In China, a number of regulatory agencies are legally empowered to investigate and bring enforcement actions against illegal activities and other corporate misconducts. In recent years, Chinese authorities have initiated high-profile anti-bribery and antitrust investigations.
Commercial bribery is against Chinese laws and may lead to administrative and criminal liabilities. Under the current Chinese legal regime, most administrative agencies have the legal duty to enforce laws and regulations and are given the power to investigate misconducts and unlawful activities and impose administrative penalties. When the unlawful activities reach a criminal threshold, a criminal investigation will be opened, and charges will be brought and a trial will be conducted by a judicial organ before criminal penalty is imposed. Additionally, given the dominant role the Chinese Communist Party (CCP) plays in the political, economic and social spheres, the disciplinary organ of the CCP also plays a significant role in combating bribery, especially if it involves government officials who are predominantly CCP members.
The State Administration of Industry and Commerce and other administrative agencies investigating commercial bribery and imposing administrative penalties
The State Administration of Industry and Commerce (SAIC) is the ministerial level authority directly under the State Council in charge of market supervision and regulation and related law enforcement through administrative measures. The SAIC’s functions include maintaining market order and protecting the legitimate rights and interests of businesses and consumers by regulating registration, competition, consumer protection, trademark protection and combating economic illegalities including commercial bribery. Under the PRC Anti-Unfair Competition Laws, the SAIC is the primary regulator bestowed with legal enforcement duty in the field of anti-bribery, and the SAIC and its local branches have the authority to investigate commercial bribery and other unfair competition conducts.2
As a market regulator, the SAIC is focused on commercial bribery (bribery related to commercial activities) instead of official bribery (bribery to state officials) and it has the authority to impose administrative punishments such as fines and confiscation of unlawful profits. In the course of investigation, the SAIC and its local branches have the authority to: (1) question and investigate the business operators, interested persons, witnesses etc., and require them to provide evidential materials; (2) inquire about and make copies of relevant business agreements, account books, invoices, documents etc.; and (3) inspect the properties that are used or involved in the commercial bribery.3
A number of other administrative agencies are also dedicated to the regulation and investigation of commercial bribery in specific industries. For instance, the National Health and Family Planning Commission (NHFPC) and China Food and Drug Administration (CFDA) are the two main watchdogs over the healthcare, medical and pharmaceutical industries. Specifically, the PRC Drug Control Law provides that the CFDA is the authority to investigate illegal activities in the pharmaceutical industry. In recent years, the CFDA has increasingly been clamping down on irregularities due to the numerous food and drug scandals that have taken place. In order to ensure a healthy drug market, cracking down on bribery is one of the most important investigation and regulatory functions of the CFDA. For example, according to the Drug Control Law, it is illegal for drug manufacturers or distributors to offer or pay off-the-book discounts or other benefits, and the CFDA will investigate such manufacturers or distributors and impose administrative liabilities.4
Similarly, the China Securities Regulatory Commission (CSRC) regularly issues regulations and guidelines for the securities and future markets, and all listed companies and securities firms are all under the CSRC’s supervision. In 2015 for instance, the CSRC launched a special project whereby it performed on-site inspections to investigate illegal acts by securities companies, including commercial bribery. Meanwhile, the China Banking Regulatory Commission (CBRC) and China Insurance Regulatory Commission (CIRC), regulators of China’s banking and insurance industries respectively, investigate and penalise acts of bribery in China’s banking and insurance sectors.
