LEGISLATION
National Healthcare Security Administration Seeks Comments on the Guidance on the Establishment of Pharmaceutical Price and Procurement Credit Evaluation System
On 24 July 2020, the National Healthcare Security Administration issued the Guidance on the Establishment of Pharmaceutical Price and Procurement Credit Evaluation System (Draft for Comment), aiming at improving the market-orientated pharmaceutical pricing mechanism and establishing the pharmaceutical price and bidding and procurement credit evaluation system. According to this guidance, the pharmaceutical enterprises which implement monopoly agreements may be included in the catalogue list of dishonest matters for bidding and procurement. 1
Hainan AMR Publicly Solicits Comments on the Regulations on Fair Competition of Hainan Free Trade Port
On 24 July, Hainan Administration for Market Regulation ("Hainan AMR") solicited comments from the public on the Regulations on Fair Competition of Hainan Free Trade Port. The Draft Regulations intended to build a business environment which is international, convenient and under the rule of law, protect and promote fair market competition, improve economic efficiency, protect the legitimate rights and interests of business operators, safeguard consumers' interests and public interests and build a high-level Hainan Free Trade Port. Hainan government planned to establish the Fair Competition Committee according to this Draft Regulations.2
The General Office of the State Council: Further Strengthen the Law Enforcement against the Monopoly Conduct on APIs and Imported Drugs
On 23 July, the General Office of the State Council issued the Notice on Promulgation of Key Tasks for Deepening the Reform of Medical and Healthcare System in the Second Half of 2020. The Notice underlines that the supply and price of medicines in short supply shall be stabilized, and it is necessary to further strengthen the enforcement of unlawful monopoly behaviors concerning active pharmaceutical ingredients ("APIs") and imported drugs. Ministry of Industry and Information Technology ("MIIT"), National Health Commission, State Administration for Market Regulation ("SAMR") and other authorities are responsible for its enforcement. 3
The General Office of the State Council: Prohibit Platform Enterprises from Abusing Market Dominance to Charge Unfairly High Service Fees
On 21 July, the General Office of the State Council issued the Implement Opinions on Further Optimizing Business Environment to Serve Market Entities Better.4 The Opinions underlines that it is necessary to reduce operating costs for small and micro enterprises, encourage and guide platform enterprises to appropriately reduce service charges such as platform commissions, barcode payment fees and online payment fees charged to small and micro enterprises, prohibit platform enterprises from abusing market dominance to charge unfairly high service fees. The burden of enforcement in these fields is shared respectively by SAMR, Cyberspace Administration of China("CAC"), MIIT, etc. 4
24 Departmental Regulations including The Several Provisions on Prohibiting Public Enterprises from Restricting Competition are Repealed by SAMR
On 16 July, State Administration for Market Regulation ("SAMR") issued the Decision on the Repeal of Certain Regulations, which repealed 24 departmental regulations including the Several Provisions on Prohibiting Public Enterprises from Restricting Competition ("Several Provisions"), aiming at improving the business environment and regulatory effectiveness. The Several Provisions was promulgated by the former State Administration for Industry and Commerce on December 24, 1993. 5
The General Office of the State Council: Break Up Monopolies in Charging Services provided by Industrial Associations and Chambers of Commerce and Marketize Service Price
On 10 July, the General Office of the State Council issued the Notice on Further Regulating Charges by Industrial Associations and Chambers of Commerce, which indicated that it is necessary to set reasonable charging standards for operational services to further enhance standardization and transparency of charges by industry associations and chambers. Breaking up monopolies in monopolistic and compulsory operational services charged by industry associations and chambers of commerce and marketizing service price can be achieved by lowering entry barriers and introducing diversified servicers. 6
Shanghai AMR Issues the Provincial Standard: Competition Compliance Guideline for Business Operators (Draft for Comment)
On 3 July, Shanghai Administration for Market Regulation ("Shanghai AMR") issued the provincial standard: Competition Compliance Guideline for Business Operators (Draft for Comment). The draft stipulated the basic requirements for business operators to participate in market competition in accordance with the relevant provisions of the Anti-Monopoly Law("AML"), including the basic requirements of competition compliance, management responsibilities for competition compliance of undertakings' leadership, compliance cooperation mechanism, risk identification and compliance measures, compliance guarantee mechanism, assessment and improvement mechanism, etc. 7
