Anti-monopoly perspectives of chinese public air transport market

• Author: JIN Meirong
• Pages: 138-153

FRONTIERS OF LAW IN CHINA

VOL. 12 MARCH 2017 NO. 1

DOI 10.3868/s050-006-017-0008-1

ARTICLE

ANTI-MONOPOLY PERSPECTIVES OF CHINESE PUBLIC AIR TRANSPORT MARKET

JIN Meirong∗

Abstract Chinese public air transport market has been undergoing restructuring and

marketization since the reform and opening up, which plays a special and significant

role in the social and economic aspects of the state. After the enforcement of the

Anti-Monopoly Law of China in 2008, the issue of effective regulation on the

anticompetitive practices of public air transport market has become the focus of the

relevant discussions, in which monopoly agreements and concentration of undertakings

play a key part. Only thorough understandings of and insights from the competition

motives of relevant industry, markets and enterprises based on comprehensive legal

controls, can the relevant anti-monopoly legislation and law enforcement be effectively

optimized and improved.

Keywords anti-monopoly, public air transport market of China, monopoly agreement,

concentration of undertakings

INTRODUCTION .................................................................................................................... 139

I. MONOPOLY AGREEMENTS ON THE PUBLIC AIR TRANSPORT MARKET IN CHINA ..... 140

A. International Monopoly Agreements................................................................. 140

1. Monopoly Agreements in the International Air Transport Market................. 140

2. Relevant Legal Controls in China.................................................................. 143

B. Domestic Monopoly Agreements....................................................................... 145

1. Public Air Transport Prices Are Not Fully Market-Oriented in China........... 146

2. The Key to Proving a Monopoly Agreement on Public Air Transport Prices Is

to Obtain Evidence of Intention Communication among Airlines ................147

3. The Ticket Selling and Flight Information System of TravelSky Shall Be

Protected from Becoming a Platform for Conspiracy among Airlines ......... 148

II. CONCENTRATION OF UNDERTAKINGS ON THE PUBLIC AIR TRANSPORT MARKET IN

CHINA..................................................................................................................... 149

A. Market Shares and Control over the Market..................................................... 150

B. Entry to the Market ........................................................................................... 151

1. Cost Barriers ..................................................................................................151

2. Resource Barriers........................................................................................... 151

* (金美蓉) Ph.D., School of Law, Renmin University of China, Beijing, China; Associate Professor, School

of Law, Renmin University of China, Beijing 100872, China. Contact: jmeirong@sina.com

2017] ANTI-MONOPOLY PERSPECTIVES OF CHINESE PUBLIC AIR TRANSPORT MARKET 139

3. Policy Barriers............................................................................................... 153

C. Considerations of National Security and International Competitiveness ......... 154

CONCLUSION........................................................................................................................ 155

INTRODUCTION

In 1987, the structural reform of separating airlines from airports was implemented in

China, six critical national airlines were established.1 Later, local state-owned airlines

also came out, such as Shanghai Airlines, Sichuan Airlines, and Shenzhen Airlines. In

March, 2002, the State Council decided to reorganize China’s civil aviation industry again

by establishing six group companies, namely, Aviation Industry Corporation of China,

China Eastern Airlines, China Southern Airlines, TravelSky, China Aviation Supplies and

China National Aviation Fuel. On June 21, 2002, the Civil Aviation Administration of

China (CAAC) issued the Provisions on Foreign Investment in Civil Aviation, which

allows foreign investors to involve in air transport enterprises in China, including public

air transport enterprises, general aviation enterprises and civil airports, except for air

traffic control systems.2

The CAAC issued the Provisions on the Business Licensing for Public Air Transport

Enterprises and the Provisions on the Domestic Investment in Civil Aviation (for Trial

Implementation) in the beginning of 2005, which, while emphasizing the dominant status

of the state-owned economic, allow collectively owned enterprises and private enterprises

to invest in a variety of aviation projects. Those projects include public air transport,

general aviation, civil airports and computer ticket-booking system services, etc., marking

the entry of private investments into the Chinese civil aviation market. Since then, private

airlines such as Spring Airlines, East Star Airlines, Okay Airways, and Juneyao Airlines

came out one after another, contributing to the industrial investment structure of

state-owned dominance with diversified investment entities.

In China’s public air transport market, Air China, Southern Airlines, Eastern Airlines,

and Hainan Airlines share a total of over 90% domestic air routes, showing typical

oligopoly characteristics. According to the theories of industrial economics and the

anti-monopoly practices, oligopoly markets generally produce considerably intense

competition, where oligopoly enterprises with large market shares have equivalent control

over the market, and no single oligopoly enterprise is able to possess dominant market

power on its own. Therefore, there are less practices of abuse of dominant market

position in relevant markets, and it is more likely for oligopoly enterprises to acquire

1 The six airlines were Air China, Eastern Airlines, Southern Airlines, Southwest Airlines, Northwest

Airlines, and Northern Airlines.

2 However, the Chinese partner shall hold the majority of shares in civil aviation enterprises.