The year 2018 marked the tenth anniversary of the implementation of the PRC Anti-monopoly Law. The most influential event was the integration of the three former antitrust enforcement agencies. In 2018, the antitrust enforcement functions of China's three former antitrust agencies – the National Development and Reform Commission (NDRC), the State Administration for Industry and Commerce (SAIC) and the Ministry of Commerce (MOFCOM) – were consolidated into a newly established agency, the State Administration for Market Regulation (SAMR). The establishment of the SAMR was approved by the National People's Congress on 17 March 2018. The SAMR is responsible for the supervision of markets and the maintenance of market order. The SAMR comprises 27 divisions, including the Anti-monopoly Bureau, which is responsible for the supervision and enforcement of the Anti-monopoly Law. The bureau's functions include drafting antimonopoly rules and guidelines, enforcing the Anti-monopoly Law, assisting enterprises in responding to foreign investigations, promoting the fair competition review system, undertaking international cooperation and undertaking the day-to-day work of the State Council Anti-monopoly Commission, etc.

Generally, antitrust enforcement has become the norm. However, the total amount of antitrust fines imposed by the SAMR in 2018 was relatively low compared with that in previous years – only 183.6 million yuan. While in 2017 the total amount reached more than 600 million yuan. According to the information disclosed in an SAMR meeting,2 the SAMR has initiated 32 investigations on alleged monopoly agreements and abuse of market dominance in 2018. Among them, 15 cases were closed. The penalties touched a variety of industries (transportation, pharmaceutical, nature gas, electricity and furniture, etc.). It is notable that in 2018, the SAMR imposed a fine of 84 million yuan in total on two subsidiaries of Petro China Company Limited (Petro China) for resale price maintenance. Also, the identification of competitors in the Shenzhen tally companies case demonstrates SAMR's strict approach and its zero tolerance for monopolistic behaviours.

In 2018, the SAMR maintained a consistently rigorous and prudent attitude towards merger control review. The number of cases concluded was significantly increased and the efficiency was remarkably improved. As to the cases that were conditionally approved, the SAMR imposed various tailored conditions. In addition, the SAMR investigated more non-filing cases and imposed more penalties on the non-filers compared with 2017.

i Prioritisation and resource allocation of enforcement authorities

Before the integration, the three antitrust enforcement agencies had their own responsibility respectively. The NDRC was responsible for price-related antitrust enforcement; the SAIC was responsible for antitrust enforcement that was not directly related to price; while MOFCOM was mainly focused on merger control review. And the Office of State Council Anti-monopoly Commission was seated in MOFCOM. After the integration, all of the above antitrust enforcement functions have been transferred to the Anti-monopoly Bureau of the SAMR.

As to legislative work, the SAMR promulgated two sets of measures on the administrative penalty procedures to regulate the investigations initiated by the SAMR. On 26 December 2018, the SAMR promulgated the Interim Provisions on Administrative Penalty Procedures of the SAMR3 and the Interim Measures for Administrative Penalty Hearings of the SAMR.4 These two sets of measures apply to the investigations launched by the SAMR, including investigations into antimonopoly behaviours. The two sets of measures clarify the principle of case jurisdiction, rules for investigation, and evidence collection, retrieval, production and preservation, and hearing procedures. Furthermore, the two sets of measures regulate the time limit for the case handling. After the implementation date of these measures (1 April 2019), it is expected that the investigation, hearing and penalty procedures will be more transparent and predictable.

Regarding the legislature in merger control review, the SAMR revised seven guidelines in 2018. However, the amendments concerned only wording changes due to the institutional reform. There is no material change compared with the guidelines implemented by MOFCOM previously.

The SAMR was relatively active in its antitrust enforcement practices after integration. The agency began to publish its penalty decisions on its website from June 2018. In 2018, the SAMR published seven cases and its local counterparts published 14 cases. In addition, the SAMR and its local counterparts published five cases that were terminated or suspended without any penalties.

As to merger control review, according to data published on its website, the SAMR unconditionally concluded 444 cases in 2018, a significant increase from 325 in 2017. Furthermore, four cases were conditionally cleared in 2018. Meanwhile, the SAMR significantly strengthened its supervision of and penalties for non-filing parties. A total of 13 penalty decisions were published throughout the year, which reached a peak of non-filing enforcement crackdown.

ii Enforcement agenda

The SAMR stated in its press conference5 on 16 November 2018 that the antitrust enforcement authority has been keeping a close eye on suspected monopolistic behaviours in key sectors that are of particular concern to the general public such as automotives, gas, power supply, water supply, telecommunications, pharmaceutical, electricity, education, finance, insurance and architecture, etc. Additionally, the SAMR will enhance international coordination regarding competition policies and antitrust enforcement, as the status of competition rules in the international economic and trade rules system is increasingly important. The newly established antitrust agency will strengthen antimonopoly international exchanges and cooperation; safeguard fair competition in the international market; strengthen consultations on multiple and bilateral competition issues; and establish rules for protecting investment and trade liberalisation.

