Anti-monopoly Enforcement Trends in Healthcare Industry

 Authored by Michael Gu (michaelgu@anjielaw.com) and Sihui Sun at AnJie Law Firm

The healthcare industry has gradually become one of the key focal points of the anti-monopoly law enforcement in China. As of the end of July 2017, the National Development and Reform Commission (NDRC) and the State Administration for Industry and Commerce (SAIC) have concluded and published nine anti-monopoly penalty cases, targeting 16 healthcare enterprises with a total fine of about RMB 134 million since the implementation of the Anti-Monopoly Law in 2008. We foresee the two law enforcement authorities potentially raising a more forceful ‘anti-monopoly windstorm’ in the healthcare industry in the future and possibly investigating and penalizing in succession certain well-known pharmaceutical and medical device enterprises. Through the investigation and handling of a series of cases, the NDRC and SAIC have accumulated a significant amount of experience in the healthcare industry sector. Healthcare enterprises are likely to face a more serious anti-monopoly compliance challenge.

 

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A Rational Approach towards Abuse of Collective Market Dominance in Antitrust Law

Authored by Dr. Zhan Hao (zhanhao@anjielaw.com) and Song Ying(songying@anjielaw.com) and Tian Chen (tianchen@anjielaw.com)at AnJie Law Firm

1.Introduction

The concept of abuse of collective market dominance (“Collective Abuse”)stems from Article 102 of the Treaty on the Functioning of the European Union (“TFEU”), (formerly Article 82 of the European Community Treaty) and was first acknowledged by the EU General Court in 1992.

According to Article 102 of the TFEU, Collective Abuse refers to two or more undertakings abusing their concentrated market dominance based upon some kind of connection between/among them. However, since there are no specific applicable rules for this concept under EU competition laws or guidelines, and with the concept being applied in only a few cases under EU competition law practice, from an antitrust perspective, the relevant competition issues have to some extent not been solved. Hence, there is still plenty of theoretical and practical space to discuss those issues. For these reasons, this article is written from three aspects of this topic as follows, with the intention of shedding light on the rationale behind this concept, and the precautions to take when applying Collective Abuse.
 

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Decoding the Exposure Draft for Amendments to MOFCOM Rules on Antitrust Review

Authored by Zhan Hao (zhanhao@anjielaw.com) and Song Ying (songying@anjielaw.com) at AnJie Law Firm

On 8 September, 2017, an exposure draft of amendments to the Provisions on Antitrust Review of Concentrations (the “exposure draft”) issued by the Ministry of Commerce of PRC (the “MOFCOM”) was released for soliciting public comments. 

The Provisions on Antitrust Review of Concentrations (the “Antitrust Review Provisions”) were originally published on November of 2009. The purpose of amendments this time is understood to make the Antitrust Review Provisions more functional, comprehensive and improved by summarizing the past experience and best practice of MOFCOM since 2008.

 

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Deregistration--Severest Antitrust Punishment on the Trade Association

Authored by Michael Gu (michaelgu@anjielaw.com) and Sihui Sun at AnJie Law Firm

According to a press release2 published by the National Development and Reform Commission (“NDRC”) on its website on 10 July, China’s Zhejiang Provincial Price Bureau3 (“Price Bureau”) recently concluded the investigation of a cartel case organized by a local trade association. In this case, 17 paper manufacturers reached and implemented a horizontal monopoly agreement under the organization of the local trade association in Hangzhou - Fuyang Paper Manufacturers Association (“Paper Manufacturers Association”). The 17 paper manufacturers were fined a total amount of RMB 7.78 million, accounting for 1% of their sales value in 2016. Furthermore, it is worth noting that the Paper Manufacturers Association, which played a critical and leading role in organizing and facilitating the aforementioned conspiracy, was forced to de-register by the Price Bureau for its wrongdoings. This is the first time an antitrust authority in China has ever invoked Article 46(3) of the Anti-Monopoly Law (“AML”) to de-register a trade association.

 

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Annual Review of Public Enforcement of China's Anti-Monopoly Law

Authored by Michael Gu (michaelgu@anjielaw.com) and Sun Sihui (sunsihui@anjielaw.com) at AnJie Law Firm

I. OVERVIEW

2016 marked the eighth anniversary of the implementation of the PRC Anti-monopoly Law. All three Chinese competition authorities were very active in their enforcement practices. As in2015 and 2014, many waves of high-profile antitrust crackdowns have further established China’s standing as one of the most important emerging jurisdictions for antitrust enforcement in the world. Both the State Administration for Industry and Commerce (SAIC) and the National Development and Reform Commission (NDRC) took atough stance against the cartel and abuse of dominance conduct in 2016 with a strong industry focus on healthcare, automotive and public utilities.In particular, after a five-year investigation, the SAIC finally published its findings and punishments on the Tetra Pak case. The Swiss packaging giant was fined approximately US$97 million for abuse of dominance including the conducts of tying practice, exclusive dealing and loyalty discounts. This penalty decision set the record as the highest antitrust penalty ever issued by the SAIC.

In addition, the three competition authorities in China have increasedtheirlegislativeactivities to refine the antitrust regime. NDRC, SAIC and Ministry of Commerce (MOFCOM)completed their draft of the antimonopoly guidelines on abuse of intellectual property for each of their own enforcement areas. In the second half of 2016, the unified set of guidelines on antitrust enforcement in the intellectual property area was finalized and submitted to the Anti-monopoly Commission of the State Council (AMC) by the NDRC on behalf of the three competition authorities, along with the State Intellectual Property Office, which also had certain input into the guidelines, however theguidelines were not passed in2016 as wasexpected. Furthermore, NDRC has submitted its latest drafts of another five antitrust guidelines to the AMC for review and approval. These guidelines cover both sector-specific substantive issues and procedural issues involvingautomotive industry, the process for undertakings’ exemption, leniency programme, undertaking’s commitments, and the calculation on illegal gains and fines. Theseguidelines will lay down more detailed guidance on the practical and procedural issues with respect to the application of the Anti-monopoly Law. Moreover, 2016 saw the establishment of the fair competition review system. This is a major initiative to ensure fair play among participants in the Chinese market. Under the fair competition review system, government authorities must fully consider the impact of their policies and measures on market competition during the formulation stage and review any potential impact in accordance with the requirements of establishing a unified, open, orderly and competitive market system.

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Unveil the Special Evidential Rules for Private Antitrust Litigations in China

This article was co-authored by Dr.Zhan Hao and Song Ying

Admittedly, the evidential rulesin specific jurisdiction, especially for the allocation of burden of proof, are of great vital for the ultimate result of the case trial. In view of the fact that private antitrust litigations are frequently featured with specificity, high-degree complexity and relative weakness of the plaintiffs, several special evidential rules have been instituted for private antitrust litigations in China. Meanwhile, private antitrust litigations still belong to the scope of civil litigations, hence are also applied to the evidence rules provided for the general civil litigations, except the articulated special rules.

In the following sections, the authors intend to address three key issues among others, that most frequently excite interests of multi-national firms, on the evidential rules for private antitrust litigations in China, including the burden of proof, evidence format and quasi discovery rules. Hopefully the presentation and illustration could provide valuable insights for the readers.

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AUCL: Draft Submit for NPC Review

After a whole year’s review and rounds of public comments, on February 22, the State Council has eventually submitted the Draft Amendments of the Anti-Unfair Competition Law (the “Draft”) to the Standing Committee of the National People’s Congress for ratification. Most of the key principles of the earlier drafts have remained while rules in addressing the abuse of dominant market positions were taken out.

Here are some highlights vis-a-vis previous draft:

  1. Scope of unfair competition (Art. 2): In the previous draft, the behaviors infringing consumers’ legitimate rights and interests fall into the scope of unfair competition. The new Draft excludes consumers from being the subject of violation, and leaves the consumer rights and interests to be protected by the Consumer Protection Law, which we believe a correct revision avoiding the overlap of different laws.
  2. The abuse of relatively dominant position: The inclusion of abuse of relatively dominant position as unfair competition conduct has been one of the most controversial issues in the earlier draft. Some worries that it may blur the boundary between AUCL and AML and put common trade practice under the risk of anti-competition concerns. Now there is no need to worry as the new Draft removed all the clauses regarding abuse of dominant position, which may be good news for leading companies in different industries.
  3. Trade secret (Art. 9-10, Art.19): The new Draft further expands the scope of trade secrete protection and specifically indicates both employees and former employees are forbidden to obtain the trade secrets by theft, bribery, threatening and other illegal ways. The government employees and other professionals like lawyers, accountants are also obliged to keep the trade secrets confidential in their duties. However, the clause in the earlier draft which shifted the burden of proof to the defendants in trade secret cases has been removed. The earlier draft provided that the right holders only need to prove “substantial similarity” and “access to confidential information”, which is quite positive for the right holders. The new Draft, however, makes the burden of proof unclear in trade secret violation cases, which may weaken the protection of trade secrets.
  4. Unfair competition in the internet industry (Art. 14): When it comes to the internet sector, the protection area extends from the earlier draft’s really narrow concept of “network application services” to a broader one of “network products and services” in the new Draft. Three out of the four kinds of unfair competition behaviors banned in the earlier draft - i.e. forcing users to redirect from competitors’ websites, misleading or forcing users to shut or unload competitor’s products or services, and interfering or interrupting competitors’ products or services - still remain with only some change of wording. Another illegal practice, “blocking the services of competitors”, has been replaced by “being maliciously incompatible with competitors’ legitimate products or services ”.
  5. Authority of Inspection (Art. 16): Art. 15 of the earlier draft remains in the new Draft. It gives the local authorities of industry and commerce (AICs) power to investigate alleged violations, including raiding the business sites of violators, seizing relevant goods and investigating bank accounts, as well as to request relevant parties to provide data, technical support and other materials. The local authorities, with expanded power, may push forward law enforcement on the one hand, while on the other arouses concerns of inconsistency in different regions.

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Tetra Pak Receives SAIC's Severest Antitrust Penalty

Authored by Michael Gu (michaelgu@anjielaw.com) and Sun Sihui (sunsihui@anjielaw.com) at AnJie Law Firm

Introduction

On November 9 2016, after a nearly five-year investigation, the State Administration for Industry and Commerce (SAIC) finally concluded the Tetra Pak case. The SAIC's landmark decision:

  • imposed a Rmb667,724,176.88 (approximately $97 million) penalty on Tetra Pak – equivalent to 7% of the Swiss packaging giant's 2011 China sales – for its abuse of a dominant position in China; and
  • ordered Tetra Pak to cease its illegal conduct.

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At the Cutting Edge of PRC AML Private Litigation

 Authored by Dr. Zhan Hao (zhanhao@anjielaw.com) and Song Ying (songying@anjielaw.com) at AnJie Law Firm

 

I. INTRODUCTION 

On August 1, 2008, China launched the Anti-Monopoly Law (“AML”), establishing a dual enforcement system comprising both public and civil enforcement measures. Article 50 of the AML provides the legal basis for private anti-monopoly enforcement and states that undertakings that violate the provisions of the AML and cause damage to others shall bear civil liability.

In contrast to the activity surrounding public enforcement cases, China’s private antitrust enforcement regime remained relatively quiet during its first four years. From 2008 to 2012, a total of 143 cases concerning monopolistic conducts were accepted by the courts. Since then, however, an increasing level of private antitrust enforcement action in China, accompanied by some high-profile cases, has prompted an increased level of attention and scrutiny. Over the last four years to date, more than 300 antitrust cases have been brought before the courts. Considering that China as a jurisdiction has not traditionally hosted a competition or pro-litigation culture, these statistics are surprising to everyone, even within Chinese competition circles.

Generally speaking, Chinese courts are still at an early stage in implementing the AML.

Nevertheless, they have garnered a great deal of experience in the intervening eight years since implementation began, and are now stepping up the pace. This is evidenced by the advent of several landmark cases addressing increasingly more complicated facets of competition law, such as two-sided markets, Standard Essential Patents (“SEPs”),  resale price maintenance, refusal to deal and essential facilities.

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New Review System Milestone for Fair Market Competition

 Authored by Michael Gu (michaelgu@anjielaw.com) and Sun Sihui (sunsihui@anjielaw.com) at AnJie Law Firm

Introduction

On June 1 2016 the State Council published its Opinions on Establishing a Fair Competition Review System in the Development of the Market Regime, signalling the formal establishment of China's fair competition review system. The fair competition review system is a major initiative to ensure fair play among participants in the Chinese market. It is also a significant instrument for promoting the development of China's socialist market economy and the reform of its economic system from the top down.

The opinions represent a key step towards establishing the competition policy and implementing the State Council's measures to streamline administration and delegate more power to lower-level governments. The opinions will also:

• have a profound influence on the supervision and regulation of government activity;

• promote market-oriented policy development;

• stimulate creativity and vitality among market players; and

• foster fair market competition.

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China Intensifies Antitrust Enforcement in the Pharmaceutical Industry: NDRC Issues Ruling in its First Concerted Practice Case

 Authored by Michael Gu (michaelgu@anjielaw.com) at AnJie Law Firm

Introduction

Since the implementation of the Anti-Monopoly Law (the “AML”) in August 2008, those industries particularly affecting the populous’ quality of life have been the major focus of the antitrust authorities’ enforcement agenda. Targeted industries include those such as automobile, consumer goods, insurance, construction materials, tourism, tobacco, telecoms and public utilities, etc. In particular, the National Development and Reform Commission (the “NDRC”) has launched several rounds of “antitrust storms” upon the auto industry, which attracted wide attention in recent years. In the meantime, enforcement upon the pharmaceutical industry has been relatively light, even though it is a critical sector affecting quality of life. In spite of some discussion and various rumors, neither the NDRC nor the State Administration for Industry and Commerce of the PRC (the “SAIC”) had penalized any pharmaceutical enterprises over the past few years. However, during a single month period in the beginning of 2016, both the SAIC and the NDRC respectively published penalty decisions against pharmaceutical companies, i.e. the Chongqing Qingyang Pharmaceutical Monopoly case  and the Allopurinol Drug Cartel case . The nearly parallel actions evidence an accelerated enforcement targeting the pharmaceutical industry.

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Concurrences Review Event on Multinationals Deals in a World of Non-Convergence

Concurrences Review, in partnership with George Washington University Law School, will hold the 4th edition of their annual joint conference “120 Merger Regimes: Multinationals Deals in a World of Non-Convergence: US, EU, Brazil, China... on Monday, September 19, from 14:00 to 18:30, at George Washington University School of Law, 2000 H Street, NW, Washington, DC. 

Speakers include:
  • William E. Kovoacic, Professor, George Washington University Law School
  • Sir Philip Lowe, Senior Advisor, FTI Consulting
  • George Rozanski, Partner, Bates White
  • Michael Keeley, Partner, Axinn, Veltrop & Harkrider
  • Rosie Lipscomb, Senior Competition Counsel, Google
  • Yong Huang, Director, Competition Law Center, Uni. of Int'l Business & Econ
  • John Harkrider, Partner, Axinn, Veltrop & Harkrider
  • Aviv Nevo, Senior Advisor, Cornerstone Research
  • Carles Esteva-Mosso, Deputy Director General, DG COMP
  • Elaine Ewing, Partner, Cleary Gottlieb Steen & Hamilton
  • Michael Ray, Executive Vice President, Western Digital Corporation
  • George Cary, Partner, Cleary Gottlieb Steen & Hamilton
  • Jonathan Orszag, Senior Managing Director, Compass Lexecon
  • Ian Simmons, Partner, O’Melveny & Myers
  • Sharis Pozen, VP, Global Competition and Antitrust, General Electric
  • Richard Parker, Partner, O'Melveny & Myers
  • Randolph W. Tritell, Director, Office of International Affairs, US Federal Trade Commission
There will be three panels:
  • Lack of Consistency: Navigating an Unharmonized World of Merger Regimes
  • A Call for Harmonization: Towards Regional Regulators or Comity?
  • Does the Bureaucratic Model Work? Advocacy Before the Agencies and the Courts
You can find the detailed program on the dedicated website: multinational-mergers.eventbrite.com
 

Authority Scrutiny of SEP and FRAND Issues in China

Authored by Dr. Zhan Hao (zhanhao@anjielaw.com) and Mr. He Jing (hejing@anjielaw.com) at AnJie Law Firm

Antitrust enforcement relating to standard essential patents (SEPs) and fair, reasonable and non-discriminatory (FRAND) licensing in China has been a focal point for industry and the international legal community for the past few years. In this regard, the National Development and Reform Commission’s (NDRC) investigation into Qualcomm Corporation was typical of what a licensing company may encounter in China. This report highlights the relevant legal basis for SEP and FRAND-related antitrust enforcement in China, as well as key developments. Standard related IP policies, FRAND royalty rates, refusal to license, patent pools and injunction relief for SEPs have been hotly debated among policy makers, judges, practitioners and industry players. Some Chinese court cases have arguably been among the earliest decisions worldwide in this field, and future enforcement activities and the outcome of private antitrust lawsuits in China will likely continue to affect global trends.

 
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Annual Review of Public Enforcement of China's Anti-Monopoly Law (2016)

 Authored by Michael Gu (michaelgu@anjielaw.com) at AnJie Law Firm

I. OVERVIEW

In 2015, the Chinese market experienced rapid developments in anti-monopoly law enforcement. Further efforts also went into new guidelines and rules aimed at refining China's antitrust regime. Also, China's three anti-monopoly law enforcement agencies were very active in terms of the number of cases handled, the rate of fines imposed, and the varied grounds for investigations. In particular, high-profile antitrust cases have further profiled China as an emerging centre for antitrust enforcement. The Qualcomm case concluded by the National Development and Reform Commission (NDRC) set a new record for the highest antitrust penalty ever issued in China’s anti-monopoly enforcement history, and also is the first investigation concluded by Chinese antitrust agency against the abuse of standard-essential patents (SEPs). A pharmaceuticals company in Chongqing has become the first company penalized for refusing to deal in the antitrust enforcement history of China. 

