I Introduction

Article 17 of the Chinese Anti-Monopoly Law (AML) prohibits undertakings with a dominant position in the relevant market from abusing their market dominance. According to Article 17, such undertakings are banned from conducting the following abusive activities:

  1. selling commodities at unfairly high prices or buying commodities at unfairly low prices;
  2. without justifiable reasons, selling commodities at prices below cost;
  3. without justifiable reasons, refusing to enter into transactions with their trading counterparties;
  4. without justifiable reasons, requiring trading counterparties to make transactions exclusively with themselves or with the undertakings designated by them;
  5. without justifiable reasons, conducting tie-in sales of commodities or imposing other unreasonable trading conditions on transactions;
  6. without justifiable reasons, applying differential prices and other transaction terms among trading counterparties on an equal footing; or
  7. other acts of abuse of dominant market positions confirmed as such by the AML enforcement authorities under the State Council.

In the past year, the antitrust enforcement powers that previously sat within three Chinese antitrust enforcers, the National Development and Reform Commission (NDRC), the State Administration for Industry and Commerce (SAIC) and the Ministry of Commerce of China (MOFCOM), have been consolidated into a single authority, the State Administration for Market Regulation (SAMR).

The SAMR has released several new regulations and drafts for comment. Because the regulations relating to abuse of market dominance have not been finalised, former provisions and guidelines in relation to enforcing Article 17 of the AML by the NDRC, SAIC and the Anti-Monopoly Commission of the State Council (AMC) will continue to be in force until the new rules come into effect.

II Year in Review

The institutional reform of the antitrust enforcement agencies was the biggest event in competition law enforcement in China in 2018. After the reform, the previous antitrust functions of MOFCOM, NDRC and SAIC were integrated into the newly established, powerful SAMR. In addition, private antitrust enforcement by the private sector is also noteworthy.

i Public enforcement

Investigation cases published by the SAMR, the former SAIC/NDRC and their local branches

In 2018, the SAMR and its local branches initiated 32 investigations into anticompetitive conduct and closed 15 of them, including five major abuse of market dominance cases. The most noteworthy cases are mentioned below.

Investigation into chlorpheniramine active pharmaceutical ingredients by the SAMR (completed)2

On 30 December 2018, the SAMR imposed a fine of 8.4797 million yuan on Hunan Er-kang Pharmaceutical Management Co Ltd and 1.5573 million yuan on Henan Jiushi Pharmaceutical Co Ltd for abuse of market dominance in relation to chlorpheniramine active pharmaceutical ingredients (APIs). The two companies were accused of selling chlorpheniramine APIs at excessive prices, as well as engaging in unjustifiable refusal to trade and tying practices. For Hunan Er-kang, the SAMR imposed a fine equivalent to 8 per cent of its 2017 sales revenue, confiscated its illegal gains of 2.3947 million yuan and ordered it to terminate its anticompetitive practices; for Henan Jiushi, the SAMR imposed a fine equivalent to 4 per cent of its 2017 sales revenue and ordered it to terminate its anticompetitive practices.

Investigation into civilian blasting equipment by the former SAIC/SAMR (terminated)3

On 29 December 2018, the SAMR announced that its Hubei branch terminated an investigation launched by the former SAIC into Hubei Lianxing Civilian Blasting Equipment Management Co Ltd in relation to the alleged abuse of market dominance (i.e., unjustifiable exclusive dealing in relation to civilian blasting equipment in the Hubei market). In accordance with Article 45 of the AML, Hubei Lianxing proposed their commitments to the SAMR, which subsequently suspended the investigation on 15 November 2018 and terminated it on 29 December 2018.

Investigation into power supply by the former SAIC/SAMR (terminated)4

On 3 December 2018, the SAMR announced that its Jiangsu branch terminated an investigation launched by the former SAIC into Nanjing Lishui Branch of the State Grid Jiangsu Electric Power Co Ltd in relation to the alleged abuse of market dominance (i.e., unjustifiably imposing unreasonable trading conditions of power supply in the Nanjing Lishui District market). In accordance with Article 45 of the AML, State Grid Nanjing Lishui proposed their commitments to the SAIC, which subsequently suspended the investigation on 23 August 2018 and terminated it on 3 December 2018.