In terms of merger control, the SAMR's law enforcement maintained MOFCOM's professionalism and stability after the integration. According to data released by the SAMR, the number of unconditional approved cases in 2018 increased significantly compared with that in 2017. However, in practice, strict rules concerning the material and data required by the SAMR still apply. In particular, during the pre-review stage before official case acceptance, notified parties must often submit detailed materials. Therefore, this requirement may also extend the wait time before case filing. As to conditionally approved cases, the SAMR attached various tailored conditions specifically addressing competition concerns. In addition, a number of 'gun-jumping' cases were published in 2018 and the increased penalties against non-filers showed that the SAMR is strengthening its enforcement crackdown on non-filers.


The number of cartel cases reached a peak in 2018. The SAMR and local agencies concluded and published 13 cartel cases in 2018. The investigation and penalties targeted industries including manufacturing, training, shipping and ports, architecture, gas, medical, furniture, engineering testing, fireworks, etc. However, the amount of fines imposed by the SAMR was relatively low compared with that of previous years. The most significant case was the Tianjin Storage Yard cartel case,6 in which 17 enterprises were imposed a total fine of 45 million yuan. In addition, the identification of competitors was further clarified by the SAMR in the Shenzhen tally companies case.7 Also, trade associations remained one of the focuses in the antimonopoly law enforcement by the SAMR. Trade associations were involved in five out of the 13 cartel cases.

i Significant cases

Shenzhen tally companies case

On 20 July 2018, the SAMR published a decision fining two Shenzhen tally companies a total of 3,163,108 yuan for entering into a horizontal monopoly agreement. According to the decision, China United Tally Shenzhen and China Ocean Shipping Tally Shenzhen reached and implemented an agreement to divide sales and service areas for the tallying market in the western area of the Port of Shenzhen. In addition, the two companies raised tallying prices from May 2013 to August 2016.

The notable feature of this case lays in the identification of the companies as independent competitors, for the two companies share the same shareholder, who owns a 50 per cent share in the two companies respectively. First, the SAMR found that the companies' ownership structures did not negate their competitive relationship. Although the shareholder owned a 50 per cent interest in both companies, it performed different roles for each. The shareholder was the controlling shareholder in one tallying company while it did not hold a controlling position in the other tallying company. Second, the SAMR found that the two companies had been independently operated and managed. In addition, the SAMR relied on the companies' articles of association and inquiry records of relevant staff to prove that there had been a competitive relationship between the two tallying companies. However, such detailed information was not disclosed in the SAMR's decision.

During the investigation, the two companies argued that they were not competitors since they were both affiliates within the same group. However, the SAMR dismissed this argument for a number of reasons. It noted that according to the relevant provision regulating port management issued by the State Council and the Ministry of Transport: (1) port tally companies should introduce a competition mechanism to the market; and (2) any two tally companies in one port cannot be controlled by the same investment entity.

It seems that the SAMR adopts a strict view on the identification of competitors. Normally, if one shareholder owns 50 per cent of the shares respectively in two companies, the two companies will be regarded as jointly controlled by the same shareholder (i.e., the same entity). Moreover, the fact that two companies are actually competing with each other does not necessarily mean that they constitute competitors in the sense of the Anti-monopoly Law, for the reason that different subsidiaries in the same group can also compete with each other.

This is one of the first cases to be announced by the newly established SAMR and may therefore indicate its attitude towards certain industries and behaviours. In particular, the way in which the competitors in this case were identified could raise new compliance challenges for companies operating business in China.

Tianjin Storage Yard cartel case

On 16 November 2018, Tianjin Development and Reform Commission concluded the most high-profile cartel case of the year in terms of the total amount of penalties. A total of 17 port logistics companies were accused of reaching and implementing price collusion in connection with general surcharges and unloading charges in Tianjin port. The 17 port logistics companies were fined a total of 45 million yuan.

The SAMR's probe into this case was triggered by a voluntary self-reporter – Tianjin Waidai Logistic, which was eventually exempted from punishment by virtue of the leniency programme.

According to the penalty decision, from 2010, the port logistics companies had discussed the price of general surcharges and unloading charges in Tianjin port by means of signing proposals, holding meetings, and exchanging emails and telephone discussions. Particularly, these logistics companies reached many proposals on fixing the price of general surcharges and unloading charges in December 2010, April 2011, March 2012 and December 2012. In this way, these logistics port companies formed a relatively stable price alliance with each other.

