China: Update On Antitrust Legislative Development In China

In the nearly 10 years since the introduction of the Anti-Monopoly Law (AML) in 2008, China's antitrust regime has developed and matured and is now one of the most important regulatory frameworks alongside the US and EU regimes. In this legal update, we highlight a number of anticipated changes to the key antitrust legislative instruments and rules that are expected to come in the near future.

Anti-Monopoly Law

The AML, being the main piece of antitrust legislation in China, is set to be amended for the first time in a decade. In September 2017, a number of seminars and workshops have been held by the antitrust enforcement agencies to discuss revisions to the AML and although the structure of the AML is not expected to change, there are likely to be some important amendments to supplement the current law and to clarify certain areas that have caused confusion in enforcement.

It is contemplated that the amendments will seek to establish a pre-review mechanism for monopolistic conduct (akin to an application for exemption available in certain jurisdictions) and to formally legalise the Fair Competition Review System, which is designed to regulate the potential abuse of administrative power by government agencies that could result in anti-competitive effect and will hold local level government officials accountable for such abuse. A definition of the concept of "control", which is particularly important in the context of merger control (see below), is also expected to be included in the amended legislation. In addition, it has been proposed that the statutory penalty for failure to notify a notifiable concentration, currently capped at RMB 500,000, would be increased.

These suggested amendments are still subject to changes and a research report on the amendments is set to be produced by the Anti-Monopoly Commission by the end of this year.

Merger Control

On 8 September 2017, MOFCOM (Ministry of Commerce) released revised draft merger review measures ("Draft Measures") for public comments. As compared with the first draft circulated in July this year, the revised draft contains fewer changes (the number of clauses reduced from 70 to 54). The Draft Measures seek to consolidate the various rules and regulations relating to the review of concentration of undertakings in China and introduce a number of important changes to the existing rules and regulations, which are summarised as follows.

CONTROL

The Draft Measures provide that voting rights and the ability to influence the appointment of senior management, as well as the approval of budget and strategic planning should be taken into consideration in the determination of control or decisive influence. The list of factors relevant to the analysis of control as currently stated in the guiding opinion on the notification of concentrations between business operators published by MOFCOM in 2014 has been incorporated into the Draft Measures (such as the purpose of the transaction, the change in shareholding structure, and historical voting pattern at shareholders meeting, etc). These would be welcome changes as they provide clarity and additional guidance in analysing whether a transaction involves an acquisition or change of control.

INTER-DEPENDENT TRANSACTIONS

The Draft Measures also clarify an uncertainty regarding the treatment of inter-dependent transactions, which currently the rules are silent on. It is now provided that where an undertaking acquires control or imposes decisive influence over the other undertaking through several consecutive or parallel transactions that are linked in law (de jure)

or in fact (de facto), these transactions will be treated as one concentration. It is, however, not specified in the Draft Measures the time limit within which the transactions have to take place in order to be considered as one concentration.

TURNOVER CALCULATION

There are two noticeable changes in the Draft Measures as compared to the current rules regarding turnover calculation. Firstly, the relevant turnover of an undertaking will now comprises the turnover of entities it controls or exercises decisive influence at the time of filing, and exclude the turnover of entities that it no longer controls or exercises decisive influence over at the time of filing. Hence, undertakings may have to make adjustment to figures contained in their audited financial statements when calculating turnover in the threshold analysis. Secondly, it is stipulated that the turnover of an entity jointly controlled by the undertakings concerned in a concentration shall be apportioned equally among themselves, though it is silent as to whether adjustment should be made with reference to the respective shareholding held by each party. Unfortunately, the Draft Measures do not distinguish between control for turnover calculation purpose and the concept of control to determine whether a transaction qualifies as a concentration under the AML.

INVESTIGATION OF CONCENTRATIONS FALLING BELOW NOTIFICATION THRESHOLD

The Draft Measures set out a new procedure for MOFCOM to investigate concentrations that do not meet the filing threshold. With this clarification of the procedure MOFCOM may be prepared to initiate more investigations, such as the September 2016 MOFCOM investigation into the deal between Uber and Didi Chuxing, which the parties claimed it fell outside of the notification thresholds.

