China: China Monthly Antitrust Update - September 2016

LEGISLATION

State Council Publishes the Working Scheme to Lower Costs for Real Economy Enterprises

On 22 August, the State Council published the Working Scheme on Reducing Cost of Real Economy Enterprises ("Scheme"), which is aimed at alleviating difficulties of real economy enterprises effectively, helping enterprises on transformation and upgrading, and taking measures to lower costs for real economy enterprises. The Scheme includes that the State Council will devote on reducing institutional transaction costs with efforts to break regional blockade and industry monopoly and strengthening development of market circumstance of fair competition; the State Council will further reduce land costs of enterprises, impel revolution in energy field and deregulate price in competition area; and the State Council will carry out supporting measures on reducing costs, strengthen regulations in respect of antitrust, anti-unfair competition, IP protection, quality safety supervision, etc.1

Jiangsu Government Issues Opinions on Implementing the Fair Competition Review System

On 22 August, People's Government of Jiangsu Province issued the Opinions on Implementing the Fair Competition Review System of Jiangsu Province ("Opinions"). According to the Opinions, regulations, normative documents, policies and measures that have bearing on the business of market participants as well as drafts of local laws and regulations that requested for review by the People's Congress, etc., should be reviewed in terms of fair competition during drafting process. Policymaking departments should enforce self-review strictly according to the review standard during policies and measures making process. Policies, measures and relevant documents are banned to be issued until reviewed in terms of fair competition. Meanwhile, the Opinions set deadlines for government departments of Jiangsu at all levels to clear and abolish the relevant regulations and measures that obstruct unified market and fair competition.2

State Tobacco Monopoly Administration and China National Tobacco Corporation Publish Opinion to Establish Fair Competition Review System in Tobacco Industry

On 17 August, the State Tobacco Monopoly Administration and China National Tobacco Corporation published an opinion, which requires establishing fair competition review system in tobacco industry. Tobacco monopoly bureaus and tobacco corporations at all levels and other relevant departments should enforce fair competition review while enacting normative documents, policies and measures related to market entry, tendering and biding, operation standard, etc., that have bearing on the business of market participants, should take laws and regulations as final review standard and should combine self-review with external supervision.3

NDRC Publishes Internal Working Procedure of Implementing Fair Competition Review System

On 27 July, the National Development and Reform Commission ("NDRC") published the Notice of Internal Working Procedure on Implementing the Opinions on Establishing the Fair Competition Review System in Market System Development, which requires all departments of NDRC to conduct self-review according to the principle that "whoever formulates a policy shall be responsible for policy clean-up"; all departments can solicit opinion from the Price Supervision and Inspection and Anti-Monopoly Bureau if deemed necessary; all departments should submit the conclusion of fair competition review while submitting the relevant policies and measures to Laws and Regulations Department for legal review.4

Guangdong Province Will Enforce the Fair Competition Review System Stepwise

On 25 July, People's Government of Guangdong Province published the Notice of People's Government of Guangdong Province on Transmitting the Opinions on Establishing the Fair Competition Review System in Market System Development("Notice"),which requires government departments of Guangdong at all levels to accelerate the establishment and enforcement of the fair competition review system. The relevant departments at provincial level must enforce fair competition review in enacting process of policies and measures from July 2016, while governments and departments of city and county level should enforce fair competition review gradually from 2017. The Notice requires government departments of Guangdong at all levels, at the same time, to clear and abolish orderly the relevant regulations and measures that obstruct unified market and fair competition, as well as complete the relevant working mechanism.5

AUTHORITIES

NDRC, SAIC and MOFCOM Launch Surveys about Fair Competition Review System in Several Provinces

China's antitrust enforcement authorities (NDRC, the State Administration for Industry and Commerce("SAIC")and the Ministry of Commerce ("MOFCOM")) conducted on-site surveys on the fair competition review system in Chongqing, Tianjin, Hebei, Sichuan, Hunan, etc. since 16 August. Survey groups carried out surveys in respect of the implementation of the fair competition review system and the development of the fair competition market circumstance, discussed with delegates of government departments, industry associations and enterprises in terms of basic circumstances of market competition within industry and listened to their suggestions and opinions.6

The First Phase of the Training Program of Price Supervision and Antitrust Enforcement Graduation Ceremony Held at CUPL

