China: Comparison of the NDRC rules and the SAIC rules on monopoly agreements

Last Updated: 1 March 2011
Article by Susan Ning and Shan Lining

In January 2011, the National Development and Reform Commission (NDRC) and the State Administration of Industry and Commerce (SAIC) released the Rules on Anti-Price Monopoly (the NDRC Anti-price Monopoly Rules) (see our article entitled "Anti price monopoly rules") and the Rules in relation to Conduct amounting to Monopoly Agreements (the SAIC Monopoly Agreement Rules) (see our article entitled "Three rules which shed light on non-price violations of the Anti Monopoly Law" ) respectively on the 4th and 7th day of the month.

The NDRC and the SAIC have different jurisdictions over the prohibitions of monopoly agreements under the Anti-Monopoly Law (AML), the former governing and enforcing against price-related monopoly agreements and the latter investigating and adjudicating on non-price-related monopoly agreements. These two sets of new rules expand and provide further guidance on the prohibitions of monopoly agreements within the respective jurisdiction of the NDRC and the SAIC.

This article outlines the boundaries and operation of these two sets of new rules and outlines the similarities and differences between them.

This article outlines the boundaries and operation of these two sets of new rules and outlines the similarities and differences between them.


the NDRC Anti-price Monopoly Rules

the SAIC Monopoly Agreement Rules


1. How to determine whether a conduct amounts to a "concerted act" ?

Factors to be considered including:

whether there has been consistency between business operators in relation to their pricing conduct;

whether there is "communication of intention" between business operators;

the structure of the market; and any changes to the structure of the market, etc.

Factors to be considered including:

whether there has been consistency between business operators in relation to their market conduct;

whether there is"communication of intention" or information exchange between business operators;

whether business operators can justify their consistent conduct;

the structure of the market; competition on the market; any changes to the structure of the market; and the industry concerned, etc.

"Communication of intention" between business operators is an indispensible factor to find a "concerted act" under the NDRC rules; while under the SAIC rules, it seems that information exchange may lead to a finding of a "concerted act" and "communication of intention" is not necessarily required.

2. What horizontal conducts are prohibited?

Competing business operators are prohibited from eight types of price fixing conducts, such as fixing or altering the price level of commodities or services; fixing or altering a commission, discount or other charges; and agreeing to apply a standard formula as a basis to calculate prices.

Competing business operators are prohibited from non-price related conducts, such as restricting output and sales, dividing markets, restricting innovation and joint boycotts.

Whether there is a price component in the conduct is the watershed between the jurisdiction of the NDRC and the jurisdiction of the SAIC.

3. What vertical conducts are prohibited

Business operators and their trading partners are prohibited from fixing resale price or the minimum resale price.

No prohibitions expressly provided

Regarding vertical conducts, the AML only explicitly prohibits resale price maintenance which is price-related, falling into the exclusive jurisdiction of the NDRC.

4.What leniency whistleblowers are entitled to

the first whistleblower may be exempted from penalty;

The second whistleblower may be given penalty mitigated by over 50%;

Other business operators who are not 'first in' or the second may be given penalty mitigated by less than 50%.

the first whistleblower will be exempted from penalty;

Other whistleblowers will be given mitigated penalty based on the circumstance.

Only monetary fine can be exempted or mitigated; confiscation of illegal gains is not exemptible or mitigatible.

The first whistleblower will obtain exemption of penalty under the SAIC Rules; while, under the NDRC rules, the first whistleblower won't necessarily obtain immunity and NDRC has the discretion to decide the level of sanction to first whistleblower.

The SAIC rules give no indication on the extent of penalty mitigation regarding other whistleblowers.

It's not clear under the NDRC rules what penalty is exemptible or mitigatible, or whether all types of penalty stipulated by the AML are exemptible or mitigatible.

5. What are the penalties imposed for breach?

The NDRC rules refer back to the penalty provisions of the AML.

The SAIC rules reiterate the penalty provisions of the AML and add two details:

The mitigation or exemption of penalty referred to in the SAIC rules is only limited to monetary fine.

Business operators who stop breaching conducts on their own initiatives may be granted mitigation or exemption of penalty.

The discretion of the SAIC to mitigate or exempt penalty (monetary fine, to be specific) for business operators who stop breaching conducts on their own initiatives could be understood as an embodiment of the Article 49 of the AML, which provides that the enforcement agencies may decide the specific amount of monetary fine in light of the nature, severity or duration of the breaching conduct.

Concluding remarks

From the implementation of the AML on 1 August 2008 up to today, administrative actions by the NDCR or by the SAIC enforcing the AML prohibitions against monopoly agreements have remained sparse probably because of lack of detailed guidance and rules. It is expected that these two news rules, effective on 1 February 2011, may set the stages, ushering in a new phase in the enforcement on monopoly agreements.

Price component is the demarcation between the jurisdiction of the NDRC and the SAIC over monopoly agreements. Further, currently, the AML prohibitions on vertical monopoly agreements (all price-related) fall within the exclusive jurisdiction of the NDRC. It is useful to bear this in mind and know which rules and authority to turn when you want to make sure your cooperation with other businesses won't run foul of the AML or you fall victim of monopoly agreements of other business operators.

There is certain difference between the NDRC rules and the SAIC rules regarding finding of "concerted act", the leniency program, and penalty as listed above. It remains to see whether or how the NDRC and the SAIC coordinate their enforcement practice on such difference.

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.

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