China: China Publishes Draft Rules Relating to Anti-Monopoly Law ´Monopoly Agreement´ Provisions

Last Updated: 18 May 2009

Article by Hannah C. L. Ha , John M. Hickin and Gerry P. O'Brien

Originally published 15 May 2009

Keywords:  China, Draft Rules, Anti-Monopoly and Anti-Unfair Competition Bureau, Monopoloy Agreement Provisions, China's State Administration for Industry and Commerce, SAIC, Prohibiting Abuse of Market Dominant Positions, Anti-Monopoly Law, AML, The Monopoly Agreement Prohibition

This is the second in a series of two client alerts looking at draft implementation rules that the Anti-Monopoly and Anti-Unfair Competition Bureau of China's State Administration for Industry and Commerce ("SAIC") recently published in relation to the country's Anti-Monopoly Law ("AML").

Our first alert in this series, published on 13 May 2009, examined the SAIC's draft Rules on Prohibiting Abuse of Market Dominant Positions.

In this alert, we focus on the SAIC's draft Rules on Prohibiting Monopolistic Agreements ("Draft Rules"), which supplement and explain aspects of the AML's prohibition relating to restrictive (or 'monopoly') agreements ("Monopoly Agreement Prohibition"). Key aspects of the Draft Rules are explained in the context of a broad overview of the Monopoly Agreement Prohibition.

What you need to know about the Monopoly Agreement Prohibition

To whom does the Monopoly Agreement Prohibition apply?

The Monopoly Agreement Prohibition applies to nearly all undertakings that engage in manufacturing and selling of products, or the provision of services, in (or to) China. The only exception stated in the AML is for undertakings operating in the agricultural sector in China, although it seems that some state-owned enterprises may also be exempt from the prohibition in certain circumstances.

The Monopoly Agreement Prohibition will also impact the activities of industry associations.

Under the AML, industry associations are generally prohibited from involvement in the formation of monopoly agreements, and the Draft Rules provide examples of how such involvement may arise. Specifically, the rules stipulate that an industry association may not, amongst other things:

  • create and issue rules, decisions or circulars that eliminate or restrict competition; or
  • facilitate undertakings to communicate, discuss, or collaborate in reaching a monopoly agreement.

What does the Monopoly Agreement Prohibition restrict undertakings from doing?

The AML expressly divides the Monopoly Agreement Prohibition into separate Articles focussing on horizontal monopoly agreements on the one hand, and vertical monopoly agreements on the other.

Horizontal monopoly agreements

A number of examples of 'horizontal' monopoly agreements are set out in Article 13 of the AML, including agreements between competitors to fix prices, limit production or sales volumes, share markets, restrict technology purchases or development, or boycott competitors or customers.

Article 13 makes it clear that this is a non-exhaustive list, and this is reinforced by the fact that the Draft Rules stipulate a further type of horizontal monopoly agreement. Specifically, the rules state that collusion in bidding is prohibited, and explain that this collusion can take various forms such as secretly designating a winning bid in advance, or taking turns in winning bids.

The Draft Rules also elaborate on the various types of horizontal monopoly agreement already expressly referenced in Article 13 of the AML. For example, Article 13(iii) of the AML makes it clear that agreements between competitors that restrict production quantities or sales of a product are prohibited, and the Draft Rules provide examples of such restrictions - such as where the competing parties agree to limit the total amount of production or sales by discontinuing production, or buying out relevant unsold products.

Vertical monopoly agreements

Article 14 of the AML focuses on 'vertical' monopoly agreements, for which just two examples are provided - agreements between a company and its trading partners to fix resale prices, or to restrict minimum resale prices. Again, it is clearly stated in the AML that the enforcement authorities may identify further forms of prohibited vertical monopoly agreement, and these additional non-price related examples are now referenced in the Draft Rules:

  • where, in the course of soliciting bids in a bidding process, the soliciting persons engage in certain acts undermining the competitive nature of that process (such as secretly notifying other bidders about the bidding situation, or assisting certain bidders to replace their bid proposals before the bid opening); and
  • where, in the absence of legitimate reasons, an undertaking is restricted from operating outside a designated geographic market, or from trading with businesses other than those specified in the relevant agreement.

This latter example is particularly significant, as it was previously believed that China's competition authorities may be reluctant to examine such restrictions or 'exclusive dealing' terms in vertical arrangements (such as distribution and supply contracts) other than in the context of the AML prohibition regarding abuse of a dominant position.

Does the Monopoly Agreement Prohibition apply only to formal contracts?

No. It is clear from wording in both the AML and the Draft Rules that monopoly agreements do not have to be in written form. They may also arise from oral communications between undertakings, or collaborative acts (such as acts undertaken in concert, or with tacit agreement).

The Draft Rules also stipulate that in determining whether an act constitutes a collaborative act, the enforcement authorities will take into account factors such as any evident connection between or among the acts of competing undertakings, and the existence or absence of legitimate reasons for identical or similar trading conduct by competing undertakings.

Are there any exceptions to the Monopoly Agreement Prohibition?