According to the evidence, the involved companies collectively increased the price of general surcharges and unloading charges several times. The duration and degree of such price rises were basically the same as those agreed in the monopoly agreements. The SAMR concluded that the evidence showed that the involved enterprises reached and implemented the horizontal monopoly agreement, which violated Article 13 of the Anti-monopoly Law.

As to the penalties, considering the responsive cooperation, rectification made by the companies involved, along with the nature, extent and duration of the illegal behaviours, the SAMR imposed fines amounting to 2 to 5 per cent of their respective revenues in 2017. However, the first reporter that voluntarily disclosed its collusion to the SAMR enjoyed the benefits of the leniency programme – being exempted from penalties.

In recent years, the antitrust authorities have paid great attention to the shipping and port industry. In late 2016, the NDRC launched investigations into container shipping companies for suspected price fixing.8 A total of 18 shipping companies voluntarily reduced their terminal handling charges following the NDRC's probe. Before that, the NDRC cracked down on international ocean shipping companies9 in 2014. Furthermore, in 2018 the SAMR remained its concerns on the shipping and port industry and concluded three cases in this industry. The anti-monopoly enforcement authorities will keep an eye on this industry and regulate the anticompetitive behaviours as well as the disorder phenomenon in the coming year.

ii Trends, developments and strategies

2018 saw a significant increase in the number of cartel cases. However, the total amount of penalties was relatively low. Trade association remains the target of antitrust agencies. Five of the 13 cases involved trade associations. For example, Zhongshan Gas Trade Association was fined 150,000 yuan by Guangdong Provincial Development and Reform Commission for organising its members to conduct market segmentation10 and Beihai Driver Training Association was fined 250,000 yuan for organising its members to reach and implement price collusion agreements.11 Trade associations are self-regulatory agencies that provide industry services, of which members are usually 'peer' competitors that share a fierce competitive relationship. Industry associations cannot organise their members to reach and implement horizontal monopoly agreements even though industry associations may be exploited by some leading members on occasion.

Moreover, the SAMR holds a strict view in cartel cases, particularly on the identification of competitors. Two companies in the same industry with their 50 per cent shares respectively owned by the same shareholder may still be regarded as competitors. When enterprises assess whether their affiliates could be identified as competing parties, the equity structure should not be the only consideration. The actual operating situation ( the decision power, the board of directors and the concurrent of senior executives, etc.) should also be considered.

iii Outlook

The supervision and investigation of cartel cases remains the focus of the antitrust authorities. It is expected that in 2019 the SAMR and local agencies will reinforce their supervision on cartel and enforcement efforts so as to uphold fair market competition. According to the Interim Provisions on Administrative Penalty Procedures of the SAMR promulgated in 2018, the provincial level Administrations for Market Regulation (AMRs) will be responsible for enforcing the antimonopoly law in their respective province. However, the SAMR may take over the antitrust probe from local AMRs when it comes to high-profile cases. At the same time, the authorities will strengthen their cooperation with competition authorities from other jurisdictions in dealing with international cartel cases.

Moreover, the SAMR published the Rules on Prohibition of Monopoly Agreements for public consultation on 3 January 2019. The formal rules are expected to be published in 2019. The guidelines may provide enterprises with a more comprehensive and clearer guidance on antimonopoly compliance.


In 2018, the SAMR and local agencies concluded four abuse of dominance cases. Among these cases, two cases were terminated without any penalties. This shows the importance of active rectification and cooperation during the investigation.

Furthermore, the antitrust agencies concluded and published only one case in relation to vertical restriction cases. However, the investigation on resale price maintenance was still one of the key antitrust enforcement priorities.

i Significant cases

Chlorphenamine APIs case12

On 30 December 2018, the SAMR issued its penalty decisions against Hunan Erkang Pharmaceutical Management Co, Ltd (Erkang) and Henan Jiushi Pharmaceutical Co, Ltd (Jiushi) for their abuse of dominance in relation to chlorphenamine active pharmaceutical ingredients (APIs). The two enterprises were fined a total of 10 million yuan.

The relevant market in this case was chlorphenamine APIs, which are widely used to produce anti-allergy medicine. In China, there are only three licensed manufacturers of chlorphenamine, including Jiushi, India Supriya Lifescience Ltd (Supriya India) and Shanghai Harsen Morden Pharmaceutical Co, Ltd. Erkang did not engage in production of cholorphenamine. However, Erkang signed an exclusive distribution agreement with Supriya India to control the source of import of cholorphenamine. On the other hand, Erkang entered into a strategic cooperation agreement with Jiushi in February 2018 to collectively supply cholorphenamine. According to the penalty decision, the combined market share of Erkang and Jiushi reached 96.38 per cent in 2017. Therefore, the SAMR deduced that Erkang and Jiushi collectively held the dominant market position in chlorphenamine APIs.

