China: Antitrust Immunity For Airline Alliances Under China's Anti-Monopoly Law?

Last Updated: 14 December 2012
Article by Yizhe Zhang

Close cooperation between air carriers in international airline alliances can raise significant competition law issues. To limit the antitrust risks, airlines often seek to take advantage of grants of antitrust immunity that may be available in the jurisdictions where the alliance may operate.

In the United States, the Department of Transportation is authorized to grant formal immunity to alliances between U.S. and foreign carriers, which it has used to encourage other countries to make "open skies" regulatory liberalization agreements with the U.S.

In Europe, British Airways, American Airlines, and Iberia have been able to obtain a form of immunity through a formal decision of the European Commission following the submission of commitments.

 In Japan, the Ministry of Land, Infrastructure, Transport and Tourism also granted a formal immunity to American Airlines and Japan Airlines on the basis of the open skies agreement with the U.S.

Alliances involving Chinese carriers or having effects in China will be subject to the PRC Anti-Monopoly Law ("AML").1 Although the AML has no formal system of antitrust immunity, which itself may deter alliances involving Chinese carriers, in this article we describe ways that airlines may be able to obtain comfort that their alliances will not lead to significant antitrust risks in China.

Overview of the AML

Airlines alliances are covered by Article 13 of the AML, which prohibits agreements between competitors that eliminate or restrict competition. Such agreements are subject to a form of rule of reason analysis: an agreement may be exempted from the application of Article 13 if (i) it is entered into for certain stated purposes, including reducing costs or improving efficiency, engaging in R&D for new products, or "protecting the legitimate interests in foreign trade and economic cooperation," (ii) it will not substantially restrict competition in the relevant market, and (iii) consumers can share the benefits derived from such agreement (see Article 15). At this stage of development of the AML, there is no case law or guidelines to assess how such principles will be applied to airlines alliances.

The AML does not require the parties to apply to the antitrust authorities to obtain an exemption. The parties must perform a "self assessment" to determine whether their agreement may qualify for the exemption under Article 15. However, the AML also includes premerger notification requirements, which require transactions meeting certain thresholds to be reported to MOFCOM and then not closed before MOFCOM's approval.

The nonmerger provisions of the AML are enforced by two ministries—the National Development and Reform Commission ("NDRC") for nonmerger enforcement involving prices, and the State Administration for Industry and Commerce ("SAIC") for non-price conduct. It is unclear how the agencies plan to tackle conduct that may have both price and non-price components, nor which agency will take the lead on airlines alliances. The merger provisions of the AML are enforced by MOFCOM. The Civil Aviation Administration of China ("CAAC") is likely to be consulted by the three antitrust regulators in any investigation involving airline alliances, even if it does not have the power to enforce the AML.

Sanctions for violations of the AML are very high: between 1 and 10 percent of the parties' turnover.2

What Kind of Antitrust Protection Could Airlines Alliances Obtain Under the AML?

Even if the AML does not include a formal immunity system, there are avenues that airlines may want to consider to limit their antitrust risks in China. Most of these avenues are untested, and the enforcement agencies have offered no guidance on whether they would be accepted.

Informal Consultations with the Chinese Government Agencies. If an alliance does not qualify as a "concentration" subject to the AML's merger control provisions (see below), but rather is subject to the AML's nonmerger provisions, the parties may consult with the relevant antitrust authorities in China to seek their view, i.e., NDRC and SAIC, as well as CAAC, the aviation regulator. However, responses to such informal consultations are not legally binding, even if they may provide the parties with informal comfort. Such an informal opinion is also unlikely to be useful within the framework of private litigation, where a plaintiff could sue the members of an airline alliance before Chinese courts claiming violation of the AML.

Merger Review. The AML's provisions on merger control may also present opportunities for reducing antitrust risk. Under the AML, "concentrations" meeting certain turnover thresholds require premerger notification by the parties and review by MOFCOM. In the case of joint ventures, each of at least two of the parent companies must have China sales in excess of RMB 400 million (approximately US$65 million), and the parents' combined worldwide turnover must be in excess of RMB 10 billion (US$1.6 billion) or their combined China sales must be in excess of RMB 2 billion (US$320 million). MOFCOM also has the power to choose to review below-threshold transactions to determine if they may have anticompetitive effects.

In addition, certain joint venture arrangements with significant integration, shared risk, and revenue sharing (what airlines sometimes call "metal neutral" joint ventures) could arguably also be a considered as a concentration even if there is no legal entity, although to date there has been no precedent in China in that respect.3

Thus, certain forms of alliances may have to be submitted to MOFCOM under the merger review provisions. If MOFCOM considers that an alliance does not have anticompetitive effects, it will issue a clearance decision, although sometimes with conditions. MOFCOM's allowing the joint venture to be formed implies "immunity" for the alliance partners for conduct undertaken by the joint venture. However, it may not protect the parties from challenges by other enforcement agencies or private parties for alleged harms caused by the joint venturers' coordinating their business activities. Within the framework of private litigation, it is unclear to what extent the courts will defer to a formal MOFCOM decision that a joint venture is compatible with the AML. The courts have the authority to make their own independent judgment; nevertheless, in practice, Chinese courts generally defer to (or at least take into consideration) decisions by administrative authorities unless there is a clear error in fact or in law, with a goal to maintain consistent interpretation by the courts and the agencies.

