Our China lawyers have had several inquiries in recent months that touch on China anti-monopoly laws. This is an interesting emerging area of China legal practice as the regulation and implementation is currently in flux. The China government initiated a broad reorganization program in spring of this year which set out to consolidate the regulatory functions of 5 separate government agencies into a single oversight body. This is the State Market Regulatory Administration.
As part of this reorganization, SMRA assumes and implement anti-monopoly and antitrust, price supervision and consumer protection regulatory roles which were previously under four separate governing bodies. The bureaus which will be merged into the SMRA include the former Anti-monopoly and Anti-unfair Competition Enforcement Bureau of the old SAIC, the Price Supervision and Anti-monopoly Bureau of the National Development and Reform Commission, the Anti-monopoly Bureau of the Ministry of Commerce (MOFCOM), and the Anti-monopoly Commission of the State Council.
The reorganization and consolidation appears intended to make the antitrust process more coherent and efficient, however the devil as always is in the details. Based on our experience with these regulators we are unsure that in practical terms the day to operations of the SMRA have effectively incorporated all of the official responsibilities as described by the reorganization previously handled by the 4 disparate bureaucracies. Often In China legal implementation lags the official pronouncement, and confusion and inaction among the regulators is expected.
In this environment, representing clients as to China antimonopoly issues will involve reaching out to the four “old” antitrust and consumer protection bodies to seek to determine what if anything has actually changed in the day to day process of review and adjudication of antitrust matters over the six months since the official reorganization announcement in March. From there the process involves a bit of “playing by ear”. This is not a well-defined area of law, implementation is often subjective, officials sometimes lack initiative to pursue matters independently; regulators often attempt to offload responsibilities to “competing” regulators with a similar mandate – even when things are not in the middle of a widespread inter-agency reorganization.
As with much of China corporate legal practice the process entails a series of face to face interactions and negotiations with the regulators. China regulators are for the most part benign if you can believe it. They are in most cases neutral technocrats and bureaucrats. They won’t necessarily go out looking for regulatory violations, but they will have to act if and when presented with clear evidence of potential violations of China antitrust, fair competition and consumer protection laws. The preferred course of action requires performing due diligence as to the current state of the China market for relevant products, as well as developing projections, supported empirically where possible, of the potential negative monopolistic effects within China on the Chinese consumer caused by a target transaction, or lack thereof.
Our China lawyers will supplement economic and product sales information provided by a client with information obtained via our team’s due diligence as to China market conditions in the industry. Our China lawyers work to prepare a case in support of the client’s goal with reference to specific facts, and projected violations of Chinese laws, and general effects on competition in the industry. This is all then presented to the appropriate regulator through face to face advocacy. The goal here is to be as thorough as possible, and to build as strong a case as possible so as to effectively force the hand of the regulator by presenting them with a clear-cut case they cannot ignore or deflect off to another department. This almost always requires a “hands on” process.