A Q&A guide to competition law in China.
The Q&A gives a high level overview of merger control, restrictive agreements and practices, monopolies and abuse of market power, and joint ventures. In particular, it covers relevant triggering events and thresholds, notification requirements, procedures and timetables, third party claims, exclusions and exemptions, penalties for breach, and proposals for reform.
To compare answers across multiple jurisdictions visit the Competition law Country Q&A tool.
This Q&A is part of the PLC multi-jurisdictional guide to competition and cartel leniency. For a full list of jurisdictional Competition Q&As visit www.practicallaw.com/competition-mjg.
For a full list of jurisdictional Cartel Leniency Q&As, which provide a succinct overview of leniency and immunity, the applicable procedure and the regulatory authorities in multiple jurisdictions, visit www.practicallaw.com/leniency-mjg.
China's merger control regime is governed by Chapter 4 of the Anti-Monopoly Law (AML).
The Anti-monopoly Bureau of the Ministry of Commerce (MOFCOM) is responsible for regulating and enforcing merger control.
Transactions which meet the following two criteria must be notified and cleared by MOFCOM before they can be completed:
Transaction is deemed a concentration.
The parties to a transaction meet specified turnover thresholds (see below, Thresholds).
A concentration is defined as (Chapter 4, AML):
A merger of operators.
An acquisition of control of other operators through acquisition of equity or assets.
An acquisition of control of other operators or the capability to exercise decisive influence on other operators by way of contracts or other means.
MOFCOM has the right to review mergers even after they have been implemented, subject to the general two-year limitation period. Under Chinese law, the two-year limitation period starts running either from:
The date the illegal act is committed.
The date the illegal act is terminated, if it is of a continual or continuous nature.
Currently there is no guidance on whether failure to notify is a continuous or continual act. If it is deemed continuous or continual, MOFCOM can take action as long as the violation is discovered within two years after its termination.
The relevant turnover thresholds are either:
During the previous fiscal year, the total global turnover of all operators participating in the transaction exceeds CNY10 billion and at least two of these operators each had a turnover of more than CNY400 million within China.
During the previous fiscal year, the total turnover within China of all the operators participating in the concentration exceeded CNY2 billion, and at least two of these operators each had a turnover of more than CNY400 million within China.
The notification is mandatory for transactions which meet the notification thresholds (see Question 2, Thresholds).
The anti-trust notification must be made before the merger is completed. The AML provides that where the concentration of business operators has met the thresholds, an operator must notify MOFCOM in advance. Where the notification has not been made, the concentration cannot be implemented. However, the AML (and its accompanying rules and guidelines) does not stipulate a specified deadline in which a notification must be made. In practice, it is recommended that a notification be made shortly after the signing of the share or asset purchase agreement.
There is a pre-notification consultation procedure under the China merger review regime which means a business operator can make a pre-notification consultation with MOFCOM to seek an informal guidance relating to both procedural and substantive issues (such as whether the transaction is notifiable). However, the opinion giving by MOFCOM during the pre-notification consultation procedure is informal and non-binding. It is not possible to obtain formal binding guidance before notification.
Notifications must be filed by all business operators involved in the merger. For all other types of concentrations, notifications must be filed by the operator acquiring control of, or being able to exercise decisive influence, on other operators and other operators must co-operate with this operator (in respect of the filing).
The notification must be submitted to the Anti-monopoly Bureau of MOFCOM through the Administrative Management Service Centre of MOFCOM.
Applicants intending to seek anti-trust clearance concerning their transactions must prepare a filing form based on the template Anti-trust Notification Form issued by MOFCOM. MOFCOM updated the template on 6 June 2012, which came into effect on 7 July 2012. The new form includes 19 sections, for example:
Name of the transaction.
Nature of the transaction.
Cause of notification.
Business operators involved in the concentration.
Overview of the transaction.
The notifying party must prepare and submit both confidential and non-confidential version of the notification documents to MOFCOM. MOFCOM will use the non-confidential version to seek opinions of other government agencies or stakeholders in the market (see Question 6, Representations).
There are no filing fees.
Notifiable transactions must not be implemented or closed before obtaining anti-trust clearance from MOFCOM.
The anti-monopoly notification process can be divided into the following three major periods.