Authorities
Shanghai AMR Releases 8 Hearing Announcements, Planning to Hold Hearings on the Case In Which Tourist Association Is Suspected of Organizing and Reaching Monopoly Agreement
On 29 July, 2020, Shanghai Administration for Market Regulation ("Shanghai AMR") announced that it would hold a hearing on 10 and 11 August for the case in which Shanghai Tourist Association was suspected of organizing Shanghai Water Tourism LLC and other 7 competing operators to reach and implement monopoly agreement. The hearing is intended to renovate the tourism industry and protect consumers' rights and interests. 8
The Supervision Office of China's State Council Accuses a Weifang Industry Association and Local Authorities of Monopoly
On 21 July, the supervision office of the General Office of the State Council issued the Report on the Supervision of Shandong Weifang Housing and Urban-Rural Development Bureau and Other Units and Associations in Illegally Carrying Out the Identification, Evaluation and Commendation of Occupational Qualification Permission and Charging arbitrarily to Collect Money. According to the report, the Weifang Housing and Urban-Rural Development Bureau and its subordinate units along with the Weifang Construction Engineering Quality and Safety Association abused their administrative powers and monopolized the business of issuing vocational qualifications and of making labels. The Shandong government is looking into the matter and has asked the relevant parties to conduct a serious investigation and initiate rectification measures. 9
MITT Enhance Campaigns against Broadband Monopoly in Office Building
On 10 July, MIIT issued the Notice on Enhancing Special Campaign Against Broadband Monopoly in Office Buildings, requiring to launch the special campaign against violations recently reported by the media that some property managers and agents illegally raise the broadband's price in office buildings and industrial parks, which seriously impeded the broadband users' legitimate rights and interests and considerably increased enterprises' operating costs. 10
Anhui AMR Rectifies the Administrative Monopolies of Bozhou Emergency Management Bureau in Insurance Industry and Other Six Departments
Recently, Anhui Administration for Market Regulation ("Anhui AMR") released news that it had rectified the administrative monopolies concerning insurance industry happened in Bozhou city. According to its investigation, in May 2018, seven authorities including erstwhile Bozhou Administration of Work Safety jointly issued a plan, designating two unidentified insurance agencies as underwriters of the relevant work. They also set unified insurance clauses and fixed rates, and stipulated that the premium should be paid by entities engaged in the relevant production and operational activities, which amounted to the abuse of administrative power to exclude and restrict competition. During the investigation, according to the authority's opinions, seven authorities including Bozhou Emergency Management Bureau jointly published the rectification document to correct the abovementioned illegal behaviors. 11
Public Enforcement
Hubei AMR Punishes 3 Enterprises in Huanggang for Fixing Trading Service Prices in Used Car Market and Dividing the Market
On 29 July, 2020, SAMR issued a used car market monopoly case investigated by Hubei Administration for Market Regulation ("Hubei AMR"). In this case, 3 enterprises in Huanggang reached and implemented a horizontal monopoly agreement to divide Huanggang used car trading market and fix the service fees, therefore being fined 4% of their turnover of 2018, totalling about CNY 195,000. 12
Shanxi AMR Punishes 2 Fuel Gas Companies for Abusing Dominant Position
On 27 July, SAMR issued two fuel-gas monopoly cases investigated by Shaanxi Administration for Market Regulation ("Shaanxi AMR"). In the first case, Yizhou Fuel Gas LLC abused dominant position in fuel gas installation and construction material market, required real estate developers to use only the installation services and materials it provided for their housing pipeline natural gas installation projects without justifiable reasons,., and thus be confiscated CNY 11,284,000 as illegal gains and fined CNY 12,882,000 , which amounted to 2% of its turnover of 2018, totalling about CNY 24,166,000. 13 In the second case, Shanxi Jiankan Natural-gas Tech Joint Stock Company abused its dominant position in the urban pipeline natural gas supply service market in Yuxian district, required real estate developers to only trade with it regarding the installation projects, and asked them to use materials it provided for their new housing pipeline natural gas projects without justifiable reasons, and thus be confiscated CNY 2,970,000 as illegal gains and fined CNY 13,458,000, which was 2% of its turnover of 2018, totalling about CNY 16,430,000. 14
Shanwei Government's Administrative Monopoly Case Selected as SPC's Typical Administrative Litigation Case Concerning Property Protection