Investigation into banking loans by the former SAIC/SAMR (terminated)5

On 10 August 2018, the SAMR announced that the former SAIC terminated an investigation into the Inner Mongolia Branch of Agricultural Bank of China in relation to the alleged abuse of market dominance (i.e., unjustifiably imposing unreasonable trading conditions with 'must-buy' personal accident insurance when providing loans for a poverty alleviation project). In accordance with Article 45 of the AML, Inner Mongolia Branch proposed their commitments to the SAIC, which subsequently suspended the investigation on 8 January 2018 and terminated it on 10 August 2018.

Investigation into rolling cargo transportation by the former SAIC (completed)6

On 9 January 2018, the former SAIC imposed a fine of 977,400 yuan on Hubei Yinxingtuo Co Ltd for abuse of market dominance in relation to rolling cargo transportation (i.e., unjustifiably imposing different trading conditions when providing the relevant rolling cargo transportation services). The fine was equivalent to 6 per cent of Hubei Yinxingtuo's 2016 sales revenue.

Investigation into Microsoft by the former SAIC/SAMR (still pending)

The investigation into Microsoft commenced in June 2014. In July 2014, the former SAIC conducted simultaneous large-scale dawn raids at four of Microsoft's offices in Beijing, Shanghai, Guangzhou and Chengdu, with the cooperation of nearly 100 enforcement officers from nine SAIC branches. To date, the SAIC/SAMR has publicised only limited information about the case, including its ongoing status.

In summary, the major cases handled by the SAMR, the former SAIC/NDRC and their provincial branches in 2018 are listed below.

Investigated party Industry Investigating authority Monopoly Conduct Case Initiated Status
Hunan Er-kang Pharmaceutical Management Co Ltd and Henan Jiushi Pharmaceutical Co Ltd Pharmaceutical SAMR Selling products at excessive prices, unjustifiable refusal to trade and tying 2017 Completed
Hubei Lianxing Civilian Blasting Equipment Management Co Ltd Civilian blasting equipment Former SAIC/SAMR Unjustifiably exclusive dealing 2013 Terminated
Nanjing Lishui Branch of the State Grid Jiangsu Electric Power Co Ltd Power supply Former SAIC/SAMR Unjustifiably imposing unreasonable trading conditions 2017 Terminated
Inner Mongolia Branch of Agricultural Bank of China Bank Former SAIC/SAMR Unjustifiably imposing unreasonable trading conditions 2016 Terminated
Hubei Yinxingtuo Co Ltd Rolling cargo transportation Former SAIC Unjustifiably imposing different trading conditions 2017 Completed
Microsoft Software Former SAIC/SAMR Bundling 2014 Pending

ii Private enforcement

Pan Yao v. Shanghai International Commodity Auction Co Ltd (completed)7

The plaintiff, Pan Yao, is a resident of Shanghai. Owing to the limited issuance of non-business vehicle licence plates in the city, Pan had to participate in a monthly auction conducted by the only auction house designated by the Shanghai municipal government, Shanghai International Commodity Auction Co Ltd. After a few failed attempts at the auction, Pan sued the auction house for abuse of market dominance. Specifically, Pan alleged that, as the only auction house at the monthly event, the defendant held a dominant position in the vehicle licence plate auction market and that the defendant abused the dominant position by charging an unfairly high commission.

After losing in the first-instance trial at Shanghai Intellectual Property Court, Pan appealed to Shanghai Higher Court, which affirmed the first-instance judgment in May 2017. Both courts began their analysis with Article 12 of the AML, which provides that '[f]or the purposes of this Law, undertakings include natural persons, legal persons and other organisations that engage in manufacturing or selling commodities or providing services. For the purposes of this Law, a relevant market consists of the range of the commodities for which, and the regions where, undertakings compete against each other during a given period of time for specific commodities or services.'

Accordingly, whether an undertaking holds a dominant market position depends on whether the undertaking provides commodities or services in the relevant market. That determination depends on whether the commodity or service provided by the undertaking is something that other undertakings can compete in. In this case, the defendant is entrusted by the Shanghai government to conduct the auction for non-business vehicle licence plates, which are not a commodity or service for the purposes of the AML. The auction is essentially a mechanism for allocating public resources, and the defendant is in fact performing an administrative function delegated by the Shanghai government. Therefore, there is no market that is to be regulated by the AML, and without a relevant market, the defendant cannot be said in any way to hold a dominant market position.