The preparation of the notification materials normally takes around one to three months, depending on the co-operation of the parties, the complexity of the case, and the translation amount, among other things.
MOFCOM has sole discretion to determine whether the notification documents are complete or not. MOFCOM can require the notifying party to provide rounds of supplementary information and documents. When MOFCOM considers that the notification documents are complete, it informs the notifying party of the official start of the review period (see below, MOFCOM's review period). The pre-acceptance period usually takes two to six weeks. Occasionally, it can take two to three months. For example, in the Coca-Cola/Huiyuan case, the Inbev/AB case, and the Mitsubishi Rayon/Lucite case, the notifying parties were repeatedly required to submit supplementary information.
According to the AML, there are one or two phases for MOFCOM's anti-trust review:
Phase 1. MOFCOM must conduct a preliminary review and make a decision on whether to initiate a further review within 30 days from the date of receipt of the complete filing documents. They must inform the applicant of the decision in writing. By the end of the 30-day period, there may be two scenarios:
MOFCOM makes a clearance decision; or
MOFCOM makes a decision to initiate an in-depth review, that is, entering Phase 2.
A transaction may be cleared subject to conditions at the end of the Phase 1, but this is very rare. So far, there is only one conditional case (GM/Delphi) which has been cleared at the end of Phase 1.
If MOFCOM takes no decision at all at the expiry of the 30-day period, the parties can execute the transaction.
Phase 2. If MOFCOM makes a decision to further review the filing, it must complete the review within 90 days from the date of its decision and notify the parties involved in writing.
MOFCOM may extend the 90-day time limit for Phase 2 by written notice, provided that the extension does not exceed 60 days and under any of the following circumstances:
the applicant agrees to extend the time limit for the review;
the documents submitted by the applicant are inaccurate and therefore need further verification;
the relevant status has been significantly changed after notification by the applicant.
At the end of the Phase 2 investigation, MOFCOM will make a decision either to approve the transaction, to approve it subject to restrictive conditions (see Question 8) or to prohibit the transaction. Under the AML, if MOFCOM fails to make a decision at the expiry of the relevant time periods in Phase 2, the transaction is presumed to be cleared and the parties can execute the transaction.
Currently, there is no fast-track mechanism in relation to the merger review process. In April of 2013, MOFCOM published the draft Interim Rules regarding the Standards of Simple Cases of Concentrations of Operators (Draft Standards), to solicit comments from the public. Based on the Draft Standards, MOFCOM will treat the following transactions as "simple cases" which may be subject to a simplified review procedure:
Horizontal mergers where the collective market share of all operators is below 15%.
Vertical mergers where the market share of each operator is below 25%.
Non-horizontal and non-vertical mergers where the market share of each operator in each relevant market is below 25%.
Offshore joint ventures or acquisition transactions where the joint venture or the target does not engage in business in China.
Reduction of the number of the controlling parties.
In addition, the simplified procedure will not apply in the following circumstances (Draft Standards):
A change of control from joint to sole control where there exists a horizontal overlap.
The relevant market is difficult to define.
The transaction may cause any adverse impact on market entry, technology development, consumers, other relevant operators or national economy.
Other circumstances where MOFCOM determines that competition may be adversely affected.
Although it is expected that by publishing the official Standards of Simple Cases, MOFCOM will introduce a fast track merger review regime, the Draft Standards neither provide a fast track review regime nor stipulate any guidance on how MOFCOM will treat the simple cases.
For an overview of the notification process, see flowchart, China: merger notifications (www.practicallaw.com/4-504-5888).
MOFCOM is not required to make public whether a notification has been made or whether it is under review by MOFCOM.
In November 2012, MOFCOM published 458 notifications it had reviewed and cleared from the implementation of the AML on 1 August 2008 to 30 September 2012. The published information includes the names of the transactions and the business operators concerned.
In its recent news release, MOFCOM has also undertaken to publish the non-conditionally approved notifications at quarterly intervals. On 6 January 2013, MOFCOM published the names of the 59 notifications it had reviewed and cleared in the 4th quarter of 2012. On 2 April 2013, MOFCOM published the list of transactions reviewed and unconditionally approved by it in the 1st quarter of 2013.
MOFCOM does not make any public announcements about initiation or completion of a period during its review of a concentration. MOFCOM only makes public announcements under the following two circumstances:
Where it has prohibited a concentration.
