The PRC Anti-monopoly Law ("AML") has been in effect for over a year, during which time anti-monopoly authorities have worked to establish a comprehensive system for combating monopolistic practices by issuing various implementing regulations.
1. Guidelines on Definition of Relevant Market
On 7 July 2009, the Anti-monopoly Commission of the State Council promulgated the long-awaited final Guidelines on the Definition of Relevant Market ("Market Guidelines"). The Market Guidelines provide guidance for certain mergers and acquisitions, pricing policies as well as joint ventures and co-operative agreements.
Role and Purpose of Defining the Relevant Market
The Market Guidelines provide that defining the relevant market is the starting point for analysing competitive conduct and constitutes an important part of the enforcement of the AML. The definition plays an indispensable role in regulating three monopolistic behaviours prohibited by the AML: monopolistic agreement, abuse of dominant market position and a concentration of business operators which has or likely will have the effect of excluding or restricting competition.
Meaning of the Relevant Market
The Market Guidelines provide that the relevant market refers to the product and geographic scope within which business operators compete for certain products or services during a specific period. Defining a relevant market generally requires determining the relevant product or service market and the relevant geographic market. In addition, other elements, such as production cycle, period for use, IP rights and innovation, may be taken into account under special circumstances.
Methodology for Defining the Relevant Market
The Market Guidelines emphasise that there is more than one method to define the relevant market. In addition to a substitution analysis from the demand side and the supply side, the "hypothetical monopolist test" may apply where the market scope is unclear or difficult to define.
The Market Guidelines list a series of elements to be considered when defining the relevant product or service market and the relevant geographic market, based on analysing both demand side substitution and supply side substitution. As to the application of the hypothetical monopolist test, the Market Guidelines use "price increases" to determine the relevant market and refer to this as a common practice elsewhere.
2. Procedures for Investigation and Handling of Monopolistic Agreements and Abuse of Dominant Market Position
Other implementing regulations deserving attention are the Provisions on Procedures for Investigation and Handling of Monopolistic Agreements and Abuse of Dominant Market Position by Administrations for Industry and Commerce ("Investigation Provisions"), promulgated by the State Administration for Industry and Commerce ("SAIC") on 26 May 2009 and effective from 1 July 2009.
The salient points of the Investigation Provisions are discussed below.
When necessary, the SAIC may authorise the Administration for Industry and Commerce ("AIC") at the level of province, autonomous region or municipality to enforce the AML.
Considering that a monopolistic agreement is difficult to detect due to its secretive nature, and to encourage reporting of such agreements, Article 20 of the Investigation Provisions provides that the punishment for parties engaging in a monopoly agreement can be mitigated or avoided if they initiate a report of the monopoly agreement and offer "important evidence" to the SAIC or AIC. This refers to evidence that plays a key role in triggering an investigation or recognising a monopoly agreement. However, this lenient policy does not apply to a business operator who has initiated the monopoly agreement.
Cessation and Termination of the Investigation
If a business operator agrees to take measures to eliminate the impact, the regulatory authority can first suspend and then terminate the investigation. The Investigation Provisions detail the items required in the application letter for suspending the investigation and the circumstances under which the investigation will be resumed.
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.