At the end of 2018, this case was listed by the Supreme People's Court as a top 10 civil antitrust case since the enactment of the AML. The moral of the case is that, although the AML plays an increasingly important role in regulating socioeconomic activities, it has boundaries. Where the government exercises its power in managing public resources, it is not a market that the AML is designed to address, because government-regulated public resources are not commodities or services in a competitive market.

Xie Liansheng v. Xia Yingyu (completed)8

Both the plaintiff and defendant in this case are individuals engaged in the business of selling Duomiqi brand rice cookies. The plaintiff alleged that, as a distributor, the defendant monopolised the Duomiqi brand rice cookies market in North East China and abused the dominant position by either charging unfairly high prices to the plaintiff, a retailer, or by refusing to sell to the plaintiff. After losing the first and second-instance trials, the plaintiff petitioned the Supreme Court for a retrial.

The country's highest court ruled that, based on the facts found by the lower courts and daily life experience, there were apparently other brand name rice cookies substitutable to and competing against the Duomiqi brand. These competing rice cookies should constitute the relevant market. Further, under the judicial interpretations issued by the Supreme People's Court, for an abuse of dominance claim, the plaintiff must prove that the defendant holds a dominant market position and abused that position. However, the plaintiff in this case failed to carry that burden. In fact, he showed none of the factors prescribed under Article 18 of the AML for finding a dominant market position; that is by analysing:

  1. the defendant's market share in the relevant market, and the competition situation of the relevant market;
  2. the defendant's ability to control the sales markets or the raw materials purchasing markets;
  3. the extent of reliance on the defendant by other undertakings; or
  4. the degree of difficulty for other undertakings to enter the relevant market.

Accordingly, the Court rejected the plaintiff's appeal in January 2018. This is one of two private antitrust cases that were appealed to the Supreme People's Court for a retrial, which illustrates the point given in Section VII, that in private antitrust actions, the plaintiff is often at a disadvantage in collecting evidence, such as market data or illegal behaviour, to make a preliminary showing and shift the burden of proof to the defendant. If the plaintiff does not apply to the court for assistance in evidence collection or the court refuses to do so, it becomes very difficult for the plaintiff to move the case forward.

Shenzhen Micro Source Code v. Tencent (completed) 9 and Xu Shuqing v. Tencent (completed)10

These two cases both involve Tencent, the giant technology company.

Shenzhen Micro Source Code is a company that sells software products online, primarily through Tencent's WeChat Official Account (WeChat is a hugely popular social media platform in China, boasting a subscription of over 1 billion users, and WeChat Official Account is a marketing and promotional function derived from WeChat). Micro Source Code alleged that Tencent possessed a dominant position on the mobile instant messaging and social media market and abused the dominance by blocking Micro Source Code from using WeChat Official Accounts to sell its products. After an 18-month trial, the Shenzhen Intermediate Court dismissed the plaintiff's claims in the first-instance judgment in August 2018.

The court first clarified that the relevant market should be defined based on the harm to competition caused by the conduct at issue. It is, therefore, necessary to identify the goods and services concerned with the conduct. This is particularly important for the internet sector, because internet companies often develop derivative services (e.g., WeChat Official Account promotional function) from their basic service (e.g., WeChat instant messaging). Under this approach, the court defined the relevant market as the provision of marketing and promotional services through online platforms.

The court then held that the number of active WeChat users cannot reliably reflect the online platform's market power because most internet users register with multiple competing platforms, and the plaintiff produced no evidence as to Tencent's market power over the derivative Official Account service. Consequently, the court refused to find a dominant market position on the part of Tencent. It is unfortunate that the plaintiff did not draw on the economic theory of indirect network effect to prove that the large user base of WeChat increases the utility of the Official Account function and that Tencent could have leveraged its market power on one side of the platform to another side.

The court last held that for an antitrust refusal-to-deal claim to pass, the alleged conduct must have been for an anticompetitive purpose or have had an anticompetitive effect.

In Xu Shuqing v. Tencent, the plaintiff is a lawyer that made a series of memes to promote his legal service. After agreeing to Tencent's terms of service that prohibit commercial promotions, Xu applied to WeChat Meme Platform to upload his memes. The application was rejected, and Xu brought an antitrust refusal-to-deal action against Tencent. The case went through first and second-instance trials in Guangdong Province, which both ruled against Xu, and was then appealed to the Supreme People's Court for a retrial.