On 7 April 2015, the State Administration for Industry and Commerce (SAIC) published China’s first anti-monopoly regulation specifically aimed at the abuse of intellectual property rights - the Provisions on the Prohibition of Abuse of Intellectual Property Rights for the Purpose of Eliminating or Restricting Competition - which became effective on 1 August 2015. The provisions fill the legislative gap in China’s anti-monopoly regulations governing the IP field and aim to balance the lawful rights and interests of IP rights holders and other interested parties, while also further promoting innovation and market competition. 

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Chinese Antitrust Agency Imposes Fines for Coinsurance

   Authored by Dr. Zhan Hao (zhanhao@anjielaw.com) and Song Ying (songying@anjielaw.com) at AnJie Law Firm

In December 2015, Chinese Antirust Agnecy, the Hubei Administration for Industry and Commerce (“Hubei AIC”), disclosed its punishment on 12 insurance companies for signing illegal coinsurance agreements. In this case, Chinese antitrust agency considered a coinsurance for Construction Project Personal Accident Insurance illegal. 12 insurance companies were fined CNY 4.69 million in total. It is not the first time that insurance companies and coinsurance targeted by China’s antitrust agencies. 

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Overview of Yingding v. Sinopec Case

  Authored by Dr. Zhan Hao (zhanhao@anjielaw.com) and Song Ying (songying@anjielaw.com) at AnJie Law Firm

Introduction

Yunnan Yingding Bio-energy Co., Ltd. (“Yingding”) is an abio-energy manufacturer. In the last years, Yingding claimed that Sinopec and the Yunnan branch of Sinopec's (“Sinopec Yunnan Branch”) trading company had abused their market dominant position by refusing to incorporate the biodiesel they produced from waste cooking oil into Sinopec's distribution system, without justifiable reasons. The lawsuit was filed with Kunming Intermediate People’s Court (“Kunming Court ”) in China’s Yunnan province.

In the first instance ruling, Kunming Intermediate People’s Court (“Kunming Court”) ruled against Sinopec, holding that the Yunnan branch of Sinopec's trading company was obligated to purchase and distribute the biofuel made by Yingding and abused its dominance in the sales market of refined oil by refusing to purchase the biofuel made by Yingding without justifiable reasons. 

In the second instance ruling, Yunnan High People’s Court (“Yunnan Court”) reversed the first instance ruling and remanded the case on account of unclear facts and procedural errors. Currently, the case is pending. 

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SEPs and Application Boundary of the Anti-monopoly Law of China

 Authored by Dr. Zhan Hao (zhanhao@anjielaw.com) and Song Ying (songying@anjielaw.com) at AnJie Law Firm

In recent years, the term "standard essential patent" ("SEP") may have been a buzzword in the circle of anti-monopoly research in China. As the issue on SEPs relates to the application boundary of the anti-monopoly law, the balance between public and private rights, and the future direction of the enforcement and judicature of the Chinese anti-monopoly law, it is necessary to further discuss this issue.

In 2011, Huawei sued IDC, an American wireless manufacturer, at Guangdong and the National Development and Reform Commission ("NDRC") suspended its investigation on IDC afterwards; in 2013, the NDRC initiated an anti-monopoly investigation against Qualcomm Incorporated and made its penalty decision in early 2015; later that year, in October, the Ministry of Commerce ("MOFCOM") conditionally approved the case of Nokia's acquisition of Alcatel-Lucent. The above cases show that the question of "how to assess the SEP-related activities under the framework of China's anti-monopoly law" has not only attracted the attention of the administrative law-enforcement and judicial departments of anti-monopoly in China, but also caught the eye of many competitors in the relevant markets, especially those in the high-tech industry. Currently, the Anti-Monopoly Commission, which operates under the State Council, has taken the lead in formulating the Anti-monopoly Guidelines on the Abuse of Intellectual Property Rights, in the hope of providing more specific and targeted guidelines regarding the practice of anti-monopoly law enforcement, in which the issue on SEPs is one of the core contents.

It should be admitted that the anti-monopoly law enforcement and judicature in the field of intellectual property rights ("IPRs") is complicated; once combined with the "standard setting activities" which cover wider fields and have more complicated procedures, it will become more sensitive and challenging.

Where a relevant enterprise participates in the process of standard setting, it needs to spend a lot of human, material and financial resources on research and development, technical discussion, screening and evaluation, promotion and planning, and other activities. If its technology is eventually included in the standards and can be used in a wider area, then the enterprise can have its earlier investment recovered and even make considerable profits. If in the end, the technology is rejected by the standards, then the enterprise cannot recover the huge investment it made during the early stages. This makes the participation in standard setting activities to some extent commercially risky and not all enterprises have the capability and sufficient motivation to actively participate in standard setting activities. However, only if more enterprises are encouraged to engage in the standard setting process so as to cover as many competing technologies as possible for comparison and selection, can the best advanced technologies which benefit most consumers be included in the standards. Once practical and feasible standards are formed, they will help the entire industry improve the operational efficiency and the level of standardization. Therefore, under normal circumstances, due care and encouragement should be given to businesses in order to motivate them to actively engage in standard-setting activities.

However, we have also noticed that some patentees of SEPs abuse their rights and the market dominance brought by the indispensability of the SEPs, and thus the intervention by the Anti-monopoly Law is necessary under some extremely exceptional circumstances. Despite such indispensability, a reasonable balance should be sought between the protection of SEP holder's patent right and the regulation by the Anti-monopoly Law. The intervention by the Anti-monopoly Law regarding the relevant conduct of SEP holder must be cautious, and should not be in the form of law enforcement and administration of justice deviating from the reality of the markets and the specific competition situation on the relevant markets; otherwise, it will undermine the motivation of businesses to actively innovate and participate in standard setting activities.

In this article, we will first give more background information regarding standards, standardization organizations and SEPs; we will then go on to explain the anti-monopoly regulation system in China for SEP-related behaviors; finally, we will put forward our views on several important issues concerning the application of law, emphasizing that due prudence should be given in the anti-monopoly law enforcement and judicature with respect to SEP-related behaviors, and recommending businesses to conduct an assessment based on the specific competition conditions on the relevant markets and comprehensive consideration of various factors, including the special nature of patent licensing as well as strictly limiting the interpretation of SEPs to a proper extent. We hope our readers will get something from this article.

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2015 China Anti-Monopoly Annual Report

Authored by Dr. Zhan Hao (zhanhao@anjielaw.com) and Song Ying (songying@anjielaw.com) at AnJie Law Firm

I. Legislation

A. Legislation Tendency Highlight

  • In the year of 2015, China’s antitrust enforcement agencies, namely the National Development and Reform Commission (“NDRC”), the State Administration for Industry and Commerce (“SAIC”) and the Ministry of Commerce (“MOFCOM”)   made more efforts regarding legislation, especially when it comes to strengthening the role of soft law, compared to 2014.
  • Intellectual property right (“IPR”) related antitrust issues are a hot topic. At this stage, three antitrust enforcement bodies and the State Intellectual Property Office are respectively drafting the IPR antitrust guidelines based on their respective enforcement areas and are going to submit their respective guidelines to the State Council’s Anti-monopoly Commission (“AMC”). The AMC will eventually come up with the final and unified guidelines (the “IPR Antitrust Guidelines”) based on the draft versions submitted by above-mentioned bodies.
  • The auto industry has consistently attracted attention under the framework of AML. Apart from continuous enforcement activities against cartel, vertical monopolistic agreement and abusing dominance in the auto industry, the antitrust guidelines for the auto industries being drafted by NDRC (the “Auto Industry Antitrust Guidelines”), are the only antitrust guidelines  specialized for a particular industry. This suggests a deepening and detailing of legislative activities of China’s antitrust enforcement authorities. 
  • In addition to the IPR Antitrust Guidelines and the Auto Industry Antitrust Guidelines, the NDRC has also drafted four other guidelines in 2015 in order to normalize and guide the enforcement activities. The four guidelines include Guidelines on Leniency Policy, Guidelines on Commitment of Undertakings, Guidelines on Calculating the Illegal Gains and Fines for Monopoly Conducts and Guidelines on Procedures of Monopolistic agreement Exemption.

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Trade Association Comes Under the Spotlight Again - First Boycott Case Published by the SAIC

 Authored by Michael Gu (michaelgu@anjielaw.com) and Bai Chen (baichen@anjielaw.com) at AnJie Law Firm

Introduction

China’s Guangdong Provincial Administration for Industry and Commerce (“Guangdong AIC”) fined local trade association Guangzhou Panyu Animation and Game Association (“GAGA”) RMB 100,000 for alleged monopolistic conduct, according to a penalty decision posted on the website of the State Administration for Industry and Commerce (“SAIC”) on 8 December 2015. This is the first ever boycott case penalized by the PRC competition enforcement agencies. 

According to the penalty decision, the Guangdong AIC’s investigation was not triggered by third party complaints, as is often the case; instead the agency initiated the investigation based on a report published by Guangzhou Daily on 13 March 2013. The local newspaper reported that GAGA had signed an “exhibition alliance agreement” (“Alliance Agreement”) with its 52 members. Under the Alliance Agreement, GAGA’s members were prohibited from attending exhibitions that were either not related to the animation and game industry or not approved by GAGA. 

After an initial investigation, the Guangdong AIC regarded that GAGA’s behavior might violate China’s Anti-monopoly Law (“AML”). On 21 July 2014, the Guangdong AIC officially started its probe into the suspected conduct after obtaining authorization from the SAIC.

After further investigation, the Guangdong AIC concluded that the Alliance Agreement constituted a monopolistic agreement under Article 13 of the AML since the participants were competing undertakings and the Alliance Agreement was designed to carry out a boycott which effectively restricts or eliminates competition. Therefore, citing Article 46(3) of the AML, the agency imposed a penalty of RMB 100,000 on the association, and ordered it to cease the illegal conduct. 

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Commentary on MOFCOM's Conditional Approval of NXP's Acquisition of Freescale

 Authored by Michael Gu (michaelgu@anjielaw.com) at AnJie Law Firm

Introduction

On 27 November 2015, the Ministry of Commerce (“MOFCOM”) granted clearance to the proposed acquisition of Freescale Semiconductor Inc. (“Freescale”) by NXP Semiconductors N.V. (“NXP”). This is the second conditional clearance case in the 2015 merger review.

NXP is a global semiconductor firm mainly engaged in the design, manufacture and sale of integrated circuits (ICs) and discrete components. Its products are used in various sectors, including the automotive, wireless network infrastructure, lighting, mobile, consumer and computer industries. The target company, Freescale, is mainly engaged in the manufacture and R&D of microcontrollers and digital networking processors (embedded processors). Freescale also provides customized semiconductor products to clients to complement its embedded processing solutions.

After conducting detailed analysis of the impact the concentration of undertakings may have on the relevant product markets, MOFCOM established that the proposed deal could eliminate or restrict competition in the radio frequency (RF) power transistor product market. MOFCOM comprehensively evaluated the remedies submitted by NXP, which includes the divestment of NXP’s RF power transistor business, and eventually granted conditional clearance to the proposed acquisition of Freescale based on NXP’s commitments. This is the only conditional clearance case granted by MOFCOM in the last three years, with the condition that the parties adopt the structural remedy of divesting business that may have negative effects on competition in the relevant market. As this deal involves a global notification, it obtained conditional approvals from the European Commission (EU) on 17 September 2015, as well as from the Korean Fair Trade Commission (KFTC) on 23 November 2015. The remedy submitted to MOFCOM by NXP is quite similar to that submitted to the EU and KFTC. This is, to a large extent, due to the fact that the geographical markets of the relevant products, which drew the attention of anti-monopoly authorities in different jurisdictions, are defined as the global market. This also indicates that MOFCOM’s anti-monopoly review and law enforcement practices are becoming more in line with international practice.

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Commentary on MOFCOM's Conditional Approval of NXP's Acquisition of Freescale

 Authored by Michael Gu (michaelgu@anjielaw.com) at AnJie Law Firm

Introduction

On 27 November 2015, the Ministry of Commerce (“MOFCOM”) granted clearance to the proposed acquisition of Freescale Semiconductor Inc. (“Freescale”) by NXP Semiconductors N.V. (“NXP”). This is the second conditional clearance case in the 2015 merger review.

NXP is a global semiconductor firm mainly engaged in the design, manufacture and sale of integrated circuits (ICs) and discrete components. Its products are used in various sectors, including the automotive, wireless network infrastructure, lighting, mobile, consumer and computer industries. The target company, Freescale, is mainly engaged in the manufacture and R&D of microcontrollers and digital networking processors (embedded processors). Freescale also provides customized semiconductor products to clients to complement its embedded processing solutions.

After conducting detailed analysis of the impact the concentration of undertakings may have on the relevant product markets, MOFCOM established that the proposed deal could eliminate or restrict competition in the radio frequency (RF) power transistor product market. MOFCOM comprehensively evaluated the remedies submitted by NXP, which includes the divestment of NXP’s RF power transistor business, and eventually granted conditional clearance to the proposed acquisition of Freescale based on NXP’s commitments. This is the only conditional clearance case granted by MOFCOM in the last three years, with the condition that the parties adopt the structural remedy of divesting business that may have negative effects on competition in the relevant market. As this deal involves a global notification, it obtained conditional approvals from the European Commission (EU) on 17 September 2015, as well as from the Korean Fair Trade Commission (KFTC) on 23 November 2015. The remedy submitted to MOFCOM by NXP is quite similar to that submitted to the EU and KFTC. This is, to a large extent, due to the fact that the geographical markets of the relevant products, which drew the attention of anti-monopoly authorities in different jurisdictions, are defined as the global market. This also indicates that MOFCOM’s anti-monopoly review and law enforcement practices are becoming more in line with international practice.

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Commentary on MOFCOM's Conditional Approval of NXP's Acquisition of Freescale

 Authored by Michael Gu (michaelgu@anjielaw.com) at AnJie Law Firm

Introduction

On 27 November 2015, the Ministry of Commerce (“MOFCOM”) granted clearance to the proposed acquisition of Freescale Semiconductor Inc. (“Freescale”) by NXP Semiconductors N.V. (“NXP”). This is the second conditional clearance case in the 2015 merger review.

NXP is a global semiconductor firm mainly engaged in the design, manufacture and sale of integrated circuits (ICs) and discrete components. Its products are used in various sectors, including the automotive, wireless network infrastructure, lighting, mobile, consumer and computer industries. The target company, Freescale, is mainly engaged in the manufacture and R&D of microcontrollers and digital networking processors (embedded processors). Freescale also provides customized semiconductor products to clients to complement its embedded processing solutions.

After conducting detailed analysis of the impact the concentration of undertakings may have on the relevant product markets, MOFCOM established that the proposed deal could eliminate or restrict competition in the radio frequency (RF) power transistor product market. MOFCOM comprehensively evaluated the remedies submitted by NXP, which includes the divestment of NXP’s RF power transistor business, and eventually granted conditional clearance to the proposed acquisition of Freescale based on NXP’s commitments. This is the only conditional clearance case granted by MOFCOM in the last three years, with the condition that the parties adopt the structural remedy of divesting business that may have negative effects on competition in the relevant market. As this deal involves a global notification, it obtained conditional approvals from the European Commission (EU) on 17 September 2015, as well as from the Korean Fair Trade Commission (KFTC) on 23 November 2015. The remedy submitted to MOFCOM by NXP is quite similar to that submitted to the EU and KFTC. This is, to a large extent, due to the fact that the geographical markets of the relevant products, which drew the attention of anti-monopoly authorities in different jurisdictions, are defined as the global market. This also indicates that MOFCOM’s anti-monopoly review and law enforcement practices are becoming more in line with international practice.

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Slow Down! Follow Merger Filing Procedures Step by Step

 Authored by Michael Gu (michaelgu@anjielaw.com) and Bai Chen (baichen@anjielaw.com) at AnJie Law Firm

Background

On 29 September 2015, the Ministry of Commerce of the People’s Republic of China (“MOFCOM”) issued four penalty decisions on parties involved in four merger cases that failed to fulfill their notification obligations under the Anti-Monopoly Law (“AML”). It is the second time that MOFCOM has announced penalties on non-filers following the penalty decision for Tsinghua Unigroup's failure to notify its acquisition of RDA Microelectronics in December 2014.

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MOFCOM Focuses On Competition Impacts of SEPs on The Chinese Market-Review of Nokia's Equity Acquisition of Alcatel-Lucent

 Authored by Michael Gu (michaelgu@anjielaw.com) at AnJie Law Firm

Background

On October 19, 2015, the Ministry of Commerce ("MOFCOM") announced the first conditionally approved merger review case in 2015, namely the case of Nokia's acquisition of Alcatel-Lucent's equities. It is the second time that Nokia has become the protagonist in a MOFCOM merger review case due to mobile communications standard essential patents ("SEPs") 18 months after MOFCOM conditionally approved the case of Microsoft's acquisition of Nokia's device and service divisions in April 2014.

In early April 2014, when reviewing the case of Microsoft's acquisition of Nokia's device and service divisions, MOFCOM thought this concentration might have adverse impact of excluding or restricting competition on China's smart phone market after considering that Microsoft owns a number of important patents in the field of smart phones and Nokia holds thousands of SEPs in the field of communication technologies. After several rounds of negotiations, MOFCOM finally accepted the commitments with remedy plans respectively proposed by Microsoft and Nokia, and thereby conditionally approved this concentration. Specifically, Nokia, as the seller, made relevant commitments to strict compliance with the FRAND (fair, reasonable and non-discriminatory) principle in respect of related SEPs. In the recent case of acquisition of Alcatel-Lucent's equities, Nokia, as the acquirer, has made more stringent commitments to a larger extent in respect of its telecommunications SEPs, including telecommunications SEPs owned by Alcatel-Lucent.

