The Standing Committee of the National People’s Congress (NPCSC) of the People’s…
On June 24, 2022, the Standing Committee of the National People's Congress published the final version of the "Antimonopoly Law of the People's Republic of China" ("Antimonopoly Law") (中华人民共和国反垄断法), which will become effective on 1 August 2022. The amendment works, which began in 2017, makes substantial changes to the 2008 Antimonopoly Law, which was, until now, never amended.
Concurrently with the publication of the law, the State Administration for Market Regulation ("SAMR"), published draft updates to six provisions to bring them in line with the new Antimonopoly Law, specifically:
Preamble
Articles 4 and 5 of the Antimonopoly Law have been amended to clarify that antitrust work will have to be carried out under CCP leadership but that, on the other hand, it must be market-oriented and based on the rule of law.
Data as tool for restricting or eliminating competition
Abuse of data, algorithms, technologies, and regulations by market-dominant parties may constitute monopolistic behavior under the new Articles 7 and 22 of the Antimonopoly Law, which give specific relevance to such tools because of their potential to create an excessive competitive advantage and alter the balance of the market.
Safe-harbor provision for monopoly agreements that fall below a certain threshold
Article 18 of the Antimonopoly Law originally provided that any kind of monopoly agreement was considered per se illegal, by describing the different type of agreements prohibited by the law. The reformed Article 18 provides that these agreements will be allowed if the economic operator proves that the agreement does not have an eliminatory or restrictive effect on competition. Even though the burden of proof of the economic operator is particularly complex, and it will be necessary to observe its practical application, the new provision represents an important opening by the Chinese legislator. In addition, a minimum market share threshold is introduced, determined by the SAMR Antimonopoly Bureau, below which these agreements are permitted.
Prohibition of hub-and-spoke cartels
The new Article 19 of the Antimonopoly Law expressly prohibits organizing other undertakings to reach a monopoly agreement or provide them with substantive assistance for reaching a monopoly agreement.
This provision directly affects hub-and-spoke cartels, in which the supplier facilitates coordination among distributors, without the distributors directly entering contracts among each other, altering the normal competitive balance. The new provision introduces liability for those entities (hubs) that carry out these facilitating behaviors, raising the level of attention on sharing relevant information among the various distributors (spokes) to avoid coordination of their policies.
Possibility of control by the Antimonopoly Bureau on subthreshold mergers
A merger between firms that does not exceed the market share above which the competent authorities must be notified may nevertheless have a restrictive or eliminatory effect on competition. On the one hand, the merger may be aimed at directly eliminating competition by removing a potential competitor from the market ("acquisition killer"); on the other hand, the merger may involve the acquisition of strategic technologies that provide a strong competitive advantage.
For these reasons, Article 26 requires economic operators to notify the Antimonopoly Bureau of any transaction that may have the effect of restricting or eliminating competition in the market, even if it is below the threshold determined by the Antimonopoly Bureau and, if the economic operator fails to notify such a transaction, investigative powers are granted to the Antimonopoly Bureau.
Introduction of a "stop-the-clock" mechanism
A stop-the-clock mechanism is introduced for the first time in Chinese antitrust law, which allows the authority to stop the clock on the 90 days’ time limit within which it must review the documents provided and rule on the admissibility of the merger in cases, where: a) the notifying party fails to provide the requested materials, b) when it is necessary to ascertain new situations or facts, c) when it is necessary to assess further evaluation of the remedy proposal and the economic operator submits a request for suspension.
At the same time, the structure of the antimonopoly office has been reformed and staffing increased to enable more timely and effective control.[7]
Violation of public interest as a prerequisite for legal action
Although the Antimonopoly Law never provided a mechanism for private parties to initiate legal proceedings - such as a class action – this possibility is introduced for public prosecutors against a company that engages in monopolistic practices that violate the "public interest."
Tightening of sanctions
Existing penalties were tightened, and individual penalties were introduced for the first time.
Anti-competitive agreements
Article 56 of the new Antimonopoly Law now provides for a fine of 1 percent up to 10 percent of the previous year's turnover or, in its absence, up to RMB 5,000,000.00 (EUR 724,511.68 approx.[8]) in addition to confiscation of the illegal proceeds.
Individual penalties have been introduced against managing directors, representatives, directors, and project supervisors who participated in the monopolistic agreement of up to RMB 1,000,000.00 (EUR 144,902.34 approx.).
In the case of gun-jumping, the liability that varies in consideration of the effects derived from the transaction. In the case of anticompetitive effects, there is provision for the cancellation of the transaction, restoration of the pre-merger status, and a fine of up to 10 percent of the previous year's turnover; if, otherwise, no anticompetitive effects are derived from the transaction, the penalty is a fine of up to RMB 5,000,000.00 (EUR 724,511.68 approx.).
Abuse of dominant position
The new text of Article 57 provides for a fine between 1 percent and 10 percent of the previous year's turnover and confiscation of the illegal gain.
Failure to cooperate in examinations and investigations
There are fines of up to RMB 500,000 (EUR 72. 451.17 approx.) for individuals, and fines of up to 1% of the previous year's turnover for the company or, in its absence, a penalty of up to RMB 5,000,000 (EUR 724,511.68 approx.).
The content of this article is for information purposes only and is not, and cannot be intended as, professional advice on the matters dealt with. For further information, please contact Hermes Pazzaglini.
[1] 关禁止滥用知识产权排除、限制竞争行为规定（征求意见稿）
[4] 国务院关于经营者集中申报标准的规定（修订草案征求意见稿）
[6] 制止滥用行政权力排除、限制竞争行为规定 （征求意见稿）
[7] The Antimonopoly Bureau was divided into three departments: 1) department for coordination of competition policy implementation 2) department for supervision of anticompetitive agreements and abuse of market dominance, and 3) department for merger control and gun-jumping investigation. In addition, the bureau's divisions have increased from 11 to 19.
[8] Exchange rate of 1 EUR = 6.9 RMB as of July 19, 2022
