China: China Punishes Cartel Participants - But Yet to Unleash AML

Last Updated: 3 June 2010

Article by Hannah C. L. Ha , John M. Hickin and Gerry P. O'Brien

Originally published 3 June 2010

Keywords: China, cartel, AML, NDRC, regulatory action

China's National Development and Reform Commission ("NDRC") recently announced regulatory action against a group of rice noodle manufacturers in Guangxi province, due to the involvement of those manufacturers in a joint action to increase prices in the region. However, while a number of businesses involved in the cartel have been fined, reports that the case signals the commencement of more vigorous regulatory enforcement of the Anti-Monopoly Law conduct rules (rules prohibiting anti-competitive behaviour in the form of horizontal or vertical monopoly agreements, or abuse of a dominant market position) appear overstated.

While the authorities handling the case have noted that the relevant price-fixing behaviour was unlawful under the Anti-Monopoly Law ("AML"), it appears the specific enforcement action announced by the NDRC was primarily taken under the authority of several laws which pre-date the AML (and which are expected to play a reduced role once more active AML enforcement begins).

Accordingly, while the case serves as an example to business operating in China that the country's pre-AML competition laws and regulations remain in effect and have teeth, it also indicates that conduct rule enforcement under the newer AML is likely to remain low until the regulators charged with enforcing that law are further advanced in AML-related capacity building activities. This is significant, as the AML has a much broader scope than many of its predecessor competition laws in China, and grants enforcement authorities the ability to impose substantially higher penalties and to potentially exercise greater investigatory powers in respect of business operators engaged in anti-competitive behaviour.


On 1 November 2009 and 16 December 2009, 18 rice noodle manufacturers, led by the owner of Nanning Xianyige Food Plant (the "Organiser") held meetings seeking to reorganize the local rice noodle industry and increase rice noodle prices in the region. According to relevant Chinese authorities, after further exchanging ideas and discussions by telephone, agreements were struck and the 18 manufacturers " jointly raised prices" by RMB 0.2 Yuan per 500 grams from 1 January 2010.

Further, after learning the news, some rice noodle manufacturers from neighbouring Liuzhou city contacted the Organiser and initiated participation in the arrangements. Specifically, in January 2010, 15 manufacturers in Liuzhou organised three meetings discussing cooperative operation and collaborative price increase. Meanwhile, they "coerced" several other rice noodle manufacturers to increase price. Eventually, on 21 January 2010 the participating rice noodle manufacturers in Liuzhou jointly increased the rice noodle price and signed profit-sharing agreements with the Organiser.

In response to such price increases, the Nanning and Liuzhou Price Bureaus in Guangxi province (counterparts to the NDRC, which is responsible for tackling relevant price-related violations under both relevant pre-AML laws and the AML) launched an investigation in conjunction with several other relevant authorities. Subsequently, on 30 March 2010, the NDRC announced that a number of the rice noodle manufacturers involved in the cartel activities described above had been ordered to cease their collusion activities, and were being fined for their conduct.

The Organiser and another two Liuzhou manufacturers were fined RMB 100,000 (approx. US$14,000), while 18 other rice noodle manufacturers were fined ranging from RMB 300,000 to RMB 800,000 (approx. US$43,000 to US$117,000) according to "the seriousness of their respective cases." Another 12 manufacturers only received warning orders because they had "cooperated with the investigation, provided important evidence and taken corrective measures on their own initiatives." Caution letters were also issued to other price increase followers who did not participate in any agreements, requesting that those business operators strengthen "price self-regulation" and maintain "good market order".

The NDRC did not expressly cite a specific statutory provision as the basis for the punishment outlined in their announcement, but the fact that the AML was mentioned in the announcement led to the case garnering significant attention and caused many observers to cite the case as the first regulatory action targeting cartel activities under the AML. Upon closer inspection of the facts, however, it appears this may not be the case.


As mentioned above, the NDRC did not quote any specific statutory provision in its announcement and press release as being the basis for the penalties imposed on the Guangxi cartel participants. However some clues as to the basis for the decision can be found from other sources.

Firstly, in an announcement titled Some Rice Noodle Manufacturers in Nanning Received Administrative Penalties for Their Price Illegal Conduct issued by the Nanning Price Bureau on 14 April 2010, there is no single reference to AML. Instead the legal basis used for determining the nature of the price increase is expressly quoted as Article 14(1) of the Price Law, and the price increase is considered as "an illegal conduct of price collusion and market manipulation".