On 12 August, the first phase of the training program of price supervision and antitrust enforcement graduation ceremony was held in International Communication Center of Changping campus of China University of Political Science and Law ("CUPL"). Mr. Chen Zhijiang, Deputy Director-General of the Price Supervision and Inspection and Anti-Monopoly Bureau ("PSIAMB"), Mr. Chen Da and Mr. Liu Jian, Director and Deputy Director of the General Office of PSIAMB, Mr. Shi Jianzhong, Deputy President of CUPL, Ms. Zhang Xiaoqin, Deputy Dean of CUPL's School of Further Education, attended the commencement. The training program was held for improving enforcement ability of antitrust enforcement authority so as to better preserve fair competition order of market and protect legitimate rights and interests of consumers. The second phase will be held from 28 August to 23 September.7

CEB of SAIC Meets a Delegation from China Gas Association

On 3 August, the Anti-Monopoly and Anti-Unfair Competition Enforcement Bureau ("CEB") of SAIC met a delegation led by Mr. Chi GuoJing, Secretary-General of China Gas Association ("CGA"). CEB introduced the status of the special enforcement implemented by AICs against public utilities which restrict competition and commit monopolistic conduct. Both sides exchanged opinions and discussed on existing problems which are suspected of monopoly and anti-unfair competition in gas industry. It was expressed that CGA will support the special enforcement by SAIC actively, organize self-review of members, rectify irregular issue discovered and reinforce self-discipline within industry in future. CGA was, meanwhile, looking forward to receiving more guidance from SAIC towards business operation in gas industry.8

Jiangsu AIC Supervises the Special Enforcement Action against Public Utilities

From 12 July to 20 July, the Administration of Industry and Commerce of Jiangsu Province ("Jiangsu AIC") composed 5 inspection teams for supervising the special enforcement action to rectifying the conduct of competition restriction and monopoly by public utilities. Jiangsu AIC held a meeting to brief the supervision and brought up new requirements for the future work.9

PUBLIC ENFORCEMENT

Sichuan AIC Holds an Analysis Meeting on Representative Cases in the Enforcement Campaign against Public Utilities

On 26 August, the Administration of Industry and Commerce of Sichuan Province ("Sichuan AIC") held an analysis meeting on representative cases in the enforcement campaign against public utilities. The status of play of the enforcement campaign against public utilities in Sichuan Province was communicated, difficult issues in individual cases were discussed and further requirements on the next step work were put forward during the meeting. Officials of SAIC also attended the meeting.10

Hubei AIC Fines Insurance Industry Association for Monopoly Agreement

On 16 August, SAIC released penalty decision imposed by the Administration of Industry and Commerce of Hubei ("Hubei AIC") on Insurance Industry Association of Hubei Province for organizing industry participants to implement monopoly agreement. Hubei AIC found that since May 2003 the Insurance Industry Association of Hubei Province organized 27 insurance companies to conclude monopoly agreement on dividing up the new car insurance market, which violates Article 16 of the Anti-monopoly Law("AML"). Hubei AIC imposed penalties of RMB 200,000 on the Insurance Industry Association of Hubei Province.11

Shanghai Price Bureau Fines Three Home Appliance Selling Companies for RPM

On 12 August, the Development and Reform Commission of Shanghai released penalty decision imposed by Shanghai Price Bureau on Chongqing RRS Household Appliances Selling Company (Shanghai branch), Chongqing Haier Electronics Selling Company (Shanghai branch)and Chongqing Haier Household Appliances Selling Company (Shanghai branch) ("Parties") for committing monopoly agreement. Shanghai Price Bureau uncovered that the Parties concluded and implemented agreements on maintaining resale price towards third parties, which violates Article 14(2) of the AML and Article 8(2) of the Provisions against Price Monopoly. Shanghai Price Bureau fined the Parties RMB 12.348 million in total.12

MERGER CONTROL

MOFCOMReleases25 Streamlined Cases in August

Up to 31 August 2016, MOFCOM has released 25 streamlined cases in August on its website, with total amount reaching 506 so far.13

MOFCOM Commented on the Didi&Uber China Merger Filing Issue for the second time

On 17 August, Mr. Shen Danyang, the spokesperson of MOFCOM commented on the Didi&Uber China merger filing issue for the second time during the routine press conference: Enterprises shall calculate turnover according to relevant regulations strictly and make filing in advance to MOFCOM; enterprises shall take responsibility if they implement the concentration without merger filing while the concentration reaches the filing threshold; if the concentration of enterprises leads, or may lead, to elimination or restriction of competition which is indicated from the fact or evidence collected in accordance with regulations, MOFCOM shall carry out investigation according to law seven though the concentration doesn't reach the thresholds.14