According to the penalty decision, Erkang and Jiushi abused their dominance by: (1) refusing to supply to downstream purchasers on the grounds that chlorphenamine was out of stock or other reasons that led to unavailability of chlorphenamine; and (2) bundling sales of chlorphenamine APIs with Erkang's other pharmaceutical accessories without a valid reason.

In addition to the aforementioned behaviours implemented by Erkang and Jiushi, Erkang had raised the price of chlorphenamine to 2,940 yuan per kilogram, which was four times the average purchase cost of chlorphenamine as at July 2018. Furthermore, the SAMR found that the price was also much higher than 700 yuan per kilogram, which was offered by Jiushi to its downstream manufacturers.

The SAMR concluded that Erkang and Jiushi had abused their dominance and imposed a total fine of 10 million yuan. In addition to refusing to supply without a valid reason and bundling sales, Erkang also sold chlorphenamine at unfairly high prices. That may be the reason why Erkang was fined 8 per cent of its 2017 revenue, which was relatively higher than the penalties imposed on the other pharmaceutical violators. Meanwhile, 8 per cent of revenue was the highest percentage out of the penalties imposed in 2018.

In recent years, antitrust law enforcement authorities have shone a spotlight on enterprises engaged in the manufacture and sale of APIs. The legal risks associated with the following behaviours in APIs industry are relatively high: (1) refusal to deal; (2) imposing unfair prices; (3) tying and bundling; and (4) imposing unreasonable trading conditions, etc.

Petro China case13

On 26 January 2018, the NDRC penalised two subsidiaries of Petro China – PetroChina Daqing Oilfield Natural Gas and PetroChina Natural Gas Sales Daqing – for their maintenance of the minimum resale price on their downstream distributors for gas sold to consumers. The SAMR published the above penalty decision on 27 July 2018. According to the penalty decision, the two Petro China subsidiaries had been hit with a total fine of 84.06 million yuan, amounting to 6 per cent of their respective revenues for the previous year.

The SAMR found that the two branches had reached and implemented a minimum resale price maintenance agreement with 13 downstream compressed natural gas filling stations in Heilongjiang Province. According to the decision, the two branches conducted the following wrongdoings:

  1. They held meetings with the downstream purchasers to discuss the minimum resale price and arrange for the signing of such agreements. Also, they circulated a supplementary notice to enhance the implementation of such vertical agreements.
  2. The two companies supervised the involved companies to implement such vertical agreements and required the downstreamers to submit information of targeted consumers, volumes and selling prices at a regular interval. In addition, the two companies built up a group to supervise the implementation of the agreements by conducting on-site inspections.
  3. The two companies threatened to reduce or suspend gas supplies to the downstreamers that refused to obey the policy of resale price maintenance.

The SAMR held that the two companies had violated Article 14(2) of the Anti-monopoly Law by concluding and implementing a monopolistic agreement to restrict the minimum resale price of gas. The companies' violation had severely restricted and eliminated competition in the natural gas market, undermined fair competition and impaired consumer interests. The SAMR imposed fines equivalent to 6 per cent of the two companies' respective revenues for the last year. PetroChina Daqing Oilfield Natural Gas was fined 38.76 million yuan and PetroChina Natural Gas Sales Daqing was fined 45.3 million yuan.

This case is a typical monopolistic case involving resale price maintenance. The entities that were penalised are subsidiaries of PetroChina, a centrally administered state-owned enterprise. And the industry involved in this case is one of the natural monopoly industries. The case implies that the SAMR is expected to be more aggressive in its antitrust enforcement. Whether a company is a foreign company or state-owned, and whether the related industry is or is not a special industry, if a company violates the Anti-monopoly Law, it should expect to be scrutinised by the SAMR.

ii Trends, developments and strategies

As in the past, antitrust law enforcement authorities have kept an eye on the medical industry, particularly on the enterprises engaged in the manufacture and sale of APIs. The dominant position of the APIs enterprises can be explained for the reasons that: (1) few enterprises actually compete in certain APIs markets; (2) APIs manufacturers provide the active ingredients of drugs with a strong ability to control the market and downstream pharmaceuticals have no choice but to submit to and rely on the APIs manufacturers; and (3) China has a strict certification system for supervising the production of APIs and it is difficult to enter into APIs markets.