Similar to the Shenzhen Intermediate Court in Micro Source Code, the Supreme Court refused to give inappropriate weight to WeChat's huge popularity in social media in defining the relevant market. Applying substitutability analysis, the Supreme Court found the relevant market to be broader than the WeChat meme service, but instead encompass the overall online meme service market.

The Court went on to specify the key element of the refusal-to-deal claim (i.e., whether the refusal has had a substantial effect of restricting or eliminating competition and has thereby harmed consumer welfare). As a general rule of thumb, excluding a single business operator would not result in substantial anticompetitive effect in most circumstances. In fact, contract disputes that have no apparent anticompetitive effect should be resolved under the contract law and not under the antitrust law. The Court dismissed the petition for retrial in September 2018.

It will, therefore, be increasingly difficult for individual businesses to seek remedies under the AML for contract disputes. As China's antitrust law matures and the courts gain more experience with various types of competitive behaviour, the boundaries between antitrust and other disciplines of the law will become clearer and the courts will fill more gaps left by the AML in determining the key elements of specific antitrust claims.

Another moral of these two cases is that, although Tencent's WeChat platform is immensely popular among internet users in China, leaving an impression of presumptive market dominance, the courts have not agreed with the laymen's opinion. This is either because the plaintiffs have almost insurmountable hurdles in evidence production or because the disputes do not directly arise from the basic WeChat service, but from other derivative services. As new internet giants challenge Tencent's market position,11 it remains to be seen whether China's big tech will be found to have violated antitrust law.

In summary, the most high-profile private enforcement actions between 2017 and 2019 (both completed and pending cases) are listed below.

Plaintiff Defendant Sector Courts Type of conduct Case opened Status of proceedings
Pan Yao (an individual) Shanghai International Commodity Auction Co Ltd Government service Shanghai IP Court, Shanghai Higher Court Abuse of dominance by charging unfairly high prices 2016 Plaintiff lost in first and second-instance trials
Xie Liansheng (an individual) Xia Yingyu (an individual) Food Liaoning Higher Court, Supreme People's Court Abuse of dominance by charging unfairly high prices and refusing to deal 2016 Plaintiff lost in first and second-instance trials. Supreme Court rejected petition for retrial
Shenzhen Micro Source Code Software Development Co Ltd Tencent Technology (Shenzhen) Co Ltd, Shenzhen Tencent Computer Systems Co Ltd Internet Shenzhen Intermediate Court Refusal to deal 2016 Plaintiff lost in first-instance trial
Xu Shuqing (an individual) Tencent Technology (Shenzhen) Co Ltd, Shenzhen Tencent Computer Systems Co Ltd Internet Shenzhen Intermediate Court, Guangdong Higher Court, Supreme People's Court Refusal to deal 2016 Plaintiff lost in first and second-instance trials. Supreme Court rejected petition for retrial
Jinjiang Ruitai Zipper Co Ltd YKK Corporation, YKK (China) Investment Co Ltd, and others Zipper manufacture Fuzhou Intermediate Court Abuse of dominance by charging unfairly high prices and refusing to deal 2017 Plaintiff withdrew the claims in September 2018
Yunnan Yingding Biological Energy Co Ltd Sinopec Bio-energy Kunming Intermediate Court, Yunnan Higher Court Refusal to deal 2014 The plaintiff petitioned the Supreme People's Court for a retrial, which has not yet made a ruling
Four Chinese rare earth companies Hitachi Metals Rare earth magnets Ningbo Intermediate Court Refusal to deal 2014 Pending
Apple Iwncomm Wireless communication Beijing IP Court Abuse of dominance in standard-essential patents 2016 Pending
Apple Electronics Qualcomm Baseband processor chip sets Beijing IP Court Refusal to license on fair, reasonable and non-discriminatory terms 2017 Pending

III RELEVANT MARKET DEFINITION AND MARKET POWER

The approaches for defining the relevant market and assessing market power presented in the black letter law of China are consistent with other major antitrust regimes.

i Relevant market definition

The basic principles related to abuse of dominance in the AML are similar to those of Article 102 of the Treaty on the Functioning of the European Union and Section 2 of the Sherman Act. The specification of market definition is stipulated in the Guidelines on the Definition of Relevant Market (Guidelines). In accordance with the Guidelines, the basic approaches for defining the relevant market are analysis of demand-side substitutability and supply-side substitutability.

