China: One Step Closer to Market Economy: China Adopts New Antitrust Law

Last Updated: 25 October 2007
Article by William S. D'Amico and David T. Blonder

Originally published September 17, 2007

On August 30, 2007, the Standing Committee of the National People's Congress, China's top legislature, enacted its antitrust law, literally translated "Anti-Monopoly Law (the Law)." The Law, which will take effect on August 1, 2008, is comprehensive in scope. Because some of its key provisions are open to multiple interpretations, it remains to be seen how it will be implemented and interpreted in practice.


Even though China had launched its economic reform program in 1978, it was not until 1992 that China began to accelerate its economic reform. In 1992, the 14th Congress of the Chinese Communist Party declared the main goal of China's economic reform was the establishment of a "socialist market economy." In an effort to reach this goal, China began drafting the law in 1994. Since then, China has gone through a long process to finalize the law involving various experts from all over the world. At last, China has successfully adopted a uniform set of antitrust laws. The reaction from the antitrust bar so far has been fairly positive.

The Anti-Monopoly Law


The Law is designed to prevent monopolistic conduct, to protect fair market competition and improve the efficiency of economic operations, to safeguard consumer and public interests, and to promote a socialist market economy. The Law addresses three main areas of monopolistic conduct that are common in other antitrust law regimes: i) prohibition of certain monopoly agreements, ii) abuse of dominant market position, and iii) mergers and acquisitions. Below is a brief overview of the most relevant provisions.

Prohibited Horizontal and Vertical Monopoly Agreements

The Law strongly prohibits certain types of horizontal agreements (price fixing, supply restriction, market allocations, and collusive boycotts) that eliminate or restrict market competition. Prohibited vertical agreements (agreements between undertakings and their trading partners) are limited to resale price maintenance.

The provisions allow for some flexibility in that exemptions may be granted if the agreement encourages technological progress, improves efficiency or quality, serves the public welfare (energy conservation, environmental protection) or addresses oversupply issues in severe recessionary conditions.

Fines for violations may be up to 10% of prior year's sales turnover, and may include orders prohibiting certain types of conduct, as well as disgorgement remedies. The Law also allows for lower fines in less significant cases and mitigation of fines in cases of amnesty where violators report their own conduct to the authorities.

Abuse of Dominant Market Position

The Law prohibits abuse of dominant market position. The Law defines "dominant market position" as a market position held by undertakings that can control prices and other terms or foreclose entry of other undertakings to the market.

In addition, the Law identifies certain market share thresholds to establish a dominant market position. For instance, one undertaking that has more than 50% market share, two undertakings whose combined market share exceeds 66% and three undertakings whose combined market share exceeds 75% in the relevant market are deemed to be in a dominant market position. It is likely, however, depending on how the relevant market is defined, that there may be opportunity to argue the extent of a dominant position.

Selling or buying products at unfair prices, selling products below cost, unreasonably refusing to trade with trade partners, unreasonably restricting trade partners to only trade with the undertaking, tying products, or discriminating between trading partners are listed as examples of abuse of dominant market position.

Fines for abuse of dominant market position may also be up to 10% of prior year's sales turnover.

Notification of Mergers and Acquisitions

Lastly, the Law provides for a pre-merger notification procedure in the event of a concentration of undertakings. The concentration of undertakings refers to a merger, acquisition of control, and an acquisition of indicia of control (arrangement of management positions, ownership, and agreements, among others.)

Such undertakings must file a prior notification, along with explanations regarding the influence of the concentration, agreements, financial reports and any other documents as required by the Law, to the Anti-Monopoly Enforcement Agency (AMEA) for approval.

The Law applies to Chinese as well as foreign acquirers, and the AMEA has express powers to both prohibit and unwind mergers and acquisitions.

Acquisitions of domestic companies by foreign capital further need to go through "National Security Review" to ensure that such undertakings do not pose a threat to China's national security. There is also a general "public interest" standard on which transactions restricting competition may be able to proceed. Aside from the national security and public interest components to the Law, the analysis largely focuses on economics.


While the world's antitrust authorities are largely applauding China on its enactment of the new Law, there are a few concerns that will only be resolved over time through enforcement decisions and rulemakings.

First, because many provisions in the Law are largely broad, guiding principles, they remain open to various interpretations by the government authorities, which may lead to unpredictable and inconsistent enforcement decisions.

Second, the enforcement scheme under the Law is unclear due to the possibility of decentralized enforcement agencies. The Law seems to designate AMEA, which is to be established, as a key enforcement agency in administering the Law, but at the same time gives AMEA power to delegate enforcement activities to government agencies at the provincial, autonomous region, and municipal levels. Although the Law does not come into effect until August 1, 2008, it is unclear to what extent there will be interaction at the various levels of government.

Third, "National Security Review" in the merger and acquisitions context may be misused to discriminate against foreign investors due to a lack of clear standard. Pundits suggest that this provision was incorporated in response to the failed CNOC/Unocal takeover in 2005. There is no guidance and explanation of how and to what extent this review will be applied. Chinese authorities will provide further guidance on this review before the Law becomes effective.

Despite these issues, it is expected that China's rapidly growing economy with its first uniform antitrust law will continue to attract foreign investment. Nevertheless, clients are advised to stay alert as developments unfold and further guidance is provided by the Chinese government.

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”

Related Topics
Related Articles
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

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