SUFE received a letter of thanks from the State Administration for Industry and Commerce (“SAIC”), which highly acclaims Professor Tan Guofu and Professor Ju Heng and other economists of the SUFE Center for Anti-Monopoly Law and Competition Economics (“CAML”). The 2 professors provided comprehensive economic analysis and professional consulting service to SAIC in the case of Tetra Pak’s dominance in the market under Anti-monopoly Law. In November 2016, SAIC issued a press release on the over-four-year investigation with a fine imposed in amount of 670 million Yuan on Tetra Pak. The SAIC’s decision and the penalty in this case has raised considerable concerns in the international community and the masses speak highly of this case. This decision also strikingly enhances the international influence of China’s law enforcement agencies.
SUFE CAML has assembled a panel of research scholars in almost a decade of international recruitment and wide cooperation. Both full-time professors and distinguished professor teams are engaged in the program. The panel keeps up with the cutting-edged research through regular research seminars and annual workshops. As time goes by, the discourse of industrial organization economics has seen a benchmark in terms of academic research.
The thorough research greatly contributes to high standards of strategy consulting service. SAIC notes that the case of Tetra Pak falls within rather complicated Dominance Case and they have employed several panels from various fields during the investigation. The experts of SUFE research center studied an abundance of domestic and foreign literatures on monopoly, conducted active research based on masses of solid data and composed thorough special papers, which offered considerable support in the investigation.
Meanwhile, SAIC has manifested its professional enforcement during the investigation. The officials of SAIC and experts of SUFE developed effective communication, where they discussed not only economic evidence but also the research into related theoretical issues. The officials of SAIC also attended the workshop of antitrust 2015 organized by SUFE CAML. SAIC expressed its willingness to foster deeper cooperation in the future to maintain the fairness of market economics.
Review of Tetra Pak Case
On November 16th 2016, SAIC released the decision on the Tetra Pak Case. SAIC decided that Tetra Pak’s conduct violated the regulations in the Anti-Monopoly Law (AML) of the People’s Republic of China, and constituted tying without legitimate reason, restricting trade without legitimate reason, and other acts of abuse of market dominance as stipulated in Article 17 (4), (5) and (7) of the AML. Pursuant to the AML, SAIC ordered Tetra Pak to stop the illegal conduct, and imposed on Tetra Pak the penalty of 7% of its sales in 2011 in Greater China.
According to the investigations, SAIC concluded that from 2009 to 2013, Tetra Pak had dominant position in the three markets including paper-based aseptic packaging equipment for liquid food (“equipment”), technology service for paper-based aseptic packaging equipment (“technology service”), and paper-based aseptic packaging materials (“packaging materials”) in mainland China, whose clients are in the majority dairy manufactures and secondarily soft drink enterprises. All 3 markets show rather rigid barriers to market entry. Tetra Pak won and retained clients in long term supply by its operation experience, technical service system and continuous research and development; all these reasonably justify its edge over other competitors.
SAIC concluded that Tetra Pak had enhanced its market dominance in addition to its original market power through varied contracts.
Highlights of the Case
The difficulty and the focus fall in loyalty rebates. Rebates are common business practice, benefiting consumers and promoting market competition. But in this case, SAIC explicitly demonstrated that Tetra Pak had specific market conditions to impose loyalty rebates.
In the packaging market, large and mid-sized enterprises will purchase a certain amount of packaging material. If the customers made incremental orders, they would receive a lower price and additional rebates. Other competing packaging materials suppliers have to not only match Tetra Pak’s rebates for contestable portions, but also further reduce their prices to compensate customers’ rebate loss in non-contestable portions; while the average price of Tetra Pak remains high, they maintain a rather low price for incremental orders. Such a situation brings difficulty for other packaging materials suppliers to compete with Tetra Pak.
The previous orders can be deemed, as non-contestable demand of Tetra Pak’s market power and the incremental orders is contestable demand. Tetra Pak enhanced its dominance in contestable demands by loyalty rebates. The critical point needed to understand the antitrust conducts in this case is that Tetra Pak also employs retroactive rebates in its rebate strategy, which further adds to difficulty of other packaging enterprises to compete with it.
Tetra Pak enhances its market dominance in an unreasonable way not by advance of techniques and service, but by its market power. This further induces customers to choose Tetra Pak and foreclose its competitors, which eventually restricts market competition in the short run. Therefore Tetra Pak sustains and expands its market power and the Tetra Pak-dominant market is hard to change.
According to the Decision, SAIC took the “rule of reason” approach and employed the save clause of principal (7) of Article 17 of the AML, which can serve as a landmark model in addressing cases of eliminating and restricting competition.
The School of International Business Administration and CAML will continue the Workshop on Antitrust and Industrial Organization in 2017. The workshop features enforcement agencies, experts in the industry and outstanding scholars around the world, and serves to boost research on antitrust and offer theoretical bases for antitrust enforcement.
Brief introductions of the 2 experts
Professor Tan Guofu
Guofu Tan is a Professor of Economics, University of Southern California with PhD from the California Institute of Technology, Distinguished Professor of Shanghai University of Finance and Economics, Dean of Center for Anti-Monopoly Law and Competition Economics. His research fields are Auction Theory, Industrial Organization, Antitrust Economics, Competition Policy and Regulation, Microeconomics and Chinese Economy. He serves in various editorial capacities for the International Journal of Industrial Organization, the Annals of Economics and Finance, China Economic Quarterly, and the Review of Industrial Economics.
Doctor Ju Heng
Doctor Ju Heng is Assistant Dean of the School of International Business Administration; Executive Director of Center of Anti-Monopoly Law and Competition Economics. PhD of Economics from the University of British Columbia Economics. His professional interests include Industrial Organization, Regulation and Competition Policy, Applied Microeconomics, and Chinese Economy. He has published several papers in Review of Economics and Statistics, International Economic Review, Journal of Comparative Economics, etc. He also works as antitrust expert of Shanghai Administration of Industry and Commerce at the time this article is composed.
Translated by Sun Yichen
Edited by Dominic Graham , Zhang Boxin
Source ： SUFE News