China: SAMR's Triple Guidance On Antitrust Enforcement

Last Updated: 23 July 2019
Article by Adrian Emch, Rachel Xu and Qing Lyu

On 1 July 2019, the State Administration for Market Regulation (SAMR) made public three sets of regulations to implement China's AntiMonopoly Law (AML):

The three regulations will enter into force on 1 September 2019.

The regulations contain a mix of substantive and procedural rules. In many ways, they represent continuation of the AML implementing rules issued by SAMR's predecessors as antitrust enforcement body, the National Development and Reform Commission (NDRC) and the State Administration for Industry and Commerce (SAIC).

A read-through of the three regulations reveals an attempt by SAMR to lay out similar rules for three of the four types of anti-competitive conduct targeted by the AML: anti-competitive agreements; abuse of a dominant market position; and abuse of administrative rights to restrict competition (often dubbed "administrative monopoly" conduct in China). Guidance on the AML's merger control provisions is provided in separate SAMR implementing rules.

Anti-competitive agreements

The SAMR Agreements Regulation contains 36 provisions. The procedural provisions make up the bulk of the regulation. These provisions focus inter alia on SAMR's jurisdiction, case delegation to its local offices, and supervision of the local work; complaints; the commitments process; and the leniency regime.

The substantive provisions in the SAMR Agreements Regulation put forward guidance on the various prohibitions for horizontal agreements listed in the AML – namely, various types of hardcore cartel conduct – and resale price maintenance as the only vertical agreement. The guidance is largely similar to that in the prior NDRC and SAIC regulations, with no big surprises.

Similarly, the SAMR Agreements Regulation restates the prior SAIC guidance on the concept of "concerted practice," laying out the factors to be considered: unity in market conduct; meeting of minds or information exchange; reasonable (counter-) explanations; and seemingly objective factors such as market structure, status of competition, and market change.

The SAMR Agreements Regulation also contains guidance on how to operate the AML's "catch-all clause" for finding anti-competitive agreements not explicitly listed in the AML. The regulation sets out a few general factors, such as the degree of competition in the market; market shares; impact on prices, market entry etc. but – unlike an earlier draft – does not provide a market share safe harbor.

Interestingly, the guidance on how to use the AML's exemption provision is quite limited. The regulation appears to view the exemption as a procedural mechanism (like a defense) rather than as a part of the substantive analysis.

Abuse of dominance

The SAMR Abuse of Dominance Regulation has 39 provisions. On the procedural front, the provisions are very similar to those of the SAMR Agreements Regulation.

From the substantive perspective, the SAMR Abuse of Dominance Regulation puts forward the most detailed guidance among the three regulations. First, it attempts to further flesh out the factors in the AML for finding dominance. For example, the regulation explains that market shares can be measured by reference to sales value, sales volume or "other norms." Beyond the general guidance on the dominance assessment, the SAMR Abuse of Dominance Regulation contains specific points for the Internet sector and intellectual property rights (IPRs): for Internet and similar businesses, the dominance assessment can look at the industry specificity; business models; user numbers; network effects; foreclosure effects; technological characteristics; market innovation; and data control and processing, and any associated market power. In the IPR space, countervailing power (likely to mean the licensee's bargaining position in a crosslicensing context) is a relevant factor.

Interestingly, the SAMR Abuse of Dominance Regulation also includes new detail on "collective dominance," a rarely used concept in the AML. Largely in line with international practice, the regulation proposes to assess the market structure; transparency in the market; the degree of homogeneity of products; and the parallelism of the companies' conduct as relevant factors in the collective dominance assessment.