Some bribery activities may trigger multi-layer jurisdictions by several authorities. For example, in the process of tendering and bidding on a municipal construction project in Shanghai, two departments – the Urban Planning, Land and Resources Commission and the Housing and Urban-Rural Development Commission – may jointly supervise bidding activities and investigate any conducts that are in violation of relevant laws. Local practices, however, may differ as the process for tendering and bidding on construction projects is extremely complicated.5
Lastly, the watchdog of China’s state-owned assets, the State-owned Assets Supervision and Administration Commission (SASAC), is empowered to investigate illegal activities that will cause or may have caused loss of state-owned assets. Acts of bribery such as senior managers of state-owned enterprises (SOEs) taking bribes or obtaining other improper benefits can be investigated by the SASAC.6 In addition to punishing corrupt managers of the SOEs, the SASAC may also impose economic penalties against the counterparty in the transaction, and in some extreme cases may void the transaction.7
Involvement of judicial organs, such as the police, procuratorate and the courts, in criminal bribery cases
When an act of bribery is serious enough that it calls for criminal liabilities, judicial organs will be involved to investigate, prosecute and impose criminal penalties. According to Article 163 of the PRC Criminal Law, an individual is subject to serious criminal penalties such as imprisonment and a criminal fine if the individual takes advantage of his or her position and demands or accepts money or properties from other persons. Furthermore, Article 387 of the PRC Criminal Law provides that a corporate entity can also be criminally liable for taking or offering bribes. As such, offering money or properties to government officials or responsible persons in a corporate entity in order to seek illegitimate interests in return carries severe legal consequences because the individual or the corporation could be criminally prosecuted.
Under the Chinese context, judicial organs usually refer to (1) the police (i.e., Ministry of Public Security or local public security bureau); (2) the procuratorate (i.e., the Supreme People’s Procuratorate (SPP) or people’s procuratorate); (3) the courts, or Supreme People’s Court (SPC) or people’s courts of provinces, municipalities, counties and districts; and (4) the administrator of justice, or Ministry of Justice or local justice bureaus, which is responsible for regulating lawyers and operating prisons.
In general, the police and the procuratorate have broad authorities to investigate various crimes; in particular, the police has wide authority and discretion to investigate all types of crimes, including commercial bribery. On the other hand, the procuratorate, through its internal anti-corruption and anti-bribery bureau, is more focused on investigating certain types of duty-related crimes, such as official bribery involving state officials or functionalities. The police and the procuratorate have extensive powers in investigations, including detention or arrests, interception of private communications, covert surveillance, etc.
Central Commission for Discipline Inspection (CCDI) and local commissions for discipline inspection are responsible for bribery involving government officials, who are predominately CCP members
Lastly, perhaps the most important institution driving the recent anti-corruption and anti-bribery campaign is the Central Commission for Discipline Inspection (CCDI) under the CCP, led by Wang Qishan. The CCDI is technically not a governmental authority or regulator since it is an internal department of the CCP. Nonetheless, the CCDI has the authority to investigate acts of bribery relating to any individual party member or high level official. If the CCDI discovers during its investigation that an enterprise or a non-CCP individual may have committed criminal bribery, the CCDI may hand over the case to the relevant judicial organs for further action. The CCDI and local party discipline commissions play a vital role in supervising and regulating individual government officials of the Communist Party at different levels. Although the CCDI is not a formal governmental authority, it has wielded extraordinary influence and deterrence power through the anti-corruption campaign.
ii Antitrust and anti-monopoly
The National Development and Reform Commission (NDRC), SAIC and Anti-Monopoly Bureau within Ministry of Commerce (MOFCOM) are the three main agencies responsible for antitrust and anti-monopoly enforcement.
As a primary strategic planner of the domestic market and economy, social reform and development, the NDRC is a very powerful agency under the State Council charged with investigating any acts in violation of pricing rules and potential monopolies. In practice, the NDRC is particularly interested in investigating pricing monopolies compared to other monopoly activities. According to the Provisions on Anti-Price Monopoly issued by the NDRC, the NDRC is responsible for investigating price monopoly acts including price monopoly agreements by business operators and abuse of market dominant positions resulting in the exclusion or limitation of competition by price-based methods.8
The SAIC is another important regulator in the antitrust field, and its main antitrust function is to regulate and investigate (1) abuses of dominant market position; (2) monopoly agreements; (3) abuses of administrative power for curbing or restricting competition; and (4) abuses of monopoly activities with intellectual property advantages. Since 2010, the SAIC has issued an array of provisions in relation to prohibitions on abuse of dominant market positions, monopoly agreements and abuse of administrative powers. According to such provisions, all monopoly agreements and abuse of dominant market positions, except for price monopoly agreements, may be investigated and punished by the SAIC.