The various types of monopoly agreement referenced in the AML and the Draft Rules are deemed to unlawfully restrict competition unless the parties qualify for an exception under Article 15 of the AML.

Article 15 provides that such agreements will not be prohibited if the parties can show that they were formed for a legitimate purpose - such as improving technology, raising product quality and production efficiency, or enhancing the competitiveness of small or medium-sized entities. Unfortunately, the Draft Rules do not provide any new information on these exceptions, leaving unclear their precise scope, and the issue of how the existence of a legitimate purpose may be proved.

How will the Monopoly Agreement Prohibition be enforced?

As with the AML prohibition relating to 'abuse of dominance', the SAIC shares enforcement responsibilities in relation to the Monopoly Agreement Prohibition with China's National Development and Reform Commission ("NDRC"). The NDRC's primary focus will be on those aspects of the prohibition relating to pricing matters (such as price-fixing and resale price maintenance activities), while the SAIC will take charge in relation to other forms of conduct.

The Draft Rules also contemplate the delegation of certain of the SAIC's enforcement powers to provincial-level branches (AICs), in substantially the same manner as was described in relation to the enforcement of the AML's abuse of dominance prohibition in our first alert in this series.

What penalties apply for a violation of the Monopoly Agreement Prohibition?

The Draft Rules repeat the list of available penalties set out in the AML in respect of a violation of the Monopoly Agreement Prohibition. Namely, undertakings found to have engaged in such a violation may be ordered to cease the violation, have their illegal gains confiscated, and face a fine of up to 10% of sales revenue from the previous year. Additionally, it is clear from the AML that undertakings who suffer loss as a result of such conduct may bring private actions for damages.

However, the Draft Rules also introduce specific leniency treatments for undertakings who come forward with information on monopoly agreement conduct. According to the rules, the first proactive whistleblower of a monopoly agreement may completely avoid penalties, and the second and third reporter may enjoy a 50% or 30% reduction of penalties respectively.

However, the rules make it clear that this leniency policy does not apply to the organizers and promoters of monopoly agreements, nor do they apply to undertakings who coerce other parties to engage in a monopoly agreement. To enjoy waived or reduced penalties, the relevant undertakings must also provide the SAIC or NDRC with important evidence to help with their investigation and determination of a case.

What further information can we expect in relation to the Monopoly Agreement Prohibition?

In our first client alert in this series, we noted that the SAIC is reported to be working on implementation rules specifically explaining how relevant AML prohibitions will be applied in relation to cases involving significant intellectual property matters.

Although these rules are likely to be most instructive in relation to the AML prohibition regarding abuse of a dominant position, it is also hoped they will clarify certain issues relating to the Monopoly Agreement Prohibition. For example, Article 13(iv) of the AML provides that an agreement between competitors that restricts the purchase of new technology or new facilities, or the development of new technology of new products, is a prohibited monopoly agreement. The broad wording of this horizontal monopoly agreement example has raised concerns, as it could potentially be applied to a wide array of arrangements not typically deemed anticompetitive in other jurisdictions. An example is technology and intellectual property licence agreements, which often include field-of-use restrictions.

Accordingly, it is hoped that further guidance on this issue will be provided by the forthcoming implementation rules concerning intellectual property .

Focus your compliance endeavours

As noted in our first client alert in this series, it appears that both the SAIC and NDRC are holding back from active enforcement of the AML's behavioural prohibitions while relevant implementation rules and associated guidance notes are developed. However, as finalisation of these documents is likely to occur in the coming months, and China's courts remain free to hear private actions in this area in the interim (although they appear reluctant to do so), it will be prudent for businesses with operations or sales in China to take steps now to maximise their prospects of compliance.

In this context, it is noted that authorities in emerging competition regimes regularly make 'horizontal' monopoly agreements (cartels) a priority for their investigation and enforcement activities - as cartels are generally perceived as one of the most harmful forms of anti-competitive manifestation. Successful cartel prosecutions also commonly result in huge fines and significant media exposure, which can help competition regulators 'spread the message' about the need for competition compliance.

Accordingly, ensuring that dealings with competitors are 'risk free' under the AML should be one of the main areas of focus for compliance endeavours at this stage - and in addition to review of relevant contracts (such as cooperation deals and joint venture agreements) this may require that staff be provided with guidance on how to conduct themselves in any formal or informal liaison with competitor representatives.

Additionally, the expansion of the scope of the vertical monopoly agreement prohibition by the Draft Rules reinforces the need for undertakings to ensure their distribution and supply agreements are reviewed for AML compliance - even where their market share or degree of market power in China may be limited.

Learn more about our Hong Kong and PRC offices and Antitrust & Competition practice.

Visit us at

Copyright 2008. JSM, Mayer Brown International LLP and/or Mayer Brown LLP. All rights reserved. Mayer Brown is a global legal services organization comprising legal practices that are separate entities ("Mayer Brown Practices"). The Mayer Brown Practices are: JSM, a Hong Kong partnership, and its associated entities in Asia; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales; and Mayer Brown LLP, a limited liability partnership established in the United States. The Mayer Brown Practices are known as Mayer Brown JSM in Asia.

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

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”

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