Several rules published after the enforcement of China’s Anti-Monopoly Law (AML). The are Provisions on Anti-Price Monopoly, and its procedural rules, Provisions on Prohibition of Monopoly Agreements, Provisions on Prohibition of Abuse of Dominant Market Position, and Provisions on Abuse of Administrative Power to Exclude or Restrict Competition . These new rules will each take into effect on 1 February 2011.
As almost all main enterprises in China are hold, controlled, and managed by government, it is said there are great obstacles in the effort of anti-monopoly. Although these new rules have been released, it can still be difficult to restrict the monopoly of these state enterprises.
However, these new rules provide further guidance on conduct prohibited under the AML. They also demonstrate possible competition and a lack of coordination between the NDRC and the SAIC.
The main points of these new rules include:
- Various types of price monopolistic agreement are prohibited, including fixing or changing the prices of products/services, fixing or changing price variance, and agreeing a price calculation formula. The NDRC also has discretion to determine other types of price monopolistic agreement.
- Trade associations are specifically prohibited from formulating rules, decisions or issuing notices that exclude or restrict price-related competition. They are also prohibited from organizing undertakings to enter into price monopolistic agreements or from taking related actions.
- The coincidence of price-related behaviour and communications between the undertakings will be examined to determine whether concerted action has taken place. Market structure and market change will also be taken into consideration. Under the AML, concerted action between the undertakings is one of the means through which a monopolistic agreement can be reached.
- Factors are specified for determining whether an enterprise has a “good reason” for engaging in what would otherwise be an abuse of dominant market position. These factors differ depending on the particular abuse.
- The first whistle-blower who reports a price-related monopolistic agreement and provides important evidence can be exempted from punishment. The second undertaking reporting the violation and providing important evidence can be subject to mitigated punishment of no more than 50% of the statutory sanction. Undertakings subsequently reporting the violation and providing important evidence can be subject to mitigated punishment of no less than 50% of the statutory sanction.
- In order to identify concerted action, the SAIC will examine factors in addition to those prescribed by the NDRC; in particular, the SAIC will also consider: whether the undertakings have exchanged information; whether they can provide a reasonable explanation; the competitive status of the market; and the situation of the industry.
- Monopolistic agreements can be either written or verbal.
- Authorization granted, restrictions imposed or rules published by an administrative authority do not provide an excuse for undertakings to reach or execute monopolistic agreements or to abuse a dominant market position.
- The SAIC will consider two general factors in determining whether an enterprise has a “good reason” for engaging in what would otherwise be an abuse of a dominant market position. These factors are: (i) whether the conduct in question is part of the normal business of an enterprise; and (ii) the effects of the conduct in question on the efficiency of the economy, social public interest and economic development. These factors differ from the more specific factors given by the NDRC Provisions.
- A whistle-blower among undertakings that are parties to a monopolistic agreement, in addition to the requirements set out in the NDRC Provisions, must also fully cooperate with investigation in order to be exempted from punishment. Mitigation for subsequent undertakings is discretionary.
Lehman Lee & Xu is licensed to operate as an international background law firm in China by the Ministry of Justice.