Article 8 of the Guidelines provides that the following factors may be considered when defining the relevant market from the demand side:

  1. evidence of switching to other products when the price or other factors of the product concerned are changed;
  2. the appearance, characteristics, quality, technical features and functionality of the product;
  3. price variance between products;
  4. the distribution channel; and
  5. other factors.

Article 9 of the Guidelines provides the following factors to be considered when defining the relevant geographical market from the demand side:

  1. evidence of turning to other regional products when the price or other factors of the product concerned are changed;
  2. the cost and characteristics of transportation;
  3. the region in which the majority of customers purchase the product in practice, and the regional distribution of major business operators' products;
  4. trade barriers, such as tariffs, regulations and environmental and technical factors; and
  5. other factors.

The Guidelines also mention the 'small but significant and non-transitory increase in price' method, a tool frequently used by both EU and US antitrust regulators.

ii Market dominance

Market dominance under the Chinese antitrust regime is defined in Article 18 of the AML and further clarified by the implementing rules. It refers to a market dominant position held by one or more undertakings that enable the undertakings to:

  1. control the price, volume or other trading terms12 in the relevant market; and
  2. block or affect the ability of other undertakings to enter the relevant market by impeding or delaying other undertakings' entry into the market, or substantially increasing other undertakings' entry costs, so that the competitors cannot compete effectively post-entry.

iii Market share presumption

As illustrated in the table below, Article 19 of the AML specifies the market-share thresholds that are regarded as preliminary evidence of market dominance.

Number of undertakings Aggregated market share in the relevant market
One One-half
Two Two-thirds
Three Three-quarters

The preliminary evidence of market dominance can be rebutted by proof showing lack of sufficient market power despite high market share.13 In addition, under the preliminary evidence, if any of the undertakings has a market share of less than 10 per cent, this undertaking shall not be deemed to have a dominant position.14

iv Factors for assessment of dominance

The AML has further elaborated the factors by which market dominance should be assessed in Article 18, including:

  1. market share in the relevant market;
  2. the competition situation in the relevant market;
  3. the ability to control sales markets or raw material purchasing markets;
  4. the financial status and technical conditions of undertakings;
  5. the degree of dependence of other undertakings;
  6. entry to the relevant market by other undertakings; and
  7. other factors related to finding a dominant market position.

IV Abuse

i Overview

Article 17 of the AML sets out a non-exhaustive list of seven types of behaviour that may be regarded as abuse of market dominance:

  1. excessive pricing or selling at an unfairly low price;
  2. selling below cost;
  3. refusal to deal;
  4. requiring a party to trade exclusively with the undertaking or other designated undertakings;
  5. tie-ins or the imposition of other unreasonable trading terms;
  6. price discrimination or the imposition of other discriminatory trading terms; and
  7. other behaviours defined as abuse of dominance by the antitrust regulators.

As early as 2015, the enforcement priority of the SAIC gradually shifted from monopoly agreements to abuse of dominance. In particular, practices including excessive pricing, tying and discriminatory treatment by public utility companies have frequently come under antitrust scrutiny. In 2018, the enforcement agencies continue to challenge the pharmaceutical and public utility sectors; for example, in February 2018, the Hubei provincial branch of the SAIC (Hubei AIC) fined roll on/roll off (RORO) port operator Hubei Yinxingtuo Co Ltd for abusing its market dominance by discriminating against RORO shipping companies.

ii Exclusionary abuses

'Exclusionary abuses' means the dominant undertaking abuses its market dominance by excluding its competitors; for example, by selling below cost, refusing to deal, or tying or bundling.

Concluded cases suggest that the enforcement agencies have an interest in exclusionary abuses. In December 2018, the SAMR imposed fines on Hunan Er-kang Pharmaceutical and Henan Jiutian Pharmaceutical for abuse of market dominance in relation to chlorpheniramine APIs. These two pharmaceutical firms allegedly engaged in unjustifiable refusal to trade, and bundling.

iii Discrimination

The Hubei AIC's investigation into Hubei Yinxingtuo Port focuses on discriminatory treatment. On 9 January 2018, the Hubei enforcer imposed a penalty on Hubei Yinxingtuo of 977,400 yuan (equivalent to 6 per cent of the company's 2016 sales revenue) for discriminating against RORO shipping transport companies by favouring its connected entity, Yichang H Transport.

iv Exploitative abuses

'Exploitative abuses' means that a dominant undertaking abuses its position by exploiting its customers or suppliers; for example, by selling at an unfairly high price or buying products at unfairly low prices.

