August 2022
Jolene Chen and Teresa Huang
On June 24, 2022, the Standing Committee of the National People’s Congress adopted the Decision of the Standing Committee of the National People’s Congress to Amend the Anti-Monopoly Law of the People’s Republic of China (the Anti-Monopoly Law so amended is hereinafter referred to as the “Amended Anti-Monopoly Law”), which is the first amendment to the Anti-Monopoly Law since its implementation in 2008 and comes into effect since August 1, 2022. Although the Amended Anti-Monopoly Law is only revised by way of amendment, it has many highlights that will have a great impact on the anti-monopoly practice, which will be briefly introduced in this article.
Interpretation of the amendment to Chapter II “Monopoly Agreement”:
Firstly, Article 16 of the Amended Anti-Monopoly Law separates the definition of monopoly agreement from the provisions of monopoly agreements between competing parties horizontally, so that the question of whether vertical agreements are illegal per se, which was a major controversy in practice, has a clear answer, i.e., a vertical agreement will be a monopoly agreement if it meets the constitutive element of having the effect of eliminating or restricting competition.
Secondly, Article 18 of the Amended Anti-Monopoly Law provides for the safe harbor rule for vertical agreements, i.e., the Amended Anti-Monopoly Law does not prohibit vertical agreements that can be proven not to have the effect of eliminating or restricting competition. This is a clear provision that is equally applicable in vertical monopoly agreements following the Provisions of the Supreme People’s Court on Several Issues concerning the Application of Law in the Trial of Civil Dispute Cases Arising from Monopolistic Conduct, which stipulates that a party to a horizontal monopoly agreement who has been sued for monopoly conduct shall bear the burden of proving that the agreement concerned does not have the effect of eliminating or restricting competition.
Thirdly, Article 19 of the Amended Anti-Monopoly Law adds a new type of violation of organizing other business operators to enter into a monopoly agreement or providing substantial assistance to other business operators to enter into a monopoly agreement, which will be equally applicable to the penalties relating to monopoly agreements according to Article 56 of the Amended Anti-Monopoly Law.
Interpretation of the amendment to Chapter IV “Concentration of Business Operators”:
Firstly, Article 26 of the Amended Anti-Monopoly Law adds the provision that where a concentration of business operators does not reach the threshold of declaration, but is shown by evidence to have the effect of actually or potentially eliminating or restricting competition, the anti-monopoly law enforcement agency may require the business operators to make declaration, and the anti-monopoly law enforcement agency may make an investigation only when any such business operator fails to make a declaration. This amendment can effectively reduce the number of cases actively investigated by the anti-monopoly law enforcement agency.
Secondly, Article 32 of the Amended Anti-Monopoly Law adds a new system of suspending the time limit of examination, i.e., in the three listed circumstances (e.g., the emergence of new circumstances or facts that have a significant impact on the examination of the concentration of business operators and would make the examination impossible without verification), the anti-monopoly law enforcement agency may decide to suspend the calculation of the time limit of examination and continue to calculate the time limit of examination after the relevant circumstances have been eliminated. This system will improve the original practice that the anti-monopoly law enforcement agency could not complete the complex case within the specified time limit, and then require the filing unit to make a new declaration, making the system more reasonable in design.
Interpretation of the amendment to Chapter V “Abuse of Administrative Power to Eliminate or Restrict Competition”:
Firstly, Article 40 of the Amended Anti-Monopoly Law adds a new type of administrative monopoly, i.e., no administrative organ or organization empowered by a law or administrative regulation to administer public affairs may abuse its administrative power to prevent other business operators from entering the relevant market or impose unequal treatment on other business operators to eliminate or restrict competition by entering into cooperation agreements or memoranda with certain business operators.
Secondly, Articles 42, 43 and 44 of the Amended Anti-Monopoly Law expand the scope of administrative monopoly conducts, such as extending the rejecting or restricting the participation of business operators in tendering and bidding activities to other business activities other than bidding and tendering activities, adding the circumstances of compelling non-local business operators to invest or set up branches in the local area or doing so in disguised form, and adding the compelling in disguised form business operators to engage in monopolistic activities that are prohibited by the Amended Anti-Monopoly Law.