Where it has imposed conditions on a concentration.
These public announcements are available on MOFCOM's website (www.english.mofcom.gov.cn). A public announcement generally outlines the timetable of MOFCOM's review process, basic information of the transaction and the parties, definition of the relevant market, MOFCOM's competitive analysis and its final decision. Relatively speaking, MOFCOM's public announcements contain less information and analysis compared to those made by the more sophisticated foreign authorities such as the European Commission.
The AML does not specifically require MOFCOM to keep confidential information obtained from the review. The PRC Administrative License Law generally requires that the implementation of an administrative licence or the results of it should not be disclosed if they concern a state secret.
The notifying party can request that certain information be kept confidential and not be shared with any third parties other than MOFCOM. MOFCOM typically asks the notifying party to prepare a non-confidential version of the notification materials to be used to solicit opinions from other government agencies or other stakeholders in the market (see Question 6, Representations).
During the review process, MOFCOM can seek opinions from stakeholders including the relevant governmental departments, industrial associations, downstream and upstream companies, competitors and consumers.
When seeking opinions, MOFCOM can release the non-confidential version of the filing documents prepared by the notifying party to the stakeholders who are consulted by MOFCOM.
During the review process, MOFCOM can hold hearings on its own initiative or as a response to the request of the relevant parties.
When holding a hearing, MOFCOM can notify the following parties to attend the hearing:
The business operators participating in the concentration.
The parties' competitors and enterprises in the upstream and downstream industries.
Representatives from other relevant enterprises.
MOFCOM can invite, as appropriate, relevant experts and representatives of industrial associations and relevant governmental departments, as well as consumers.
If a hearing participant intends to make a separate statement for the purpose of keeping confidential business secrets, a separate hearing can be arranged.
If concentrations have or may have the effect of eliminating or restricting competition, MOFCOM has the power to prohibit the concentration (AML).
On 27 March 2013, MOFCOM published the draft Rules Regarding Imposition of Restrictive Conditions on Concentrations of Undertakings (Draft Rules on Remedy) for public comments. The Draft Rules on Remedy, once in force (although not confirmed by MOFCOM, this is expected during 2013), will replace the Interim Provisions on the Divestiture of Assets or Business enacted by MOFCOM on 5 July 2010. In accordance with the Draft Rules on Remedy, MOFCOM can impose restrictive conditions including the following:
Structural conditions including partial assets or business divestiture.
Behavioural conditions including granting access to infrastructures such as network or platform, licensing of key technologies (patents, know-how or other intellectual property rights) and termination of exclusive agreements.
Hybrid conditions that combine structural conditions and behavioural conditions.
The notifying party can propose remedies to MOFCOM during the period of merger review. According to the Draft Rules on Remedy, the notifying parties shall propose remedies within a specified period after MOFCOM raises a competition concern or, in some circumstances, before any competition concern may be raised by MOFCOM (for example, a notifying party may propose a remedy to MOFCOM before any concern raised by MOFCOM where the notifying party has already submitted proposal for remedy to regulators in other jurisdictions). The Draft Rules on Remedy also provide that the notifying party must submit the final revisions to the remedies before the last 20 days of the review period.
In practice, the notifying party usually offers remedies to address competition concern raised by MOFCOM. Both MOFCOM and the notifying party can offer suggestions to amend the proposed restrictive conditions. When MOFCOM deems the remedies effective and feasible to reduce the anti-competitive effect of the concentration, it will make the decision of clearance with restrictive conditions.
In practice, the parties can offer conditions at either Phase 1 or Phase 2. Nevertheless, to the present only one case (GM/Delphi) was conditionally approved during Phase 1.
According to the Draft Rules on Remedy, the notifying parties as well as the assigned supervising trustees must provide timely and periodical reports to MOFCOM on the implementation of the remedies. The interval between reports changes on a case-by-case basis. For example, in MOFCOM's decision on the Google/Motorola case, Google must report to MOFCOM every six months and in MOFCOM's decision on Glencore/Xstrata case in April 2013, Glencore was requested to report to MOFCOM annually.
The AML provides no criminal penalties for failing to comply with the merger control rules.
