China Competition law
After 13 years in the making, China’s Anti-Monopoly Law (AML) came into effect on 1 August 2008 and provides a comprehensive framework for regulating market competition in the PRC. It has since been supplemented by a number of implementing rules and guidelines. The Anti-Monopoly Law prohibits three types of monopolistic conduct, namely:
- “monopoly agreements” (i.e. anti-competitive agreements) made between business operators;
- abuse of a dominant market position; and
- concentrations of business operators (i.e. mergers and acquisitions) that may have the effect of eliminating or restricting competition.
In addition, Chapter V of the Anti-Monopoly Law prohibits the abuse of administrative powers to restrict competition – a highly controversial subject during drafting of the Anti-Monopoly Law. On February 1, 2011, five sets of implementing rules (New Rules) issued by the National Development & Reform Commission (NDRC) and the State Administration for Industry and Commerce (SAIC) came into effect.
The rules issued by the NDRC (NDRC Rules) are:
- the Rules on Anti-Pricing Monopoly; and
- the Rules on the Administrative Procedures of Anti-Pricing Monopoly.
The rules issued by the SAIC (SAIC Rules) are:
- the Rules on Prohibiting Monopoly Agreements;
- the Rules on Prohibiting the Abuse of Dominant Market Positions; and
- the Rules on the Abuse of Administrative Authority to Exclude or Restrict Competition.
In accordance with the division of jurisdiction between the NDRC and SAIC under the Anti-Monopoly Law, the NDRC Rules deal only with price-related infringements of the Anti-Monopoly Law and the SAIC Rules deal with non price-related infringements. The Five New Rules provide further clarification as to the types of anti-competitive agreements and abuse of dominant market position prohibited under the Anti-Monopoly Law. It was widely anticipated that the new rules would give rise to more widespread and rigorous enforcement of the Anti-Monopoly Law. It is worth noting, that prior to the introduction of the new rules, the majority of enforcement actions by the NDRC against price cartels were brought under the Price Law, rather than the Anti-Monopoly Law. It is thought that this was due, at least in part, to the lack of NDRC rules and procedures on implementation of the Anti-Monopoly Law.
Anti-monopoly review process
In the event of certain foreign acquisition of PRC enterprises or businesses which leads to a business concentration, a pre-merger notification would need to be submitted to the Ministry of Commerce (“MOFCOM”) for approval. Under the Anti-Monopoly Law of the PRC, such notification would be required if the concentration triggers any of the following thresholds:
- combined worldwide turnover of all business operators exceeds RMB10 billion in the immediate preceding fiscal year and the domestic turnover of each of at least two business operators in the immediate preceding fiscal year is more than RMB400 million
- combined domestic turnover of all business operators in the immediate preceding fiscal year is more than RMB2 billion and the domestic turnover of each of at least two of business operators in the immediate preceding fiscal year is more than RMB400 million
The approval process would be dealt with by the anti-monopoly department of MOFCOM which will, upon receipt of an application, make preliminary assessment and to decide (within 30 days upon formal acknowledgement of receipt of the application) whether a further review would need to be initiated. If a further review is required, then such review would need to be completed within 90 days, unless extended for an additional review of 60 days. MOFCOM does not set out “bright-line” guidance as to when it would grant anti-monopoly law approval or reject an application. It is generally perceived that MOFCOM would have an interest in protecting domestic enterprises and decisions may likely taken into account domestic political factors and industrial policy (in particular, the effect on concentration on national economic development). Statistically, out of 900 transactions which MOFCOM has reviewed as at May 2014, only 24 resulted in a prohibition or imposition of conditions.