MOFCOM is another important antitrust regulator responsible for merger review. Because it applies to both domestic mergers as well as international mergers with Chinese pieces or impact, its merger review has attracted international attention. Since the Anti-Monopoly Law came into effect on 1 August 2008, as of 30 September 2015, there had been 1,222 merger review cases, making MOFCOM one of the most active antitrust regulators.
In general, unless explicitly required by law, individuals and companies in China are not obligated to report any known misconduct to regulators or to the public. However, self-reporting will be taken into account, and likely be appreciated, by authorities in the course of investigations, and may help reduce the severity of any punishment. Take individuals for instance, if an individual self-reports or surrenders before or during the bribery investigation, or cooperates by providing valuable information or other assistance to the investigation, the individual defendant could receive leniency or even immunity during sentencing.9
It should be noted, however, that companies do have certain mandatory reporting obligations if a merger of business reaches the reporting threshold, as discussed above. Under the Anti-Monopoly Law, if a merger reaches a certain threshold, the business operators involved in the merger may need to apply to MOFCOM for approval. MOFCOM usually will conduct pre-acceptance review after the initial submission, and conduct substantive Phase I, II or III review where applicable. Failure to comply with the merger filing requirement may result in a fine or an order to undo the merger. Furthermore, proactive and voluntary self-reporting may lead to remarkable reductions in penalties for cartel cases. Under the Regulations on Procedures for Enforcement of Administrative Law on Anti-price Monopoly10 published by the NDRC, the first cartel operator to report the relevant information on a cartel and provide important evidence may be exempted from punishment, while the second operator to self-report may be granted leniency in the form of a 50 per cent or more reduction of the punishment. The NDRC has released a draft of Guidelines for Application of the Leniency Regime to Cases of Horizontal Monopoly Agreements in February 2016 to supplement current rules regarding self-reporting.
ii Internal investigations
Similar to the self-reporting obligation, a company is not explicitly required under Chinese laws to conduct an internal investigation on any existing or potential wrongdoing. Nevertheless, authorities tend to encourage companies to conduct internal investigations as part of a robust compliance programme. Companies, especially multinational corporations with strong compliance and internal investigation teams, appreciate the value of properly conducted internal investigations in order to make informed decisions about dealing with problems or making voluntary disclosures to the public or to regulators.
In our experience, an internal investigation could be triggered by a report from a whistle-blower, by certain findings during a regular audit, or by a notification of government investigation. Setting up clear goals and parameters for the investigation from the beginning is often the key to a successful investigation. Furthermore, internal investigations need to be properly staffed with appropriate legal, compliance and human rights personnel, as well as external advisers such as outside counsel and forensic experts.
As mentioned above, many internal investigations or regulatory investigations are triggered by information from whistle-blowers. In our experience representing multinational corporations, whistle-blowers are sometimes employees bearing resentment or a grievance against local management. Furthermore, incentives and rewards for whistle-blowers also make them more willing and likely to come forward. In fact, some multinational corporation employees in China are becoming increasingly aware of highly publicised awards to whistle-blowers granted by the United States Securities and Exchange Commission.
It is worth noting that, during the ongoing anti-corruption campaign, Chinese authorities have also started to encourage whistle-blowing with a recent rule on the protection of and award to whistle-blowers stipulated by the Supreme People’s Procuratorate, Ministry of Public Security and Ministry of Finance on 30 March 2016. The new rule offers monetary incentives to whistle-blowers reporting duty-related crimes, as well as protection from the procuratorate.