The PRC Administrative Penalty Law provides that no administrative punishment must be imposed for illegal behaviours which are not discovered within two years of its commission, unless otherwise prescribed by law. Since there is no special mention in the AML with regard to the time limit for imposing administrative punishment, the two-year statute of limitations applies.
The Administrative Penalty Law further provides that the two-year period starts running from the date the illegal act is committed, or from the date the illegal act is terminated if it is of a continual or continuous nature. Currently there is no guidance on whether failure to notify is a continuous or continual act. If it is deemed continuous or continual, MOFCOM can take action as long as the violation is discovered within two years after its termination.
If a notifying party is found concealing substantive information or providing false information, MOFCOM will not accept the notification or will cancel the notification if it has been accepted.
Those who refuse to provide relevant materials or information, or provide false materials to MOFCOM, must rectify the violation and pay a fine not exceeding CNY20,000 for individuals or a fine not exceeding CNY200,000 for companies. In more serious cases, a fine ranging from CNY20,000 to CNY100,000 may be imposed on individuals and a fine ranging from CNY200,000 to CNY1 million may be imposed on companies. Where the case constitutes a criminal offence, criminal liability must be pursued under the criminal law. For example, if any individual tries to stop the investigation using a violent method, he may be arrested for the crime of interference with public administration.
If a business operator has implemented the concentration in violation of the provisions of the AML (including implementation without due notification or before approval or after prohibition of the merger), MOFCOM will order the operators to stop the implementation and to reinstate the pre-concentration status by:
Disposing of shares or assets.
Transferring the business within a required period.
Adopting other necessary measures.
In addition, a fine not exceeding CNY500,000 may be imposed on the operator.
The AML and the relevant rules impose no penalties on individuals for the implementations that violate the AML.
Any failure to observe a decision of the regulator is a violation of the AML. Where a business operator fails to perform its obligations in accordance with the imposed restrictive conditions, MOFCOM may order it to rectify the relevant conduct within a specified period. If the operator fails to do so, MOFCOM may penalise the operator by requesting it to reinstate the pre-concentration status and imposing a fine of no more than CNY500,000.
The AML and the relevant rules impose no penalties on individuals for failing to observe a decision.
Persons who disagree with a decision to prohibit, clear or clear with conditions a concentration have the right of appeal. However, they must first apply for an administrative review before complaining to the court. The review authority is MOFCOM and an application for administrative review must be submitted within 60 days after the decision is known by the applicant.
To appeal against the decision of the administrative review, the appellant can choose to file an application for a final award with the State Council or to initiate an administrative lawsuit before a competent court within 15 days of receiving the administrative review decision.
According to the PRC Administrative License Law, an individual or an entity can apply for administrative review against MOFCOM's merger review decision. However, they must first apply for an administrative review before going to court.
Even if a merger is cleared, it does not automatically clear the restrictive provisions in the agreement(s). The restrictive provisions are still subject to regulation as monopoly agreements or abuses of a dominant position (see Questions 13 and 27).
Currently, no industry is specifically regulated except for the financial services and agriculture industry.
The Rules on Turnover Calculation for Notification of Concentration between Business Operators in Financial Industry issued by MOFCOM and other relevant authorities provide the turnover calculation method for business operators involved in financial services and set their notification thresholds as ten times that of operators in other industries.
The co-operative or collaborative acts between agricultural producers and rural economic organisations are not subject to the regulation of the AML.
Restrictive agreements and concerted practices are collectively referred to as monopoly agreements and are regulated under Chapter 2 of the AML. Competing business operators are prohibited from making horizontal agreements having the following effect (Chapter 2, AML):
Dividing the market.
Restricting new technologies and equipment.
In addition, vertical agreements to fix resale prices or to fix the lowest resale price are also expressly prohibited. In February 2013, Kweichow Moutai and Wuliangye, the two most famous Chinese state-owned producers of premium liquor, were penalised by the respective local pricing administration authorities (NDRC’s provincial branches), for resale price maintenance, in an aggregated amount of CNY449 million, which is the largest fine under the AML to date.
The above list is not exhaustive. The AML enforcement agencies have the discretion to identify other horizontal or vertical agreements that constitute prohibited monopoly agreements.
On the face of the relevant provisions, monopoly agreements, either horizontal or vertical, are per se illegal, unless the parties can prove that the relevant agreements fall within the exemptions stipulated under Article 15 of the AML, such as the agreements whose purpose is to improve technologies or upgrade product quality (see Question 15).