In the Chlorpheniramine API case, Hunan Er-kang Pharmaceutical was fined 8,479,400 yuan, equivalent to 8 per cent of the company's 2017 sales revenue. The firm allegedly sold chlorpheniramine API at excessive prices and engaged in unjustifiable refusal to trade, as well as bundling.15 This demonstrates the antitrust enforcement agencies' willingness and capacity to deal with exploitative abuse behaviour.

V Remedies and Sanctions

i Sanctions

In accordance with Article 47 of the AML, an undertaking that has abused its dominant position may be fined between 1 and 10 per cent of its turnover in the preceding year. Additionally, the regulator may confiscate the illegal gains. Article 49 of the AML further states that when calculating the amount of the fine, the regulator shall consider factors such as the nature, gravity and duration of the illegal conduct. In 2016, the NDRC released draft guideline on fines,16 which further explain the key points regarding imposing fines and confiscation of illegal gains.

ii Behavioural remedies

Along with sanctions, Article 47 of the AML provides that the regulator may impose cease-and-desist orders to stop illegal abusive conduct, although there is no explicit legal basis regarding whether and how the regulator may impose such interim measures for abusive conduct. Previous cases provide little clarification in this regard, owing to their lack of transparency.

iii Structural remedies

To date, there are no effective antitrust-related laws, regulations or rules in China explicitly authorising the SAMR to impose structural remedies on undertakings for violation of Article 17 of the AML. Accordingly, all previous cases suggest that the regulators do not adopt structural remedies for abuse of dominance.

However, Article 45 of the AML does not delineate the scope of the commitment that the undertakings under investigation may make, so it remains to be seen whether a dominance investigation can be closed on the basis of structural commitments.

VI Procedure

On 30 January 2019, the SAMR released a draft of the Rules on the Prohibition of the Abuse of Market Dominating Position Behaviours (the Draft Rules). The Draft Rules will replace the original regulations of the former SAIC and NDRC with regards to dominance, once they come into force.

The articles of the Draft Rules relating to substantive provisions, such as how to define the market dominance power and the behaviours of abuse, are mainly integrated with provisions of the SAIC's Rules on the Prohibition of the Abuse of Market Dominance, the SAIC Regulation on Prohibition of Abuses of Intellectual Property Rights, the SAIC Provisions and Procedures on Investigation of Monopoly Agreements and Abuse of Dominant Market Position and the NDRC Regulations on Anti-Price Monopolies.

The Interim Provisions on Administrative Penalty Procedures for Market Administration (the Interim Provisions) came into effect on 1 April 2019, and these cover the common procedural provisions regarding administrative penalties issued by the SAMR. The Draft Rules provide special provisions on investigating abuse of dominance.

Therefore, at this transition stage before the Draft Rules come into force, some procedures that are not covered by the Interim Provisions shall comply with the old SAIC and NDRC regulations.

Considering the Interim Provisions and previous regulations that are currently effective, the stages of SAMR investigations are as follows:

  1. An antitrust investigation can be triggered largely from four possible sources:
    • ex officio discovery;
    • reports;
    • transference from other government agencies; and
    • assignment by superior entities.
  2. With regards to a specific investigation department, on 28 November 2018, the SAMR announced the Notice on Authorisation of Antitrust Enforcement. The Notice provides that the SAMR shall be responsible for, or authorise the relevant provincial market regulatory authorities to be responsible for, investigation and punishment of the following monopoly acts:
    • that have occurred across provinces, autonomous regions and centrally administered municipalities;
    • that are complicated or have a significant impact nationwide; and
    • that are deemed by the SAMR to be under its own jurisdiction. The provincial branches shall be responsible for enforcement against cases that have occurred within their administrative region. Further, commissioned by the SAMR, the provincial branches can conduct investigations in the name of the SAMR.
  3. It falls within the regulators' discretion to determine whether to open a formal investigation after receiving a lead.
  4. Investigative measures include:
    • conducting an inspection by entering business premises or another relevant place;
    • interviewing business operators under investigation, interested parties or other relevant entities or individuals;
    • checking and duplicating, inter alia, relevant documents, agreements, account books, business correspondence and electronic data for the business operators under investigation, interested parties or other relevant entities or individuals;
    • registering the evidence for preservation in advance where there is a likelihood that the evidence may be destroyed or lost, or difficult to obtain later;
    • seizing and detaining relevant evidence; and
    • checking the bank accounts of the business operators under investigation.
  5. Undertakings under investigation can offer commitments at any stage of an investigation. The regulators are entitled to decide whether to accept the commitments.
  6. The authorities may issue punishment decisions when they consider that the undertaking concerned has violated Article 17 of the AML. The regulators should publish the decisions.
  7. If unsatisfied with a decision, the undertakings under investigation may apply for an administrative review or file an administrative lawsuit with a court for judicial review.