Another trend in the cases concluded by the antitrust authorities is the increase of terminated cases. The decisions to terminate various investigations revealed that in such cases, the companies submitted their commitments to rectify their behaviours and asked for a suspension. The antitrust enforcement agencies decided whether to suspend the investigation based on the nature of the illegality of violations, the duration of the illegal activities, the cooperation with the investigation and the commitment of rectification submitted by the companies. According to the published cases, normally one year after rectification, the companies involved were allowed to submit an application for termination of the investigation to the antitrust enforcement agencies. The agencies exercise discretional power when deciding whether to terminate an investigation according to the performance of rectification.

iii Outlook

In 2018, the SAMR and local enforcement agencies announced five cases in which the investigation was suspended or terminated. The termination of investigated cases reflects the importance of cooperation and active rectification by the relevant enterprises under investigation. All of the five cases targeted abuse of market dominance, focusing on the wrongdoings of tie-in sales and imposing unreasonable conditions.

Compared with cartel cases, the number of dominance cases and resale price maintenance cases was small in 2018. This is possibly because the SAMR was busy with the establishment and integration of the new antitrust authority; as the investigation of and the evidence collection in dominance cases are much more difficult than cartel cases. It is estimated that the SAMR will strengthen its crackdown on dominance cases and resale price maintenance cases in 2019, particularly with the assistance of local antitrust authorities.


According to the data released on the SAMR's website, in 2018 the SAMR unconditionally approved 444 cases, a significant increase from 2017 (325 cases). Among these cases, 359 cases were concluded in Phase I (30 days from the acceptance date), accounting for 80.8 per cent of all concluded cases. The conclusion rate increased considerably compared with that in 2017 (76.9 per cent cases concluded in Phase I).

As to simple cases, a total of 362 cases were concluded in 2018, accounting for 81.53 per cent of all cases. The proportion of simple cases increased slightly compared with that of 2017 (the number of simple cases accounting for around 80.6 per cent of total cases in 2017). On average, simple cases took 16 days to be concluded, which is notably reduced from 24 days in 2017. And 99.4 per cent of the simple cases were cleared within 30 days after they were accepted by the SAMR. This demonstrates that simple case procedure plays an active role in enhancing the efficiency of concentration filing, particularly in the reduction of reviewing time.

i Significant cases

Penalties for non-filers

In 2018, the SAMR significantly strengthened its supervision of and penalties for non-filing parties. Over the course of the year, 13 decisions were published, a sign that the SAMR is cracking down on non-filers. By the end of 2018, the SAMR/MOFCOM had released 30 non-filing cases and imposed total fines of 9.85 million yuan on 47 undertakings. The biggest fine issued was 400,000 yuan, while the smallest was 150,000 yuan. According to the statistics, since the merger review function was transferred from MOFCOM to the SAMR, penalty amounts have increased notably. The fine imposed on each party to a non-filing joint venture increased from 150,000 yuan to 300,000 yuan. The SAMR initiates investigations of non-filing based on self-observation, third-party reporting, and voluntary reporting by notifiable parties.

The non-filing of notifiable acquisitions is usually referred to as 'gun jumping'. The most common oversight of notifiable parties is the non-fulfilment of filing obligations in a step-by-step acquisition. The implementation of the first-step transaction indicates that the concentration has started; failure to file first-step transactions with the SAMR will constitute gun jumping. A typical case is the acquisition of Eldorado by Paper Excellence BV.14 The SAMR considers the object of the acquisition and the relationship between the different steps. Notifiable parties must submit their notifications and file with the SAMR before implementing the first step of a package deal composed of several steps.

In addition, the SAMR has no mercy on the non-filers that failed to file with the competition agency long time ago; and it conducts retrospective investigations once a failure has been discovered. For example, Linde Hong Kong was penalised three times in 2018 for its non-filing of three former joint ventures. These joint ventures were established in either 2011 or 2012. It is notable that the SAMR severely punished non-filing that happened seven years ago.

The SAMR may impose a maximum fine of 500,000 yuan on non-filers. The nature, extent and duration of the non-filers' behaviour must be considered, as well as the transaction's competitive effects. In addition to fines, penalties may include (1) the cessation of the concentration; (2) the disposal of shares or assets by a specified deadline; (3) the transfer of certain business operations by a specified deadline; and (4) other necessary measures (e.g., publication of the penalty decision). In addition, once penalties have been published, the non-filer's business reputation and social image will be damaged and its subsequent notification or filings with other government agencies may be adversely affected.

Bayer's acquisition of Monsanto15

On 13 March 2018, MOFCOM conditionally approved the acquisition of Monsanto by Bayer. The case was filed on 5 December 2016 and accepted by MOFCOM on 24 February 2017 after withdrawal and refiling by Bayer due to the change of the agent firm. On 8 September 2017, the parties withdrew the case again and further refiled the case after several days.