In practice, vertical agreements are treated less stringently than horizontal agreements. The enforcement agencies and the courts tend to apply the per se rule to horizontal agreements but adopt the rule of reason when vertical agreements are concerned. For example, in the Ruibang v Johnson & Johnson case adjudicated by the First Intermediate People's Court of Shanghai, the claimant's arguments were rejected on the ground that it failed to prove the anti-competitive effects of the vertical agreement concerned.
The Price Supervision and Anti-Monopoly Bureau of the National Development and Reform Commission (NDRC) is responsible for regulating price-related monopolistic practices (for example, price-fixing). The Anti-Monopoly and Anti-Unfair Competition Enforcement Bureau of the State Administration for Industry and Commerce (SAIC) is responsible for regulating non-price-related monopolistic practices (for example, dividing the market).
In certain circumstances, companies can be subject to criminal liability for breaching anti-trust law. For example, bid-rigging may constitute an offence under the Criminal Code.
Monopoly agreements prohibited by the AML include both formal agreements and other collaborative acts. In addition, decisions made by industrial associations to eliminate or restrict competition also fall under the monopoly agreements (see Question 13).
If a business operator can prove that the relevant agreement is reached for any of the following purposes, it is not subject to the restrictive provisions concerning monopoly agreements:
Enhancing quality, lowering costs, improving efficiency, standardising products and implementing specialisation.
Strengthening the small and medium-sized enterprises.
Being in the public interest.
Alleviating serious sales drop or over-production during the recession.
Protecting legitimate interests in foreign trade and co-operation.
Any other conditions provided by the laws and the State Council.
In addition, to apply for the first five exemption categories, a business operator must also prove that the agreement does not severely restrict competition and that consumers can benefit from the agreement.
Currently, there is no applicable individual or block exemption in China.
No de minimis provisions excluding small agreements or any other exclusions are prescribed by the AML or the relevant rules.
For administrative penalties, if a violation is not discovered within two years of its commission, no punishment can be imposed by anti-trust enforcement agencies. If the violation is of a continual or continuous nature, the two-year period is calculated from the date the violation is terminated.
For civil liabilities, the statute of limitations is two years as of the time when infringement caused by monopoly practices is discovered or should have been discovered.
There is no notification system for restrictive agreements and practices in China.
There are no formal notification procedures. However, consulting with the relevant authorities can be a way to obtain informal guidance.
The regulator can initiate an investigation on its own initiative.
The regulator can initiate an investigation based on a complaint from a third party. A third party must make a written complaint providing the relevant facts and evidence for the regulator (Article 38, AML). Where an investigation is started upon a complaint from a third party, the regulator will keep the identity of the third party confidential.
A regulator will initiate an investigation when a third party makes a complaint in written form with relevant facts and evidence (see Question 18). According to the SAIC's rules, a written complaint must include the following information:
Basic information about the complainant (not applicable for anonymous complaints).
Basic information about the party against whom the complaint is made.
Relevant facts of the suspected monopolistic practices.
Whether the third party has made any complaints to other authorities or filed any proceedings to the court on the same facts.
During the investigation, a complainant or other third party can submit responses on the regulator's request.
The AML or the relevant rules do not grant rights to a third party to get access to the documents relating to the investigation.
According to the relevant rules of SAIC, if a hearing is held for the administrative penalties to be imposed as the result of an investigation, the complainant can attend it as a witness or an interested third party.
Currently, NDRC or SAIC provide no clear regulations concerning the stages and timetable of the investigation.
Under the AML and relevant rules, the publicity concerning investigations into potentially monopolistic practices including restrictive agreements or practices is quite limited. To date NDRC and SAIC have disclosed a very limited amount of cases that they investigate and/or decide on. However, the two agencies have vowed to increase transparency of their enforcement actions. Recently they published information of their activities on various occasions, including, for example, the total number of cases, types of cases, industries involved, and detailed information of certain cases.
The regulator must keep the identity of a complainant confidential (see Question 18, Third parties). The business secrets that become known to the investigators during the investigation must also be automatically kept confidential by the regulator.
