29.07.10 13:35 Age: 14 yrs
New provisions on price control
This year, there has been an increase in the number of abnormal fluctuations in market prices, seriously disrupting the market order. This can be attributed to the fact that certain operators are increasingly fabricating and spreading price information, which in turn drives up prices and thus increases their profits. To further improve the legal system of monitoring the market price during times of abnormal market price fluctuation, any observations of unlawful behavior should be followed through with severe punishment. The National Development and Regulatory Commission has made strides to address this issue and on 13th July 2010 issued Special Regulations on penalties for unlawful practices committed during periods of abnormal market price fluctuations. The Regulatory Commission is seeking feedback on their new regulations, for which the deadline to submit comments is 13th August 2010.
The main contents of the regulations are as follows:
•Increasing punishments on pricing irregularities
Article 3: If a business operator fabricates and disseminates information of pricing increases, disturbing the order of market prices, such business operator will be ordered to make a rectification, face confiscation of unlawful gains, and be subject to a fine of less than five times the unlawful gains; the business operator who obtains no unlawful gains will be subject to a fine between RMB 200,000 and RMB 2 million; in a serious case, the business operator will be ordered to cease its business operation or face a suspension of its business license by the administrative authority of industry and commerce according to law.
Article 4: When a commodity is in short supply and has an abnormal price fluctuation, if a business operator speculates on this commodity by: purchasing more and selling less; purchasing only and not selling it; or hoarding such commodity and refusing to sell, such business operator will be ordered to make a rectification, face confiscation of unlawful gains and be subject to a fine of less than five times the unlawful gains; the business operator who obtains no unlawful gains will be subject to a fine between RMB 200,000 and RMB 2 million; in a serious case, the business operator will be ordered to cease its business operation or face suspension of its business license by the administrative authority of industry and commerce according to law.
Article 5: If the difference between the production cost and selling price or the difference between purchasing price and selling price is twice as much as in a normal period, such business operator will be ordered to make a rectification, face confiscation of unlawful gains and be subject to a fine of less than five times the unlawful gains; the business operator who obtains no unlawful gains will be subject to a fine between RMB 200,000 and RMB 2 million; in a serious case, the business operator will be ordered to cease its business operation or face suspension of its business license by the administrative authority of industry and commerce according to law.
Article 6: If two or more business operators collude by such means as an agreement, resolution or collaboration in manipulating the market price, thus harming the legitimate rights and interests of other business operators or consumers, such business operators will be ordered to make a rectification, face confiscation of unlawful gains and be subject to a fine of less than five times the unlawful gains; the business operator who obtains no unlawful gains will be subject to a fine between RMB 200,000 and RMB 2 million; in a serious case, the business operator will be ordered to cease its business operation or face suspension of its business license by the administrative authority of industry and commerce according to law.
If an industrial association or another unit organizes business operators to collude in manipulating the market price, such industrial association or other unit may face a fine of less than RMB 500,000; in a serious case, they will face suspension of their permits and business license or cancellation of registration by the relevant authority according to law.”
According to Lily Han, attorney of Lehman, Lee & Xu, “Strengthening the penalties will effectively curb unlawful behavior and decrease incentives for engaging in such behavior, thus helping to stabilize market order.”
•Procedures to deal with urgent situations
If there is an urgent situation demanding for the immediate take down, investigation and punishment of unlawful price practices, the following measures may be taken:
1. Establish the case immediately to order the suspension of the relevant business operation and attach or seize relevant property
2. Go through the procedure of prior notification of an administrative penalty and the procedure of a notification of hearing
3. Confiscate the unlawful gains in advance and handle such unlawful gains according to relevant regulations
•Application of the anti-monopoly law
Article 6 and Article 7 state that if the relevant behaviors constitute monopolistic behaviors, penalties shall be imposed pursuant to the anti-monopoly law (AML).
•Cooperation with the commission’s survey
Article 8: Operators, other units or individuals shall, according to the competent pricing departments’ requirements, submit supporting documents, information, and shall not refuse or impede the investigation.
Anyone who refuses to provide the materials, information, or provides false materials and information, or conceals, destroys, transfers evidence, or behaves in such a manner will be ordered to make corrections. If such amendments are not made before the deadline, the perpetrator may be fined 200,000 yuan. The directly responsible persons in charge and other directly responsible personnel shall be punished by the authorities.
•Criminal liability
Article 11: If the unlawful price practices set forth herein have severely disturbed the market order, thus constituting a crime, criminal liabilities shall be pursued.
