The State’s Invisible Hand: Chinese SOEs Facing EU Antitrust Law

Abstract

We argue that the European Commission (EC) case law on mergers involving Chinese state-owned enterprises (SOEs) suffers from several flaws. First, it is inconsistent with the set of criteria initially set out in the EC case law for SOEs. Secondly, the EC’s assessment is based on an ownership bias that ignores the institutional environment in which Chinese SOEs operate. Third, it violates the basic legal rationale to maintain and ensure competitive neutrality between private and public companies in merger review. We argue in favour of a more systematic application of the single entity theory to restore the consistency of the case law. This appears a necessity in the case of Chinese investments in the EU. Indeed, due to its broad influence over its economy and its financial system, Chinese SOEs may enjoy an exorbitant privilege that could jeopardize the principle of competitive neutrality at the core of EU competition law. One should recognize that the antitrust law is a point of tension between the Western understanding of corporate law and the Chinese state capitalism based on a radically different institutional environment. A more consequential implementation of the principle of competitive neutrality is necessary to take into account this institutional environment.