China: MIIT releases draft rules which govern antitrust issues

Last Updated: 8 March 2011
Article by Susan Ning and Huang Jing

Partly driven by the QQ-360 disputes (see our article entitled " The QQ / 360 Disputes - Who, What, Where, When and Preliminary Antitrust Analysis"), the Ministry of Industry and Information Technology  (MIIT) released the Interim Rules for Supervision and Management of Internet Information Service Market (Draft for Comment) (Draft Rules), on 12 January 2011.

The objective of the Draft Rules is to safeguard the competitive environment in relation to the internet information service industry, and to safeguard consumers' interests. Broadly, the Draft Rules sets out the code of conduct for internet information service providers (IISP), and dispute resolution mechanisms. 

The code of conduct section prohibits unfair competition between IISPs.  The code of conduct also governs conducts which infringe subscribers' right to know certain information and right to choose IISPs.  Some articles in the Draft Rules are similar to the provisions of the Anti-Unfair Competition Law (AUCL) and the Anti-monopoly Law (AML).  As many provisions in these Draft Rules touch on antitrust or competition issues; it appears that the MIIT will possess some jurisdiction to enforce antitrust related regulations in the internet information service industry once these Draft Rules become effective.

The following are the salient antitrust or competition provisions within the Draft Rules:

Like Article 14 of the AUCL, Article 6 of the Draft Rules prohibits operators from infringing the competitors' goodwill without valid reasons. Pursuant to Article 6 of the Draft Rules, IISPs are prohibited from:

  • Spreading false information, or intentionally spreading false facts about products or services provided by competitors, in order to undermine the goodwill of competitors or their commodities;
  • Causing incompatibility against lawful products or services provided by other operators without authorization or valid reasons; or when providing products or services unintentionally incompatible with existing lawful products or services of other operators, fail to honestly remind subscribers of such incompatibility, or deceive or mislead subscribers in making choices
  • Interfering with the operation of other operators' lawful products or services on subscriber's computers, or changing the content of other operators' lawful products or services, or blocking the information of other operators' lawful products or services
  • Misleading, deceiving or forcing subscribers, in any way, to uninstall or shut down other lawful products or services; and

Similar to Article 17 (3) (4) (5) of the AML, Article 8 of the Draft Rules provide that IISPs shall respect the rights of subscribers, and are prohibited from the following types of conduct

  • Unilaterally delaying terminating or refusing to provide services to subscribers without valid reason
  • Requesting subscribers to use designated services or restrict the subscribers from choosing other operators' lawful products and services
  • Using false information to mislead subscribers to accept unfair service terms or choose their specific services;
  • Other behaviors that infringe the subscribers' right to know and right to choose.

Of note is the fact that Articles 17 (3), (4) and (5) of the AML are only applicable to operators which possess a dominant market position, whereas Article 8 of the Draft Rules does not possess such a prerequisite.

Comments

MIIT is not the enforcement agency of either the AUCL or the AML.  However, as the draft rules contain similar regulations as the AUCL and the AML, IISPs must be aware that conduct undertaken by them may be subject to scrutiny by the MIIT as well as by the antitrust authorities in China (e.g. the National Development Reform Commission and the State Administration of Industry and Commerce).

The MIIT is well placed to regulate the internet information service industry in China, including regulating antitrust or competition issues within this industry.  Pursuant to the Draft Rules, the MIIT will also be able to impose sanctions (including fines) on operators who breach the Draft Rules.  It will be interesting to see whether and how the MIIT will work with the antitrust authorities in China in relation to enforcing the antitrust provisions outlined above.  In overseas jurisdictions (such as the EU and the US), it is common for sectoral and cross-sector antitrust authorities to possess concurrent jurisdiction in relation to antitrust rules.  It is also common for both the sectoral and cross-sector antitrust authorities to consult with each other when investigating or adjudicating on a case which involves antitrust aspects.

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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