On 27 July, the Supreme People's Court ("SPC") collectively released series of typical administration litigation cases concerning property rights protection for the first time, including Shanwei Zhencheng Bus Transportation LLC v. Shanwei government for eliminating and restraining competition and other 8 cases. The Guangdong High People's Court held in the second instance that Shanwei government's appointment of the exclusive undertakings in advance with regard to management of the city's public transportation and the use of public land violated relevant regulations that undertakings should be determined by market competition mechanism, and consequently constituted the abuse of administrative power which excluded existing competitors out of the market. 15
Jiangsu AMR Terminates its Abuse of Dominance Investigation into Yancheng Xin'ao Fuel Gas
On 24 July, SAMR published the decision on the termination of investigation issued by the Administration for Market Regulation of Jiangsu Province ("Jiangsu AMR") in which the antitrust investigation into the suspected abuse of dominance of Yancheng Xin'ao Fuel Gas. was terminated. In December of 2015, the antitrust regulator launched a formal investigation against the company because of the suspected unreasonable transaction terms in the pipeline gas services contracts. After that, the antitrust regulator decided to suspend the investigation on February 20, 2019, upon Yancheng ENN's application and recently decided to terminate the investigation after considering the implementation of the rectification commitment proposed by Yancheng ENN. 16
Hunan Fuel Gas Monopoly Case: "One Case, Two Investigation", Administrative Staff being Held to Account for Administrative Monopoly for the First Time
On 2 July, SAMR published Hunan Administration for Market Regulation's ("Hunan AMR") administrative penalty decision on the case in which Hunan Zhongmin Fuel Gas LLC and Huaihua Railway Economic and Technological Development Co. LTD reached and implemented monopoly agreement. According to the survey, leaded by Huaihua fuel gas authority, these 2 companies reached and implemented the horizontal agreement which divided the shares and territory of bottled-liquified-gas sales market. Therefore, one company was fined 3% of its turnover in 2018 (CNY 1.76 million), and the other was exempted from punishment due to the application of leniency policy. This case was the first and the typical case in which an administrative staff was held to account for abusing administrative power to exclude and restrict competition by Hunan antitrust authority. 17
Taiwan Cement and OYAK are Fined CNY 300,000 Respectively for Gun-Jumping
On 6 July, SAMR released the sanction decision in which two concrete companies, Taiwan Cement Co. LTD ("TCC") and Ordu Yardimlasma Kurumu ("OYAK"), were fined CNY 300,000 respectively for gun-jumping. According to the investigation, TCC and OYAK's establishment of the co-controlled joint venture meets the merger filing threshold, but the parties concerned fail to comply with pre-merger notification requirements, which violated AML and constituted gun-jumping. 18
Merger Control
SAMR Releases 33 Simple Cases for Merger Control Review in July
Up to 31 July 2020, the SAMR has released 33 simple cases in July on its website. 19
After Antitrust Filing, Jinguang Files for National Security Review on the Acquisition of Bohui Paper Industry
On 20 July, Jinguang Paper Industry Investment Co. Ltd ("Jinguang Paper") filed its proposed acquisition of Shandong Bohui Group Co. Ltd's ("Bohui Group") 100% share for the foreign investment security review under National Development and Reform Commission's ("NDRC") requirements. Previously, on 29 June, Bohui Paper Industry claimed that this deal had been approved by SAMR without preconditions. 20
China's "First" Merger Filing Involving VIE Structure Has Been Approved without Any Preconditions
On 16 July, SAMR approved the antitrust filing of Shanghai Mingchazhegang Management Consulting Ltd and Huanshang IT(Shanghai)Ltd's newly establishment of a joint venture without any preconditions. According to public information, this deal was the first formally registered merger filing involving the VIE structure. The ultimate controller of Shanghai Mingchazhegang Management Consulting Ltd("Mingchazhegang") is LEADING SMART HOLDINGS LIMITED, a company registered in Caymans, which controlled Mingchazhegang through associated entities based on a series of protocol arrangements. 21
Courts Litigation
Beijing Intellectual Property Court Makes the First-Instance Judgement on Yibai Ltd's Antitrust Lawsuit against CAVCA
On 24 July 2020, China judicial document website released the civil judgement of first instance of Huizhou Huanchangyibai Entertainment Ltd v. China Audio-Video Copyright Association ("CAVCA"). In this case, Beijing Intellectual Property Court dismissed plaintiff's claim that CAVCA abused the dominant position. The court held that ACM has a dominant market position in the licensing service market of movies or audio-visual products in KTV business in mainland China. However, existing evidence was not enough to prove that the defendant had abused its market dominance by restricting transaction and imposing unreasonable trading conditions. Therefore, the court dismissed the plaintiffs' requests. 22
SPC Dismisses the Retrial Request on a Monopoly Case against SICA