There are no provisions in the AML and the relevant rules stipulating that the parties can request for certain information to be kept confidential. However, the relevant parties may still file a request if that is justified. The NDRC and SAIC have discretion in this respect.
The relevant regulator can adopt the following measures to investigate potentially restrictive agreements or practices of a business operator:
Entering the business premises of the business operators who are under investigation or any other relevant place to investigate.
Making enquiries of the business operators, interested parties, or other relevant entities or individuals.
Inspecting and duplicating the relevant business documents, agreements, accounting books, business correspondences, electronic data, files, or documentations of the business operators, interested parties, or other relevant entities or individuals.
Seizing and detaining the relevant evidence.
Enquiring into the bank account of the business operator.
Before the above measures are adopted, a written report must be submitted to the principal of the relevant enforcement agency for approval.
During the investigation, the business operator under investigation can undertake to remove the anti-competitive effects of the suspected monopolistic practice within an approved period. The regulator may decide whether to accept the undertaking and suspend the investigation. During the suspension of the investigation, the regulator will supervise the performance of the undertaking and will have the right to resume the investigation if:
The operator fails to perform its undertaking.
There are significant changes to the facts on which the suspension decision was made.
The suspension decision was made on the basis of incomplete or inaccurate information submitted by the business operator.
Where the regulator considers that the business operator has fulfilled its undertaking, the regulator may decide to terminate the investigation.
Where an operator is found entering into and implementing a monopoly agreement, the AML enforcement agency must issue an order to stop the implementation of the agreement.
The AML and the relevant rules provide no criminal sanctions for entering into a monopoly agreement, and thus no orders will be made in the context of criminal prosecution.
The AML enforcement agency can confiscate the illegal gains and impose a fine ranging from 1% to 10% of the turnover of the preceding year on the business operator which has entered into and implemented a monopoly agreement.
For those who have not implemented the monopoly agreement, a fine of not more than CNY500,000 can be imposed.
Currently, there is no guidance on whether the turnover of the preceding year is for all of the operator's businesses or for the business related to the monopoly agreement. Nor is there any guidance on whether the turnover is for the operator's global business or business in China.
The AML and the relevant rules provide no criminal sanctions for entering into a monopoly agreement, and thus no fines will be imposed in the context of criminal prosecution.
The AML and relevant rules do not impose liability of any kind on individuals such as the employees of a business operator that enters into and implements a monopoly agreement.
Article 46 of the AML provides the general rules of leniency programme, stipulating that the regulatory authority may, at its discretion, reduce or waive the sanctions on a business operator if the operator has voluntarily reported the relevant facts of entering into a monopoly agreement and provided important evidence to the regulatory authority.
The restrictive provisions in a monopoly agreement (not the entire agreement) are void.
Third parties can claim damages for losses caused by a monopoly agreement by filing a civil action.
The Supreme People's Court's judicial interpretation of 1 June 2012 sets out some special procedures for the AML civil actions, including the following:
The competent courts for the AML civil actions are limited to the:
intermediate people's courts of provincial capital cities;
intermediate people's courts designated by the Supreme People's Court; and
certain basic people's courts upon approval of the Supreme People's Court.
The claimant can directly bring an action before a competent court, or bring a follow-on action after the decision of the AML enforcement agencies affirming the existence of a monopolistic conduct.
A party can apply to the court to employ a professional institution or professionals to produce market investigation or economic analysis reports on special issues of the case.
For certain hard-core monopoly agreements, the defendant will assume the burden of proving that the agreement does not have the effect of excluding or restricting competition.
There is no class action system under China's litigation regime. But multiple claimants can file joint actions under the Civil Procedures Law of China.
Persons who disagree with a decision of the regulator on monopoly agreements or abuse of dominance can choose to apply for an administrative review to a higher-level competent authority or directly file an action before a competent court. An application for administrative review must be submitted within 60 days as of the date when the decision is known to the applicant. To appeal against the decision of the administrative review, the appellant can choose to file an application for a final award with the State Council or to initiate an administrative lawsuit before a competent people's court within 15 days of receiving the administrative review decision.
Otherwise, the appellant can directly bring an action to the court without first applying for administrative review within three months from the date of receiving a decision from the regulator.
A third party can apply for an administrative review under the Administrative Review Law of China if it considers that its rights and interests are affected by the decision of an anti-trust enforcement agency.
