This China Newsletter provides an overview of key developments during Q3 2023 in the following areas:
1. Antitrust
- China Amends Provisions on Prohibiting Abuse of IP Rights
- SAMR Releases Anti-Monopoly Compliance Guidelines for Concentrations of Undertakings
2. Compliance
- China Introduces National Standard on Restricting Excessive Packaging of Food and Cosmetics
- 10 Departments Release Measures for Review of Scientific and Technological Ethics (for Trial Implementation)
3. Corporate
- China Tightens Regulations for Auto Finance Sector, Enhancing Supervision and Streamlining the Operation of Auto Finance Companies
- SAMR Releases Implementing Measures for Administrative Provisions on Registration of Enterprise Names
4. Data Privacy & Cybersecurity
- China Central Bank Proposes New Rules to Regulate Financial Data in Bank Sector
- MIIT Releases Notice on Record-Filing of Mobile Web Applications
- China Proposes New National Standard on Protection of Sensitive Personal Data
- CAC Releases Provisions on Security Management of the Application of Facial Recognition Technology (Draft for Comment)
5. Private Equity Funds
- China Introduces New Rules for Private Funds
Antitrust
China Amends Provisions on Prohibiting Abuse of IP Rights
新版《禁止滥用知识产权排除、限制竞争行为规定》施行
China's top market regulator, the State Administration for Market Regulation (SAMR), issued the new Provisions Prohibiting Abuse of Intellectual Property Rights to Exclude and Restrict Competition (Revised Provisions) June 29, 2023. The Revised Provisions took effect Aug. 1, 2023, replacing the former version (SAMR Order No.74), which SAMR promulgated April 7, 2015. The Revised Provisions align with the Anti-Monopoly Guidelines issued by the State Council in 2019 (Guidelines) and aim to strengthen anti-monopoly regulation and maintain market competition while protecting intellectual property and promoting innovation.
Highlights of the Revised Provisions include:
- IPR-related agreements: Following the revision
of the Anti-Monopoly Law, the Revised Provisions add that the
business operators must not, by way of exercising intellectual
property rights (IPR), organize with other business operators to
reach monopoly agreements or provide substantive assistance for
other business operators to reach monopoly agreements.
- Safe harbor rule: The Revised Provisions
revise the "Safe Harbor" rule to align with the
Guidelines. According to the Guidelines, if the business operator
can prove that (i) agreements between competitors where the
combined share of the parties in the relevant market is no more
than 20%; and (ii) agreements between non-competitors where the
share of each party in any relevant market affected by the
technology agreement is no more than 30%; and (iii) if market share
information is difficult to obtain or does not accurately reflect
the market positions of the parties, where, apart from the
technologies controlled by the parties, there are at least four
additional substitutable technologies in the relevant market that
are independently controlled by third parties and obtainable at
reasonable cost, such agreement will not be deemed a monopoly
agreement.
- Unfairly high pricing: The Revised Provisions
outline five factors to consider whether licensing royalties or
whether the price of IP products are unfairly high, including (i)
the R&D costs and the recovery cycle of the intellectual
property; (ii) the method for calculating royalties for the
intellectual property rights and the license conditions; (iii) the
comparable historical royalties or fee rate of the intellectual
property; (iv) commitments made by the undertaking regarding
licensing of the intellectual property rights; and (v) any other
relevant factors.
- Concentrations: The Revised Provisions specify that any technology transactions that may constitute "concentrations" must submit a merger filing in advance.
SAMR Releases Anti-Monopoly Compliance Guidelines for Concentrations of Undertakings
市场监管总局印发《经营者集中反垄断合规指引》
On Sept. 5, 2023, SAMR issued the Anti-Monopoly Compliance Guidelines for Concentrations of Undertakings (the Anti-Monopoly Guidelines). The Anti-Monopoly Guidelines provide practical recommendations to companies with compliance risks relating to concentration of undertakings, clarifying several gray zone issues as set forth below.
- Factors that Determine Company
"Control": The Anti-Monopoly Guidelines indicate
that the elements to consider when determining whether an
undertaking obtains "control" under the antitrust law are
not limited to acquisition of majority equity interests, but also
include the right to veto material matters and other factors. The
Anti-Monopoly Guidelines give the following example: an undertaking
only acquires minority equity interests but obtains veto right to
matters including annual business plan, budget, and appointment and
removal of senior officers in the target company, which constitutes
"Joint Control" and thus would trigger the declaration
obligation.
- Timing for Declaration in Step-by-Step
Transactions: The antitrust law requires that if a
transaction meets the declaration standards, the undertakings must
make a concentration declaration prior to entering the relevant
"concentration agreement." The Anti-Monopoly Guidelines
clarify for the first time that if the same undertaking conducts a
group of transactions within a certain period, which individually
do not meet the declaration standards but collectively do, the
undertakings must make the concentration declaration before
implementing the first transaction.
- Circumstances Constituting "Concentration of Undertakings": The 2023 Provisions on the Review of Concentrations of Undertakings provide that the factors to determine whether a concentration has been implemented include, but are not limited to, whether a market entity registration or registration of changes in rights has been completed, whether senior management have been appointed, whether one undertaking is actually participating in the business decisionmaking and management of another undertaking, and whether one undertaking has exchanged any sensitive information or substantially merged its business with another undertaking. The Anti-Monopoly Guidelines further reinstate that completion of market entity registration constitutes concentration implementation, and failure to declare a concentration before such implementation will elicit legal consequences.
Note that several points in the Anti-Monopoly Guidelines were previously presented in drafts of antitrust laws but ultimately removed from the laws to give the authorities certain discretion in law enforcement. Therefore, although the Anti-Monopoly Guidelines are not mandatory and do not create new obligations, companies are advised to comply with them.
To view the full article, 1428326.pdf.
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.