Commitments. The AML includes a system of commitments enabling the antitrust authorities to suspend or terminate their investigation if the company under investigation initiates concrete measures within a certain time limit to eliminate the competitive effects of the suspected conduct. The decision to terminate the investigation should state the concrete commitments by the undertakings. If the undertakings implement the commitments, the agency may terminate its investigation. Both SAIC and NDRC have issued guidelines in relation to commitments procedures.4

In this context, the parties to the alliance could voluntarily submit their alliance agreement for review by the antitrust agencies (NDRC or SAIC). If needed, they could suggest some commitments that the agency could impose in a formal decision (such as surrendering slots for use by competitors). This procedure would be similar to that followed by American Airlines, British Airways, and Iberia in the European Union.

A lingering question is whether an agency would consider its decision to terminate its investigation on the basis of commitments to be final, or whether it could decide later to reopen the matter. In this respect, the AML allows agencies to resume an investigation if the parties have failed to implement their commitments, if the facts upon which the decision was based have changed, or if the decision was based on incomplete facts provided by the parties.

China has not provided complete guidance on the effect on private litigants of a government agency decision to close an investigation after the submission of commitments. The April 2011 draft rules on antitrust private litigation issued by the Supreme People's Court ("SPC") included a provision stating that a court may not infer the existence of anticompetitive conduct from the submission of commitments to an antitrust agency.5 However, this provision was removed from the final rules issued by the SPC in May 2012.6 Thus, in principle, a private plaintiff may argue before the courts that a particular alliance has anticompetitive effects, even if one of the regulators has terminated its investigation into such alliance following the submission of commitments. That said, even if the case were accepted by a Chinese court, the parties should be able to use the agency's decision as evidence of the absence of anticompetitive effects. As explained above, courts are likely to show some deference to an agency's decision.


Despite the absence of a formal procedure to obtain antitrust immunity, informal avenues to reduce antitrust risk may be available for alliances involving Chinese air carriers or otherwise affecting Chinese transportation markets. Submitting the alliance for merger review or offering commitments in a nonmerger investigation seems most promising. These are as yet untested, and alliance parties should expect extensive discussions with the enforcement agencies before they can be put in place with confidence that they actually will provide some protection.

Given the importance of airline alliances to Chinese carriers, and considering growing competition from Korean and Japanese carriers on transpacific routes, Chinese government agencies may be motivated to look favorably on attempts to seek immunity. This attitude would be consistent with the AML's industrial policy considerations. For example, an agreement may be exempted from application of the AML for "protecting legitimate interests in foreign trade and economic cooperation." Similarly, in the context of merger review, MOFCOM must assess the effect of a transaction on the "development of the national economy." These industrial policy considerations easily could be employed by Chinese agencies to justify allowing Chinese carriers to enter into extensive cooperation agreements with foreign carriers.


1 See generally about the AML, the book coauthored by Jones Day lawyers, including the authors of this article: Anti-Monopoly Law and Practice in China, Oxford University Press, 2011, 574 pages.

2 At this stage, it seems that the relevant turnover to be taken into account is the worldwide turnover at the group level.

3 The term "metal neutral" refers to the carriers participating in an integrated joint venture alliance being indifferent to which member's airplane (metal) carries a passenger, due to their sharing the costs and benefits of operation within the alliance. The alliance between Alitalia and KLM (Case No COMP/JV.19) was regarded by the European Commission as a full-function joint venture, even though the companies did not create a corporate vehicle for their cooperation.

4 Rules by the Supreme People's Court on Certain Issues relating to Application of Laws for Hearing Cases of Civil Disputes caused by Monopoly Conduct (draft of April 25, 2011), available in Chinese here.

5 See Jones Day's Antitrust Alert, "China's Supreme Court to Set Framework for Antitrust Litigation," available here.

6 See Jones Day's Antitrust Alert, "Chinese Supreme People's Court Sets Framework for Antitrust Litigation," available here.

7 Another option would be to file for amnesty under both agencies' rules, but at this stage, there are many unanswered questions surrounding amnesty in China. See S. Evrard and Yizhe Zhang, "Cartels," in Competition Law in the BRICS Countries, Kluwer, 2012.

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.

Events from this Firm
13 Dec 2017, Seminar, Cleveland, United States

Jones Day partners Harold Gordon and Tony Dias, and Associate Courtney Snyder will explore the significant role New York's Attorney General and its Department of Financial Services (DFS) play in the financial services industry and why these two state-level agencies will continue to exert significant power over the financial services industry, especially with federal oversight potentially shrinking.

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”

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
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 you may opt out by clicking here

    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.

    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.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    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.

    By clicking Register you state you have read and agree to our Terms and Conditions