Abuses of a dominant position (or abuses of market power) are regulated by Chapter 3 of the AML. It is not regulated under the criminal law of China.
Under the AML regime, the NDRC is responsible for price-related abuses, and the SAIC is responsible for non-price-related abuses (see Question 13).
A dominant position is defined as the ability of a business operator to control prices, quantities or any other terms of transactions in the relevant market, or the ability of an operator to obstruct and affect the entrance of the relevant market. In determining the existence of dominant position, the following must be considered:
The market share of the business operator and the competition condition in the relevant market.
The ability to control the market, product or raw material.
The financial and technological strength of the operator.
The reliance by other operators on the operator.
The difficulty of market entrance.
Other related factors.
A single or combined dominant position can be presumed (as any of the following) unless proved otherwise (Article 19, AML)):
A business operator holds 50% of the market share.
Two operators hold an aggregate of two-thirds of the market share.
Three operators hold an aggregate of three-quarters of the market share.
A business operator with a dominant position must not abuse its position in the following manner (Article 17, AML):
Setting unfairly high prices or unfairly low prices.
Setting below-cost prices without a valid reason.
Refusing to transact without a valid reason.
Exclusive dealing without a valid reason.
Tying and bundling without a valid reason or imposing any other unreasonable contractual terms.
Applying discriminatory prices or other transaction terms to trading parties with equal standing without a valid reason.
Committing any other abuses as defined by the AML enforcement agency of the State Council.
The co-operative or collaborative acts between agricultural producers and rural economic organisations are not subject to the regulation of the AML (see Question 15).
There is no notification system available under the AML. Consulting with the relevant authorities can be a way to obtain informal guidance.
There is no procedural difference between investigations into abuses of market power and investigations into monopoly agreements. See Questions 18 to 21 and Question 23 for information about the procedures.
The regulator's powers of investigation of abuse of dominance are the same as those for monopoly agreements and practices (see Question 22).
A business operator found abusing its dominant position can face the following sanctions:
Be ordered to stop the illegal act.
Have their illegal gains confiscated.
Have a fine imposed amounting to 1% to 10% of its turnover in the preceding fiscal year.
The AML and the relevant rules provide no criminal sanctions for abuse of market power.
Third parties can claim damages for losses due to a business operator's abuse of dominance by filing civil actions.
In addition to the special rules listed under Question 25, the Supreme People's Court's judicial interpretation sets out specific rules for civil actions arising from abuse of dominance, including the following:
The claimant must prove that the defendant has a dominant position in the relevant market and has abused its dominant market position, whereas the defendant has the burden to establish a defence or justification of its conduct.
Where the alleged monopolistic conduct is an abuse of a dominant market position by a public utility or any other business operator that has a dominant position under law, the people's court may, in light of the market structure and the specific circumstances of competition, determine that the defendant has a dominant position in the relevant market, unless such a determination can be overturned by evidence to the contrary.
A claimant may use information externally released by a defendant as evidence that the defendant has a dominant market position. Where the information externally released by the defendant is sufficient to prove that the defendant has a dominant market position in the relevant market, the people's court may make a determination on this basis, unless such a determination can be overturned by evidence to the contrary.
There is no class action system in China. But multiple claimants can file joint actions under the Civil Procedures Law of China.
The AML and relevant rules do not provide any guidelines on the issues concerning joint ventures. However, in practice, the AML enforcement agencies took a similar point of view with the competition authorities in other major jurisdictions that a joint venture may be reviewed either as a concentration of operators or as a restrictive agreement.
MOFCOM anticipates receiving notifications in relation to joint ventures as, under Article 4 of the Guidance on the Documentation of the Notification of Concentration of Business Operators, the establishment of joint ventures is listed as being a type of transaction which could be notifiable under the merger control rules (see Question 2, Triggering events). In practice, the establishment of a joint venture (where the parties to the joint venture meet the turnover thresholds; see Question 2, Thresholds) is considered as a notifiable transaction. Changes of control in relation to already existing joint ventures are also considered notifiable transactions.
The three Chinese AML enforcement agencies, that is, MOFCOM, NDRC and SAIC, have signed memoranda of understanding (MoU) with their counterparts in various foreign jurisdictions.