On 21 July, China Judicial Document Website released the civil ruling on the case of abusing dominant position between the retrial applicant Yao Pan and the respondent Shanghai International Commodity Auction Co. LTD ("SICA"). In this case, The plaintiff refused to accept the Shanghai Higher People's Court's civil judgment No.75 (2017) and filed with SPC for a retrial, claiming that SICA's conducts belong to the monopolistic behaviors that "the operator abuses the dominant market position in the reason of authorities' administrative restrictions". The court held that SICA was designated by the authority to carry out non-commercial passenger car quota auction, which is essentially the government's allocation of non-commercial passenger car quota. There is no relevant market and the reasons for application are lack of facts and legal basis. Accordingly, the court dismissed the retrial application. 23
Shandong Qingzhou People's Court Invalidates the Price-fixing and Market-dividing Contract of Distributors
On 15 July, China judicial document website released the first-instance judgement between the plaintiff Bensheng Liu and the defendants Shunyang Liu, Quande Zhang, Haiping Zhao and Dereng Xi over the dispute on the invalidation of a contract. In this case, Shandong Qingzhou People's Court held that the Agricultural Films Sales Agreement and its supplemental agreements signed by two parties restrained competition through fixing the price and dividing the sales market, which violated AML Article 13, the regulation on monopoly agreement and did not fall into the exemption scope listed in article 15, therefore was invalid for violating compulsory provisions. 24
Hunan Hengyang Intermediate Court Invalidates A Contract that Conceals Illegal Monopoly Purposes in the Form of a Lease Contract
On 10 July, China judicial document website released the retrial civil judgement on a contract dispute between Yu Xia, Sanzhi Wang and Meiyu Xie, Guangming Yang. In this case, Hunan Hengyang Intermediate People's Court held that the purpose of the applicant to enter into the lease (cessation of production) contract is not to lease the appellee's brick factory to continue its production and business activities, but to arrange the appellee to cease production, which may be suspected of monopolizing the brick market and raising the sales price. Therefore, the contract between the two parties is an invalid contract that covers up the purpose of illegally monopolizing the market in the form of a legal lease and violates the prohibitive provisions in the AML. Therefore, the court ruled to cancel the judgment of the first instance and dismissed applicant's other claims. 25
Dentons Team
Dentons Lawyers Continue to be Employed as Lawyers of CCA Lawyers' Group
On 24 July,2020, China Consumer Association("CCA") held the "work conference of CCA lawyers' group in 2020" in Beijing, reviewed and summarized the work of lawyers' group in the last session, and discussed the focus of the work of lawyers' group in the future. This conference was hosted by the vice secretory of CCA, Yuanguang Li. 25 lawyers including Dentons' senior partner Jet Deng continued to be employed as members of lawyers' group. CCA's vice president and secretory Jianqiao Zhu issued the certificate of employment to the members of lawyers' group. 26
Footnotes
1. http://www.nhsa.gov.cn/art/2020/7/24/art_48_3378.html
2. https://mp.weixin.qq.com/s/rQAcqr1hcFAFu2qqT6rIPA
3. http://www.gov.cn/zhengce/content/2020-07/23/content_5529417.htm
4. http://www.gov.cn/zhengce/content/2020-07/21/content_5528615.htm
5. http://gkml.samr.gov.cn/nsjg/fgs/202007/t20200716_319829.html
6. http://www.gov.cn/zhengce/content/2020-07/10/content_5525616.htm
7. http://fw.scjgj.sh.gov.cn/shaic/ask!toOnlineFaqDetailPage.action?id=0000009a202007020002
8. http://scjgj.sh.gov.cn/056/20200729/2c9bf2f67394e2f5017399ed406c3a82.html
9. http://www.gov.cn/hudong/ducha/2020-07/21/content_5528518.htm
10. http://www.miit.gov.cn/n1146295/n1652858/n1652930/n3757020/c8001476/content.html
11. http://amr.ah.gov.cn/xwdt/gsgg/142308471.html
12. http://www.samr.gov.cn/fldj/tzgg/xzcf/202007/t20200729_320340.html
13. http://www.samr.gov.cn/fldj/tzgg/xzcf/202007/t20200727_320270.html
14. http://www.samr.gov.cn/fldj/tzgg/xzcf/202007/t20200724_320228.html
15. http://www.court.gov.cn/zixun-xiangqing-244101.html
16. http://www.samr.gov.cn/fldj/tzgg/xzcf/202007/t20200724_320227.html
17. http://www.samr.gov.cn/fldj/tzgg/xzcf/202007/t20200702_319339.html
18. http://www.samr.gov.cn/fldj/tzgg/xzcf/202007/t20200706_319407.html
19. http://www.samr.gov.cn/fldj/ajgs/jzjyajgs/index.html
20. http://news.pack.cn/show-356023.html
21. http://www.samr.gov.cn/fldj/ajgs/wtjjzajgs/202007/t20200722_320099.html
22. https://wenshu.court.gov.cn/website/wenshu/181107ANFZ0BXSK4/index.html?docId=8d5bdebcf8ba4be8981eac02000df142
23. https://wenshu.court.gov.cn/website/wenshu/181107ANFZ0BXSK4/index.html?docId=ebb6a51d6562485eade1abfb00c498d4
24. https://wenshu.court.gov.cn/website/wenshu/181107ANFZ0BXSK4/index.html?docId=5c1e255ef3f64141b293abea01821c45
25. https://wenshu.court.gov.cn/website/wenshu/181107ANFZ0BXSK4/index.html?docId=7935f86e4eca418fbf9cabf4010d8a7c
26. https://mp.weixin.qq.com/s/c6wA2q4L4ili3VzYo8dCuA
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