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MOFCOM Conditionally Clears Nokia's Acquisition of Alcatel-Lucent with Behavioral Remedies

Authored by Dr. Zhan Hao (zhanhao@anjielaw.com), Ms. Song Ying(songying@anjielaw.com), and Feng Siduo (fengsiduo@anjielaw.com) at AnJie Law Firm

On 19 October 2015, the Ministry of Commerce of the P.R.C (“MOFCOM”)   conditionally cleared Nokia Oyi’s (“Nokia”) acquisition of Alcatel Lucent (“Alcatel”) with four behavioral remedies focusing on maintaining fair licensing of standard-essential patents (SEPs).

Brief Introduction of the Case

On 15 April 2015, Nokia signed a Memorandum of Understanding on Acquisition with Alcatel, according to this memorandum, Nokia intends to acquire 100% shares of Alcatel through a tender off.

A notification about this deal was filed on 21 April 2015 and officially accepted by MOFCOM on 15 June 2015. On 14 July 2015, the notification went into the second phase for review of MOFCOM. After MOFCOM expressed its concerns that this deal would lead to anti-competitive effects, Nokia proposed relevant remedies to MOFCOM. Through thorough evaluation, MOFCOM considers the proposals could release its competition concerns and decides to clear this transaction with remedies.

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The SAIC Fined An Enterprise for Refusal to Cooperate with Anti-Trust Investigation for the First Time

 Authored by Michael Gu (michaelgu@anjielaw.com) and Sun Sihui (sunsihui@anjielaw.com) at AnJie Law Firm

Background

For the last two years, the State Administration for Industry and Commerce (SAIC) has exercised its law enforcement powers in a rather smooth and steady manner. SAIC’s steady hand contrasts starkly with the National Development and Reform Commission (NDRC)’s frequent heavy anti-trust fines and its round after round of anti-trust enforcement actions..With the exceptions of the Microsoft and Tetra Pak cases, none of the SAIC’s cases have become very public. In fact, the SAIC has carried out all its investigations into monopoly behaviors in an orderly manner, unless the conduct directly involves prices. According to SAIC official Mr. Zhao Guobin who addressed the subject at a recent anti-trust seminar , up until October 2015, the SAIC authorized local commerce and industry administrations to open 57 cases, of which 23 cases have been closed and four cases have been suspended. In those cases, the entities were punished for monopoly conduct violating the Anti-Monopoly Law of the PRC (AML) and related regulations; more than half were cases involving monopoly agreements, but the percentage of cases involving an abuse of dominant market position has gradually increased. On 13 October 2015, the Anhui administration for industry and commerce (Anhui AIC) published a case where the party was fined for not cooperating with the investigation conducted by the anti-trust law enforcement agency.   This is the first case published by anti-trust law enforcement agencies which level led a penalty for not cooperating with the investigation.

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Rational, Scientific and Rigorous Anti-monopoly Analyses Needed for Judicial Judgments - Several Thoughts about the Case of Yunnan YingDing Bio-energy Co., Ltd v. Sinopec Corp. for Refusal to Deal

Authored by Dr. Zhan Hao (zhanhao@anjielaw.com) at AnJie Law Firm

Introduction 

The year 2014 was an important year for implementation of China's Anti-monopoly Law. Against this background, the anti-monopoly civil action case of Yunnan YingDing Bio-energy Co., Ltd (hereinafter referred to as "Yunnan YingDing") v. Sinopec Chemical Commercial Holding Company Limited Yunnan Petroleum Branch (hereinafter referred to as "Sinopec Yunnan Branch") and China Petroleum and Chemical Corporation (hereinafter referred to as "Sinopec Corp.") for refusal to deal has attracted much attention due to many spotlights.

This case is the first anti-monopoly civil action against a State-owned petroleum company of China due to refusal to deal, is among a few cases involving "abuse of market dominant position" in China, and is also one of few cases worldwide which are brought by a "seller" against "potential buyers" for refusal to deal. This case involves both the Anti-monopoly Law and the Law on Renewable Energies, which are gilt-edged laws at present. Under the great background of sluggish international crude oil prices, domestic environmental pollution control and the mixed ownership reform of the State-owned enterprises, this case deserves wide attention.

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Warning from MOFCOM: Second Wave of Penalties Imposed for Breaches of Concentration Notification Rules

 Authored by Dr. Zhan Hao (zhanhao@anjielaw.com) at Anjie Law Firm and Ms. Li Xiang(lixiang@anjielaw.com)

On September 29th 2015, the Ministry of Commerce of the P.R.C (“MOFCOM”) published four administrative decisions on penalties for illegal activities involved in the concentration of undertakings on its official website. This is the second time that China’s authority responsible for merger control released its penalty decisions on undertakings which failed to abide by laws and regulations relevant to anti-monopoly notification obligation.

Brief Introduction of the Cases

According to the penalty decisions issued against Fujian Electronics & Information (Group) Co., Ltd (“FJEI”) by the MOFCOM, FJEI was imposed a fine of RMB 150,000 for failure to file a pre-notification to the authority with respect to acquisition of 35 percent of shares of Shenzhen Chino Communication Co., Ltd (“SCC”). The decision suggests that the investigation was trigged by complaint of third parties during the period of MOFCOM’s public notification for the concentration between SCC and FJEI’s holding company, namely Fujian Furi Electronics Co., Ltd.

In the Shanghai Fosun Pharmaceutical Industry Development Co., Ltd. (“FPID”) case, FPID’s parent company, Shanghai Fosun Pharmaceutical (Group) Co., Ltd notified and applied for consultation with MOFCOM about the proposed purchase of 65 percent shares of a target company through FPID and an off-shore subsidiary. Within the period of negotiation, FPID completed the transfer of shares without MOFCOM’s approval. Therefore, FPID was fined RMB 200,000 for violating relevant laws and regulations. 

The third case is also relevant to implementing the concentration before obtaining MOFCOM’s approval. In accordance with MOFCOM’s decision, on November 3 2014, CSR Nanjing Puzhen Co., Ltd (“Nanjing Puzhen”) and Bombardier Transportation Group Sweden Co., Ltd (“Bombardier Sweden”) concluded an agreement to establish a joint venture where each party owns 50 percent shares. In December, the transaction parties notified the MOFCOM about the potential transaction. However, before the notification, both parties have already appointed directors and management to the joint venture, and the joint venture has gained the business license. Considering that the parties actively filed the concentration notification and showed the cooperative attitude towards MOFCOM’s investigation, Nanjing Puzhen and Bombardier Sweden were separately fined RMB 150,000 by the MOFCOM in the end.

In the last case, Bestv New Media Co., Ltd and Microsoft Corporation were each fined RMB 200,000 for unnotified establishment of joint venture. This case is also triggered by complainants.

Concentrations Subject to Anti-monopoly Notification

The Anti-Monopoly Law (the “AML”) stipulates where a "concentration" between undertakings reaches certain turnover thresholds, the concentration should be notified to the MOFCOM for anti-monopoly review before the concentration is  implemented.

A “concentration” is (i) a merger of undertakings; (ii) an undertaking's acquisition of a controlling right in another undertaking through the acquisition of equity or assets (including establishment of joint ventures); or (iii) an undertaking's acquisition of a controlling right in another undertaking or its ability to exercise decisive influence over another undertaking by contract or other means.

The “turnover thresholds” are met if (i) the collective global turnover of the concentration undertakings in the previous fiscal year exceeds RMB 10 billion with at least two undertakings each achieving a turnover of more than RMB 400 million within China; or (ii) the collective turnover of all the concentration undertakings within China in the previous fiscal year exceeds RMB 2 billion with at least two undertakings each achieving a turnover of more than RMB 400 million within China.

For the purpose of the AML, “control” means controlling or exercising decisive influence over a company. Chinese regulators would identify “Control” based on multiple legal and factual elements, such as (i) the purpose of the concentration transaction and future plans; (ii) the equity structure of other undertakings both before and after the concentration transaction; (iii) the matters for voting by the general meeting of other undertakings, and the voting mechanisms; (iv) the composition and voting mechanisms of the board of directors or the board of supervisors of the other undertakings; (v) the appointment and removal of the senior management personnel of the other undertakings; (vi) the shareholder-director relationship of other undertakings; and (iiv) whether there is a significant business relationship between the undertaking and other undertakings, etc.

It is worth noting that in the FJEI case, MOFCOM identified that the transfer of 35% shares which is below 50% constituted “control” under the AML and therefore the transaction parties should perform the notification obligation.

Failure to Notify a Concentration

According to the currently released cases, failure to notify a concentration refers to the following conditions:

a.      Reaching the turnover thresholds but fail to notify MOFCOM;

b.      Filing a notification to MOFCOM after implementing the concentration; and

c.       Conducting implementation behaviors before obtaining the official approval.

All the above-mentioned acts may be considered as fail to perform the notification obligation under the AML by the authority. Under some certain circumstances the transaction has been notified to MOFCOM, if the concentration parties engage in any implementation behavior prior to the official approval, they may still be considered as violation of the AML.

Implementation Behaviors Prior to Official Approval

The second and the third case suggests that behaviors such as transfer of the equities, receipt of business license and appointment of directors or managements before getting the approval of MOFCOM could be viewed as failure to notify the concentration by the authority. Besides, according to our experiences, behaviors such as transferring ownership of property and asset, relocating important staffs, exchanging competitively sensitive information including but not limited to the prices and planned output of commodities and so on might breach the AML as well.

Penalties for Failure to Notify

Pursuant to the AML and the Interim Measures for Investigating and Handling Failure to Notify Concentrations of Undertakings (the “Interim Measures”),  MOFCOM may impose a fine of up to RMB 500,000 if it finds the undertakings implemented the concentration without legal notification and approval. MOFCOM may also reinstate the concentration, order a disposition of shares or assets within a specified time limit, transfer of business within a specified time limit and/or other necessary measures.

Comments

In brief, we considered the following issues should be noted with respect to the cases.

First, it is quite obvious that MOFCOM has paid great efforts on the concentration enforcement these years. The procedural transparency with the publication of information on penalties for failure to notify concentrations and failure to comply with restrictive conditions imposed by MOFCOM has been significantly improved. We can expect more normative and stricter enforcement in the future.

Second, with respect to sources of case, complaints from the third party are still the main channel of triggering investigation which reminds the undertakings the importance of the antitrust compliance during merger and acquisition activities.

Third, after assessing the competitive effects of the transactions, MOFCOM concluded that all the concentrations would not eliminate or restrict competition in the relevant market. Therefore, whether the transaction will eliminate or restrict competition in relevant market will not affect the notification obligation of the undertakings

Fourth, the undertakings were fined up to RMB 200,000 which is less than the imposed penalty (RMB 300,000) in the last year and the maximum penalty (RMB 500,000) for violations of concentration control rules. It is not clear how the amount is determined.

Considering the negative influence might be trigged by unnotified concentration, it is advisable to pay attention to and seek professional advice from antitrust counselors to provide guidance for mergers and acquisitions.

A Rational Thinking on the Refusal to License Intellectual Property under China's Antitrust Legal Framework

Authored by Dr. Zhan Hao (zhanhao@anjielaw.com)and Ms. Song Ying(songying@anjielaw.com) at AnJie Law Firm

Introduction 

This article will address the perplexing issue of refusal to license a patent or copyright to other undertakings conducted by intellectual property proprietors under China’s antitrust legal framework. The issue of refusal to license is at the interface of Intellectual Property Rights (IPRs) and antitrust law. It argues from theoretical perspective that refusal to license is a right inherent in patent rights or copyright, and that compulsory license based on antitrust law should only be ordered in exceptional circumstances. It further illustrates the legislations applicable in China and how they should be applied to disputes regarding refusal to license. We will further examine a high-profile antitrust case related to license of Standard Essential Patents (SEPs), namely, the Huawei v. IDC case, which is seen as the model case dealing with IP antitrust matters. In the final analysis the author shares caveats for assessing issues regarding refusal to license under China’s antitrust legal framework.

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Private Antitrust Enforcement in China

Authored by Dr. Hao Zhan (zhanhao@anjielaw.com) at Anjie Law Firm and Mr. Wei(wtan@compasslexecon.com) at Compass Lexecon 

Introduction 

Recent years have witnessed a rapid increase in private antitrust litigations in China. By the end of May 2014, Chinese courts had already accepted 188 cases, and concluded 172 cases, while the Chinese courts accepted 71 cases, concluded 69 cases in 2013 and accepted 30 cases in 2012. In addition, the private litigation cases have become more diversified and have included more complicated issues such as two-sided market, standard essential patent, resale price maintenance, refusal to deal and essential facilities. Chinese courts, including the Supreme People’s Court (“SPC”), have issued lengthy opinions with remarkably sophisticated legal and economic analysis, demonstrating a level of confidence and openness unseen in Chinese judicial system. 
 

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Mercedes-Benz Fined for Price Fixing: Auto Industry at Stake

Authored by Dr.  Zhan Hao (zhanhao@anjielaw.com) and Moon Wang (wanglingling@anjielaw.com) at Anjie Law Firm

Event

On 23 April, 2015, the Jiangsu Price Bureau, which is the provincial branch of the NDRC, announced the punishment on its website and stated that it had imposed a fine of CNY 350 million (USD 56.49 million) on German premium car maker Mercedes-Benz, along with a combined CNY 7.87 million (USD 1.27 million) fine on its dealers. The fine came as a result of Mercedes-Benz reaching and implementing resale price maintenance (“RPM”) agreements to fix the minimum prices of Class E and Class S cars, as well as certain auto parts. The announcement (“announcement”) was published without much detail of relevant facts, the reasons for the fine calculations, or definitions of the relevant markets.  
 
Later on 22 May, 2015, the Jiangsu Price Bureau published a full administrative penalty decision imposed against Mercedes-Benz and several of its dealers in Jiangsu province for the price monopoly. The punishment decision was dated 20 April, 2015 and shed light on the facts and reasons behind the penalty decision. 
 

Brief Comments on China's First Anti-Monopoly Regulation in the IP Field

 Authored by Michael Gu (michaelgu@anjielaw.com) at AnJie Law Firm

On 7 April 2015, State Administration for Industry and Commerce of the People’s Republic of China (SAIC) published China’s first anti-monopoly regulation specifically aimed at the abuse of intellectual property rights (IP), namely the Provisions on the Prohibition of Abuse of Intellectual Property Rights for the Purpose of Eliminating or Restricting Competition (the Provisions) which will become effective on 1 August 2015. The drafting of the Measures can be traced back to 2009, when the SAIC established a special task force to carry out the research and drafting of the Guidelines on the Anti-monopoly Enforcement in the Intellectual Property Rights field (the Consultation Draft)(the Guidelines). Based on the draft Guidelines, the SAIC issued the draft Provisions for public consultation (the Consultation Draft) in June 2014.The Official promulgation of the Provisions marks a giant leap for the SAIC in terms of anti-monopoly legislation in the IP field.

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Annual Review of PRC Anti-Monopoly Law Enforcement (2015)

Authored by Michael Gu ( michaelgu@anjielaw.com) at Anjie Law Firm

Overview

In 2014, China’s three competition authorities have all been very active in their enforcement practices. A number of new implementing rules have been enacted as part of an effort to further refine China’s antitrust regime. On top of that, a recent wave of high-profile antitrust crackdowns has established China’s standing as one of the most important emerging jurisdictions for antitrust enforcement.

In terms of the rulemaking, the Ministry of Commerce (MOFCOM) has been the most active one, with four implementing rules published - covering simple case qualifications and review procedure, merger control guidance and imposition of restrictive conditions. The Interim Provisions on Standards Applied to Simple Cases of Concentration of Undertakings (“Provisions on Simple Cases Standards”) published on 13 February 2015, the Guiding Opinions on Notification of Simple Cases of Concentration of Undertakings issued on 18 April 2015 are the set of rules that build up a fast-track merger review system for transactions unlikely to raise competition concern, which is a big step forward for China’s merger review regime. They laid down the criteria for determining cases that qualify as a simple case and provide guidance on the procedure for the notification of simple cases.

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Chinese Antitrust Agency Renders Milestone Decision on Standard Essential Patent Case

 Authored by Michael Gu  ( michaelgu@anjielaw.com ) at Anjie Law Firm

Background

Just a week before the Chinese New Year, the National Development and Reform Commission of China (NDRC)announced the long-awaited penalty decision against Qualcomm with respect to its abuse of standard essential patents (SEPs) in the wireless telecommunication industry. The NDRC imposed a penalty ofRMB 6.088 billion (about USD 1 billion) onQualcomm, equivalent to 8% of Qualcomm's China sales in 2013, for itsabuse of dominance in China, in addition to an order to cease illegal conduct.This milestone decision demonstrates NDRC’s determination to take a stringent stance against any monopoly activities in China and its ambition to become one of the most powerful antitrust enforcement agencies in the world. The NDRC initiated an antitrust investigation of Qualcommas early as November 2013 based on a complaint filed with the NDRC. On 10 February 2015, the NDRCmade its final decision after a one-and-a-half-year investigation, numerous consultations with external experts and multiple meetings and discussions with senior officers of Qualcomm. The fine imposed on Qualcomm sets the record as the highest antitrust penalty ever issued in China’s anti-monopoly enforcement history which accounts for more than three times the total amount of fines rendered by the NDRC in 2014 which is nearly RMB 1.8 billion.

