On 27 July 2018, China's State Administration for Market Regulation (SAMR) released to the public an infringement decision finding that Daqing Oilfield Company Ltd and PetroChina's Daqing gas sales branch (both parties referred here as PetroChina entities) were engaged in illegal minimum price setting in the resale of compressed natural gas (CNG). The PetroChina entities were earlier fined RMB 84.06 million for the conduct.

In August 2016, the PetroChina entities were found to have met with 13 CNG retail stations in Harbin, Qiqihar and Daqing in Heilongjiang province to request for CNG resale prices to be set at not less than RMB 2.25 per cubic meter from 1 September 2016 onwards. The parties subsequently signed an agreement confirming the arrangement. Before the agreement, the retailers had independently priced CNG at RMB 1.76 to RMB 2.30 per cubic meter.

In September 2016, the PetroChina entities circulated a notice threatening to cut off CNG supplies for retailers that did not comply with the minimum price. They subsequently also requested the retailers to provide regular data on customers, sales volumes and prices; as well as set up a team to monitor the retailers on their compliance with the minimum price.

The PetroChina entities were found to have infringed Article 14 of China's Anti-Monopoly Law, which generally prohibits agreements that fix or set minimum resale prices of products to third parties.

Businesses should be alert to involvement in resale price maintenance practices and their risks and pitfalls. Sanctions imposed on retailers that do not comply with minimum or fixed prices, and measures to monitor and detect non-compliance, are factors that enhance the effectiveness of resale price maintenance, and would be viewed seriously by regulators. We have previously discussed the strict treatment of resale price maintenance practices in China and Hong Kong in our update here.

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 2018. 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.