China: Is China Giving Carte Blanche For Anti-Competitive Conduct By PRC Companies Doing Business Overseas?

PRC companies should be careful not to interpret as carte blanche for anti-competitive behavior a recent policy statement by the Chinese government encouraging PRC companies to coordinate their activities and cooperate with each other while investing overseas. The statement also highlights the need for foreign companies to be on guard for possible anticompetitive conduct by their PRC business partners (and competitors).

On June 29, 2012, thirteen agencies—including the three agencies responsible for enforcing China's Anti-Monopoly Law ("AML"): the Ministry of Commerce ("MOFCOM"), National Development and Reform Commission ("NDRC") and the State Administration for Industry and Commerce ("SAIC")—issued a jointly drafted "Implementation Opinion" entitled "Encouragement and Guidance on Private Capital's Healthy Development." The Opinion contains broad sweeping policy statements regarding Chinese foreign investment. It is one of many follow-up opinions to the policy statement of May 2010 issued by the State Council regarding the development, management and regulation of private investment, which is considered to be one of the milestone policy statements after the 2005 statement on private investment. Although strictly speaking State Council and agency opinions are not law, the provincial governments and Chinese companies are well advised to and do take such statements seriously.

Under the first heading of the Implementation Opinion, entitled "To Strengthen Macro Guidance on Private Enterprises' Outbound Investments", there is language potentially ripe for misinterpretation: "The government intends to guide the enterprises to intensify the coordination and cooperation among each other to prevent disorderly and malicious competition."

On one hand, this may reflect well-intentioned advice to PRC companies not to needlessly cannibalize each other's businesses and to have healthy competition among each other as they generate efficiencies through R&D joint ventures, production joint ventures, all-in joint ventures, and the like. Such activities can reap pro-competitive benefits, such as increased asset utilization, reduced production costs, economies of scale, and can enable new investment. On the other hand, competitor coordination and cooperation can potentially lead to anti-competitive results and significant antitrust risks. For instance, R&D joint ventures run the risk of limiting competition for innovation. Production joint ventures can create antitrust issues related to information flow and agreements on prices and output. All-in joint ventures, which integrate all aspects of a business, can have antitrust issues similar to mergers in terms of potential detrimental consequences to actual or potential competition.

When the Chinese government tells private enterprises to intensify coordination and cooperation among each other, there is the risk that competitively sensitive information may be exchanged, which could lead to suspicions of cartel activity: the greater the overlap of business activities, arguably the more likely it is that the information exchanged will be competitively sensitive. The PRC companies may come under scrutiny by potential foreign partners as well as foreign antitrust enforcement agencies, or as in the case of the US, be sued by private parties.

In particular, PRC companies should be aware of the extraterritorial scope of the U.S. antitrust laws as defined by the Foreign Trade Antitrust Improvements Act, 15 U.S.C. § 6a ("FTAIA"). The FTAIA sets forth a "general rule" providing that U.S. antitrust laws do not apply to conduct involving foreign commerce, which has generally been defined to mean transactions involving a non-U.S. buyer and/or seller. But the FTAIA provides two significant exceptions to this rule. First, conduct involving foreign commerce is subject to U.S. antitrust laws if it "involves" U.S. import commerce. Second, under the FTAIA's so-called "domestic injury" exception, U.S. laws apply to foreign conduct where (a) the conduct "has a direct, substantial, and reasonably foreseeable effect" on U.S. commerce, and (b) that effect "gives rise to" the plaintiff's antitrust claim.

U.S. court decisions and publicly-announced positions of the U.S. Department of Justice ("DOJ") and Federal Trade Commission ("FTC") all help shed light on the standards PRC companies should be aware of.

With regard to the "involves import commerce" standard, the Third Circuit has stated that the issue is whether the anticompetitive behavior was "directed at an import market". The DOJ/FTC's position is broader: "A price-fixing conspiracy 'involves' U.S. import commerce even if the conspirators set prices for products sold around the world (so long as the agreement includes products sold into the United States) and even if only a relatively small proportion or dollar amount of the price-fixed goods were sold into the United States."

With regard to the FTAIA's alternative "direct, substantial, and reasonably foreseeable effect" requirement, the Seventh and Ninth Circuits have stated that such effects must be "an immediate consequence" of the alleged foreign anticompetitive conduct. The DOJ/FTC definition is again broader: "defining 'direct' as reasonably proximate gives each of the three parts of the direct effects exception its own function: 'direct' goes to the effect's cause, 'substantial' goes to its amount, and 'reasonably foreseeable' goes to its objective predictability."

Although the DOJ/FTC positions do not coincide completely with U.S. court decisions, foreign defendants should be aware of the possibility that the courts could move toward a broader interpretation of the elements of the FTAIA. From the perspective of private plaintiffs in the United States, this increases the likelihood of keeping PRC defendants in court.

So how can PRC companies protect themselves? Or from the perspective of U.S. companies, what should they keep on their radar screen? When a PRC firm sells products to U.S. purchasers or otherwise enters the U.S. market, it should consider putting an effective antitrust compliance policy and training program in place, in particular, with respect to preventing collusive behavior that could arouse the interest of the U.S. Department of Justice. Simultaneously, it may also be prudent to conduct internal due diligence to review current activities from the perspective of antitrust compliance to find out where the company may be exposed. Ideally, due diligence should cover both written documents and interviews with employees.

Some areas to review are any communications with competitors, internal emails and other documents concerning price increases, price announcements, internal market updates and minutes of meetings. Companies may wish to advise employees not to talk to competitors about any business issues, and to be careful, in particular, to never agree or do anything suggesting an agreement to implement any price change suggested by a competitor. Another area of particular concern are communications or agreements with competitors concerning the allocation, division, or sharing of customers or markets.

While it is encouraging to see that the Chinese government is taking steps to promote the economic viability of private enterprises on a par with that of state-owned entities, this Implementation Opinion could also lead to practices by Chinese private companies that risk governmental and private antitrust enforcement in the United States. Accordingly, PRC companies doing business abroad must be vigilant in ensuring that their activities comply with the parameters of relevant foreign antitrust standards.

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.

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.