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Six Years After the Implementation of the Anti-Monopoly Law: Enforcement Trends and Developments of Anti-monopoly Investigation in China

 Authored by Michael Gu (michaelgu@anjielaw.com) , Yu Shuitian (yushuitian@anjielaw.com) at AnJie Law Firm and Sun Sihui (sunsihui@anjielaw.com)

Overview

Six years after the implementation of the Anti-Monopoly Law (“AML”), the National Development and Reform Commission of the People’s Republic of China (“NDRC”) and the State Administration for Industry and Commerce of the People’s Republic of China (“SAIC”) have gradually strengthened their anti-monopoly law enforcement in terms of investigation with rounds of record fines. The range of industries involved is widening, the nature of cases is diversifying, and the enforcement procedure is becoming more open to the public. Given the intensified frequency of investigation initiated and level of penalties imposed by the two competition authorities, it can be seen that China has gradually become one of the three most important antitrust enforcement jurisdictions together with the United States and the European Union. The investigation and enforcement may have far-reaching influence both on those foreign companies directly engaged in business activities within China and those multinationals indirectly connected with China.

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2014 China Anti-Monopoly Annual Report]

 Authored by Dr. Zhan Hao (zhanhao@anjielaw.com) at AnJie Law Firm

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MOFCOM Steps Up: Penalty Decisions Regarding Merger Control Published for the First Time

Authored by Michael Gu (michaelgu@anjielaw.com) and Yu Shuitian (yushuitian@anjielaw.com) at AnJie Law Firm

Two months after the National Development and Reform Commission (“NDRC”) published its last high-profile anti-monopoly penalty decisions (e.g. Japanese Auto Parts and Bearing Manufacturers case, Audi and Chrysler case), another anti-monopoly agency in China, the Ministry of Commerce (“MOFCOM”) steps up in antitrust enforcement in addition to its usual merger reviews with a new round of anti-monopoly crackdown. On 2 December 2014, for the first time ever, MOFCOM, the Chinese antitrust enforcement authority responsible for merger control, published three penalty decisions regarding concentration of undertakings. MOFCOM has announced that it was going to publicize its penalty decisions on undertakings which fail to file a notifiable merger as early as 21 March 2014, and now, here it comes.

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Translation of The Guangdong High Court's Reasoning in Huawei v. IDC Case

Authored by Dr. Zhan Hao (zhanhao@anjielaw.com) and Ms. Xue Ying (xueying@anjielaw.com) at AnJie Law Firm

 

Dear readers,

To facilitate your understanding of the Huawei/IDC case, the AnJie lawyers have translated the reasoning of the Guangdong People’s High Court, the appellant court. Should you have any questions, please feel free to contact us.

Sincerely,

Zhan Hao

Managing Partner at Anjie Law Firm

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Huawei vs. ZTE - The Advocate General Has Spoken

 Authored by Dr. Zhan Hao (zhanhao@anjielaw.com) and Wan Jia (wanjia@anjielaw.com) at AnJie Law Frim

Background

On April 5, 2013, the Landgericht Düsseldorf (a German regional court) referred a set of questions relating to injunctive relief over standard-essential patents (“SEPs”) to the European Court of Justice (“ECJ”) in connection with a patent dispute between Huawei Technologies Co. Ltd (“Huawei”) and ZTE Corp. and ZTE Deutschland GmbH (collectively “ZTE”). This lawsuit was originally brought by Huawei in 2011, relating to an alleged infringement by ZTE of a patent owned by Huawei and declared to be essential in the LTE standard developed by the European Telecommunications Standards Institute (“ETSI”).

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Private AML Enforcement is Catching up its Public Counterpart

Authored by Dr. Zhan Hao (zhanhao@anjielaw.com) & Dr. Song Ying (songying@anjielaw.com) at Anjie Law Firm

Public enforcement and private enforcement of competition law should be complementary mechanisms each other. It is witnessed a situation of “leaning to one side” in China previously, namely the public antitrust enforcement progressed more rapidly than the private enforcement system. While from 2012, a leap-forward development of China’s private AML enforcement has impressed people. This article mainly introduces the tendency and evolvement in China’s private AML enforcement, with the hope to give readers some enlightenment.

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FAW-Volkswagen, Chrysler and Related Dealers Fined Nearly RMB280 Million for Monopolistic Conduct

Authored by  Michael Gu (michaelgu@anjielaw.com) at AnJie Law Firm

Background

The automotive industry has undergone a new round of “antitrust crackdowns”. On 11 September 2014, Hubei Price Bureau released its decisions to impose penalties arising from a price monopoly on FAW-Volkswagen Sales Co., Ltd (“FAW-Volkswagen”) of RMB248.58 million (USD40.52) and eight Audi dealers in Hubei Province amounting to RMB29.96 million [1]. Two Audi dealers, i.e. Hubei Aoze and Wuhan Aojia, were exempted from the penalty. On the same day, Shanghai’s municipal price authority imposed a fine of RMB31.68 million (USD5.16 million) on Chrysler (China) Automotive Sales Co., Ltd (“Chrysler”) and a combined RMB2.14 million fine on its three dealers in Shanghai for price monopoly [2]. It is worth noting that this is the first time that both horizontal and vertical monopolies were found in the same case. Both FAW-Volkswagen and Chrysler reached vertical agreements with their respective dealers to restrict the resale price of the car and after-sale services. Furthermore, their respective dealers reached and implemented horizontal agreements to fix the relevant price.

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Announcement for Concurrences Journal Event on Antitrust in Developing Countries

Concurrences Competition Law Journal, in partnership with the New York University School of Law, will hold its inaugural conference "Antitrust in Emerging and Developing Countries” on Friday, October 24, 2014, at the NYU campus. This one-day conference (8:30am to 6:30pm) brings together prestigious speakers from across the world. Leading lawyers, in-house consultant, and enterprises senior managers from emerging and developing countries like China, Brazil, Mexico, South Africa, among other jurisdictions will participate in the event.

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Chinese Competition Authorities Hold Joint Press Conference in Response to Criticism from E.U. and U.S. Trade Groups

Authored by Michael Gu (michaelgu@anjielaw.com) and Yu Shuitian at AnJie Law Firm

Introduction

On 11 September 2014, China’s three antitrust law enforcers held a joint press conference in defense of the recent antitrust probes into multinationals including Microsoft and Japanese auto parts and bearing manufacturers. Issues surrounding the probes came to light after U.S. and European trade groups including the U.S. Chamber of Commerce and the European Union Chamber of Commerce said PRC antitrust investigators were unfairly targeting foreign businesses. Director General Mr. Shang Ming of the Anti-Monopoly Bureau of Ministry of Commerce (“MOFCOM”), Director General Mr. Xu Kunlin of the Price Supervision and Anti-Monopoly Bureau of National Development and Reform Commission (“NDRC”) and Director General Ms. Ren Airong of AntiMonopoly and Anti-unfair Competition Enforcement Bureau of State Administration for Industry and Commerce (“SAIC”) attended the press conference. They spoke on their respective Anti-Monopoly Law (“AML”) enforcement positions and answered questions. In particular, they offered updates on the status of several high-profile cases, responded to criticism on selective law enforcement and lack of procedural fairness and transparency.

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China's Follow-on Public Antitrust Enforcement Intensifies

Authored by Dr. Zhan Hao (zhanhao@anjielaw.com) and Dr. Annie Xue at AnJie Law Firm

China’s National Development and Reform Commission (NDRC) handed down antitrust penalties totaling 1.24 billion yuan on 12 Japanese companies in the past August, including eight auto parts makers and four bearing manufacturers. This action came after a series of global crackdown on auto parts price cartels taking place in the U.S., the EU, Japan and Singapore, while reinforcing the trend of the Chinese antitrust authorities following their counterparts in other major antitrust regimes, especially the U.S. and the EU.

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Better Late Than Never: NDRC Publishes Full Decisions on Zhejiang Car Insurance Cartel Case - Analysis of NDRC's Antitrust Law Enforcement Approach

Authored by Michael Gu (michaelgu@anjielaw.com) and Shuitian Yu at AnJie Law Firm

Introduction

Less than 2 weeks after the record fine (USD 200 million) in the Japanese Auto Parts and Bearing Manufacturers case that shocked the auto parts industry [1], on 2 September 2014, the Chinese price monopoly regulator, NDRC released its decisions [2] to impose combined fines of RMB 110 million (USD 17.89 million) on 23 property insurance companies and a local trade association in Zhejiang province for their price fixing in relation to car insurance. Among the companies involved in the case, one company is fully exempted and two other are granted significant reduction of the fines. Investigations into the Zhejiang branches of other nine insurance companies were terminated because those nine companies had not fixed prices or reached monopoly agreements.

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Note of Caution: Record Fines on 12 Japnese Auto Parts and Bearing Manufactures - Analysis of the NDRC's Penalty Decision and Countermeasures of Companies

Authored by Michael Gu (michaelgu@anjielaw.com) at AnJie Law Firm

Within six years of implementation of China's Anti-Monopoly Law, the China's law enforcement agency responsible for supervising price monopoly, the National Development and Reform Commission ("NDRC"), continues to strengthen its law enforcement efforts with rounds of “antitrust storm” that swept across a number of industries and companies along with record fines. This is especially true since 2013, the NDRC has probed into number of high-profile penalty cases, including the LCD Panel case [1], Moutai and Wuliangye case [2], Baby Formula case [3], Shanghai Gold Jewelers case [4] and Spectacle Lenses case [5]. Meanwhile, the NDRC has also launched investigation into the US high-tech giants, InterDigital and Qualcomm. For InterDigital case, the investigation has been suspended [6]. As for Qualcomm case [7], Qualcomm has manifested their willingness to cooperate with the NDRC in its investigation and has submitted relevant commitment.

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China's Antitrust Enforcement is at Its Full Swing

Authored by Dr. Zhan Hao (zhanhao@anjielaw.com) and Dr. Song Ying from AnJie Law Firm

Since the very beginning of 2014, China’s public antitrust enforcement has attracted increasing attention domestically and abroad. Apart from business people, antitrust scholars and lawyers, even common people in the mainland have gotten to be familiar with the terminology of “antitrust”. The enforcement of China’s two antitrust investigative authorities, the National Development and Reform Commission (“NDRC”) and the State Administration for Industry and Commerce (“SAIC”), has foreboded two tendencies recently, which will be elaborated in the following.

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Abuse of Dominance in Relation to Intellectual Property: From China's Perspective

Authored by Dr. Zhan Hao (zhanhao@anjielaw.com) and Li Xiang at AnJie Law Firm

Introduction

There is a joke in reference to the relationship between antitrust and intellectual property and the conflicts between them, which goes, “It is not easy to marry the innovation bride and the competition groom and some have argued that such a marriage will unavoidably lead to divorce.” Nowadays it is not a problem if there is an intrinsic conflict between them. In China, the principle that both of the two legal regimes serve the common purpose of promoting innovation and enhancing consumer welfare is broadly acknowledged.

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Abuse of Dominance in Relation to Intellectual Property: From China's Perspective

Authored by Dr. Zhan Hao (zhanhao@anjielaw.com) and Li Xiang at AnJie Law Firm

Introduction

There is a joke in reference to the relationship between antitrust and intellectual property and the conflicts between them, which goes, “It is not easy to marry the innovation bride and the competition groom and some have argued that such a marriage will unavoidably lead to divorce.” Nowadays it is not a problem if there is an intrinsic conflict between them. In China, the principle that both of the two legal regimes serve the common purpose of promoting innovation and enhancing consumer welfare is broadly acknowledged.

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SAIC Moves Closer to Antitrust Rules for IP

Authored by Dr. Zhan Hao (zhanhao@anjielaw.com) from AnJie Law Firm

On June 11, 2014, China’s State Administration for Industry and Commerce (SAIC) released the latest draft [1] of regulations designed to implement the Anti-Monopoly Law (AML) with respect to intellectual property rights—Rules of the Administration of Industry and Commerce on the Prohibition of Abuses of Intellectual Property Rights for the Purposes of Eliminating or Restricting Competition (Rules), to solicit public opinions. The Rules describe the authority’s enforcement policies, criteria of proof, and types of acceptable evidence in its analysis of suspected anti-competitive conduct involving IPR. The period of calling for public opinions will expire on July 10, 2014.

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No Way: Top Three Shipping Liners' Proposed Alliance was Blocked by Chinese Watchdog

Authored by Michael Gu (michaelgu@anjielaw.com) and Yu Shuitian from AnJie Law Firm

Introduction

On the very last day of the statutory period for a merger review (i.e. June 17, 2014), China’s Ministry of Commerce (“MOFCOM”) rendered its decision to prohibit the proposed shipping alliance among the world’s three largest liner shipping operators, namely, Maersk Line (“Maersk”), Mediterranean Shipping Co and CMA CGM (“P3 Alliance”). The proposed P3 Alliance would be structured as a limited liability partnership in England and Wales. It will be in overall charge of operational matters of all the participating undertakings’ container liner business on the world’s three major shipping routes - Asia to Europe, Transatlantic, and Transpacific. According to MOFCOM’s decision [1] and a statement of the explanations [2], MOFCOM concluded that the P3 Alliance was actually a “close joint operation” and it would have restrictive and anti-competitive effects on the Asia-Europe container shipping market. MOFCOM further pointed out that the parties cannot prove that the positive impact of the proposed alliance will outweigh the negative impact or that the alliance will serve public interest. The parties negotiated with MOFCOM for possible remedial measures for several rounds and submitted a final remedy proposal for review on June 9, 2014. However, MOFCOM observed that the remedy plan lacked legal basis and convincing evidence, thus it cannot resolve MOFCOM’s competition concerns.

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Non-filers Beware: MOFCOM Takes More Strict Approach

Authored by Michael Gu (michaelgu@anjielaw.com) from AnJie Law Firm

Introduction

On March 21, 2014, the PRC Ministry of Commerce (“MOFCOM”) announced that it decided to publicize the decisions of administrative penalties of undertakings which did not submit a notification prior to the implementation of their concentration. These decisions involved undeclared concentrations formally investigated after May 1, 2014 in accordance with the Anti-Monopoly Law (“AML”) of the PRC and the Interim Measures on Investigation of Failure to File Concentration of Undertakings (“Interim Measures”). As for those formally investigated before May 1, 2014, MOFCOM will still impose administrative penalties if necessary but may choose not to announce such decisions. In order to facilitate the implementation of this policy, MOFCOM had set up a hotline phone number (+86 10 65198998) for whistleblower complaints.

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Last Hurdle for Merck's Acquisition of AZ Electronics Removed: MOFCOM's 23rd Conditional Clearance

Authored by Dr. Zhan Hao and Dr. Song Ying

Following the antitrust watchdog in Germany, Japan, Taiwan and the United States, the Ministry of Commerce of the People's Republic of China (MOFCOM) conditionally cleared Merck KGaA’s (Merck) acquisition of AZ Electronic Materials S.A. (AZ Electronics) on April 30, 2014. It means that Merck has won the last pass it needed to wrap up the takeover.

As the world's oldest chemical and pharmaceutical company, Merck was founded in Darmstadt in 1668. The company was privately owned until going public in 1995. The Merck family, however, still controls a majority (roughly 70%) of the company's shares.

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China Issues New Insurance Merger Rules

Authored by Dr. Zhan Hao and Dr. Annie Xue

clevel play ground, optimizing industry structure, promoting competitiveness, and enriching the risk management tool kit of the insurance institutes”, quoting a statement of CIRC posted on its website. [1]

Promotion of Competition

CIRC’s partially relaxed mergers and acquisition rules in the insurance sector are expected to help facilitate market entry and expand the footprint of private capital, including the domestic and China-based foreign-funded insurance firms.

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China Deregulates Pricing in Telecommunication Sector

Authored by Dr. Zhan Hao and Dr. Annie Xue

China has seen another far-reaching step towards deregulating the strictly regulated telecommunication sector.

On May 9, 2014, the Ministry of Industry and Information Technology of the P.R.C. (MIIT) and the National Development and Reform Commission (NDRC) jointly issued a notice announcing liberalizing pricing of the telecommunication services (Notice). [1] This policy has come into force on May 10, 2014.

Backdrop

The price liberalization in the telecommunication sector comes when the ruling party vows to comprehensively deepen the reform and looks to the market as the essential price-setting mechanism. And the Notice is an execution of the State Council’s Decision on Removing and Delegating Some Items Requiring Administrative Approval, [2] which was promulgated on January 28, 2014.

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Chinese Court's Roadmap on Vertical Monopoly Analysis: Some Comments on the Final Judgment on Rainbow vs. Johnson & Johnson Case

Authored by Zhan Hao (zhanhao@anjielaw.com)      
 

On August 1 2013, Shanghai People’s High Court (the Court) handed down judgment on the first private antitrust action involving vertical agreements under the minimum resale price maintenance (RPM) clause of China’s Anti-monopoly Law (AML). The Court rescinded the judgment of the first instance court and ordered the US-headquartered health care giant Johnson & Johnson Medical (China) Ltd. and its Shanghai branch (collectively J&J) to pay their Beijing-based former distributor Rainbow Medical Equipment & Supply Co. (Rainbow) RMB 530,000.

This judicial decision was made against the backdrop that the recent high-profile luxury liquors case and baby formula case handled by antitrust implementing agencies of China have demonstrated a new trend of striking both horizontal and vertical monopolies, but the agencies used to invest much more efforts in investigating horizontal monopolies. The Court’s judgment marks the first official deliberation of the Chinese judicial bodies over vertical monopoly agreements. Meanwhile, the judgment has also helped to mitigate the lack of transparency of how to deal with vertical monopoly agreements by the government bodies, as the ruling has clarified the Court’s attitudes towards vertical monopolies, in particular vertical price agreements, and the analytical approach. In this sense, the judgment is of great importance.