WITHDRAWAL AND REFILING OF SIMPLE CASE

Under the latest draft, MOFCOM may revoke a simple case status under the following circumstances: (i) the filing parties withhold important information or provide false and misleading information; (ii) third parties contest with supporting evidence that the concentration has or may have the effect of eliminating or restricting competition; or (iii) MOFCOM discovers there are major changes in the condition of the concentration or competition in the relevant market. It also clarifies for the first time the procedure for the transfer from simple case to normal case: under the Draft Measures revoked simple cases are to be withdrawn and refiled with MOFCOM as a normal case. The public consultation period for the Draft Measures has ended and it is expected that the new measures will take effect by the end of this year.

Anti-Unfair Competition Law

On 4 September 2017, the Law Committee of the National People's Congress (NPC) released a second draft of the amendments to the Anti-Unfair Competition Law (AUCL) for public consultation.

Once finalised, this will represent the first amendments ever made to the AUCL since it entered into force in 1993. As compared to the first draft amendments submitted by the State Council to the NPC in early 2017 and the several earlier versions circulated for public comments prior to legislative readings, the current draft contains much less changes to the current AUCL. We set out below in summary some of the major changes to the AUCL as reflected in the latest draft.

COMMERCIAL BRIBERY

The current AUCL prohibits business operators from practicing bribery by using money, property or other means to sell or buy commodities. The implementation of such provision by the different local Administration for Industry and Commerce (AIC) has reportedly caused significant confusion in the business community. The latest draft amendments seek to clarify the scope by restricting the prohibition of commercial bribery through money, property or other benefits in order to obtain business transaction opportunities or other competitive advantage to 4 categories of entities or individuals. These categories can be summarised as individual employees, entrusted agents, government authorities, state-owned enterprises, government officials and other entities or individuals with power to influence a transaction. It is noteworthy that the latest draft amendments do not prohibit bribery of a business counterparty, which was expressed to be prohibited under the earlier draft. This may reflect a change from the current enforcement practice, where, for example, the payment of a "display fee" or sponsorships to a business counterparty may not be considered to fall within the scope of prohibition under the revised AUCL.

ONLINE UNFAIR COMPETITIVE BEHAVIOUR

The amended AUCL will include new provisions regulating online anticompetitive conduct. Business operators are prohibited from using technical measures to impact user choice or other measures to hinder or hamper other business operators' provision of network products or services.

TIE-IN SALES

In the earlier draft amendments it was proposed that business operators should be prohibited from forcing consumers to unwillingly purchase bundled products or imposing other unfair terms in the course of selling products. This has raised some concerns as such behaviour when practiced by an entity with a dominant market position is already regulated by the AML. It is also reflected that business operators who do not have a dominant market position should be entitled to decide on their terms of transaction. This provision has eventually been removed from the latest draft.

INVESTIGATIVE POWER

The AUCL is enforced by local AICs and the latest draft amendments have expanded their investigative power. It is now provided that AICs will be able to seal and seize money or property involved in the conduct of unfair competition, and access the bank accounts of business operators who are suspected of committing unfair competitive behaviour. As a balance to these expanded investigation powers, local AICs are required to submit a written report and obtain approval from the head of the particular local AIC before commencing any investigation and exercising their powers in evidence collection. Where seizure of property and inspection of bank accounts are involved, a written report will have to be submitted and approval has to be obtained from the person-in-charge of an AIC at the municipal level.

Concluding Remarks

The antitrust regime in China will be undergoing a number of major changes in the near future. It is important for companies doing business in China to keep abreast of the latest legislative developments since these changes are likely to have significant impacts on business operations. If you wish to know more about any aspect of this update, please feel free to contact us.

Visit us at www.mayerbrownjsm.com

Mayer Brown is a global legal services organization comprising legal practices that are separate entities (the Mayer Brown Practices). The Mayer Brown Practices are: Mayer Brown LLP, a limited liability partnership established in the United States; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales; Mayer Brown JSM, a Hong Kong partnership, and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

© Copyright 2016. The Mayer Brown Practices. All rights reserved.

This article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein. Please also read the JSM legal publications Disclaimer.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
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
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
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

Mondaq.com (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 www.mondaq.com

To Use Mondaq.com 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.

Disclaimer

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.

General

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