MOFCOM found that Bayer and Monsanto were overlapped in 12 product markets (including different kinds of vegetable seeds, traits and digital agriculture) and vertically connected in three markets. MOFCOM believed that the concentration might have the impact of eliminating and restricting competition on the Chinese market of non-selective herbicides, vegetable seeds (e.g., long-day onion seeds, carrot seeds under cutting process for sales, and large-fruit tomato seeds), and the global market of corn, soybean cotton and oilseed rape traits and digital agriculture.

Bayer and Monsanto were two global agriculture giants and collectively owned over 60 per cent of the overlapped product markets. The total market share of the two parties was much higher than the other competitors in the relevant market. MOFCOM concluded that the transaction would eliminate the competition between the two parties and would have adverse effects on the relevant markets. Also, MOFCOM believed that Bayer had the motive and ability to conduct bundling sales of seeds, traits and agrochemical products concerning non-selective herbicides. And there were not likely to be any new effective competitors in the relevant Chinese market in the short term. In addition, MOFCOM believed that the concentration would have negative impacts on the technical progress in relevant traits. Before the transaction, the two parties both had the power of innovation in the market of digital agriculture with large investments in research and development. Upon completion of the transaction, the entity may reduce its input in innovation and therefore would have adverse impacts on technical progress. This is the second profound case in terms of concern over innovation in the industry of agricultural chemistry. In the Dow/DuPont case,16 MOFCOM also considered that the combination of the two chemical giants would reduce the motivation and investment in innovation.

MOFCOM notified the filing parties of the adverse effects on the relevant market and held several rounds of negotiations with the parties. Upon evaluation, MOFCOM concluded that the final remedy proposal submitted by the parties would reduce the negative effects of the concentration. The conditions imposed on the entity after the concentration included: (1) to divest Bayer's business of vegetable seeds worldwide, including relevant facilities, personnel, intellectual property rights and assets; (2) to divest Bayer's non-selective herbicide business; (3) to divest Bayer's corn, soybean, cotton and oilseed trait business; and (4) to allow Chinese agricultural software and application developers to connect their software to the platform of the combined entity within five years on the basis of fairness, reasonableness and non-discriminatory clauses, and allow all Chinese users to register and use the products.

The merger of Essilor International and Luxottica Group17

On 25 July 2018, the SAMR conditionally cleared the merger of Essilor International and Luxottica Group. This marked the first conditional merger clearance case reviewed by the SAMR. The SAMR concluded that the proposed merger might exclude or restrict competition in the Chinese wholesale markets for optical lenses, optical frames, and sunglasses, as well as the Chinese retail market for glasses products.

The parties submitted the merger filing on 23 May 2017 and the SAMR officially accepted the case on 17 August 2017. The parties withdrew their filing on 11 February 2018, which was near the end of extended review period. The SAMR accepted the refiling of the parties on 7 March 2018 and conditionally cleared the merger in Phase II. It took more than 400 days from the date of first submission to the date of conditional clearance. During the case review, the SAMR solicited feedback from relevant government departments, industry associations and downstream enterprises, and held several seminars to assess the definition of the relevant markets and the structure of the market competition. Also, the SAMR hired an independent consulting party to conduct economic analysis on the proposed concentration.

The SAMR defined seven relevant product markets – six wholesale markets and one retail market. As to the geographic market, the geographic market of the wholesale products was China, and the geographic market of the retail glasses was the Chinese urban market. The parties collectively owned an almost 50 per cent market share in the relevant product markets, while the market share of the other competitors was relatively lower than the combined entity. After analysis, the SAMR concluded that:

  1. the proposed transaction was expected to further strengthen the combined entity's control over the wholesale markets for mid-to-high-end optical lenses, low-end optical lenses and the mid-to-high-end sunglasses;
  2. the proposed transaction would increase the likelihood of the combined entity engaging in bundling or tie-in sales in the market for optical lenses, optical frames and sunglasses; and
  3. the proposed transaction may eliminate or restrict competition in the glasses retail market by enforcing unfair trading terms and refusing to supply popular products through a special programme.

Therefore, the SAMR concluded that the combination of the two eyeglasses enterprises might have anticompetitive impacts on the Chinese relevant markets. After multiple rounds of negotiations, the SAMR concluded the remedies proposed by the two enterprises would eliminate the impacts of the combination.

Essilor, Luxottica and the combined entity are required to fulfil the following obligations: (1) not engaging in the tie-in practice nor imposing unreasonable trading conditions without justifiable reasons; (2) making their special programme available to Chinese eyeglasses stores and let the stores participate in the programme by their sole discretion; (3) not imposing exclusive conditions on Chinese stores nor prohibit or restrict Chinese stores from selling lenses, frames, and sunglasses supplied by competitors; (4) supplying eyeglasses products and necessary trademark licences on fair, reasonable, and non-discriminatory terms; (5) not selling eyewear products at below-cost prices without justifiable reasons; and (6) reporting to the SAMR on any proposed acquisition of a Chinese target within 10 working days of signing the acquisition agreement.