In July 2011, the three authorities signed an MoU with the United States Federal Trade Commission and Department of Justice, laying out the framework for long-term co-operation between anti-trust agencies on both sides.
In September 2012, the NDRC and SAIC and the Directorate General for Competition of the European Commission signed an MoU to enhance the co-operation and co-ordination on anti-trust matters between the EU and China.
In addition, the NDRC has separately entered into MoUs with the UK Office of Fair Trading (OFT) and the Korea Fair Trade Commission (KFTC). The SAIC has signed MoUs with the OFT, KFTC, the Russia competition authority, Australian Competition and Consumer Commission, and the Brazilian Counsel for Economic Defence.
Noticeably, in some of the MoUs, such as the ones with the US and the EU, the signatories agree to exchange information and/or directly co-ordinate their enforcement activities.
There are otherwise no proposals for reform of the AML or any of the relevant rules at this stage..
Description. This is the official website of the Central People's Government of the PRC, where the official Chinese version of applicable legislation can be found (for example, the AML and the PRC Administrative Penalty Law).
Description. The official website of the Anti-Monopoly Bureau of MOFCOM, where one can find the official Chinese version of the Rules on Turnover Calculation for Notification of Concentration between Business Operators in Financial Industry, among other things.
Description. This is the official website of the Supreme People's Court of the PRC, where one can find the official Chinese version of the Judicial Interpretation.
Head. Mr Shang Ming
Contact details. No. 2 Dong Changan Street
T +86 10 8509 3146
F +86 10 8509 3144
W http://fldj.mofcom.gov.cn (www.practicallaw.com/1-517-6041)
Outline structure. It comprises six divisions, namely the:
General Affairs Division.
Competition Policy Division.
Supervision and Law Enforcement Division.
Legal Analysis Division.
Economic Analysis Division.
Among these, the Legal Analysis Division and Economic Analysis Division are the two major divisions handling the notification of concentrations.
Responsibilities. The Anti-Monopoly Bureau is responsible for merger control under China's Anti-Monopoly Law.
Procedure for obtaining documents. The notification form is available on the website of the Anti-Monopoly Bureau.
Head. Mr Xu Kunlin
Contact details. 38.S. Yuetan Street
T +86 10 6850 1554
Outline structure. It comprises nine divisions, namely the:
General Affairs Division.
Legislative Affairs Division.
Supervision and Guidance Division.
Price Inspection Division.
Market Prices Supervision Division.
First Division of Anti-Price Monopoly Investigation.
Second Division of Anti-Price Monopoly Investigation.
Competition Policy and International Co-operation Division.
Among these, the First and Second Divisions of Anti-Price Monopoly Investigation, and Competition Policy and International Co-operation Division are three divisions engaged in the price-related AML enforcement.
Responsibilities. The NDRC is responsible for:
Drafting laws and regulations of price supervision and inspection.
Guiding and organising price supervision and inspection.
Handling activities and cases involving violation of price-related laws.
Handling price monopoly activities and reconsideration cases and appeals concerning the punishment of price violations.
Procedure for obtaining documents. Not applicable.
Head. Mr Ning Wanglu
Outline structure. It comprises five divisions, namely the:
General Affairs Division.
Anti-Monopoly Enforcement Division.
Anti-Monopoly Law Guidance Division.
Anti-unfair Competition Division.
Supervision and Co-ordination Division.
Among these, the Anti-Monopoly Enforcement Division and Anti-Monopoly Law Guidance Division are the divisions responsible for enforcing the AML.
Responsibilities. The SAIC is the regulatory authority in charge of enforcement against monopoly agreements, abuses of dominant position as well as abuses of administrative power (except price-related monopoly practices). Moreover, it is also responsible for drafting specific measures on anti-monopoly and anti-unfair competition and undertaking enforcement actions of anti-unfair competition cases.
Procedure for obtaining documents. Not applicable.
King & Wood Mallesons
Professional qualifications. China, 2004; New York, US, 2012
Areas of practice. Anti-trust and competition; intellectual property.
Languages. Mandarin, Cantonese, English
King & Wood Mallesons
Professional qualifications. China
Areas of practice. Anti-trust; competition.
Languages. Mandarin, English
King & Wood Mallesons
Areas of practice. Anti-trust; competition.
Non-professional qualifications. BA in Economics, Renmin University.
Languages. Mandarin, English