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Chinese Antitrust Agency Imposed Record Fines on Baby Formula Brands - An Analysis on the Application of the Leniency Program under the PRC Anti-Monopoly Law

Authored by Michael Gu (michaelgu@anjielaw.com)

Late June of this year, it was reported that the National Development and Reform Commission (“NDRC”) had been conducting antitrust probes against several major baby formula brands, including both foreign and domestic brands such as Mead Johnson, Dumex, Wyeth, Abbotts, Friesland Campina, Biostime, and Beingmate, for suspected price monopoly behavior. Shortly after that, NDRC confirmed that the investigations were underway, which immediately attracted extensive attention. In response to the NDRC’s investigation, the baby formula manufacturers have, one after another, taken rectification steps, such as cutting formula prices directly or indirectly. At the beginning of August, NDRC closed their investigations into the manufacturers. According to the NDRC news release, six of the nine investigated brands were fined various amounts while the other three did not receive administrative penalties.

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Chinese MOFCOM grants a clearance on the proposed acquisition of a Swedish equipment manufacturer by an American healthcare company (Gambro & Baxter)

Authored by Michael Gu (michaelgu@anjielaw.com)

On 8 August 2013, China’s Ministry of Commerce (“MOFCOM”) granted a clearance on the proposed acquisition of the Swedish dialysis equipment manufacturer Gambro AB (“Gambro”) by its US rival healthcare company Baxter (“Baxter”) in accordance with the Anti-monopoly law. The approval is subject to the conditions of the divestment of Baxter’s continuous renal replacement therapy business and the termination of an outsourcing production agreement with Niplo Corporation (“Niplo”) in China. After the acquisition Gambro will become a wholly owned subsidiary of Baxter.

MOFCOM received the notification on 31 December 2012 and officially decided to entertain the case on 12 March 2013 after receiving supplementary submissions made by the parties. MOFCOM proceeded into Phase II review on 10 April 2013 and subsequently an extension of deadline of the review was awarded on July 9. Although the MOFCOM clearance for Gambro/Baxter was granted less than one month after the approval by the European Commission (the “Commission”), which was also subject to similar conditions, the review process of MOFCOM was significantly prolonged as against the review of the Commission who received the filing of the transaction on 3 June 2013 and approved the same on 22 July 2013.

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Five Years On: SAIC's Anti-Monopoly Law Enforcement Review

Authored by Michael Gu (michaelgu@anjielaw.com), Moon Wang (wanglingling@anjielaw.com)

1.   Overview 

On July 29, 2013, the 5th anniversary since the Anti-Monopoly Law (“AML”) came into effect, the State Administration for Industry and Commerce (“SAIC”) announced that the antitrust case publishing platform was officially opened. This platform publishes, for the first time since the implementation of the AML, all 12 anti-monopoly administrative penalty decisions that the SAIC has investigated and concluded. The AML and related regulations does not necessarily require that the SAIC publicly release the results of its antitrust case investigations. Therefore, the fact that the SAIC has, on its own initiative, decided to use this online platform to publish antitrust cases for the public to view illustrates the SAIC’s laudable openness and progress on law enforcement transparency.

 

In the July 29th afternoon press conference, Ren Airong, the director of the SAIC Anti-Monopoly and Anti-Unfair Competition Law Enforcement, said that since the AML came into effect on August 1, 2008, the SAIC has received a number of complaints in regards to alleged monopolistic behavior in the past 5 years. After combing through, the cases were classified into different categories. For some cases where there are signs of monopoly or minor monopoly issues, the parties are supervised and required to timely rectify the matter. For some major cases, the SAIC organizes a task force or commissions the local Administration for Industry and Commerce (“AIC”) to conduct an investigation for verification. For cases that meet the terms of authorization, the provincial AICs are authorized to file and conduct an investigation.

 

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Jewelers among the Antitrust Storm

Authored by Michael Gu(michaelgu@anjielaw.com), Moon Wang (wanglingling@anjielaw.com)

Background                

Following a sweep on baby formula manufacturers and the packaging giant (i.e. Tetra Pak), the young but powerful Chinese antitrust watchdogs have probed gold jewelers in Shanghai and the Shanghai Gold & Jewelry Industry Association (the “Industry Association”). The National Development and Reform Commission (“NDRC”) and the Shanghai Development and Reform Commission (“SDRC”) allege that the Industry Association and its major members have been manipulating the retail prices of gold jewelry in the Shanghai area. It is reported that 13 major members of the Industry Association, including Shanghai-based gold companies Lao Feng Xiang, Lao Miao Jewelry, Shanghai Yuyuan, world’s biggest jewelry retailer-Hong Kong's Chow Tai Fook, and Chow Sang Sang, were among those probed. It’s said several jewelers have submitted reports to the antitrust agency admitting their wrongdoings. In contrast, Chow Tai Fook has officially denied their involvement in the alleged manipulation of gold retail prices in Shanghai, claiming that they have their own gold pricing mechanism. They further explained that their mechanism determines the gold price in accordance with international bullion price and the prices of their gold products are uniform across China with no regional differences.

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NDRC Leaps Forward with Antitrust Enforcement

Authored by Dr. Zhan Hao (zhanhao@anjielaw.com), Dr. Song Ying (songying@anjielaw.com)

Even though the National Development and Reform Commission (NDRC)’s investigation into milk powder producers has not yet concluded, it has been recently reported that a number of gold shops in Shanghai including Lao Fengxiang and Shanghai Yuyuan are also undergoing close inspection by the NDRC. Various sources have confirmed that this investigation relates to the practice of manipulating the retail price of gold through the Shanghai Gold Jewelry Industry Association. People who follow China’s growing antitrust enforcement are increasingly impressed with the NDRC’s accelerated pace of investigation in spite of its limited personnel resources.

Activities under the Roof of Industry Associations

In the short history of China’s antitrust enforcement, industry associations have long been implicated in antitrust violations. In 2011, the paper industry association of Fuyang in Zhejiang province was fined by the NDRC because it organized paper manufacturers to fix prices in violation of the Price Law of P.R.C.. Furthermore, a series of investigations conducted by the State Administration of Industry and Commerce (SAIC) in various regions of mainland China in 2012 focused on market partitioning agreements between insurance companies, which were organized by the insurance industry associations in the various regions. In this case, the insurance industry associations were fined for violating the Anti-Monopoly Law of P.R.C (AML).

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Chinese Antitrust Enforcement Marches Onwards

Authored by Dr. Zhan Hao (zhanhao@anjielaw.com), Hong Min Taek 

Since China’s adoption of its first anti-monopoly laws in 2008, there has not been any major activity by enforcement agencies like NDRC and SAIC until recent months. One of the main reasons behind China’s reservation in implementing the new law was the fact that it could have lost foreign investment. Another reason behind China’s hesitance was its intention to vitalize state-owned corporations as national counterparts to compete against giant multinationals.

However, a new trend arose near the end of last year, as China finally determined to execute investigations on price cartels in the LCD industry and fined Samsung, LG, AUO, HannStar Display, Chunghwa Picture Tubes, and CMI for fixing the prices of LCD panels in Chinese market. The six LCD companies had to pay 353 million RMB in total, an amount that is considered to be one of the highest fines ever.  

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NDRC Flexes Antitrust Muscles to Infant Formula Producers

Authored by Dr. Zhan Hao (zhanhao@anjielaw.com), Dr. Annie Ying Xue (xueying@anjielaw.com)

The hefty fines on LCD panel manufacturers and top distilleries may have served as a harbinger for the next step antitrust enforcement actions of NDRC which target multinationals and vertical price fixing. The recently unveiled anti-monopoly probes into vertical price fixing of infant milk formula (IMF) producers are cases to the point. The ten companies under investigation are suspected of having committed vertical price-fixing, and among them eight are leading international brands.

Antitrust dawn raid driven by soaring price of IMF products

It is reported that NDRC launched anti-monopoly investigation as early as in May of this year because of the increasingly high prices of IMF products. Since the 2008 melamine scandal, the cumulative price increase of the investigated companies has reached over 30%; moreover, it is said that the retail prices of some imported baby formula products are more than twice of the prices of the same-brand and equally packaged products sold outside China.

Unnamed NDRC officials claimed that there are three ways in which IMF producers can manipulate and raise the price of baby formula products:

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Baby Formula Brands Face Antitrust Probe

Authored by Michael Gu (michaelgu@anjielaw.com), Moon Wang (wanglingling@anjielaw.com

Background

It has been reported that the National Development and Reform Commission (NDRC), China's price monopoly regulator, has been conducting an antitrust probe against several major baby formula brands since May 2013. Although most are leading foreign brands – including Mead Johnson, Dumex (owned by Danone), Wyeth (owned by Nestlé), Abbotts and Friesland Campina – two Chinese firms, Biostime and Beignmate, are also involved in the probe. The companies in question have been accused of violating Article 14 of the Anti-monopoly Law (AML) by limiting the lowest resale prices offered by their distributors and retailers, which potentially eliminated market competition. All of these investigated companies recently confirmed that they are cooperating with the NDRC's investigation.

The investigation was first made public by Biostime in an announcement filed to the Hong Kong Stock Exchange on 30 June 2013, which stated that the "NDRC initiated the investigation on the grounds of an alleged violation of Article 14 of the Anti-monopoly Law by Biostime Guangzhou in maintaining sales prices of its distributors and retailers". Shortly after Biostime's announcement, the NDRC confirmed that it had already launched antitrust investigations against leading formula manufacturers for suspected price fixing and other illegal pricing practices.

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MOFCOM Speeds Up the Rule-Making Process

Authored by Michael Gu (michaelgu@anjielaw.com)

The week before the Chinese Qingming Festival, MOFCOM published two sets of draft rules regarding merger control for public consultation, namely, Provisions on Imposing Restrictive Conditions on Concentration of Undertakings (“Provisions on Imposing Restrictive Conditions”) and Interim Provisions on Standards Applied for Simple Cases of Concentration of Undertakings (“Provisions on Standards for Simple Cases”). These positive steps demonstrate MOFCOM’s continued effort to accelerate the rule-making process and improve the efficiency and transparency of the merger control review.

Provisions on Imposing Restrictive Conditions

The draft Provisions on Restrictive Conditions was published on 28 March and will be open to the public for comments until 26 April 2013. This new draft is intended to replace the currently effective 2010 version of Interim Provisions of the Ministry of Commerce on Implementing Assets or Business Divestment Related to Concentration of Undertakings.

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Key Developments of 2012 in Merger Control Enforcement

Authored by Michael Gu (michaelgu@anjielaw.com), Zhan Hao (zhanhao@anjielaw.com)

The Ministry of Commerce (“MOFCOM”) continues to play an active role in reviewing merger cases, supervising the concentration applications, and drafting implementing rules and guidance for enforcing the Anti-Monopoly Law (“AML”). The year 2012 witnessed 6 conditionally approved concentration decisions. This has been the most conditional approvals rendered by MOFCOM in a single year since the implementation of the AML in 2008. As of this writing, there have been a total of 16 cases conditionally approved by MOFCOM.

This article will review the key developments of 2012 and provide an analysis of the future trends of merger control enforcement and relevant AML supporting legislation in 2013.

Overview of MOFCOM’s Merger Control Review

According to a press conference held by MOFCOM on 27 December 2012[1], during the period between 1 January 2012 and 26 December 2012, MOFCOM received a total of 201 concentration filings, officially accepted 186 of them, and concluded 154 cases. 142 of these cases were approved without any conditions, accounting for 92% of all concluded cases. The number of received, accepted, and concluded cases has had no significant changes as compared with the 2011 figures. In addition to six conditionally approved cases, another six cases were voluntarily withdrawn after being accepted by MOFCOM in 2012.

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Tencent Defeats Qihoo 360 in First Antitrust Litigation Involving Instant Messaging Services

Authored by Dr. Zhan Hao (zhanhao@anjielaw.com), Annie Ying Xue (xueying@anjielaw.com)

The simmering war between two Chinese giant internet companies Qihoo 360 Technology Co., Ltd. (Qihoo 360) and Tencent Inc. (Tencent) culminated in Qihoo 360 losing the first antitrust litigation involving instant messaging services (IM services) in the trial of first instance. On March 28, the Guangdong High People’s Court (Guangdong High Court) declared that Tencent did not commit the abuse of dominance as defined in the PRC Anti-Monopoly Law (AML). The Guangdong High Court further held Qihoo 360 responsible for the 790, 000 RMB litigation costs. Qihoo 360 expressed that it would retain the rights to appeal.

In November 2011, Qihoo 360 filed a lawsuit with the Guangdong High Court under the AML against Tencent’s two subsidiaries: Tencent Technology (Shenzhen) Co., Ltd. and Shenzhen Tencent Computer System Co., Ltd.. Qihoo 360 accused Tencent of abusive practices and claimed damages of 150 million RMB.

Given the current stage of the development in PRC private antitrust litigation, Qihoo 360 v. Tencent is a landmark case. The social influence of the plaintiff and the defendants, the claimed amount of damages, and long-term hostility between the two parties are unprecedented.

This article seeks to highlight the key issues presented by the recently issued decision. 

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Briefing on MOFCOM's Antitrust Enforcement

Authored by Dr. Zhan Hao (zhanhao@anjielaw.com)

With more than four years’ experience, the Ministry of Commerce of PRC (“MOFCOM”) is becoming an increasingly important and high-profile merger review jurisdiction in the globe. As of 30th December, 2012, MOFCOM has handled 533 cases in total, which is quite striking. With regard to both the legislation and law enforcement, MOFCOM have gained impressed progress.

Supporting Legislation

There are eight concentration-related supporting regulations or guidelines have been enacted between 2008 and 2011 in all. In the passing 2012, MOFCOM mainly focused on proceeding supporting legislation in two aspects.

One is rules on imposing conditions on concentrations, before which MOFCOM issued the Interim Provisions on Asset or Business Divestiture in Concentration between Undertakings in 2010. With the target to summarize experience in implementing this Interim Provisions and address discovered problems, MOFCOM decided to enact a new legislation to make a full range of regulation on the proposal, assessment, implementation, supervision, modification of conditions on the concentration as well as the liability issue.

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Rumors Come True:NDRC Imposes Record High Penalties on Luxury Chinese Liquors

Authored by Michael Gu (michaelgu@anjielaw.com)

Background

Just one and half months following the breakthrough LCD cartel case, the Chinese price-monopoly watchdog, two provincial branches of National Development and Reform Commission of the People’s Republic of China (“NDRC”), rendered another harsh punishment against two luxury Chinese Liquor producers.

On 22 February 2013, the NDRC’s provincial branches (i.e. Guizhou Provincial Price Bureau and Sichuan Development and Reform Commission) officially announced that two most famous Chinese liquor producers were respectively fined RMB 247 million and RMB 202 million for their monopoly behaviors. The total penalties combined amount to RMB 449 million, overtaking the total penalty of RMB 353 million imposed on six internal LCD manufacturers early last months, reach a new record high since the China’s Anti-monopoly Law came into force in 2008.  

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NDRC May Fine Two Famous Liquor Companies RMB 449m

Authored by Dr. Zhan Hao (zhanhao@anjielaw.com), Michael Gu (michaelgu@anjielaw.com), Dr. Song Ying (songying@anjielaw.com)

Just after the Chinese New Year, according to relevant source, the National Development and Reform Commission (‘NDRC’), one of the three main China’s anti-monopoly enforcement authorities may impose a new high penalty amount to CNY 449 million ( equal to 71.47 million USD) against two Chinese high-end liquor companies soon, 247 million for Kweichow Moutai and 202 million for Wuliangye respectively.

This action of NDRC actually is only around one and a half month following the LCD case’s 353 million-penalty in January, which can’t be denied that NDRC is becoming more and more aggressive regarding its steps of China’s antitrust enforcement.

As a matter of fact, Kweichow Moutai has issued a statement on its website as early as 15 January 2013 that it will cancel the marketing policies which may violate the Anti-Monopoly Law of China (AML) and conduct a complete rectification due to the investigation by the NDRC and the Price Bureau of Guizhou Province. On 18th of the same month, another top liquor company Wuliangye also published the announcement expressing its cooperation attitude to make rectification in compliance with the AML. Some people forecasted at that time that NDRC may suspend the case partly due to the Stated-owned Enterprise (ome ’) identity of the two and another ground may rest on that vertical agreements at the present time was not the priority of NDRC’s enforcement yet. Only one month later, however, people are surprised that a new record fine may be imposed on these two SOEs soon. 

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Auto-insurance Monopolistic Case Investigated in Hunan

Authored by Dr. Zhan Hao (zhanhao@anjielaw.com), Michael Gu (michaelgu@anjielaw.com), Dr. Song Ying (songying@anjielaw.com)

At the end of 2011, the Administration for Industrial and Commerce in Hunan province had received multiple reports concerning monopoly agreements and elimination of competition on new auto insurance market conducted by the New Auto Centre.

The State Administration of Industry and Commerce (SAIC) authorized the administrative bureau for industry and commerce in Hunan (Hunan administrative bureau) to further investigate the case.

Accordingly Hunan administrative bureau opened formal antitrust proceedings to investigate the involved enterprises. During the investigation, the implementation of the monopoly agreements has been suspended by the parties and the monopoly behavior of New Auto Centre has been stopped by Hunan administrative bureau.

According to the investigation, the enterprises, which under the organization of the insurance associations in some cities of Hunan province, have concluded a monopoly agreement on car insurance issues and set up the New Auto Centre to implement the agreement. The investigated enterprises made it compulsory for all new car owners to purchase the insurance from the New Auto Centre. Such agreement obviously has segmented the market of new auto insurance.

