I. Legislation

A. Legislation Tendency Highlight

  • In the year of 2015, China's antitrust enforcement agencies, namely the National Development and Reform Commission ("NDRC"), the State Administration for Industry and Commerce ("SAIC") and the Ministry of Commerce ("MOFCOM") made more efforts regarding legislation, especially when it comes to strengthening the role of soft law, compared to 2014.
  • Intellectual property right ("IPR") related antitrust issues are a hot topic. At this stage, three antitrust enforcement bodies and the State Intellectual Property Office are respectively drafting the IPR antitrust guidelines based on their respective enforcement areas and are going to submit their respective guidelines to the State Council's Anti-monopoly Commission ("AMC"). The AMC will eventually come up with the final and unified guidelines (the "IPR Antitrust Guidelines") based on the draft versions submitted by above-mentioned bodies.
  • The auto industry has consistently attracted attention under the framework of AML. Apart from continuous enforcement activities against cartel, vertical monopolistic agreement and abusing dominance in the auto industry, the antitrust guidelines for the auto industries being drafted by NDRC (the "Auto Industry Antitrust Guidelines"), are the only antitrust guidelines specialized for a particular industry. This suggests a deepening and detailing of legislative activities of China's antitrust enforcement authorities.
  • In addition to the IPR Antitrust Guidelines and the Auto Industry Antitrust Guidelines, the NDRC has also drafted four other guidelines in 2015 in order to normalize and guide the enforcement activities. The four guidelines include Guidelines on Leniency Policy, Guidelines on Commitment of Undertakings, Guidelines on Calculating the Illegal Gains and Fines for Monopoly Conducts and Guidelines on Procedures of Monopolistic agreement Exemption.

B. Legislation of SAIC

Rules on Prohibition of Abuse of Intellectual Property Rights for the Purpose of Eliminating or Restricting Competition2

On April 7, 2015, SAIC issued the Rules on the Prohibition of Abuse of Intellectual Property Rights for the Purpose of Eliminating or Restricting Competition (the "IPR Antitrust Rules"), which have taken effect on August 1, 2015.

The IPR Antitrust Rules consist of six main parts, including:

  • clarifying the purpose and basis of the legislation, and providing relevant legal concepts (e.g. Article 1);
  • prohibiting undertakings from reaching any monopolistic agreements through exercising intellectual property rights and providing the principle of "Safe Harbour" and its details (e.g. Article 5);
  • illustrating the rules for undertakings with dominant position exercising intellectual property rights, and especially proposing the "essential facility doctrine" (e.g. Article 10);
  • laying out the rules for exercising IP rights related to the patent pool and standardization (e.g. Article 12 and 13);
  • providing the analytical approaches and consideration factors for conducting the antitrust assessment (e.g. Article 15); and
  • stipulating the possible punishments to be imposed in case of violation of this Rules (e.g. Article 17).

Draft Guidelines on Prohibition of Abuse of Intellectual Property Rights for the Purpose of Eliminating or Restricting Competition

The Anti-monopoly and Anti-unfair Competition Enforcement Bureau of SAIC released the sixth draft of "Guidelines on Prohibition of Abuse of Intellectual Property Rights for the Purpose of Eliminating or Restricting Competition" ("SAIC draft IPR Guidelines") on January 6, 2016.

The SAIC draft IPR Guidelines cover various IPR related antitrust issues - such as restrictions on technology R&D between competitors, exclusive grant-back clauses, market division among competitors, and safe harbour rules regarding monopolistic agreements involving IPRs, etc. The following areas are mainly illustrated:

  • Chapter 1 clarifies general principles of the guidelines, the relationship between antitrust law and IPR protection, as well as the relationship between IPR abuse and monopolistic behaviour. It also covers nature and type of conduct eliminating or restricting competition via IPR abuse, the relationship between IPR and market dominance position, the legal responsibilities and remedies, as well as the scope of application.
  • Chapter 2 outlines the basic analysis framework, including its methodology, analytical steps, factors and competition effects.
  • Chapter 3 relates to defining the relevant market, including the general principle and circumstances where relevant technology market and relevant innovation market should be defined.
  • Chapter 4 refers to monopolistic agreements involving IPR, including factors that should be taken into account when analysing these agreements and related safe harbour regulations.
  • Chapter 5 stipulates the circumstances regarding the abuse of market dominance in the exercise of IPRs, including refusal to license, tie-in sales and other unjustifiable transactions.
  • Chapter 6 involves undertakings' concentration when exercising IPRs.
  • Chapter 7 analyses certain special behaviour-types related to the exercise of IPRs from the antitrust perspective, including standard-setting related activities, injunction for standard essential patents ("SEP"), patent pooling and behaviour of copyright management organizations.