When an employee blows the whistle, the company is advised to seriously look into the issues raised by the whistle-blower, and where possible, to interview the whistle-blower to receive evidence or other supporting information to ascertain the veracity of his or her allegations before deciding next steps. Under Chinese employment law, companies are prohibited from taking disciplinary actions in retaliation against a whistle-blower. Since Chinese employment law is very pro-employee, companies are advised to involve a Chinese lawyer before evaluating and taking any actions against whistle-blowing employees.
i Corporate liability
Although laws and regulations in China fail to provide a clear criterion to distinguish personal conduct from a company’s conduct, in practice, Chinese authorities, especially the courts, will deem the misconduct as the company’s behaviour if the misconduct was carried out in the name of and benefited the company. For example, the Interim Provisions on Prohibition of Commercial Bribery issued by the SAIC provide that, where a company’s employee sells or purchases commodities for the company by means of commercial bribery, the act shall be treated as the company’s act.11 Moreover, the draft Anti-Unfair Competition Law amendments publicised in February 2016 specify that where an employee commits commercial bribery in order to obtain business opportunities or competitive advantages for the employer, the employer will be deemed to have committed commercial bribery. The only exception is if there is evidence proving that the employee’s bribe-taking is in conflict with the employer’s interests, then the employee’s conduct does not implicate the employer.12
Take the GSK bribery case for example: one very conspicuous charge was that of bribery under Article 393 of the PRC Criminal Law committed by a ‘unit’.13 That is a corporate crime that requires the element of corporate intent with regard to the illegal conduct. According to the PRC Criminal Law, where a company commits the crime of bribery, it shall be criminally fined, and the persons directly in charge of or responsible for the offense shall be sentenced to imprisonment. The Chinese court found GSK China guilty of the crime of corporate bribery since its former management encouraged the bribes to doctors, hospitals and other institutions for the illegal benefits of the corporate entity, including increased revenue and profit.
Sanctions that can be imposed against a company include administrative penalties and criminal penalties. Applicable administrative penalties against a company include warnings, fines, confiscation of illegal gains and illegal assets, suspension of operations, and suspension or cancellation of licences. For example, the PRC Anti-Monopoly Law provides that where an enterprise concludes and implements an illegal monopoly agreement, the authority can issue an order to discontinue such violation, confiscate its unlawful gains, and impose a fine in an amount no less than 1 per cent but no more than 10 per cent of its sales revenues generated in the previous year.
In addition, authorities regulating specific industries may blacklist and bar a company guilty of misconducts from operating certain business within a certain period. For example, the National Health and Family Planning Commission published Provisions on the Establishment of Bad Record of Commercial Bribery in the Area of Medical Supplies and Pharmaceuticals Purchase and Sale, effective in March 2014, which provides that a company with a commercial bribery record will, for a period of two years, be ineligible as a supplier for public medical institutions or the medical and health institutions within the province of the locale of the bribery activities, and a company that has been blacklisted twice within five consecutive years will be blacklisted nationally for two years.
Criminal penalties, on the other hand, could be more severe. In a criminal bribery case, the company may be punishable by fines, while an individual convict may be punishable by imprisonment, fines, confiscation of personal assets, deprivation of political rights (including serving as director or manager of another company), life imprisonment or even the death penalty.
iii Compliance programmes
A robust compliance programme can help educate employees to understand and cease any unlawful or unethical practices, and it can help deter and detect violations, thereby reducing a company’s legal exposure in the new regulatory environment. Although a compliance programme itself is not a valid defence to criminal charges against a company, Chinese regulators and courts will take into consideration a robust compliance programme in deciding penalties. Given that Chinese authorities usually have very broad discretion to determine the extent of administrative penalties, a robust compliance programme is therefore critical.