Secondly, it is instructive that it was the local Price Bureau that issued the final administrative penalty decision, and not the NDRC itself (which according to developing administrative rules will have the highest authority in AML-related price monopoly enforcement actions). Specifically, in the Replies to Press by the Nanning Price Bureau Regarding the Rice Noodle Price Increase Collusion (the "Replies") dated 14 April 2010, which contains no express reference to the AML, the Nanning Price Bureau noted that due to the regional nature of the case it is the Guangxi Provincial Price Bureau that has jurisdiction over determination of the case according to Article 40 of the Price Law. It is also noted the final administrative penalty decision was rendered in due process "in accordance with the price laws and regulations". Accordingly, it seems clear that the determination of the enforcement body and the enforcement procedures are all based on the Price Law rather than the AML.

Thirdly, according to press reports, officials of the NDRC's Price Supervision Department have expressly stated that "the rice noodle manufacturers are all sole proprietors rather than companies. Thus the fine of RMB 100,000 is the maximum monetary penalty imposed on sole proprietors in accordance with relevant provisions in the Price Law." This is consistent with Articles 4 and 9 of the Rules of Administrative Sanctions on Illegal Activities Relating to Price, which supplement the Price Law, and in contrast to relevant AML provisions which provide that business operators involved in unlawful cartels will be fined from 1% to 10% of their turnover.

Fourthly, it is notable that the Price Law has the express aim of protecting the stability of market prices, while the AML Article detail its stated purposes relevantly focuses on the protection of fair competition. In this context, it is telling that wording in the announcement and press release of Nanning Price Bureau clearly focuses on the adverse impact the relevant price increases was seen to have on market price stability.

Fifthly, the fact that reduced fines or warning orders were issued to some companies who participated in the cartel arrangements has been viewed by some observers as evidence that the AML leniency provisions were applied. However, as Article 15 of the Price Sanction Rules also contains provisions that would allow leniency to be applied in the relevant circumstances of the Guangxi cartel, this is not necessarily the case.

Criminal sanctions?

Interestingly, sections of the Chinese media have reported that criminal detention was imposed on representatives of one rice noodle manufacturer during the process of investigation into the cartel activities. Specifically, it has been reported that Article 225 of the Criminal Law, which broadly prohibits "unlawful business activities that seriously disrupt the market order" was applied as the basis for the detention.

None of the competition-regulators who have issued announcements or press releases relating to the case have mentioned this matter, and it is possible that the right of criminal detention were briefly exercised for the purpose of facilitating investigation at the initial stage only.

Neither the AML nor the Price Law criminalise price-fixing activities. Further, while Article 52 of the AML states that "where any conduct constitutes a criminal offence, the relevant individual or organisation shall be prosecuted for criminal liability in accordance with the law", the focus of that Article is penalising conduct which hinders regulatory investigations under the AML. Accordingly, while it is conceivable that violations of the key prohibitions in the AML could in future form a basis for criminal charges under Article 225 of China's Criminal Law, to date there has been no indication from the country's key competition regulators that this is intended.


It is clear that price-fixing activities relating to a market in China violate both Article 14(1) of the Price Law and Article 13(1) of the AML. However, it is important that the Chinese regulatory authorities involved in penalising the activities in the Guangxi rice noodle case appear to have relied largely on their powers under the former law - as this suggests that the authorities remain reluctant to engage in vigorous enforcement of the AML conduct rules at the present time. This has been the case since the law commenced on 1 August 2008.

The primary reason is that the Chinese authorities are continuing work on various implementation rules and guidance documents that will eventually explain the enforcement approach and methodology to be applied to many of the broadly worded conduct prohibitions in the AML. Several revised drafts of those documents were recently released to the public for consultation purposes, and there is speculation that they could be finalised and adopted in the second half of the year.

Although review and application of those documents may be unnecessary to determine that conduct such as price collusion is unlawful under the AML, they will potentially offer crucial guidance to business operators grappling with the uncertainties surrounding the scope of other prohibitions in the AML such as the prohibition of abuse of a dominant market position.

In the interim, business operators should be aware that the Chinese authorities continue to engage in sporadic enforcement efforts relating to the various competition-related laws and regulations which pre-date the AML, particularly where widespread cartel activities are identified and politically or economically significant products and services (such as staple foods) are involved.

Learn more about our PRC offices and Antitrust & Competition practice.

Visit us at

Copyright 2010. JSM, Mayer Brown International LLP and/or Mayer Brown LLP. All rights reserved. Mayer Brown is a global legal services organization comprising legal practices that are separate entities ("Mayer Brown Practices"). The Mayer Brown Practices are: JSM, a Hong Kong partnership, and its associated entities in Asia; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales; and Mayer Brown LLP, a limited liability partnership established in the United States. The Mayer Brown Practices are known as Mayer Brown JSM in Asia.

This article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein. Please also read the JSM legal publications Disclaimer.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.