On July 27, 2011, China's State Administration for Industry and Commerce ("SAIC") posted on its website information on the first anti-monopoly case regarding abuse of administrative power to eliminate or restrict competition.
The decision resulted from an unnamed city in China's Guangdong province having issued an order requiring the use of GPS services of a private company to monitor the transportation of all hazardous goods in the city. The Guangdong Provincial Administration for Industry and Commerce ("Guangdong AIC") investigated after receiving complaints from competitors, and concluded that the specific administrative order constituted an abuse of administrative power under the Anti-Monopoly Law of the People's Republic of China ("AML"). The Guangdong AIC sought the guidance of the SAIC, then made a recommendation to Guangdong's provincial government to correct the abuse. On June 12, 2011 Guangdong's provincial government ruled that the order violated Articles 8 and 32 of the AML (namely, abuse of administrative power to eliminate or restrict competition).
Effective August 1, 2008, the AML is China's first
comprehensive competition law. Like other comprehensive competition
laws, the AML addresses the prohibition of anti-competitive
monopoly agreements, the prohibition of the abuse of a dominant
position, and merger control. Additionally, the AML covers the
prohibition of administrative monopolies, addressing the
anti-competitive effects of the misuse of government power. Such
specific rules against administrative monopolies reflects the solid
determination of the Chinese government to enforce the AML on those
monopolistic conducts resulting from administrative decisions or
orders at the local government level, which were quite common in
the past.
Although this administrative anti-monopoly case is the first
concluded by the SAIC, greater attention is being brought to the
investigation and enforcement of administrative abuses of power. On
February 1, 2011 the SAIC issued several new regulations
implementing China's AML, including a regulation specifically
with respect to prohibiting the abuse of administrative power to
eliminate or restrict competition. The regulation provides
authorities clearer indications as to what may result in a breach
of the AML, and what may perhaps be acceptable justification for
conduct that may result in a breach.
In China, many public bodies regulate or engage in commercial
activities, and the new regulations under the AML set out a number
of provisions that limit how public bodies exercise their powers.
Administrative bodies are prohibited from misusing their powers to
restrict products from other regions of China, such as through
price discrimination. Administrative bodies also may not force a
business operator to conduct itself so as to be in breach of
anti-monopoly laws and regulations. It remains to be seen whether
the new regulations will result in the publication of further cases
with respect to the abuse of administrative power.
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