Interpretation of the amendment to Chapter VI “Investigation of Suspicious Monopolistic Conducts”:
Articles 54 and 55 of the Amended Anti-Monopoly Law also add provisions on the investigation measures of the anti-monopoly law enforcement agency on monopoly conducts. For example, for any suspected abuse of administrative power to eliminate or restrict competition, the relevant entity or individuals shall cooperate with the investigation. For example, for any business operator suspected of engaging in the monopolistic activities that are prohibited by the Amended Anti-Monopoly Law, the anti-monopoly law enforcement agency may interview the legal representative or person in charge of the business operator and require him/her to propose improvement measures.
Interpretation of the amendment to Chapter VII “Legal Liability” of the Amended Anti-Monopoly Law:
Firstly, the Amended Anti-Monopoly Law significantly increases the penalty for illegal monopoly agreements and provides for a dual-penalty system. According to Article 56 of the Amended Anti-Monopoly Law, where the business operator concerned made no sales revenue in the previous year, a fine of less than RMB five million shall be imposed, and where the reached monopoly agreement has not been fulfilled, a fine of less than RMB three million may be imposed. For the business operator’s legal representative, principal person in charge and directly responsible persons who are personally responsible for reaching a monopoly agreement, a fine of less than RMB one million may be imposed. The increase of the penalties will change the status quo of the low cost of anti-monopoly violations and effectively improve the deterrent effect of the Amended Anti-Monopoly Law.
Secondly, Article 56 of the Amended Anti-Monopoly Law also adjusts the penalty for any trade association which organizes business operators to reach a monopoly agreement in violation of the Anti-Monopoly Law, i.e., the anti-monopoly law enforcement agency shall order it to make rectification and may impose a fine of less than RMB three million.
Thirdly, Article 58 of the Amended Anti-Monopoly Law amends the previous provision of “may impose a fine of less than RMB five hundred thousand” to “shall impose a fine of less than 10% of the sales revenue made in the previous year; where the concentration of business operators does not have the effect of eliminating or restricting competition, a fine of less than RMB five million shall be imposed.” The Amended Anti-Monopoly Law has significantly increased the penalties.
Fourthly, for the business operators that carry out the monopolistic conducts and cause damages to others, Article 60 of the Amended Anti-Monopoly Law adds the provision that a people’s procuratorate at or above the municipal level may institute a civil public interest litigation against monopolistic conducts that harms the public interest in accordance with law. The intervention of public power will help improve the current situation of the plaintiff’s insufficient ability to present evidence in monopoly disputes.
Fifthly, for business operators refusing or obstructing the investigation of the anti-monopoly law enforcement agency, Article 62 of the Amended Anti-monopoly Law also significantly increases the penalty, to impose the unit a fine of less than 1% of the sales revenue made in the previous year, or a fine of less than RMB five million if no sales revenue was made in the previous year or the sales revenue is difficult to calculate; and impose the individuals a fine of less than RMB five hundred thousand.
Sixthly, the Amended Anti-Monopoly Law also adds the provisions on punitive penalties. According to Article 63 of the Amended Anti-Monopoly Law, for any violation of the Amended Anti-Monopoly Law, if the circumstances are especially serious, the influence is very bad, or the consequences are especially serious, the Anti-Monopoly Law Enforcement Agency under the State Council may determine the specific fine of not less than two times but not more than five times the amount of the prescribed fine.
Seventhly, the Amended Anti-Monopoly Law also separately adds a credit punishment system and a criminal offence connection system. According to Article 64 of the Amended Anti-Monopoly Law, business operators who are subject to administrative penalties for violating the Amended Anti-Monopoly Law shall be recorded in the credit records and made public in accordance with the relevant provisions of the State. According to Article 67 of the Amended Anti-Monopoly Law, if the violation constitutes a crime, criminal liability shall be investigated in accordance with the law.
As this amendment has significantly increased the penalties of the Amended Anti-Monopoly Law, whether for the business operators engaging in, the legal persons in charge of or the individuals directly responsible for the illegal conducts, enterprises should consult with legal professionals early if they may be involved in the conducts regulated by the Amended Anti-Monopoly Law in their daily operation so as to comprehensively comply with the relevant requirements of the law.
(The authors’ opinions do not represent the position of this law firm.)