In this case, the SAMR hired a third party to study the possible impacts caused by the concentration, and made the prohibition of tie-in practice one of the remedies to approve the combination. Additionally, Chinese antitrust agency increasingly relies on a variety of analysis tools to assist in the case review (e.g., economic analysis, research reports from third parties).

United Technologies' acquisition of Rockwell Collins18

On 23 November 2018, the SAMR conditionally approved the proposed acquisition of Rockwell Collins by United Technologies. The SAMR was concerned that the transaction might eliminate or restrict competition in 14 markets. The SAMR believed that after the transaction the combined entity's market share in the 14 markets would reach 50 per cent, even almost 70 per cent in some markets. The SAMR concluded that:

  1. the transaction may further enhance United Technologies' market power in each of the 14 overlapped markets;
  2. the transaction may eliminate the close competition between the two companies in the market for rudder brake pedal systems, while before the transaction the two parties were two major players closely competing with each other;
  3. after the concentration, the parties would have the ability to conduct bundling sales, which would eliminate and restrict competition in the relevant market, particularly for the markets in which downstream aircraft manufacturers have weak bargaining power; and
  4. the transaction may also discourage United Technologies from investing in the research and development of innovative products in the market for oxygen-supply systems. Also, United Technologies may slow the pace of new-product launches, which will eventually have an adverse impact on competition and technological progress.

It is notable that the SAMR narrowed the total market volume of some overlapped markets in this case. The SAMR believed that the concentration would result in the parties obtaining a share of 65 to 70 per cent in the global adjustable horizontal stabiliser actuator market. Based on the product's total volume, the market share would be only 40 to 45 per cent after the acquisition. However, the SAMR believed that the part produced by aircraft manufacturers for their self-use would not enter the market; as such, that part was excluded. This would result in the market share of the merged entity increasing to 65 to 70 per cent after the acquisition. The exclusion of the self-use part from the calculation of market share also happened in the global rudder brake pedal system market. This calculation method would make the total market volume shrink and the market share increase, which would have a material change on the evaluation of the competition.

The SAMR cleared this case with both structural and behavioural remedies. Compared with structural remedies, behavioural remedies were customised. The SAMR attached various customised conditions closely related to competition concerns after carefully studying and analysing the relevant market, the characteristics and competition status of the upstream and downstream market, and the economic analysis. The structural remedies included the divesting of business units and R&D projects; and the behavioural remedies included the prohibition from tying or proactively bundling, or imposing other unreasonable conditions on transactions, to force Chinese customers to purchase product portfolios. Also, the combined entity shall not substantially change their current business models in some affected markets if the demand for related products still exists in Chinese markets.

Furthermore, the SAMR had particular concerns regarding possible bundling in complementary product markets. The SAMR may intervene when the economic analysis shows that the merged entity may gain more profits by bundling or tying after the concentration. The SAMR was concerned with the possible leverage effect associated with the bundling or tying. The entity may leverage its power in a dominant market into the other market and therefore damage the market competition.

ii Trends, developments and strategies

The SAMR has become more stringent and detail-oriented with respect to the analysis of relevant markets and the competition impact for mergers.

All the four conditionally cleared cases in 2018 were withdrawn just before the review period expired and subsequently refiled. The long review period observed in each of the above cases was partly due to the complicated market and a lack of authoritative data. Case withdrawal can buy the parties more time to communicate with the SAMR if the concentration would otherwise be prohibited due to the lack of satisfactory commitments. The long review process for the conditionally approved cases also reflects that the SAMR takes a prudent approach by consulting extensively with third parties, including industry regulators, industry associations, upstream and downstream enterprises and competitors.

In contrast, for the cases unconditionally approved, the rate of case review increased significantly. Among the unconditionally approved cases, 80.8 per cent of cases were cleared in Phase I (i.e., 30 days from the acceptance date). In particular, for the cases applied to the simple case review procedure, 99.4 per cent cases were concluded in Phase I. On average, simple cases took only 16 days to be concluded. It is worth mentioning that the SAMR may not officially accept a case unless the materials can satisfy the requirements.

iii Outlook

It is expected that in 2019 the SAMR's merger control enforcement will maintain its professionalism and stability. In addition, the large number of gun-jumping cases and the increased fines indicate that the SAMR is gradually strengthening its enforcement crackdown on non-filers. Furthermore, the proposed revision of the Anti-monopoly Law is expected to increase the penalties for non-filing.


i Pending cases and legislation

In May 2018, the SAMR raided the China offices of memory chip makers Micron, Samsung, and SK Hynix, all of which are major players in the market for dynamic random access memory (DRAM). The raids were prompted by complaints from downstream Chinese companies that the three giants were engaged in price collusion as well as other unfair conducts. On 16 November 2018, the SAMR disclosed in its press conference19 that the SAMR has already received a significant amount of evidence from the three companies and the investigation is still ongoing with significant progress.