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Most Severe Price Penalty Decision Rendered by NDRC

Authored by Michael Gu (michaelgu@anjielaw.com)

Just at the beginning of 2013, the National Development and Reform Commission of the People’s Republic of China (“NDRC”), the Chinese Price-Monopoly Regulator, has announced a breakthrough penalty against six leading international liquid crystal display (“LCD”) panel manufacturers, including two leading South Korean-based multinationals (i.e. Samsung and LG) and four Taiwanese companies (i.e. Chi Mei, AU Optronics, Chunghwa Picture Tubes, and HannStar). The total value of the penalty amounts to RMB 353 millions. This is the largest price-related monopoly case that the Chinese competition authority has ever investigated and penalized in terms of the total fines.

The breakdown of penalties is illustrated in the diagram below. (Unit: RMB Million)

                                        

 

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The Price Law or the Anti-Monopoly Law: Observation of NDRC's Antitrust Enforcement in China

Authored by Dr. Zhan Hao (zhanhao@anjielaw.com), Dr. Song Ying (songying@anjielaw.com)

At the right beginning of 2013, the National Development and Reform Commission of China (“NDRC”), one of three main anti-monopoly regulatory authorities in PRC, imposed fines in a total amount of RMB 353 million (approximately USD 56 million) on 6 LCD panel manufacturers, which is the harshest penalty that NDRC has ever imposed and also the first time NDRC pointed the gun at multinational companies in its anti-trust enforcement history.

The parties fined include two Korean giants Samsung and LG of as well as Chimei, AU Optronics, Chunghwa Picture Tubes and HannStar from Taiwan. According to NDRC’ notice on its official website, the 6 LCD manufacturers have convened 53 meetings during the timeframe of 2001 to 2006 either in Taiwan or in South Korea to exchange market-sensitive information and further collude the product price.

As people may have noticed, the NDRC’s action against the 6 LCD panel manufacturers actually is an investigation following up probe of EU and U.S. antitrust authority several years ago. Nevertheless, it is noteworthy that the sanction of NDRC is relatively low compared to the gesture of their counterparts in EU and U.S., although it is already the highest fine ticket ever from Chinese antitrust enforcement authorities.

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MOFCOM Disclosed 59 Unconditional Approvals in the Last Quarter of 2012

Authored by Dr. Zhan Hao (zhanhao@anjielaw.com), Dr. Song Ying (songying@anjielaw.com)

"We will disclose the approved cases without any condition by quarterly summary hereafter. In the current stage, disclosed information is only limited to case name and concentration parties. Whether additional information would be disclosed later is still under discussion.” This statement is from briefing of Mr. Shang Ming, the Director General of MOFCOM on “anti-monopoly work progress in 2012” on the press conference held on 27th Dec, 2012.

Indeed, MOFCOM kept its promise. In the very beginning of 2013, MOFCOM just disclosed all unconditional approved concentration cases in the fourth quarter of 2012, which signifies to some extent that MOFCOM’s work on information disclose in antitrust enforcement has being continuously shaped.

According to the first disclosure of MOFCOM Anti-monopoly Bureau in 2013, 59 unconditional approvals on concentration cases have been issued by MOFCOM in the fourth quarter of 2012. Besides, the following information could be observed:

      i.        Apart from the case name and concentration parties, MOFCOM additionally disclosed the closing time for each case, which is a development from the disclosure on 16th Nov, 2012;

     ii.        Among the 59 unconditional approvals in the fourth quarter of 2012, MOFCOM closed 10 concentration cases in October, 15 concentration cases in November and 34 concentration cases in December;

    iii.        24 out of 59 concentration cases took the concentration method of establishing Joint Venture, which accounted for more than 40% of all unconditional approvals in the last quarter of 2012.

NDRC Imposed the Penalty against LCD Panel Companies for Their Monopolistic Behavior

Authored by Dr. Zhan Hao (zhanhao@anjielaw.com), Dr. Song Ying (songying@anjielaw.com)

China’s National Development and Reform Commission (“NDRC”) has imposed a heavy penalty of total RMB 353 million yuan against six companies for the monopolistic behavior of price-fixing on liquid crystal display (“LCD”) panel in mainland China as announced on January 4, 2013. The six companies include Samsung, LG, as well as four firms from Taiwan——Chi Mei Optoelectronics, AU Optronics, Chunghwa Picture Tubes and HannStar Display. What worth noting is that it is the first time for NDRC to issue a penalty against foreign firms for monopolistic behavior which is also the heaviest penalty ever on price-related violations by Chinese antitrust enforcement authority until now.

NDRC has received multiple complains on the price-related monopolistic behavior of above companies from domestic enterprises since December 2006. As found by NDRC through the investigation, Samsung, LG and other four Taiwanese companies "conspired" in a price fixing scheme through monthly meetings (“crystal meetings”) from 2001 to 2006. During the period, the six companies held 53 crystal meetings in Taiwan and South Korea to exchange information related to price and make agreements on LCD panel pricing which caused huge damage on other undertakings and customers.

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Briefing on MOFCOM's antitrust enforcement in 2012

Authored by Dr. Zhan Hao (zhanhao@anjielaw.com)

With the year of 2013 approaching, MOFCOM held a press conference specific on “anti-monopoly work progress in 2012” on December 27, 2012. Shang Ming, the Director General of MOFCOM Anti-monopoly Bureau and Anti-monopoly Committee of the State Council gave a briefing on the legislation and enforcement progress of antitrust review on concentrations and answered questions from reporters.

In this occurrence, four issues are mainly involved and they are: (1) supporting legislation of antitrust review on concentrations; (2) law enforcement of antitrust review on concentrations; (3) international cooperation carried out by MOFCOM; and (4) propaganda and training carried out by MOFCOM.

Supporting Legislation

According to Mr. Shang’s introduction, there are eight concentration-related supporting regulations or guidelines have been enacted between 2008 and 2011 in all. In the passing 2012, MOFCOM mainly focused on proceeding supporting legislation in two aspects. One is rules on imposing conditions on concentrations, before which MOFCOM issued the Interim Provisions on Asset or Business Divestiture in Concentration between Undertakings in 2010. With the target to summarize experience in implementing this Interim Provisions and address discovered problems, MOFCOM decided to enact a new legislation to make a full range of regulation on the proposal, assessment, implementation, supervision, modification of conditions on the concentration as well as the liability issue.

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Antitrust Model used in Purchase of Store 1

Authored by Dr. Zhan Hao (zhanhao@anjielaw.com)

Walmart surprisingly merged with Niuhai Holdings Ltd before the concentration received approval from MOFCOM.

The concentrated entity Store No.1, controlled by Niuhai, was established in 2008, after which it experienced ups and downs in China’s e-commerce market. The founders, Mr. Yu Gang and Liu Junling, made large capital investment to rapidly increase market share. However, the money-consuming feature of e-operators seemed to trap Store No.1 permanently into capital shortage. On May 2010, Ping An Group, a leading integrated financial services group in Chinese insurance market, purchased 80% equities of Store No.1 at the price of RMB 80 million, enabling Store No. 1 to grow rapidly.

It is revealed that the turnover of Store No.1 was RMB 4.17 million in January, 2008 under the great drive from Ping An Group. The number rose to RMB 46 million in 2009 and RMB 805 million in 2010. The trading volume in 2011 continued to increase rapidly throughout the four quarters. Public statistics show that its Q2, Q3 and Q4 increased by 336%, 609% and 268% compared with those in last quarter. Before the concentration, over 180,000 kinds of commodities were on sales online by Store No.1 and its working staff amounted to 5400. Its warehousing centers scattered around Beijing, Guangzhou, Wuhan, Chengdu and Shanghai, covering a total area of 220,000 square meters.

The merger was conducted by Walmart, a tycoon in retail market. However, the retail tycoon whose physical stores are booming in China did not go smoothly in e-commerce. Sam’s Club online stores were opened in China, but it did not expand with its services limited to Shenzhen and Beijing.

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Far-Reaching Impact of the First Judicial Interpretation on Antitrust Civil Litigations

Authored by Michael Gu (michaelgu@anjielaw.com)

I.       BACKGROUND

On 8 May 2012, the PRC Supreme People’s Court (“Supreme Court”) issued the long-awaited Provisions on Certain Issues Concerning the Application of Law in Hearing Cases Involving Civil Disputes Arising out of Monopolistic Behaviors (“Judicial Interpretation”), which will become effective on 1 June 2012.Being the first interpretation on antitrust litigations, it lays the foundations of the antitrust litigation legal framework in China. The Judicial Interpretation provides guidance to the courts’ precise application of the Anti-Monopoly Law (“AML”), the undertakings’ compliance and avoidance of the legal risks in their business operation, or consumers’ initiation of antitrust litigations.

The drafting and issuance of the Judicial Interpretation has gone through an extremely lengthy process. The Supreme Court started the drafting in 2009, at the beginning of the AML’s implementation. After numerous rounds of amendments, the Supreme Court released the draft of the Judicial Interpretation for public consultation on 25 April 2011. Although the Judicial Committee of the Supreme Court has approved the Judicial Interpretation on 30 January 2012, the text of the Judicial Interpretation was not publicly released until more than three month later. The extraordinary long process and delayed issuance might indicate that the Judicial Interpretation has raised exceptional disputes during its drafting process, and that the Supreme Court shows a prudent attitude towards the Judicial Interpretation in terms of the content and timing.

The AML contains only one article (i.e. Article 50) with respect to the civil litigation, which provides that “any undertaking who engages in monopolistic act resulting in losses to another person, it shall bear civil liabilities according to law”. The Judicial Interpretation not only supplements the AML and addresses many procedural issues regarding the civil litigations; it also throws light as to how the Tort Liability Law, the Contract Law and Civil Procedure Law may apply in dealing with the antitrust civil disputes. The Judicial Interpretation clarifies certain matters related to the antitrust litigations, such as the filing, acceptance, jurisdiction, evidence rules, civil liabilities and time limit of case filing. Compared with its consultation draft released earlier, the Judicial Interpretation is simplified to 16 articles with approximately 2,000 words in total. By dropping the controversial articles and stating only the general principles for some issues, the final version of the Judicial Interpretation is more aligned with existing laws while ensuring that it remains flexible to deal with unforeseen situation that may arise in the future.

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An Introduction of the Anti-Monopoly Law in China

 

Authored by Michael Gu (michaelgu@anjielaw.com)

I. OVERVIEW

It has taken 13 years for China to finally promulgate the Anti-monopoly Law of the People's Republic of China ("AML") which was passed on 30 August 2007 and took effect on 1 August 2008. The AML aims to prevent and restrain monopolistic behaviors, protect fair market competition, improve economic efficiency and safeguard interests of consumers and the public. The AML regulates the following four types of monopolistic behavior: monopoly agreements, abuse of dominant market position, concentration of undertakings and administrative monopoly.

II. LAW ENFORCEMENT AND REGULATORY ANTHORITIES

The highest regulatory body of anti-monopoly law-enforcement is the State Council Anti-Monopoly Commission ("SCAC"), established in August 2008. The SCAC members include heads and relevant officials from the Ministry of Commerce ("MOFCOM"), the State Administration for Industry and Commerce ("SAIC"), and the National Development and Reform Commission ("NDRC"). SCAC, a coordinating body under the State Council, does not participate in specific anti-monopoly law enforcement, but is mainly responsible for drafting competition related policies, organizing investigations, assessing the overall market competition, publish assessment reports and anti-monopoly guidelines, and coordinating anti-monopoly law-enforcement. SCAC established an office in September 2011 and the office takes charge of SCAC's day-to-day work which was previously assumed by the Anti-monopoly Bureau of MOFCOM.

According to relevant State Council regulations, the administrative law-enforcement authorities are MOFCOM, SAIC and NDRC.

(1) MOFCOM is the enforcement agency in charge of antitrust reviews and investigations in connection with concentration of undertakings. The specific law-enforcement department is the Anti-monopoly Bureau.

(2) SAIC mainly regulates abuses of dominant market positions and abuses of administrative powers to eliminate or restrict competition (excluding price-related conducts). The specific law-enforcement department is the Anti-monopoly and Anti-unfair Competition Enforcement Bureau.

(3) NDRC principally administers price monopolies, including price-related monopoly agreements, abuses of dominant market position and administrative monopoly. The specific law-enforcement department is the Price Supervision and Inspection Section.

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Study on Jurisdiction of Private Antitrust Litigation

Authored by Dr. Zhan Hao (zhanhao@anjielaw.com)

1.       Overview of the Jurisdiction System of Private Antitrust Litigation

Private Antitrust Litigation belongs to the civil proceeding in nature and its relationship with the civil proceeding can be summarized as the special and general. Despite that there are differential rules and slight variances in private antitrust litigation; they are still designed rooting from general theories, principles and systems of civil proceeding.

The jurisdiction in the civil proceeding refers to division of work and authorities among People’s Courts of all levels or courts of the same level when civil cases of first instance were handled. Jurisdiction system serves as prerequisite and foundation of litigations. Appropriate division of the jurisdiction not only determines proper exercise of judicial power, but also prevents litigants from nowhere-to-go when filing lawsuits due to buck-passing or competing for jurisdiction between different courts. In addition, it helps protect our national jurisdiction and safeguard the interests of private subjects in foreign-related disputes. To ensure a reasonable jurisdiction, the following systems are specified in Civil Procedure Law of PRC: jurisdiction by level; territorial jurisdiction, exclusive jurisdiction, designated jurisdiction and transfer of jurisdiction. Likewise, the jurisdiction system of private antitrust litigation is framed with the aforesaid systems.  

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MOFCOM Imposed Conditions on the Concentration between Wal-Mart's and Niuhai Holdings Ltd

Authored by Dr. Zhan Hao (zhanhao@anjielaw.com)

On 13th August of 2012, MOFCOM granted a conditional approval on the concentration between Wal-Mart and f Niuhai Holdings Ltd (hereinafter referred to as NH) after a nearly 6-month review

MOFCOM received the concentration filing as early as Dec 16th,2011, and officially accepted the case on Feb 16th, 2012 after the supplemental filing. Through self-assessment and consultation with relevant governmental departments, industry association and main competitors, MOFCOM concluded that concerning concentration may lead to the effect of eliminating or restricting effective competition in the relevant market.

In this connection, Wal-Mart submitted proposed commitments to MOFCOM on July 3rd, 2012, who considered they can clear MOFCOM’s competition concerns after comprehensive assessment. In the end, Wal-Mart obtained the conditional approval from MOFCOM regarding its acquisition control on NH.

According to the concentration agreement concluded among the related parties, Wal-Mart shall increase its shareholding ratio over NH from 17.7% to 51.3% through its wholly–owned subsidiary company, GEC 2. NH shall take in hand the direct–sale business of online shopping platform Yihaodian of Shanghai Yishiduo E-commerce (hereinafter as YSD Yihaodian) through its wholly–owned subsidiary companies, Xingangling Hongkong Co. Ltd and NH Shanghai Corporation. Upon completion of the deal, Wal-Mart shall become the dominant shareholder of NH and take control of the direct-sale business of YSD Yihaodian through the intermediate, NH.

In light of Wal-Mart’s commitments, MOFCOM granted approval of the concentration under restrictive conditions. Wal-Mart shall fulfill the following obligations:

(1) NH Shanghai is limited to direct-sales through its own network platform.

(2) Before obtain the license for value-added telecom business, NH Shanghai after this concentration shall not provide network services for other dealers through its own network platform.

(3) Upon completion of the deal, Wal-Mart shall not undertake the value–added telecom business previously operated by Shanghai Yishiduo E-commerce Co. Ltd through VIE model.

MOFCOM Imposed Conditions on United Technologies' Purchase of Goodrich

Authored by Dr. Zhan Hao (zhanhao@anjielaw.com)

The deal between United Technologies (hereinafter referred to as “UT”) and Goodrich has triggered widespread discussions and guess from both Chinese and foreign antitrust, business and economist circles. On June 15, 2012, MOFCOM finally disclosed its decision, issuing the fourteenth conditional approval on the UT/Goodrich deal on its Antitrust Bulletin.

The filing submission of this transaction can trace back as early as December 12, 2011; when MOFCOM received the notification on the contemplated concentration between UT and Goodrich. Perhaps being influenced by the Chinese New Year session, it took 56 days from the parties filed at the first time to MOFCOM officially accepted the filing (namely, clock for MOFCOM starts to tick).

Through comprehensive competitive assessment on the relevant market, consultation with relevant authorities, industry associations, main competitors, upstream and downstream market players and customers, MOFCOM found that the concentration at hand may eliminate or restrict competition in the market for “Aircraft AC Power Generation System”. In order to solve the aforesaid competition concerns, MOFCOM engaged several rounds of talks with the filing parties regarding the remedies. In the end, on June 6, 2012, the filing parties submitted a final commitment on how to resolve MOFCOM’s concerns, which was recognized by MOFCOM as sufficient to prevent potential competition concerns in “Aircraft AC Power Generation System” market; thus, the concentration was cleared in the end.

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MOFCOM Approved Google's Purchase of Motorola with Conditions

Authored by Dr. Zhan Hao (zhanhao@anjielaw.com)

On May 19, 2012 MOFCOM confirmed the conditional approval of Google's purchase of US phone maker Motorola Mobility.

On August 15, 2011 Google and Motorola Mobility signed a purchase agreement, under which Google would acquire all shares of Motorola Mobility, which would then become a wholly owned subsidiary of the former. Thereafter, on September 30, 2011, MOFCOM received the notification regarding the concentration of undertakings through Google’s purchase of Motorola Mobility. Different aspects were reviewed by the relevant authority, such as the relevant market, free use of Google’s mobile software, Android, treatment of original equipment manufacturers by Google, Motorola’s patent obligations and market entry. However, the main aspect MOFCOM focused on when evaluating the concentration was its influence on competition within the relevant market.

