China: First Enforcement Action under Anti-Monopoly Law against Administrative Monopoly

Last Updated: 15 August 2011
Article by Susan Ning, Huang Jing and Yin Ranran

On January 26, 2010, three GPS operators filed a complaint to the Guangdong Administration for Industry and Commerce ("Guangdong AIC") claiming that the municipal government of Heyuan city, Guangdong province ("Heyuan Government") abused its administrative power in the course of promoting the global positioning system ("GPS") for automobiles and eliminated and restricted competition in this industry.  After investigation, the Guangdong AIC officially proposed to the Guangdong Government asking for rectification of Heyuan Government's abusive conducts.

According to news reports, after receiving the complaint, the Guangdong AIC initiated investigations and identified the following facts:

  • On 8 January 2010, the Heyuan Government held a government affairs meeting on the promotion of GPS vehicle data loggers for purposes of reinforcing the administration of public transportation safety.  Decisions made at the meeting were issued in the form of the Municipal Government Affairs Meeting Minutes 2010, Issue 6 ("Meeting Minutes").  According to the Meeting Minutes, the GPS tracking and monitoring platform established by New Space-Time Navigation Technology Co., Ltd ("NST") was appointed as the only municipal tracking and monitoring platform.  All the other GPS operators must upload their monitoring data onto NST's platform.  NST was entitled to charge the other GPS operators a data upload service fee at no more than RMB 30 per months per vehicle. 
  • On 12 May 2010, the Heyuan Government issued the Working Plans for Promoting GPS Vehicle Data Recorder ("Working Plans").  The Working Plans expressly set out the requirement that real time monitoring data of specified types of automobiles in Heyuan must be uploaded to the monitoring platform appointed by the Heyuan Government.
  • On 11 November 2010, the Heyuan Government held another government affairs meeting, requesting the traffic management bureau not to clear the annual review of any automobile whose monitoring data was not uploaded to NST's monitoring platform.
  • Until the end of 2010, there were 11 GPS operators in Heyuan, among which NST, Weiba, Yiliu and some others have established their own monitoring platform.  Before NST was appointed as the only operator of the municipal monitoring platform, the monitoring data collected by the other GPS operators were directly uploaded onto the provincial monitoring center of Guangdong. 

Based on the above facts, Guangdong AIC is of the opinions that:

Firstly, NST is a GPS operator and does not have administrative powers.  Appointing its platform as the mandatory municipal platform in effect forces the other GPS operators to accept NST's data services;

Secondly, NST charged other GPS operators a pre-paid data upload service fee.  Otherwise, NST would refuse the other GPS operators to upload their data onto its monitoring platform.  This effectively forced the other GPS operators to accept NST's paid services;

Thirdly, the Heyuan Government requested the traffic management bureau not to clear the annual review of any automobile whose monitoring data is not uploaded to NST's monitor platform.  Such a compulsory measure compelled the other GPS operators to rely on NST's services, and damaged the competition in the industry.

Under the guidance of the State Administration for Industry and Commerce ("SAIC"), Guangdong AIC officially proposed to Guangdong Government for "rectifying in accordance with law Heyuan Government's conduct that has abused its administrative powers to eliminate and restrict competition". 

In response to Guangdong AIC's suggestion, on June 12, 2011, Guangdong Government issued an administrative review decision finding that Heyuan Government violated the Anti-Monopoly Law and that its abusive conducts be revoked.

Comments:

One of the unique features of the AML is that it also regulates administrative monopoly, which refers to monopoly created by administrative agencies or organizations entrusted with public administration functions by laws or regulations.

The authority to investigate administrative monopoly is divided between the SAIC and the National Development and Reform Commission ("NDRC") in the same way as the agencies share their AML enforcement authorities in the areas of monopoly agreements and abuse of market dominance.  In other words, SAIC (together with provincial AICs) is responsible for non-price related administrative monopoly whereas NDRC (together with provincial price administration authorities authorized by NDRC) is responsible for price related administrative monopoly. 

Noticeably, pursuant to Article 51 of the AML, SAIC and NDRC cannot directly impose sanctions against administrative authorities for abuse of administrative powers.  They can only propose to the relevant superior authority on how to appropriately deal with the monopoly conducts. Article 6 of the Rules on Prohibiting Abuse of Administrative Powers to Eliminate or Restrict Competition issued by the SAIC on 31 December 2010 (see our article entitled " 3 rules which shed light on non-price violations of the Anti-Monopoly Law - effective 1 February 2011") also stipulates that SAIC and provincial AICs may provide corrective suggestions to the relevant superior authority. Therefore, conducts that are abusive of administrative powers to eliminate or restrict competition could only be revoked through the administrative review proceeding.

On a separate note, this is yet another example of AML enforcement actions made by provincial AICs under the guidance of SAIC.  Earlier this year, the provincial AIC of Jiangsu issued sanctions against a local industry association of concrete manufacturers and 16 concrete manufacturers for entering into a monopoly agreement (see our article entitled " First Public Enforcement Decision by SAIC against Concrete Manufacturers").  As the Chinese anti-monopoly enforcement agencies become increasingly experienced, we expect to see more enforcement actions coming up in the future.

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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