Competition & Antitrust FAQ
Q1. On January 4, 2013, National Development and Reform Commission (“NDRC”) declared that Samsung, LG and four Taiwanese firms were fined RMB 350 million for fixing the prices of LCD screens during the period from 2001 to 2006 (“LCD Case”). On January 16, 2013, Mao Tai, one of most famous wine brands in China, declared that they were investigated by NDRC for its monopolistic behaviors and they therefore would modify all their sales policies that had violated the 2008 Anti-monopoly Law of PRC (“AML”), in particular the resale price maintenance policy. This was closely followed by the declaration of Wu Liang Ye, another wine magnet in China, which announced on January 17, 2013 that they would also abolish all the sales policies in violation of AML, after an investigation of NDRC. How is the enforcement of AML in China? What is the current attitude of the NDRC towards the monopolistic behaviors in China in 2013?
A1. AML enforcement is intensifying, which puts all the market players, in particular the multinational companies and big-scale domestic companies, at the risk of being investigated and penalized for anti-competitive behaviors. NDRC will not sit by any monopolistic behaviors in China any more. It is no longer easy for a company to stay away from legal liabilities simply by conspiring to commit any monopolistic actions outside of the territory. NDRC is undoubtedly looking out for more high-hanging fruits, which would very likely come with a sharp increase of the fines, and more than that, NDRC is also aiming at normalizing and regularizing enforcement of AML in China.
Q2. How could NDRC step in and why does it have the power to punish the price fixing agreement even if the monopolistic behavior is reached outside the territory of China?
A2. Since such concerted practice of “price-fixing” arrangements were eventually implemented in China and harm the bargaining power and interest of the downstream color TV producing enterprises, NDRC could therefore be qualified to deal with the issue.
Q3. Why is the fine imposed by NDRC less than those imposed by EU and US government?
A3. It is because NDRC had levied such fines based on the Pricing Law, which calculates fines based on the illegal gains rather than the annual turnover as provided by AML. Moreover, NDRC required Samsung, LG and so on to extend the warranty period for LCD screens free of charge, which in effect adds to the cost of pricing violation of such six companies equivalent to almost another RMB 600 million (apart from the initial aggregate fines and penalties on six companies being RMB 350 million).
Q4. What is the leniency system under NDRC?
A4. It is the self-reporting system. NDRC has voiced the call for self-reporting by coming out with a formula for leniency of self-reporting: 100% exemption may be granted for the first reporter; more than 50% exemption for the second reporter; and less than 50% exemption for others. However, the benefits remain uncertain as NDRC still has discretion on whether or not to grant any exemption.
Q5. How many regulators are there in China in the field of antimonopoly?
A5. There are three. The National Development and Reform Commission (“NDRC“), the State Administration for Industry and Commerce (“SAIC“) and the Ministry of Commerce (“MOFCOM“)
Q6. What are the most significant movements made by the Chinese antimonopoly regulators?
A6. The regulators together published their latest enforcement achievements, and NDRC for the first time disclosed its case volume to the public. 49 price-related cases have been investigated by NDRC since the enforcement of AML, and 20 of them were closed with administrative penalties. The investigations have covered a broad range of industries, including pharmacy, papermaking, LCD panel, cement, insurance, shipping agency industries, etc. SAIC has authorized 10 provincial AICs to investigate in 17 cases, including 16 cartel cases (3 of them involved verbal agreement) and 1 case of abuse of dominance; besides, 8 cases have been decided by SAIC and 6 of them were closed in 2012. MOFCOM has officially accepted a total of 186 cases, and 154 of them have been cleared in year 2012.