As to the legislative work, proposed guidelines to be promulgated by the SAMR include:

  1. Provisions on the Prohibition of Monopolistic Agreements;
  2. Provisions on the Prohibition of Abuse of Dominant Market Position;
  3. Provision on the Prohibition of Abuse of Administrative Power to Exclude and Restrict Competition; and
  4. Guidelines on Abuse of Intellectual Property Rights.

ii Analysis

In general, the SAMR will step up its antitrust enforcement in 2019. After 10 years of Anti-monopoly Law implementation, China's antitrust enforcement agency has accumulated a wealth of experience. On 27 December 2018, the SAMR held a national market regulation conference. Zhang Mao, the director of the SAMR, summarised the work of 2018 and the work arrangement for the next year, emphasising that competition enforcement would be strengthened in 2019. He stated that enforcement will continually focus on industries related to livelihood such as public welfare, pharmaceutical, building materials, and daily consumer goods. In addition, the SAMR will strengthen its investigation on monopoly agreements and abuse of dominant position.20 Furthermore, in 2019, we expect more guidelines will be promulgated that will promote antimonopoly law enforcement and promote the establishment and development of a relatively mature and complete antimonopoly legal framework.

In terms of merger control review, the enforcement of the SAMR promises to be more rigorous and meticulous. In particular, the SAMR is enhancing its crackdown on non-filers. Companies should pay close attention to the nature and pattern of the merger control review, as well as the revision of the Anti-monopoly Law. Furthermore, companies are advised to acknowledge the thresholds and criteria of merger filing in order to fulfil their obligations to avoid penalties and any adverse consequences of closing a transaction.


1 Michael Gu is a founding partner of AnJie Law Firm. The author would like to thank associates Sun Sihui and Grace Wu for their contributions to this chapter.

2 Press release from China Market Regulation News, available at: http://www.cicn.com.cn/zggsb/2018-12/28/cms113995article.shtml.

3 The Chinese version is available at the SAMR's website: http://samr.saic.gov.cn/xw/yw/wjfb/201812/t20181225_279060.html.

4 The Chinese version is available at the SAMR's website: http://samr.saic.gov.cn/xw/yw/wjfb/201812/t20181225_279061.html.

5 The report of the press conference is available at the SAMR's website:: http://www.china.com.cn/zhibo/content_72615279.htm.

6 The original Chinese penalty decision is available at the website of Tianjin Port Storage Yard: http://samr.saic.gov.cn/gg/201812/t20181211_277378.html.

7 The original Chinese penalty decision is available at the SAMR's website: http://samr.saic.gov.cn/gg/201807/t20180720_275163.html.

8 For a detailed discussion in relation to the investigation on the container shipping companies, see The Public Competition Enforcement Review (tenth edition), pp. 84.

9 For a detailed discussion of this case, see The Public Competition Enforcement Review (eighth edition), pp. 79–80.

10 The original Chinese penalty decision is available at Guangdong Provincial Development and Reform Commission: http://www.gddrc.gov.cn/zwgk/gggs/sgs/xzcf/201808/t20180816_477753.shtml.

11 The original Chinese penalty decision is available at Guangxi Provincial Development and Reform Commission: http://www.gxdrc.gov.cn/xsjg/ecjg/zzqjgjdjcfj/jdjc_39111/201807/t20180719_766516.html.

12 The original Chinese penalty decisions are available at the SAMR's website: http://samr.saic.gov.cn/gg/201901/t20190118_280436.html.

13 The original Chinese penalty decisions are available at the SAMR's website: http://samr.saic.gov.cn/gg/201807/t20180727_275281.html.

14 The original penalty decision is available at SAMR's website: http://samr.saic.gov.cn/gg/201808/t20180810_275505.html.

15 The announcement is available at MOFCOM's website: http://fldj.mofcom.gov.cn/article/ztxx/201803/20180302719123.shtml.

16 The announcement is available at MOFCOM's website: http://fldj.mofcom.gov.cn/article/ztxx/201705/20170502568075.shtml.

17 The announcement is available at SAMR's website: http://samr.saic.gov.cn/gg/201807/

18 The announcement is available at SAMR's website: http://samr.saic.gov.cn/gg/201811/

19 The report of the press conference is available at: http://www.china.com.cn/zhibo/content_72615279.htm.

20 Zhang Mao's speech at the national market regulation conference, China Market Regulation News, 28 December 2018, http://www.cicn.com.cn/zggsb/2018-12/28/cms113995article.shtml.