy burden of proof? In order to answer this question, this article identifies three reasons: the reform of civil process (a background reason), current provisions of the Civil Procedure Law (a primary reason), and a lack of support from public antitrust enforcement (a subordinate reason). First, China’s reform of civil process is a background reason, which has transformed the traditional “extreme interrogation” model6 to an adversarial, rights-based system as the United States does.” See Crane, id., at 720-22. 5 In Chinese academic community, scholars hold divergent attitudes toward the American experience. For example, a professor at Fudan University suggests that China should adopt the U.S. antitrust class action mechanism. See Zhang Wusheng (章武生), Lun Quntixing Jiufen de Jiejue Jizhi, Meiguo Jituan Susong de Fenxi He Jiejian (论群体性纠 纷的解决机制——美国集团诉讼的分析和借鉴) [The Mechanism for Collective Disputes, the Analysis and Reference of the U.S. Class Action], 3 ZHONGGUO FAXUE (中 国法学) [CHINA LEGAL SCI.] 20 (2007). In contrast, other scholars argue that the U.S. experience may be of little help to China, and China should rely on public antitrust enforcement, rather than expending private enforcement. See Li Jian (李剑), Fanlongduan Siren Susong Kunjing yu Fanlongduan Zhifa de Guanzhihua Fazhang (反 垄断私人诉讼困境与反垄断执法的管制化发展) [Predicaments of Private Antitrust Enforcement and the Development of Administrative Regulatory of Antitrust Enforcement], 5 FAXUE YANJIU (法学研究) [CHINESE J. L.] 70 (2011). Moreover, in practice, the analyzing approaches between antitrust agencies and courts are divergent. For example, the judicial system seems prefer the U.S. rule of reason for analyzing RPM, but the antitrust agency follows the E.U. pattern to analyze RPM to treat RPM as per se illegal. See Jingmeng Cai, Antitrust Public Enforcement of Resale Price Maintenance in China: A Crusade or Discrimination?, 42:1 BROOK J. INT’L L.1, 50-52 (2016). 6 After the People’s Republic of China was founded in 1949, a model of civil trial named as the “Ma Xiwu Model” was widely