With respect to the influence the concentration could exercise upon the relevant market, MOFCOM pointed out that it may affect competition by means of eliminating and restricting it. In order to solve the aforesaid issue MOFCOM engaged several rounds of talks. As a result, on May 15, 2012 Google submitted a final commitment on how to solve any competition issue thereby. After its evaluation, MOFCOM states that Google’s commitment could reduce the adverse effects of the concentration on competition, and, therefore, the concentration was approved.

According to the final commitment, which Google should fulfill the following obligations:

1. Google shall provide Android on a “free and open basis”.

2. Google shall treat all original equipment manufacturers on a non-discriminatory basis.

3. Google shall continue to comply with Motorola’s current fair, reasonable and non-discriminatory patent obligations.

4. Google shall appoint an independent superintendent to monitor and supervise the fulfillment of these obligations.

Conditions 1 & 2 are binding for a five-year period. Nevertheless, should market conditions have changed Google could ask for their modification or rescission. The superintendent’s report must be submitted to MOFCOM every six months. After expiration of the five-year period, MOFCOM may still monitor the situation and take any necessary decision according to market conditions.

360 VS Tencent Impels the Growing up of Private Antitrust Litigation in China

Authored by Dr. Zhan Hao (zhanhao@anjielaw.com)

On 18th April, 2012, the case of dispute on the abuse of dominant market position filed by Qihoo 360 (NYSE: QIHU) against Tencent (HKEX: 700) was heard in the Superior People’s Court of Guangdong Province, with the claim of 150 million RMB. It should be recognized that, whether in terms of the claim amount or close involvement in people’s everyday life of the goods or services provided by the two parties, the fact that 360 vs Tencent case has aroused wide attention is not a surprise.

Parties of the Case

The Plaintiff:

Qihoo 360 Technology Co Ltd (referred to as “Qihoo 360”), is engaged in the operations of Internet services and sales of third party anti-virus software in the People's Republic of China. It provides Internet and mobile security products in China. In January 2011, the Company had 328 million monthly active Internet security product users, representing a user penetration rate of 83.9% in China.

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The First Judicial Interpretation on the Anti-monopoly Private Litigation in China

Authored by Dr. Zhan Hao (zhanhao@anjielaw.com)

On 4th May, 2012, the People’s Supreme Court issued the Regulations on Several Issues Concerning the Application of Law in relation to Trials of Monopoly Civil Disputes arising from Monopolistic Conducts (The “Judicial Interpretation”). This new Judicial Interpretations of Anti-Monopoly Law will take effect on 1st June, 2012. As the first issued judicial interpretation on the field of Anti-Monopoly law, it began to be drafted early since 2009. On 25th April, 2011, the People’s Supreme Court of China released the Draft version of the Judicial Interpretation to solicit public comments. Based on various public opinions, the official Judicial Interpretation freshly baked is different from the Draft version in some facets to some extent.

It is a fact that since 1st August 2008, when the Anti-Monopoly Law of PRC came into force, civil monopoly dispute cases have gradually become a very important type of lawsuits of People’s Courts. According to the Supreme Court’s records, as of the end of 2011, local courts in China have accepted 61 civil actions as courts of first instance under the Anti-Monopoly Law and have closed 53 of them. However, the civil monopoly dispute cases are normally difficult and complicated for the court proceedings whether in terms of anti-competitive agreements or abuse of dominant position. legal problems in such cases usually closely intertwine with economic data and analysis. Good understanding of specific field of economy is necessary with the view to analyze monopoly dispute cases. Indeed, some provisions of the Anti-Monopoly Law are highly principled and abstract. Provisions that refer to the operation of the People's Court are stipulated relatively simple. Therefore, the issue of the Judicial Interpretation undoubtedly has a significant influence on the practical operation of the People’s Courts.

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Nestlé's Filing of Acquiring China' Largest Listed Confectionery Company Has Been Accepted

Authored by Dr. Zhan Hao (zhanhao@anjielaw.com)

A spokeswoman from the Ministry of Commerce publicly declared in the recent, that the Ministry has officially accepted the notification on Nestlé’s acquisition of Hsu Fu Chi. If the Ministry turns on the green light for this filing it could be one of the biggest foreign takeovers of a Chinese undertaking historically.

Founded in 1866 by Henri Nestlé in Vevey, Switzerland, Nestlé is the world's leading Nutrition, Health and Wellness company. Nestlé’s product lineup covers from baby food, bottled water, cereals, chocolate & confectionery, coffee, culinary, chilled & frozen food, dairy, drinks to food service, healthcare nutrition, ice cream, petcare, sport nutrition, and further to weight management.

Hsu Fu Chi is China’s largest listed confectionery company, with more than 16,000 sales outlets and 100 sales affiliates. In connection to its revenue, the first quarter of 2011 alone was Rmb1.51bn ($234m). Hsu Fu Chi focuses itself on chocolates, pastries and other sweets markets, and particularly is famous for a breakfast bar called Sachima. It should be recognized that Hsu Fu Chi already developed into a national brand within two decades. Voices from different communities, hence, expressed their worry that this event may ignite nationalist outcries just as it did with Coca-Cola's negotiations with Huiyuan.

From a legal point and preliminary view, this concentration may bring about many anticompetitive effects. Firstly, both Nestlé and Hsu Fu Chi are strong market players in Chinese market with regard to their own products, respectively. (Without exact and concrete market share statistics though). Secondly, there is horizontal overlap between the two “Mr big”, namely, on the product market of confectionery. In a further consideration, the occurrence of penetrating effects between different markets of Nestlé and Hsu Fu Chi cannot be excluded from concerns in any means. Therefore, Nestlé’s action also triggered a school of worries that it may encounter the same judgment as Coca-Cola (KO) and juice maker China Huiyuan Juice Group in 2009.

As far as the author concerned, nevertheless, Hsu Fu Chi harbors still the hope of being cleared given that the following grounds:

Firstly, Hsu Fu Chi has not such a powerful market position as Coca cola has in consideration of the situation of confectionary market. (6.6% in 2009) Besides, it has been seen that the trend of mergers and acquisitions in China's confectionery industry recent years has facilitated cooperation in many creative levels, and accordingly inflamed more fierce competition and more pressure on local players. Consequently, concerned acquisition here also give rise to many precompetitive effects on the relevant market.

All in all, how the Ministry assess and balance the concentration at issue is still of full suspicion.

Updates in Anti-Monopoly

On 15th February of 2012, several fundamental policies for economic reform of China in 2012 have been settled down through the Executive Meeting of the State Council (hereinafter referred to as “the Meeting”). To promote the development of diverse forms of ownership, push reforms of strategic adjustment of state-owned economy and turning state-owned enterprises into standard joint-stock companies, to improve and implement the policies and measures in order to promote development of non-public ownership economy, encouraging private capital to enter the railway, municipal, financial, energy, telecommunications, education, medical and other fields. The above slogans have been highlighted in the Meeting.

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Coming out after a Long Wait

The Provisional Measures on Investigating and Penalizing Violation of Notification Obligations for Concentrations of undertakings (hereinafter referred to as “Provisional Measures”) was officially published on 30th December 2011 by MOFCOM and will come into effect on 1st February 2012.

Such regulation has been for a long time called on given that not just a few undertakings often choose to escape MOFCOM’s jurisdiction in the antitrust review on concentrations, which reached the threshold by AML and relevant regulations, thus, has derogated MOFCOM’s enforcement effects.

In pursuance to Article 3 of the Provisional Measures, as expected, MOFCOM is the authority concerned in investigating and penalizing concentrations that are not notified in compliance with the law, and where necessary, provincial commence departments can be commissioned to assist MOFCOM regarding its work.

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Another Conditional Clearance on Hard Disk Industry Concentration

On 2nd March of 2012, MOFCOM publicized another conditional clearance on concentration in the hard disk industry, which comes three months after MOFCOM imposed similar conditions on Seagate's acquisition of Samsung's hard drive business. At this time, the concentration parties are Western Digital’s and Viviti Technologies, and the relevant market is defined by MOFCOM as the worldwide market for hard disk drive.

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China Unicom and China Telecom Submits Application for Suspension of Investigation to NRDC

The Price Supervision, Inspection and Antitrust Bureau of NRDC has confirmed to the public on 2nd December 2011, that they have received applications from China Unicom and China Telecom for the suspension of probe on alleged abuse of dominant position by the parties in last month. In addition, China Telecom also submitted a proposal of rectifying and reforming to NRDC, with the expectation to be awarded a leniency treatment. The proposal of rectifying and reforming is comprised of mainly the following aspects:

First, China Telecom undertakes to expand the capacity which is connected to other backbone telecommunications operators such as China Unicom and China Tietong as soon as possible.

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MOFCOM's Anti-Monopoly Investigation on Google/Motorola Mobility Concentration in the Process

MOFCOM hosted a press conference on Feb 16th, 2012, in which it announced updates and news on Chinese business affairs for the previous month of January 2012.

MOFCOM hosted a press conference on Feb 16th, 2012, in which it announced updates and news on Chinese business affairs for the previous month of January 2012.

In the announcement, Google’s recent acquisition of Motorola Mobility Holdings Inc came to focus. Shen Dan Yong, a spokesperson from MOFCOM, confirmed that the Anti-Monopoly Bureau of MOFCOM was continuing its investigations of the American internet search giant’s recent take over of Motorola Mobility and is still yet to make a decision regarding its approval.

According to media reports, Google has already received ratification from the U.S. Department of Justice and European Commission DG Comp concerning its acquisition which is worth $12.5 billion, of which for Google, has been the biggest acquisition by far in the company’s history.

Statistical reports also show that the take over has also been the biggest acquisition of the last 10 years in the wireless devices industry.

While the investigation carries on and its outcome remains pending, Shen noted that any updates or decisions made by the Anti-Monopoly Bureau of MOFCOM would be promptly published to the public.

Important Numbers Released by MOFCOM

According to the information released by MOFCOM in its news conference at the end of 2011, statistics indicate that in the year of 2011, MOFCOM received 194 notifications for antitrust review on concentration in total, the amount of received cases increased by 43% compared to last year. Among them, the number of accepted cases by MOFCOM in the year of 2011 altogether are 179, which increased by 52%. Besides, there are 160 cases completed by MOFCOM, which increased by 40% compared to 2011.

In connection to the rapid growth on the number of notification on concentration to MOFCOM, the Director of Anti-Monopoly Bureau, Mr. Shang Ming explained three reasons thereof: first, the popularization of AML of China is gradually strengthened; second, more and more enterprises reach the threshold for antitrust notification in the wake of average scale of enterprises getting larger; third, most of international investors take prudent attitude, hence mainly choose the means of concentration to increase their market shares and competitive strength.

Among the 160 cases completed by MOFCOM, cases in manufacturing industries account for the most, 64%; cases in computer service, information transmission and software industries account for 8% in together; and cases in electricity, gas and water industries account for 6%. As far as the outcome of the case concerned, MOFCOM make the decision of unconditional clearance on 151 cases (account for 94%). Besides, there are four conditional clearance and 5 withdraw of cases after acceptance by MOFCOM, which account for 3%.

MOFCOM Conditionally Cleared Samsung and Seagate Hard Disk Drive Deal

On 12th December 2011, MOFCOM publicly disclosed its decision to clear Samsung and Seagate hard disk deal by imposing several conditions. According to the Asset Purchase Agreement, Seagate Technology intends to acquire control of Samsung Electronics’ hard disk business by purchasing all relevant assets. The acquiring party, Seagate Technology, is a multinational enterprise, engaging in the manufacture and sales of hard disk and other digital storage products. The target assets are all plants, equipments and other assets specifically for R&D, manufacture and sales of Samsung Electronics’ hard disk.

From MOFCOM’s point of view, the market for manufacture and sales of hard disk constitutes a separate and distinct market by taking considerations on both demand and supply side. Moreover, the geographic scope of competition for hard disk is worldwide. Consequently, relevant market in this case is determined as worldwide market for manufacture and sales of hard disk.

MOFCOM examined a variety of facets in this transaction for the purpose of avoiding a restriction or elimination of workable competition on relevant market, including market situation, procurement structure, rate of capacity utilization, products innovation, buying power, potential influence on Chinese consumers and market entry.

Through thorough investigation, MOFCOM reached the conclusion that concerning transaction triggers potential competition concerns. For one thing, it reduces the number of players in the already highly concentrated market; hence increases market concentration in a further degree. As a result, it may eliminate or restrict competition on the market for manufacture or sales of hard disk. For another, the said transaction would increase the possibility of exclusion or restriction of competition on the market by collusion between competitors.

In light of above-mentioned competition concerns, MOFCOM and the concentration parties finally agreed several conditions to be imposed with the clearance of Samsung and Seagate hard disk drive deal, with the view to avoid potential detrimental effects on competition on the market for manufacture and sales of hard disk.

MOFCOM's Second Conditional Clearance on Concentration after the Release of its Guidance on Analysis of Competitive Influence

MOFCOM is getting more and more efficient upon dealing with its own work. Only 10 days after the Alpha V/Savio conditional clearance, MOFCOM imposed conditions on another proposed concentration between General Electric (China)., Ltd (hereinafter referred to as GE China) and China Shenhua Coal to Liquid and Chemical Co., Ltd (hereinafter referred to as CSCLC) on 10th, November, 2011. It is noticed that GE China/CSCLC is already the NO.2 conditional clearance on concentration only two months after the “Provisional Regulation on the Assessment on the Competitive Effects of Concentration of Undertakings” is officially released in the end of August (hereinafter referred to as “Provisional Regulation”). That to some extent gives people the impression that the Provisional Regulation does not only give administrative counterparts guidance, but also standardized and facilitated MOFCOM’s antitrust reviewing work on concentration in some degree.

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MOFCOM Announced the Another Conditional Clearance on Concentration

On 31st October 2011, MOFCOM posted the No.73 Notice in its website, announcing to clear proposed concentration between Penelope Co., Ltd and (referred to as “Penelope” hereinafter) and Savio Macchine Tessili S.p.A. (referred to as “Savio” hereinafter) with certain conditions. Without doubt, the reasoning and analytical instruments utilized by MOFCOM would shed some light on of what attitude and approach hold by MOFCOM when facing anti-monopoly review of concentration.

According to MOFCOM’s notice, the proposed acquiring party (Penelope) is established as a tool specifically for the sake of this concentration transaction. Alpha Private Equity Fund V (referred to as “Alpha V” hereinafter) is Penelope’s wholly-owned controlling shareholder (the “parent”), which is a private equity fund and invests in non-ferrous metal recycling, production and sales of home textile and textile machinery. Meanwhile, being the largest shareholder, Alpha V holds 27.9% equity shares of Uster technologies Co., Ltd (referred to as “Uster” hereinafter)

Proposed acquired party in the said concentration (Savio) is a manufacturer of textile machinery, engaging in the production of electronic yarn clearers for winders, twisters and rotor-spinning frames. Beside, Phenanthrene Brothers Co., Ltd (referred to as “Phenanthrene Brothers” hereinafter).is a wholly owned subsidiary of Savio.

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Nestlé's Filing of Acquiring China' Largest Listed Confectionery Company Has Been Accepted

A spokeswoman from the Ministry of Commerce publicly declared in the recent, that the Ministry has officially accepted the notification on Nestlé’s acquisition of Hsu Fu Chi. If the Ministry turns on the green light for this filing it could be one of the biggest foreign takeovers of a Chinese undertaking historically.

A spokeswoman from the Ministry of Commerce publicly declared in the recent, that the Ministry has officially accepted the notification on Nestlé’s acquisition of Hsu Fu Chi. If the Ministry turns on the green light for this filing it could be one of the biggest foreign takeovers of a Chinese undertaking historically.

Founded in 1866 by Henri Nestlé in Vevey, Switzerland, Nestlé is the world's leading Nutrition, Health and Wellness company. Nestlé’s product lineup covers from baby food, bottled water, cereals, chocolate & confectionery, coffee, culinary, chilled & frozen food, dairy, drinks to food service, healthcare nutrition, ice cream, petcare, sport nutrition, and further to weight management.

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The First Guideline for Reviewing Concentrations in China Has Been Freshly Baked

With already more than 3 years of practice experience concerning antitrust review to concentrations, the Ministry of Commerce of the People’s Republic of China in recent publicly announced its first set of guideline thereof on August 29, 2011, namely, “Provisional Regulation on the Assessment on the Competitive Effects of Concentration of Undertakings ( it would be abbreviated as “the Regulation” hereinafter).

It should be recognized that the Regulation reflects great significance in many facets without doubt. For one thing, the substantive process of reviewing and assessing concentrations by the Ministry of Commerce is tranparentized in a large degree. As a result, relevant competitors, consumers and other stakeholders of interest could obtain much more convenience for the purpose of supervising antitrust enforcement.

In the second place, the Ministry took this opportunity to standardize in the Regulation, which factors that they will take the most account into in principle, which interests they will consider principally when balancing the pro-competitive and anti-competitive effects of concentration concerned. In this connection, the Regulation would possess the function of conducting, standardizing as well as facilitating the work of antitrust control to concentrations of the Ministry.

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Nestlé's Filing of Acquiring Hsu Fu Chi is Cleared by MOFCOM

On 7th December 2011, Nestlé’s intended purchasing 60% shares of Hsu Fu Chi by Rmb1.51bn ($234m) was cleared by MOFCOM officially. By this news, all clouds of doubt and debates from a variety of societies in last months are dispelled. In particular, Nestlé/Hsu Fu Chi decision from MOFCOM cleans up the school of worries from foreign enterprises that antitrust enforcement of PRC is inclined to protect national brand, as they derived from Coca-Cola/ Huiyuan case. It is believed that MOFCOM’s clearance in Nestlé/Hsu Fu chi must have an encouraging effect on foreign enterprises’ incentive to march into Chinese market by the means of concentration.

