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Competition & Antitrust FAQ

Q1. China’s Anti-Monopoly Law (“AML”) has been implemented for over 5 years. The Ministry of Commerce (“MOFCOM”), the authority in charge of merger control review, has been gradually establishing its international reputation as one of the most important antitrust authorities. What progress has the MOFCOM mad during the past years?

A1. According to Mr. SHANG Ming, the Director General of the Anti-monopoly Bureau of MOFCOM, in 2012, MOFCOM received 201 notifications of concentrations, among which 186 cases were officially accepted and 154 cases were closed1. In 2011, a total of 205 filings were received, with 185 officially accepted and 171 closed. Among all cases closed in 2012, 142 cases (more than 92%) were approved unconditionally, 6 cases approved with conditions 2, and 6 cases withdrawn by the applicants. The number of conditionally approved cases thus adds up to 16 in total as of now.

 

Q2. In February 2012, MOFCOM enacted a new rule. What kind of issues does this rule focus on?

A2. It sets out the procedures for investigating and penalizing companies who fail to honor their notification obligations.

 

Q3. What improvement has been made by MOFCOM regarding legislation and what are the impacts to the society?

A3. In July 2012, MOFCOM adopted a revised notification form to replace the old form introduced in January 2009. The new form contains useful clarifications, such as how to determine an “undertaking concerned in a concentration”, and what information a non-confidential version shall include. It also attracted public concerns that the burdens of applicants in producing information, in particular internal documents, may be aggravated. Two new regulations are in the pipeline, one regarding merger remedies and the other regarding establishment of a fast track review mechanism. The new regulation on merger remedies is expected to replace the current regulation on divestiture and to provide a systematic framework on the proposal of remedies, the evaluation, implementation, supervision, and amendment of remedies and the related legal liabilities that apply to both structural and behavioral remedies. The draft regulation would soon be submitted to the Department of Treaty and Law of MOFCOM for review and is expected to be promulgated in 2013. The fast track would likely implicate reduced information requirement and simplified opinion-solicitation process. It is expected that market share and HHI index will be applied as the major filters for determining if a case may be cleared through such simplified procedures5. Compared to the regulation on merger remedies, it is less clear when this measure will be promulgated. An increasing number of cases cleared by end of Phase 1 or within the first 10 days of Phase 2, potentially suggesting that the fast track mechanism has been on trial.

 

Q4. The National Development and Reform Commission (“NDRC”) and the State Administration for Industry and Commerce (“SAIC”), which in charge of the enforcement, are also active with their tasks. What have been done during the past years by them?

A4.

a. NDRC:

The NDRC has been reinforcing its enforcement power since 2010. The total number of officials will be increased, and local price authorities are also intensifying antitrust enforcement efforts. Till the end of 2012, a total of 49 price-related cases have been investigated by the NDRC since the AML went into effect, and 20 of them were closed with administrative penalties rendered. The investigations have covered a broad range of industries. For example, In October, 2012, the Price Bureau of Guangdong Province (“GDPB”) announced its investigation in a price-fixing cartel among 20 sea sand dredging companies. The GDPB imposed a total of RMB 759,247 (approximately USD 120,515) of fines on three companies and granted a reduction of 50% of the fines imposed on one of the penalized organizers that voluntarily provided key evidence under the leniency program. on January 4, 2013, the NDRC published China’s first antitrust enforcement action against international cartels, where a total amount of RMB 353 million was imposed on 6 international LCD panel manufacturers, including Samsung, LG, Chi Mei, AU Optronics, Chunghwa Picture Tubes and Hann Star. In addition to the monetary sanctions, the 6 LCD manufacturers also promised to take corrective measures, including providing Chinese TV makers with high-end products on a non-discriminatory basis, and extending the warranty period of the panels to 36 months.

b. SAIC:

Since the enactment of AML, the SAIC has authorized 10 provincial AICs to investigate 17 cases, including 16 cartel cases (3 of them involving oral agreements) and 1 abuse of dominance case. Eight cases have been closed whereas in 2012 alone, the SAIC rendered administrative penalties on 6 cases. In 2012, the SAIC authorized Hunan AIC to investigate the monopoly agreement entered into by insurance companies in Hunan Province to segment the market and fix the price. The Hunan AIC imposed a fine of RMB 1.7 million on the relevant companies in accordance with the AML.

 

Q5. What is the most arresting case regarding Antitrust in the past year?

A5. Qihoo v.s. Tencent

In April, 2012, the Guangdong Higher People’s Court held the first court hearing for the abuse of dominance action filed by Qihoo (the operator of 360 safety software) against Tencent (the operator of QQ instant messaging software) under the AML. Qihoo accused Tencent for abusing its dominance in the market of online instant communications services and claimed damages of RMB 150,000,000. The court hearing lasted for more than 8 hours, and attracted an audience of almost 400 people. This case has not yet been decided as of now.

 

Q6. What action has been taken by the legal community in China regarding the antitrust?

A6. The All China Lawyers Association (ACLA) announced the establishment of the Antitrust Committee, showing that antitrust law has been recognized by the legal community in China as an important segment of the Chinese legal system.

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