In recent years, more and more Chinese companies are starting to establish compliance programmes for the company’s management to make decisions and minimise the company’s overall business and legal risks. Most large multinational corporations doing business in China have already put in place compliance programmes due to their home jurisdiction’s requirements, although the local compliance programmes might need to be tailored to reflect market risks and local Chinese laws.
iv Prosecution of individuals
Individuals may be prosecuted for commercial bribery and bribery to state officials. In fact, in our experience, individuals are often the first targets of investigation in a Chinese regulatory investigation. As discussed above, if a company is found guilty of commercial bribery, the managers directly in charge of or responsible for the bribery will be criminally liable and sentenced to imprisonment. For instance, in the GSK China case, the former CEO of GSK China and other senior managers were sentenced to imprisonment.
The Chinese government has in the past focused more on punishing individual bribe-takers, and bribe-givers were often exempted from punishment if they provided useful information for investigating bribe-takers. However, in recent years, the government has started to focus on prosecuting both the bribe-takers and the bribe-givers. According to official statistics, the Chinese government prosecuted a total of 5,512, 7,827 and 8,217 bribe-givers from 2013 to 2015, respectively, indicating a new emphasis on the supply side of bribes. Additionally, as discussed below, Chinese criminal law was also amended to raise the bar for exempting bribe-givers from punishment.
i Extraterritorial jurisdiction
Traditionally, Chinese laws have been designed to have very limited extraterritorial jurisdiction. For instance, although Chinese criminal law applies to criminal activities taking place outside China against Chinese interests or citizens, such application is technically limited to criminal activities that are punishable under Chinese law by a prison term of three years or longer (which technically does not apply to legal persons such as a multinational corporation). Moreover, criminal law does not apply if the conduct in question is not deemed a crime in the jurisdiction where it took place.
In the bribery and antitrust realms, on the other hand, Chinese law begins to exert certain long-arm jurisdictions. In 2011, the criminal law was amended to, among other things, penalise the bribing of foreign public officials or officials of an international public organisation (compared to PRC officials). During the enforcement of anti-monopoly laws, Chinese regulators also investigated and penalised monopolistic acts that took place, in part, outside China. For instance, in the first instance of punishing a cartel outside China in 2013, the NDRC investigated and found that Samsung (Korea), LG (Korea) and four other manufacturers had been holding meetings outside China in connection with price fixing in the liquid crystal display (LCD) market, and the NDRC handed down an administrative fine of 353 million yuan.
ii International cooperation
The Chinese government has always emphasised international cooperation in legal enforcement and cross-border investigations. There are already more than 50 bilateral treaties on judicial or criminal investigation assistance between China and other jurisdictions, including major trading partners such as Australia, Canada, France and South Korea. China is also a member of many multilateral treaties on cooperation on criminal matters, including the United Nations Convention against Corruption.
In recent years, in light of the ongoing anti-corruption campaign, the Chinese government has increased its international cooperation efforts against corruption. In early 2014, the Central Anti-Corruption Coordination Working Team was formed to include representatives from the CCDI, Supreme People’s Court, Supreme People’s Procuratorate, Ministry of Foreign Affairs, Ministry of Public Security, Ministry of State Security, Ministry of Justice and People’s Bank of China, in order to coordinate efforts for seeking fugitives outside China. Soon thereafter, the Chinese government released a list of the 100 most-wanted fugitives involved in corruption, and started to repatriate those fugitives. Needless to say, such efforts require international cooperation. In November 2014, the Beijing Declaration on Fighting Corruption was adopted at the 26th meeting of the Asia-Pacific Economic Cooperation (APEC). Later that year, APEC introduced a network of Anti-corruption Authorities and Law Enforcement Agencies (ACT-NET). As the leader in establishing such a network, China is highly committed to promoting and participating in the detection, investigation and prosecution of corruption.