Neither the old regulations of the SAIC or NDRC nor the new interim provisions of the SAMR have clarified the statutory deadlines of investigation; therefore, some procedures may last for a relatively long time.

VII Private Enforcement

The AML creates a private right of action against monopolistic conduct under Article 50, which provides that '[w]here the monopolistic conduct of an undertaking has caused losses to another person, it shall bear civil liabilities according to law'. The Supreme People's Court further clarifies that '[w]here a plaintiff directly files a civil lawsuit with the people's court or files a civil lawsuit with the people's court after a decision of the anti-monopoly law enforcement authority affirming the existence of monopolistic conduct comes into force, if the lawsuit satisfies other conditions for lawsuit acceptance as prescribed by law, the people's court shall accept the lawsuit'.

Among private actions, collective actions are available in China in the form of representative actions under Articles 53 and 54 of the Civil Procedure Law, which are similar to class actions in the United States. However, collective actions are not common either in antitrust disputes or in other causes of action. This is because the law has not provided clear guidance as to some key issues in representative action, such as the elements of representative action, the type of applicable cases, the division of damages awarded and the appeals mechanism. Hence, no antitrust collective action has been brought in China yet.

In contrast, private actions brought by putative individual victims are commonly seen, although the prevailing rate for antitrust plaintiffs is still low relative to other types of civil actions. The reasons are either because the plaintiffs are not in a position to carry the burden of proof or because the real issue in dispute is not an antitrust claim and does not cause any antitrust injury, but, rather, is a regular contract or tort dispute that is outside the scope of antitrust law.

VIII FUTURE DEVELOPMENTS

As the dust starts to settle on the institutional reform on both the state level and lower government levels, it is expected that the new antitrust agency will begin to set its enforcement priorities and gradually form its own enforcement style.

In terms of legislation, according to an official of the SAMR, several antitrust guidelines relating to the leniency system, procedures of exemption, abuse of intellectual property rights and motor vehicle sector are to be published in 2019.

In terms of enforcement activities, in April 2019, the SAMR dawn-raided Ericsson for alleged violations relating to standard-essential patents. It is expected that the SAMR, as a consolidated antitrust enforcement agency, will continue to maintain a stable enforcement momentum, and yet in a more consistent manner than has previously been seen.


Footnotes

1 Zhan Hao is the managing partner and Song Ying and Stephanie Wu are partners at AnJie Law Firm.

7 (2016) Hu 73 Min Chu No. 728, (2017) Hu Min Zhong No. 75, www.competitionlaw.cn/info/1026/25698.htm.

8 (2016) Liao Min Zhong No. 264, (2018) Zui Gao Fa Min Shen No. 29, www.competitionlaw.cn/info/1026/26068.htm.

10 (2016) Yue 03 Min Chu No. 182, (2016) Yue Min Zhong No. 1938, (2017) Zui Gao Fa Min Shen No. 4955, http://wenshu.court.gov.cn/content/content?DocID=b15f063c-c0f2-423c-ba5e-a9c700c56170&KeyWord=.

11 See, for example, 'Tencent and Jinri Toutiao sue each other', http://tech.sina.com.cn/i/2018-06-02/doc-ihcikcew7833064.shtml.

12 According to Article 17 of the Provisions of Anti-Price Monopoly, 'other trading terms' include the factors that can have substantial impact on a market, such as grade of commodity, payment terms, method of delivery, after-sales service, trading options or technical constraints.

13 See Article 19 of the AML.

14 ibid.

15 See footnote 2.