On June 14, 2016, the State Council promulgated its Opinions on Establishing A Fair Competition Review System in the Development of Market-oriented Systems (hereinafter, the “Opinions”), which may be said to show how antitrust is beginning to extend from rules on a companyÕs behavior to rules on government policy. The Opinions focus on the regulation of abstract administrative conduct by the government through prevention of laws that eliminate or restrict competition when setting policies regarding market behavior so as to establish a fair competition review system in market-oriented systems.
The Opinions first describes the importance and urgency in establishing a fair competition review system and confirms basic principles such as respecting the market and optimizing competition. More importantly, the criteria for the review system are now clearly defined. In view of actual circumstances where it is difficult to successfully implement at the same time a fair competition review system and an examination of past policy documents in one step, the Opinions stipulate a staggered implementation for the review system, in which the current system would be finished as soon as possible under the principle of holding the entity putting forth the policy to be responsible for it. Finally, to ensure the implementation of the system, the anti-monopoly agencies are now empowered under the Opinions with an enforcement and supervisory right to investigate and verify policy measures which allegedly violate the Anti-monopoly Law of the People’s Republic of China. The application scope, manners and examination criteria of the fair competition review system are summarized as follows:
1. Application scope of the examination system
The Opinions specify that the scope of the fair competition review system not only covers administrative regulations and rules, regulatory documents and specific internal policy measures – draft administrative laws and regulations, State Council policies and local laws and regulations are now also subject to fair competition review.
2. Establishment of “self-review” mechanisms for agencies
Pursuant to the Opinions, a policy-making agency is required to conduct self-reviews to ensure strict compliance with the review criteria in the policy-making process, and a policy which has not gone through such review may not be promulgated. Policies that are not found in a review to effectively exclude or restrict competition may be implemented, while policies that are found to effectively exclude or restrict competition should either be amended prior to promulgation or not promulgated altogether. Meanwhile, an important part of the review system would be considering the opinions of interested parties or soliciting opinions from the general public.
3. Clear examination criteria
The examination criteria in the Opinions is built on four aspects, namely, “market entry and exit”, “freedom of movement for products and elements”, “impact to production and operational costs”, and “impact to production and operational conduct”. There are also miscellaneous provisions designed to catch policies that does not fit the criteria above but still undermine the lawful rights and interests of market players or otherwise increase their obligations, or are in violation of the Anti-monopoly Law.
In particular, for market entry and exit, the focus of this criteria is the prohibition on adding restrictive measures to market entry or exit that is not based on current law, which means the policymaking agency cannot impose unreasonable conditions or implement reviews or preliminary approval processes that have no basis in law or regulations. In addition, with respect to the free flow of goods and elements, the focus is on prohibiting regional restrictions or exclusions that are intended to protect certain businesses or products. For the impact to production and operational costs, the main requirement is that policies should not illegally grant privileges to businesses or provide illegal tax breaks, exemption from social insurance premiums or even require the business to pay certain deposits or other items that involve money and profits. For impact to production and operational conduct, policies may not leverage administrative authority to require businesses to engage in unlawful monopoly behavior, interfere with market prices or set illegal government prices. In addition, the Opinions also provide for exceptional circumstances where policy measures may have an effect of restricting or eliminating competition if there are national security, defense, poverty alleviation, disaster relief, or energy conservation objectives behind such a policy.