ADMINISTRATIVE LITIGATION

Accounting Firms File an Administrative Litigation against Antitrust Penalty Imposed by Shandong AIC but Lose the First Instance

On 11 August 2016, a first-instance judgment made by Lixia district court in Jinan of Shandong Province upheld the penalty decisions made by the Administration of Industry and Commerce of Shandong Province ("Shandong AIC") towards a cartel among accounting firms. In August 2014, Shandong AIC investigated the cartel engaged in by Hongcheng Accounting Firm, etc., and made penalty decisions towards 23 accounting firms in March 2016. In May, seven accounting firms involved in the cartel filed an administrative litigation against Shandong AIC for revoking the penalty decision. Upon trial, the court found that Shandong AIC has complied with the administrative penalty procedures and collected sufficient facts and evidence, and also has applied laws and regulations rightly. Then the court dismissed the claims of the plaintiffs.15

DENTONS TEAM

Jet Deng Interviewed on the Didi&Uber China Merger Filing Issue by Several Media

On 1 August 2016, Didi announced acquisition of all assets of Uber China, including its brand, business operations and data. Jet Deng, Senior Partner of Dentons China Antitrust Team, was interviewed on the high-profile merger filing issue in this transaction by domestic and foreign media including Southern Metropolitan Daily, China Economic.com, Tencent Finance and Bloomberg. Jet Deng commented that whether the Didi&Uber China merger needs to undergo China's merger filing procedure depends on whether the filing thresholds of China are met, which in turn depends on how to calculate the turnover of the merging parties. Separately, if MOFCOM carries out antitrust review, it will focus on how significant the market power of the merging parties will be, which is often indicated by the combined market share. In this regard, relevant market needs to be first defined, which will consider whether the car-hailing service provided by Didi and Uber can be substituted by other similar services.

Footnotes

1. http://www.gov.cn/zhengce/content/2016-08/22/content_5101282.htm

2. http://www.js.xinhuanet.com/2016-08/26/c_1119460391.htm.

3. http://www.gov.cn/xinwen/2016-08/22/content_5101149.htm.

4. http://jjs.ndrc.gov.cn/gzdt/201608/t20160802_813868.html?sukey=3997c0719f1515209c54f2a8fecd4895f234f97ef446d99735efeb01162b85a0870f1e2f8ea96459111cb32987c6978a.

5. http://zwgk.gd.gov.cn/006939748/201608/t20160804_666598.html.

6. http://www.hunan.gov.cn/zw/hnyw/tjdt/201608/t20160818_3234495.htmlhttp://www.saic.gov.cn/fldyfbzdjz/gzdt/201608/t20160822_170548.htmlhttp://fldj.mofcom.gov.cn/article/xxfb/201608/20160801383721.shtmlhttp://www.sc.gov.cn/10462/10464/10465/10574/2016/8/24/10393326.shtml.

7. http://www.gx211.com/news/2016819/n5574388225.html?sukey=3997c0719f1515209c54f2a8fecd4895c1e608717a5c1d1e22b8b2da16910c71558062b438c739d980bb7d918d13ace6.

8. http://www.saic.gov.cn/fldyfbzdjz/gzdt/201608/t20160804_170247.html.

9. http://www.saic.gov.cn/ywdt/gsyw/dfdt/xxb/201608/t20160810_170330.html.

10. http://www.cicn.com.cn/zggsb/2016-08/31/cms90518article.shtml?sukey=3997c0719f15152034bee303c26668ee5156b04ea33b9fd2701e239d22c649a76b55f884268509741f31c976b49e9e4b.

11. http://www.saic.gov.cn/zwgk/gggs/jzzf/201608/t20160816_170435.html.

12. http://www.shdrc.gov.cn/fzgggz/jggl/jghzcfjds/24137.htm?sukey=3997c0719f151520d9d8ab22467f976c98c4d515fe7612d065f5b252164f77246e2681dc3fe38a088feeff499b492570.

13. http://fldj.mofcom.gov.cn/article/jyzjzjyajgs/?.

14. http://www.mofcom.gov.cn/xwfbh/20160817.shtml.

15. http://www.saic.gov.cn/fldyfbzdjz/gzdt/201609/t20160906_170867.html.

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