Although China and the US signed the Treaty on Mutual Judicial Assistance in Criminal Matters as early as 2000, there is no extradition treaty between the two countries. As a result, many Chinese fugitives fled to and hid in the US. During President Xi Jinping’s state visit to Washington, DC in September 2015, President Xi and President Obama agreed to expand law enforcement and anti-corruption cooperation, including enhancing coordination and cooperation on criminal investigations, stepping up the repatriation of fugitives, and greater cooperation on asset recovery issues. In certain cases, Chinese fugitives who fled to the US were prosecuted for money laundering and immigration fraud, and thereafter were transited back to China.
Notwithstanding the above, mutual judicial assistance in practice is not very efficient and effective due to legal complexities and for diplomatic reasons. Similarly, the US Department of Justice can and sometime does make requests to China for information in connection with FCPA investigations, but such requests might not receive prompt responses especially if the investigation is still in its early stage without any formal charges having been brought.
iii Local law considerations
In a cross-border investigation involving Chinese subjects, companies and practitioners need to be mindful of Chinese laws, which could have a vital impact on the investigation process and decision-making. For instance, state secrecy is an important factor to consider when a Chinese subsidiary of a multinational corporation is asked to produce certain documents and information to a foreign authority. State secrecy laws in China have evolved from the earlier regulations in 1950s to the adoption of the 1988 Law on Guarding State Secrets to the recent revision in 2010. Since the definition of state secrecy remains very broad and vague, transferring documents or information without careful review and analysis could be regarded as violation of state secrecy laws and criminally penalised. As a result, extra precaution during cross-border discovery or data transfer is crucial.14
Other than state secrecy considerations, issues relating to trade secrecy and personal privacy are often relevant to cross-border investigations. In recent years, China has strengthened its protection of personal information and criminal penalties have been imposed on the illegal selling and purchasing of personal information. In a broadly reported case related to infringement of personal information, Peter Humphrey, a prominent British forensic investigator, and his Chinese-American wife, were found guilty of collecting and selling personal information illegally and sentenced to imprisonment.
Other local Chinese law considerations include Chinese labour and employment law, which is considerably pro-employee. Since an internal investigation might well reveal misconducts on the part of certain employees, companies may need to take disciplinary actions against employees without violating Chinese labour and employment law. In light of the legal considerations discussed above, it is prudent for multinational corporations or international lawyers to involve a PRC-licensed lawyer in an investigation in China.
V YEAR IN REVIEW
i Anti-corruption and anti-bribery
The Chinese government, led by President Xi Jinping, has in recent years launched a historical and unprecedented anti-corruption and anti-bribery campaign; this campaign is widely regarded as vitally important for the government and the party. By insisting on zero tolerance for corruption and bribery, China has made extraordinary progress cracking down on senior and low-ranking corrupt officials, as well as combating commercial bribery; this has won widespread accolades for the new leadership. Overall in 2015, the anti-corruption campaign continued in full force without any signs of abating, with the following highlights:
The crackdown on corrupt high-level officials and lower-level officials, referred as tigers and flies, continued in 2015
In 2015 alone, more than 20 state officials above the provincial/ministerial level (PML officials) were investigated for corruption. By the end of 2015, the total number of PML officials charged or investigated had surpassed 120 since the 18th CPC National Congress in 2012. On the other hand, the vast majority of anti-corruption cases involved lower level government officials. According to official statistics for 2015, the SPP and local procuratorates in total opened 40,834 cases to investigate crimes related to official misconduct such as abuse of power and corruption. In 2015, Chinese courts nationwide completed criminal trials for about 34,000 corruption and bribery cases, involving 49,000 individuals.
CCP imposes higher anti-graft standards on its members compared to the legal standards on ordinary citizens
In October 2015, the CCP issued its guidelines and disciplinary measures against corruption, which established a stronger prohibition on corruption than applicable Chinese law. These guidelines and measures apply to all CCP members and hold them to a stricter standard for anti-corruption compared to ordinary citizens. For example, according to Article 126 of the newly amended CCP Discipline Regulations, a CCP member’s luxury consumption even with his legitimate income is subject to potential disciplinary actions. In cases where the prosecution decides not to bring a criminal charge against a CCP member because the violation of law is minor, the CCP member may still face party disciplinary action.