It is reported that the SAIC has finished soliciting opinions from the U.S. and EU chambers of commerce, some major Western companies and law firms. The SAIC's antitrust division will gather feedback on the sixth draft from relevant departments of the Chinese government, competition organizations and antitrust scholars. The draft will then be submitted to the AMC for review.

C. Legislation of NDRC

Auto Industry Antitrust Guidelines

During the Annual Conference of China Automobile Dealers Association held in November 2015, one of the NDRC officials said that the first draft of Auto Industry Antitrust Guidelines ("Auto Antitrust Guidelines") has been completed. According to the official, Auto Antitrust Guidelines consist of six sections, respectively preface, basic issues, monopolistic agreement, abuse of dominant position, concentration of undertakings and supplementary articles. Furthermore, the official stated that vertical price restrictions on sales of new energy auto might be exempted during the promotion period.

Auto Antitrust Guidelines will likely be released in 2016 by the State Council instead of the NDRC, according to Wei Tongwei, general secretary of the spare part working committee under the China Automotive Maintenance and Repair Trade Association.

Draft Antitrust Guidelines on IPR Abuses3

NDRC published a draft of the Antitrust Guidelines on IPR Abuses on December 31 2015. NDRC noted that the consultation period for the draft guidelines run from 1 until 20 January 2016.

The draft guidelines constitute five parts: preamble, basic issues, IPR-related agreements that may eliminate or restrict competition, IPR-related abuse of dominant position; and concentration involving IPR.

The draft guidelines cover antitrust issues related to joint R&D, patent pool, cross licensing, standardization, price restriction, exclusive grant-back, no-challenge clause, exemption of agreements, unfairly high royalty fees, refusal to license, tying sale, imposing unreasonable transaction conditions, discriminatory treatment and injunctive relief.

The draft guidelines also include factors for determining whether the application of injunction orders by standard essential patent owners can lead to the elimination or restriction of competition, such as whether the parties involved expressed their true intentions during negotiations.

D. Legislation of MOFCOM

The Guidelines on Standardizing the Names of Notification Cases4

MOFCOM issued the Guidelines on Standardizing the Names of Notification Cases on February 6, 2015, which took effect at the same time.

Auto Sales Management Measures

MOFCOM posted a draft of the Auto Sales Management Measures (the "draft Measures") on its website on 6 January 2016, and is soliciting for comments until 6 February, 2016. MOFCOM intends to implement this new rule to replace the current Auto Brand Sales Management Measures.

According to the draft Measures, any vehicle sales and related services engaged in the territory of China shall be abided by this rule. The draft Measures consist of five parts, which are the general principles, code of conduct, supervision and management, penalty provision and bylaw.

The Measures clearly provide that the departments of the commercial administration under the State Council will be in charge of nationwide auto sales management.

In the second part, the draft Measures list the conducts in which a supplier shall not engage in. These conducts include restricting distributors from reselling their products, requesting distributors to share expenses for their own marketing activities, restricting distributors from selling parts of other brands or providing after-sales services for other brands and so on. Most of these conducts are deemed as vertical monopolistic agreements, which are likely to induce anti-competitive effects in EU and US practices.

As reported, the Chinese government will make efforts to coordinate the Auto Antitrust Guidelines and the Measures-- two upcoming industry-specific regulations.

To continue reading this article, please click here

Footnotes

1 Dr. Zhan Hao is the managing partner of AnJie Law Firm and received his Doctoral degree, Master degree and Bachelor degree in law. Dr. Zhan also conducted Post-doctoral research on Microeconomics. E-mail address: zhanhao@anjielaw.com. Song Ying is a partner of AnJie Law Firm whose practice focuses on antitrust and litigation. Ms. Song can be reached at the following e-mail address: Dr. Zhan Hao is the managing partner of AnJie Law Firm and received his Doctoral degree, Master degree and Bachelor degree in law. Dr. Zhan also conducted Post-doctoral research on Microeconomics. E-mail address: zhanhao@anjielaw.com. Song Ying is a partner of AnJie Law Firm whose practice focuses on antitrust and litigation. Ms. Song can be reached at the following e-mail address: songying@anjielaw.com. The other team members of AnJie competition team, including Li Xiang, Wang Lingling, Zhang Wenyi, Zheng Shuangshi and Feng Siduo also make contribution to this report.

2 The original Chinese notice published by SAIC is available at http://www.saic.gov.cn/fldyfbzdjz/zcfg/zcfg/201507/t20150724_159428.html.

3 The original Chinese notice published by NDRC is available at http://jjs.ndrc.gov.cn/fjgld/201512/t20151231_770233.html.

4 The original notice published by MOFCOM is available at: http://fldj.mofcom.gov.cn/article/i/201502/20150200891361.shtml

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.