Second, the SAMR Abuse of Dominance Regulation goes into quite some detail on the types of abusive conduct. The regulation addresses each of the prohibitions in the AML and – on many aspects – provides additional guidance, going beyond the AML and the prior NDRC and SAIC regulations. For example:

  • one of the benchmarks for excessive pricing is the dominant company's own prices in another geography with the same/similar market conditions (one of the criteria which NDRC had used in the River sand case);
  • the proposed cost benchmark for predatory pricing is average variable cost;
  • a refusal to grant access to an "essential facility" is subject to a somewhat different test than a refusal to supply other products or services;
  • "restrictive dealing" (similar to "exclusive dealing" known on an international basis) can be achieved directly or indirectly – in line with SAMR's sanctioning of the minimum purchasing volumes, take-or-pay clauses, and discounts in the Eastman case in April 2019);
  • unreasonable charges other than price can amount to unlawful imposition of unreasonable conditions, an offense similar to tying; and
  • a long list of items (including for example different warranty periods) can be used to assess whether there is discrimination between two transaction parties and there is additional guidance as to when two businesses are comparable enough to be examined under the discriminatory treatment clause in the first place.

Third, perhaps most notably, the SAMR Abuse of Dominance Regulation goes at great length to describe the circumstances of "valid reasons" justifying potentially abusive conduct – both in the individual provisions for each type of abuse and in a separate, additional stand-alone provision.

Fourth, similar to the SAMR Agreements Regulation, the SAMR Abuse of Dominance Regulation puts forward criteria for operating the AML's "catch-all clause" for finding new types of abuse of dominance, explicitly requiring that SAMR prove the anti-competitive effects of the conduct.

Administrative monopoly

With 25 provisions, the SAMR Administrative Monopoly Regulation is the shortest of the three regulations.

On the procedural side, the SAMR Administrative Monopoly Regulation naturally differs from the other two regulations, as the AML does not empower SAMR to impose sanctions on the infringing administrative organ but only to issue recommendations to the organ's hierarchically superior body on how to rectify the anti-competitive conduct. However, bearing in mind this significant procedural difference, it seems the SAMR Administrative Monopoly Regulation attempts to find as much common ground as possible with the SAMR Agreements Regulation and the SAMR Abuse of Dominance Regulation, on aspects such as jurisdiction, case delegation, complaints and other procedural steps.

The substantive provisions of the SAMR Administrative Monopoly Regulation largely follow the structure of the AML, providing some more detail on what specific government actions can be deemed to be anti-competitive. The main focus of the provisions is to regulate two types of anti-competitive government conduct – exclusivity for certain producers/service providers to the detriment of others, and restrictions to the free movement of goods, services and investment within China.

Perhaps the most interesting feature of the SAMR Administrative Monopoly Regulation is not what it says, but what it does not say: there is no direct reference to the "Fair Competition Review System," a policy originally established outside the AML framework which aims to screen government rules, policies and actions for their compatibility with market competition.

Takeaways

The procedural aspects in the three regulations are similar. To a large extent, the procedural provisions are not ground-breaking.

Admittedly, the rules on jurisdiction by SAMR's provincial offices and case delegation between offices are key to future AML enforcement, as the antitrust human resources at central SAMR in Beijing are very limited. However, those rules are not new, but were decided late 2018 when SAMR issued its Notice on Anti-Monopoly Enforcement Delegation.

In contrast, a new feature in the three regulations is the push for additional publicity and transparency in SAMR's decision-making process. In particular, the regulations mandate publication of all final decisions – seemingly including settlement decisions and decisions recommending rectification of administrative monopoly conduct, politically quite a sensitive topic in China.

There is also an attempt at consistency in terms of substantive rules. For example, both the SAMR Agreements Regulation and the SAMR Abuse of Dominance Regulation call for an effects-based analysis for new types of anticompetitive agreements and abuse of dominance under the AML's "catch-all clauses."

However, the attempt to streamline the set of regulations is not present throughout. For example, there is a noticeable difference among the three regulations on how to "justify" potentially anti-competitive conduct: while there is a lot of detail in the SAMR Abuse of Dominance Regulation, the SAMR Agreements Regulation contains very little, and the SAMR Administrative Monopoly Regulation virtually no, guidance (despite the fact that the implementing rules for the "Fair Competition Review System" provide for justification possibilities, by way of exception, for anticompetitive government actions).

Overall, although a different format for the implementing rules – such as guidelines with case studies or hypothetical examples – might have provided more clarity for market players, the three SAMR regulations provide some welcome guidance as to how the authority will interpret and enforce the AML going forward.

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 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
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please 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