China’s anti-corruption efforts spread overseas
Following the ‘Fox Hunt’ operation launched in 2014, the Chinese government started the Sky Net operation in 2015 as part of China’s efforts to crack down on corruption on the international level. With strengthened international cooperation against corruption, corrupt Chinese fugitives have been repatriated from various countries including the US. In fact, as discussed above, during the state visit of President Xi to Washington, DC in late September 2015, an important milestone was achieved on expanding law enforcement and anti-corruption cooperation, including enhancing coordination and cooperation on criminal investigations, repatriation of fugitives, and asset recovery issues.
The anti-graft campaign targeted specific industries with higher commercial bribery risks
In 2015, Chinese regulators continued to target bribery in industries and sectors with higher bribery risk, including the pharmaceutical and healthcare, automobile, oil and gas, banks and financial industries. For instance, the SAIC and its local branches launched several investigations against international pharmaceutical and medical devices companies. The CCDI, on the other hand, sent hundreds of inspection teams to large state-owned enterprises and all major state-owned financial institutions, as well as to watchdogs such as the China Securities Regulatory Commissions, the People’s Bank of China, and the National Bureau of Statistics.
Most importantly, the Chinese government amended criminal laws to further crack down on corruption in 2016, and the Supreme People’s Court and Supreme People’s Procuratorate released New Judicial Interpretation on Bribery and Corruption
On 29 August 2015, China’s National People’s Congress (NPC) adopted Amendment IX to the PRC Criminal Law, which took effect on 1 November 2015. Among other changes to the PRC Criminal Law, Amendment IX contained several provisions on anti-bribery laws and enhanced punishments on bribery crimes, including (1) criminalising bribes to state functionaries’ close relatives or other persons closely related to them; (2) imposing monetary penalties in addition to other punishments for corruption-related crimes; (3) raising the bar for bribe-givers to be exempted from punishment; and (4) replacing specific monetary thresholds that trigger different levels of punishments with more general standards such as ‘relatively large,’ ‘huge,’ and ‘especially huge’.
On 19 April 2016, the Supreme People’s Court and Supreme People’s Procuratorate jointly released Interpretation of Several Issues Concerning the Application of Law in Handling Criminal Cases Related to Graft and Bribery. The new judicial interpretation provided additional clarity to the corruption provisions in Amendment IX of the Criminal Law, most notably by (1) expanding the definition of bribes to include certain intangible benefits; (2) clarifying that bribes given after benefits are received are indeed bribes; (3) adjusting monetary thresholds and standards for bribery prosecutions (in part to reflect inflation since the old thresholds were established under the Criminal Law in 1997); and (4) providing additional details on the requirements and benefits of voluntary disclosure.
ii Antitrust and anti-monopoly
There have also been major developments in the area of antitrust and anti-monopoly, spearheaded by the three regulators including the NDRC, MOFCOM and the SAIC. One precedential case involved Qualcomm, which resulted in a fine of more than 6 billion yuan imposed by the NDRC, or roughly 8 per cent of Qualcomm’s China sales in 2013 when the investigation commenced. In another high-profile case, the NDRC imposed a fine of 407 million yuan on an ocean freight cartel in December 2015.
In the field of merger filings, MOFCOM received 335 merger cases in 2015 and completed review of 319 mergers, of which 317 mergers were unconditionally approved and two mergers were conditionally approved. MOFCOM also imposed fines on mergers not voluntarily filed for MOFCOM review and approval.
Lastly, in September 2015, the SAIC imposed the first administrative penalty arising from refusal to cooperate with a monopoly investigation, an obligation imposed by the Anti-Monopoly Law and Provisions on the Procedures for AICs to Investigate Cases Concerning Monopoly Agreements and Abuses of Dominant Market Positions. As the first such case, it showed the SAIC’s determination to strengthen its supervision on monopolies.
