Comments on the Recent Procedural Provisions Promulgated by SAIC
On June 05，2009，the State Administration for Industry and Commerce (SAIC), one of the three enforcement agencies for China’s Anti-Monopoly Law (AML), released two sets of provisions on the procedures to be followed by the agency and its delegates when enforcing the AML. They are: Procedural Provisions on Stopping the Use of Administrative Power to Exclude or Restrict Competition and Procedural Provisions for Investigating Monopoly Agreement and Abuse of Dominant Position Matters. These two provisions will come into effect on July 01, 2009. On June 08, 2009, SAIC published a Set of Questions and Answers about the Two Procedural Provisions on its website, which provides answers and explanations to some of the more pressing issues.
Authorization
This is one of the main focuses before the promulgation of these two regulations. As the Procedural Provisions for Investigating Monopoly Agreement and Abuse of Dominant Position Matters stipulates, the SAIC will be fully in charge of the enforcement of the AML to regulate monopoly agreements and abuses of dominance. This means that the decision as to whether to initiate an investigation procedure will be the complete power of the SAIC. When required, the SAIC may also authorize its local branches to enforce the AML. The local branches consist only of branches within provinces, autonomous regions and municipalities directly under the central government. These branches should not vest the power to lower level branches. The purpose of the strict limitation on authorization is to maintain the same standard in cases in different regions and avoid any potential local protectionism.
The provision says that SAIC should investigate the case by itself, or it should entrust its local branches to make the investigation. Here the local branches include not only the branches mentioned above, but also branches in some of the lower level branches of Administrative of Industry and Commerce as specified in the provisions. The reasoning for such stipulation is due to the fact that it is more convenient for a local branch of the Administrative of Industry and Commerce to access the evidence, which makes their investigations more effective and efficient.
Lenient Policy
The party involved in the monopoly agreement matters, when offering crucial evidence to the enforcement institution, will be imposed mitigated or even no punishment. This lenient policy was restated in Procedural Provisions for Investigating Monopoly Agreement and Abuse of Dominant Position Matters. Besides this, there are two new points in this new regulation. Firstly, the organizer of the monopoly agreement should not be entitled to the lenient policy. Secondly, the reference to crucial evidence refers to the evidence that plays a key role in triggering the investigation or the recognizing monopoly agreements.
In practice the monopoly agreement is hard to be recognized due to its secretive nature. The lenient policy is aimed to encourage the parties involved to report such agreements, thus facilitating the enforcement of the AML.
Administrative Monopoly
Administrative monopoly is one of the four forms that are regulated by AML. For historical reasoning, the use of administrative power to exclude or restrict competition is very common in China. According to the Procedural Provisions on Stopping the Use of Administrative Power to Exclude or Restrict Competition, the SAIC and its branches are empowered to offer suggestions to each level of government as to how to deal with these sorts of violations.
This suggestion power, when used effectively, may be helpful in stopping the use of administrative power to block or restrict competition. However, many people still possess a skeptical attitude towards the effects of these suggestions. There are no such procedural provisions to the administrative institutions as to how to deal with the suggestions. The current law and regulations do not require any disclosure of such suggestions to the public meaning that it is not subjected to public supervision.
Promise System
When those who are undertaking in the violation agree to stop, the enforcement institutions may suspend the investigation. If, in the designated period those undertakings substantially cease the violation, then the institution may terminate the investigation. This system will save in the costs of investigation and has been accepted by most of the countries. The Provisions offer some new detailed rules. For example it stipulates what should be included in the application form and the decision form of suspended investigations; and under what circumstances the enforcement institution should terminate or reopen the investigation procedure.
Reporting System
Both the AML and the new provisions stipulate that the enforcement institution should protect the reporter from being exposed. The Provisions go even further detailing what materials should be included when reporting such violations. Furthermore, the provision also notes how each level of branch of the Administrative of Industry and Commerce should deal with the reporting. This makes the regulation more practical.
It is acknowledged that the existing of the procedural provisions is the precondition for the effective enforcement of AML. These two provisions, although improvements are still needed, are welcomed by the public.
Dear Dr. Zhan Hao,
In Article 7 of the Regulations Prohibiting Abuses of Dominant Market Position, it states that a undertaking that has been presumed to have a dominant market position can rebut the presumption by 7 (1)(2)(3). Can you comment upon whether you believe that the alleged dominant market position holder must satisfy all three requirements to rebut the presumption, or do you believe that satisfying one of the three will be sufficient to rebut the presumption of dominant market position?
Dear Mose,
Article 7 is exactly to state that “under the circumstances that the business operators that have been presumed to have a dominant market position shall be not determined as having a dominant market position if it can provide some evidences relating the following (a),(b) or (c) conditions, which are the evidence to prove that it doesn’t have the dominant market position”. This article is the same as the sub-section 3 of the article 19 of the AML, which simply states that “a business operator that has been presumed to have a dominant market position shall not be determined as having a dominant market position, provided that there is counter evidence.” Article 7 hereof just details the “counter evidence” in the AML. (a), (b),(c) is just leading s the business operators provide the relevant evidences to prove “ it has no dominant market power”, which is exactly the key point of this clause.
To be frankly, when I was invited by SAIC as the legislative professor, I disagreed with the opinion to detail the “counter evidence” in AML to (a) (b) (c) sub-clause hereof, because I think, any evidences if it has adequately power to prove the business operator has no dominant market power no matter how many respects these evidences will be related to, no matter how many evidences the operator will provide, I think it is ok. So to your question, any evidence relating (a) or (b) or (c) is enough if it can prove that the business operator has no dominant market power.