VI CONCLUSIONS AND OUTLOOK
In the anti-bribery arena, on 25 February 2016, the draft amendment of the Anti-Unfair Competition Law (AUCL) was made public for comments. The proposed AUCL addresses issues such as misleading publicity, improper promotion through rewards or prizes, infringement of trade secrets and commercial bribery. Compared with the current AUCL promulgated in 1993, the proposed AUCL provides a clearer definition of commercial bribery and gives the SAIC more regulatory power to conduct investigations. The Proposed AUCL attracted substantial attention and comments from the public, and the Legal Office of State Council organised discussions and meetings with participation from industry, academic and legal professionals.15 It is expected that the proposed AUCL will be promulgated in late 2016 or 2017. On the other hand, the past five months have seen high-profile investigations against approximately 18 PML officials, such as the governor of Sichuan province, and the vice governors of Sichuan, Guangdong, Jiangsu and Anhui provinces. Multinational corporations, especially those in high-risk industry and sectors, will continue to be the subject of investigations into their business conducts.
In the area of antitrust, in February 2016, the NDRC released and solicited public comments on drafts of two regulations, including Guidelines for Business Operators’ Commitments in Anti-monopoly Cases (Commitments Draft) and Guidelines for Application of the Leniency Regime to Cases of Horizontal Monopoly Agreements (Draft). These drafts, once officially promulgated, will help to improve the efficiency of anti-monopoly law enforcement, and conserve administrative law enforcement resources. We believe that antitrust regulators will continue to supplement regulations to the Anti-Monopoly Law and modernise antitrust investigation.
Overall, the Chinese government has increasingly strengthened anti-bribery and antitrust enforcement in recent years. The Chinese authorities, empowered by laws and regulations, have clearly demonstrated their willingness to conduct investigations into these areas. With five months having passed in 2016, the outlook for investigation is pretty obvious – the Chinese government will continue to enhance anti-bribery and antitrust enforcement and investigation in the foreseeable future.
1 Jianwei ‘Jerry’ Fang is a partner and Yuan ‘Joe’ Wang is a senior attorney at Global Law Office. The authors wish to thank Yimei Qiao, Jie Gao and Zhengzheng Mai for their assistance with the preparation of this chapter.
2 See Article 16 of the Law on Anti-Unfair Competition.
3 See Article 17 of the Law on Anti-Unfair Competition.
4 See Article 58 of the Drug Control Law.
5 See Article 7 of the PRC Bidding Law.
6 See Article 71 of the Law on Stated-owned Assets of Enterprises.
7 See Article 72 of the Law on Stated-owned Assets of Enterprises.
8 See Article 3 of the Provisions on Anti-Price Monopoly.
9 See Supreme People’s Court (SPC) and Supreme People’s Procuratorate (SPP) Opinions on the Application of Law in Handling Criminal Cases of Commercial Bribery and Opinions on the Determination of Voluntary Surrender and Meritorious Service and Other Circumstance for Sentencing in Handling Duty Crime Cases.
10 See Article 14 of the Regulations on Procedures for Enforcement of Administrative Law on Anti-price Monopoly.
11 See Article 3 of the Interim Provisions on Prohibition of Commercial Bribery.
12 See Jianwei ‘Jerry’ Fang, Alen L Zhou and Jieqiong Fei, Bribery watch: draft Anti-unfair Competition Law cracks whip, published on China Law & Practice on 11 March 2016.
13 See Martin Rogers, B Chen Zhu, Jianwei ‘Jerry’ Fang, GSK: A Case Study, on China Law & Practice on July/August 2014.
14 See Jianwei ‘Jerry’ Fang and Jieqiong Fei, Chinese ‘state secrets’ demystified, published on China Law & Practice on 18 January 2016.
15 The first author of this chapter, Jianwei ‘Jerry’ Fang, was also invited to the meeting and provided commentary on commercial bribery provisions.