Without many disputes, Nestlé’s market share in Chinese confectionary market would be much higher ex post this transaction. According to the market sources, Hsu Fu Chi’s greatest strength lies in bulk sales, while Nestlé is good at package sales. It is highly anticipated that combination of Nestlé and Hsu Fu Chi would give rise to a synergy effect, hence would influence Chinese confectionary market in a significant degree.

A spokesman from Nestlé publicly expressed there would not be major changes on the company’s development direction and employee after the concentration. Nevertheless, when asked if Hsu Fu Chi has the plan to develop high-end product after Nestlé joins in, he said, there existed various possibility.

China Unicom and China Telecom Submitted the Application for Suspension of Investigation to NRDC

The Price Supervision, Inspection and Antitrust Bureau of NRDC has confirmed to the public on 2nd December 2011, that they have received applications from China Unicom and China Telecom for the suspension of probe on alleged abuse of dominant position by the parties in last month. In addition, China Telecom also submitted a proposal of rectifying and reforming to NRDC, with the expectation to be awarded a leniency treatment. The proposal of rectifying and reforming is comprised of mainly the following aspects:

First, China Telecom undertakes to expand the capacity which is connected to other backbone telecommunications operators such as China Unicom and China Tietong as soon as possible.

Second, China Telecom undertakes to lower the price of connecting to China Tietong and enhance the quality of interconnection in the further step, so as to achieve a full-degree of interoperability.

Third, it will standardize the tariff management of ISP, conduct commercial activities in accordance with fair trading principle on the market and review currently existed agreements to cut the tariff level in a proper degree,

Fourth, China Telecom will immediately take measures to enhance the fiber access penetration and the broadband access rate, with the end of lowering the price for per unit of bandwidth for public customers of internet access by around 35%.

Whether NRDC would be charitable to the state-owned enterprises and suspend concerning investigation after above-mentioned application and proposal, is still open and the response of NRDC thereto is looked forward to.

High-level MOCFOM Visit to US Antitrust Agencies

On 29th November 2011, an official meeting was held between Chinese delegations led by MOFCOM’s vice minister Gao Hucheng and delegations of US antitrust agencies, Federal Trade Commission (FTC) and Department of Justice (DOJ). It is the first official high-level talk between public enforcement agencies of China and US, since DOJ and FTC signed an antitrust memorandum of understanding (MOU) with China's three antimonopoly agencies in July 2011, therefore, afforded with profound significance in terms of enhancing bilateral communication and cooperation among them.

By taking this opportunity, both sides reaffirmed and emphasized the cooperation concurred in the MOU this July, including significant issues of cooperation on investigations of two sides, confidentiality obligations, exchange of information and so on.

Consensus was reached between both sides that this meeting was of help to deepen the mutual understanding of antitrust agencies of two countries, with respect to competition policies and antitrust enforcement, to share experience and promote a further-step cooperation between the two biggest economic territories.

Conditional Clearance Offers Further Insight on Concentrations

On October 31 2011 the Ministry of Commerce posted Notice 73 in its website, announcing the clearance of a proposed concentration between Penelope Co Ltd and Savio Macchine Tessili SpA on certain conditions. The ministry's reasoning and analysis shed light on its approach to the review of concentrations on anti-monopoly grounds.

The notice states that the would-be acquirer, Penelope, was incorporated specifically as a tool for the transaction. Alpha Private Equity Fund V is Penelope's wholly-owned controlling shareholder - it invests in non-ferrous metal recycling and the production and sale of textile and home textile machinery. Alpha V is the largest shareholder in Uster technologies Co Ltd, holding 27.9% of the equity shares.

Savio, the proposed target, is a manufacturer of textile machinery. It produces electronic yarn clearers for winders, twisters and rotor-spinning frames. Phenanthrene Brothers Co Ltd is a wholly owned subsidiary of Savio.

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Tmall's Price Rise: Free Economic Behaviour or Abuse of Dominant Position?

On October 10 2011 one of China's largest retail websites, Taobao Mall - known as Tmall - announced a new set of rules, which included the imposition of a high annual technical service fee and an increased security deposit for its vendors. Tmall stated that the new rules were intended to ensure the provision of high-quality goods and services and to discourage counterfeiting and price wars.

The previous minimum annual fees of Rmb6,000 were raised to between Rmb30,000 and Rmb60,000, while the security deposit was raised from Rmb10,000 to Rmb50,000, Rmb100,000 or Rmb150,000, depending on the size of the business-to-consumer vendor. Smaller vendors protested by disrupting the online platform, using communication tools such as YY Voice to attack companies with a larger presence on Tmall. The incident sent ripples through the worlds of business, academia and politics, with many critics arguing that the price-rise policy may constitute an abuse of dominant position under the Anti-Monopoly Law.

Determining dominant position in a given market is problematic; in most cases, it requires comprehensive market research and subtle, detailed analysis. The answer may be the length of an academic paper and may take weeks to compile and express clearly. If it is assumed that Tmall holds a dominant position, there remains the question of whether its behaviour can be deemed an abuse under the law.

Article 17(1) states that an abuse consists in imposing unfairly high sale prices or unfairly low purchase prices. On the sale side, "excessive" prices may be unfair. Excessive pricing is the most obvious way in which a monopolist can exploit its position to the detriment of consumers in the short term. However, it is often argued that a free market economy needs the lure of monopoly pricing. On this analysis, the opportunity to charge monopoly prices - at least for a short period - is what attracts business acumen in the first place, encouraging the risk taking that produces innovation and economic growth.

Furthermore, excessive prices may be pro-competitive, as high prices and profits may act as a signal to attract new competitors to the market. Therefore, high prices - within reasonable limits - should not automatically be deemed excessive or unfair.

It is unquestionably difficult to decide what constitutes an excessive or unfair price. Given that it is rarely possible to ascertain what the price might have been in a more competitive market, what other yardstick can be used? How should competition policies be balanced against state policies in other sectors, given China's macroeconomic background? Should such a policy protect small and medium-sized businesses or encourage emerging business? All of these questions should be considered when deciding whether Tmall's price-rise policy should be classified as abusive.

Nestlé's Filing of Acquiring China' Largest Listed Confectionery Company is Accepted

A spokeswoman from the Ministry of Commerce publicly declared in the recent, that the Ministry has officially accepted the notification on Nestlé’s acquisition of Hsu Fu Chi. If the Ministry turns on the green light for this filing it could be one of the biggest foreign takeovers of a Chinese undertaking historically.

Founded in 1866 by Henri Nestlé in Vevey, Switzerland, Nestlé is the world's leading Nutrition, Health and Wellness company. Nestlé’s product lineup covers from baby food, bottled water, cereals, chocolate & confectionery, coffee, culinary, chilled & frozen food, dairy, drinks to food service, healthcare nutrition, ice cream, petcare, sport nutrition, and further to weight management.

Hsu Fu Chi is China’s largest listed confectionery company, with more than 16,000 sales outlets and 100 sales affiliates. In connection to its revenue, the first quarter of 2011 alone was Rmb1.51bn ($234m). Hsu Fu Chi focuses itself on chocolates, pastries and other sweets markets, and particularly is famous for a breakfast bar called Sachima. It should be recognized that Hsu Fu Chi already developed into a national brand within two decades. Voices from different communities, hence, expressed their worry that this event may ignite nationalist outcries just as it did with Coca-Cola's negotiations with Huiyuan.

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Taiyuan Railway Bureau is Sued by Private Enterprises Alleged Monopoly

On September 7th, 2011, an antitrust litigation against Taiyuan Railway Bureau was brought to Taiyuan Xinghualing Court on the ground that Taiyuan Railway Bureau violated Anti-monopoly Law and Unfair Competition Law of PRC by its administrative omission.

The trigger for this lawsuit lands on the claim that Taiyuan Railway Bureau (“A” hereinafter) has not responded to the application from Shanxi transport Group Co., Ltd, (“B” hereinafter) of additional tickets outlet, in spite that B has been applying for the authorization since 2007.

According to the case description presented by B in the Indictment, the key points decisive to the case analysis are summarized as follow by sequence number:

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The First Guideline For Reviewing Concentrations in China Was Freshly Baked

With already more than 3 years of practice experience concerning antitrust review to concentrations, the Ministry of Commerce of the People’s Republic of China in recent publicly announced its first set of guideline thereof on August 29, 2011, namely, “Provisional Regulation on the Assessment on the Competitive Effects of Concentration of Undertakings ( it would be abbreviated as “the Regulation” hereinafter)

It should be recognized that the Regulation reflects great significance in many facets without doubt. For one thing, the substantive process of reviewing and assessing concentrations by the Ministry of Commerce is tranparentized in a large degree. As a result, relevant competitors, consumers and other stakeholders of interest could obtain much more convenience for the purpose of supervising antitrust enforcement.

In the second place, the Ministry took this opportunity to standardize in the Regulation, which factors that they will take the most account into in principle, which interests they will consider principally when balancing the pro-competitive and anti-competitive effects of concentration concerned. In this connection, the Regulation would possess the function of conducting, standardizing as well as facilitating the work of antitrust control to concentrations of the Ministry.

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China and US Move Closer on Antitrust Collaboration

On July 27 2011 China's three anti-monopoly agencies - the Ministry of Commerce, the National Development and Reform Commission and the State Administration for Industry and Commerce - signed an antitrust and anti-monopoly memorandum of understanding with the US Federal Trade Commission and the US Department of Justice in Beijing, with the aim of promoting international communication and cooperation between the agencies.

Federal Trade Commission Chairman Jon Leibowitz stated:

"From the first suggestion to this final signed [memorandum of understanding], both countries has been preparing for two years. During the preparation period, we have established a mutual and steady trust relationship, and made the encouraging goal on market competition."

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Nestlé Faces Anti-Monopoly Review in Hsu Fu Chi Deal

Nestlé has announced that it plans to commit around $1.7 billion to the acquisition of a 60% share in confectionery manufacturer Hsu Fu Chi. The turnovers of the undertakings involved in the transaction are above the threshold for concentration filing and the deal is subject to anti-monopoly review.

Nestlé plans to purchase a 43.5% stake in Hsu Fu Chi from the two shareholders that are not part of the Hsu family. If these shareholders agree with the stock purchase plan, Nestlé will buy a further 16.5% share from the 56.5% share held by the Hsu family. In 2010, Nestlé's sales in China rose by 15% - the most rapid rate of growth of all of its sales regions. However, the company still lags far behind rivals such as Kraft General Foods and Unilever. For Nestlé, purchasing a famous quality brand is the best way to catch up.

Pursuant to the Provisions of the State Council on Thresholds for Prior Notification of Concentrations of Undertakings, the undertakings concerned must file a prior notification with the relevant commerce department of the State Council if:

"the combined worldwide turnover of all undertakings concerned in the preceding financial year was more than Rmb10 billion, and the nationwide turnover within China of each of at least two of the undertakings in the preceding financial year was more than Rmb400 million."

A spokesperson for the Ministry of Commerce announced at a press conference that on the basis of the information held by the ministry, the turnover figures of both parties reach the relevant thresholds.

The acquisition could significantly change the composition of the Chinese confectionery market. Nestlé is the fifth biggest manufacturer in China's domestic confectionery market(See 21st Century Business Herald); Hsu Fu Chi, with a market share of more than 7%, is in second place. If its plan succeeds, Nestlé will become the market leader. The potential impact of the deal makes it sensitive. It is too early to predict whether the ministry will approve the acquisition, with or without conditions.

Documents and materials have been submitted to the ministry and will be officially filed once the ministry is satisfied with the sufficiency of the documents and materials.

Can Companies Avoid Filing Concentrations?

When a merger, acquisition or joint venture is connected to the Chinese market and is treated as a concentration under China's Anti-monopoly Law, a company's first question to its lawyer is likely to be whether the transaction must be filed with the Ministry of Commerce.

The reason for the problem is clear. The law and relevant regulations state that a concentration which meets the filing threshold must be filed. However, the low threshold for filing a concentration in China means that the understaffed ministry has a large number of filings to review. As a result, filing is a time-consuming process. Chinese competition lawyers will also be aware that there are no specific provisions of law that penalise failure to file. Some undertakings weigh the risk of being caught against the potential time saving and choose to not to file, instead discreetly proceeding with the transaction. This practice has become an open secret in China.

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Jurisdiction for private anti-monopoly litigation

Since the Anti-monopoly Law was passed, around 50 private anti-monopoly litigations have been brought and the courts' jurisdiction over such cases has become a key issue.

Under the internal organisation of the Supreme Court, No 3 Civil Division is in charge of hearing anti-monopoly cases and directing anti-monopoly litigations at local level. This responsibility is no surprise. Previously, No 3 Civil Division focused on IP cases. Ostensibly, competition issues have an indispensable connection with IP rights; thus, on promulgation of the Anti-unfair Competition Law, No 3 Civil Division became responsible for anti-unfair competition cases. No 3 Civil Division has now become the full-time anti-monopoly court within the Supreme Court.

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The Supreme Court Issued Judicial Interpretation on the Anti-monopoly Civil Procedure

On April 25th, the Supreme Court issued Provisions On a Number of Issues Applicable to the Trial of Monopoly Civil Dispute Cases (the “Exposure Draft”) for public comments.

Totalling 20 articles, this Exposure Draft are based on the Anti-Monopoly Law (“AML”), the Civil Law, the Civil Procedure, the Contract Law, the Torts and other related laws. Primarily, the basic construction and detailed rules of the anti-monopoly civil procedure are summarised in the 4 parts below

 

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Revised Unfair Competition Law responds to changing economy

Introduction

The Unfair Competition Law, which was enacted in 1993, has been described as the constitution of the market economy. However, China's rapid social and economic development has given rise to new forms of unfair competition that the legislature did not foresee. The law is now in the final stages of amendment; the State Administration for Industry and Commerce (SAIC) has completed a revised draft and has submitted it to the Legislative Affairs Office of the State Council.

Information released by the SAIC suggests that the changes focus on:

  • identifying the competent enforcement agency to ensure uniform enforcement standards; and

  • idefining new forms of unfair competition to extend the scope of administrative enforcement.
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Market dominance and the Internet: new industry, new rules?

China's biggest encyclopaedia website, Hudong.com, has requested an anti-monopoly review of Baidu, the leading Chinese internet search engine. Hudong.com is asking the State Administration for Industry and Commerce (SAIC) to fine Baidu a total of Rmb79 million.

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New Notice Strengthens National Security Review

Recently, General Office of the State Council issued the Notice of Launching the Security Review System for Acquisitions of Domestic Enterprises by Foreign Investors (“the Notice”). The Notice will come into effect on March 5, 2011.

Recently, General Office of the State Council issued the Notice of Launching the Security Review System for Acquisitions of Domestic Enterprises by Foreign Investors (“the Notice”). The Notice will come into effect on March 5, 2011.

Security review system for acquisition of domestic enterprises by foreign investors (hereinafter referred to as "Security review") is neither created by China, nor meaning to deter foreign investment. A lot of developed countries have set up M&A Security review for many years to protect their own national security related interests. China already started Security review a few years ago, but it hasn’t yet released the formal regulations until now. The Security review system covers two sectors:

i) foreign investors' acquisition of military industrial enterprises or military industry related supporting enterprises, enterprises located near key and sensitive military facilities, and other entities relating to national defense;

ii)foreign investors' acquisition of key domestic enterprises in areas such as agriculture, energy and resources, infrastructure, transport, technology, assembly manufacturing, etc., whereby the foreign investors might acquire the actual controlling right thereof.

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SAIC regulations signal greater anti-monopoly enforcement

On November 29 2010 the National Development and Reform Commission (NDRC) promulgated one substantive regulation and one procedural regulation regarding pricerelated monopolies (for further details please see "NDRC issues new anti-monopoly pricing regulations"). To accompany these regulations, the State Administration for Industry and Commerce (SAIC) issued the Regulation on Prohibiting Monopoly Agreements, the Regulation on Prohibiting Abuse of Market Dominance and the Regulation on Prohibiting Abuse of Executive Authority to Exclude and Limit Competition on December 1 2010.

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NDRC issues new anti-monopoly pricing regulations

 The end of 2010 leaves China's anti-monopoly regulators with several matters to consider, resolve or improve. The anti-monopoly framework is still not well established and consumer rights issues have been badly neglected. End consumers remain at risk of manipulation by collusion between large enterprises, especially on price. Recently, an instant noodle company stopped providing its products because a supermarket chain objected to a price increase and a mobile telecommunications company, facing claims of unreasonable tariffs, refused to reveal the basis of its pricing structure.

The National Development and Reform Commission (NDRC) is in charge of price related monopoly agreements (ie, cartels), abuse of dominance and administrative monopoly issues. In comparison with the other two regulatory bodies - the Ministry of Commerce and the State Administration of Industry and Commerce (SAIC) - it remains severely understaffed. Moreover, price regulation is invariably a sensitive issue in China and often attracts criticism. The SAIC issued regulations on non-pricing-related monopoly agreements, abuse of dominance and administrative monopoly in May 2010 (for further details please see "New draft rules on monopoly agreements and abuse of dominant position"), but the NDRC has been slow to follow suit. As the world economy has started to emerge from the financial crisis, many Chinese and foreign economists have criticised distorted market prices and price mismatching in China, making the NDRC even more wary of taking action on anti-monopoly pricing issues.

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No quick answers in instant noodle dispute

Baixiang Food Group and other instant noodle manufacturers have brought a complaint against their competitor Kangshifu, claiming that it unfairly dominates the instant noodle market in China. Kangshifu has also been accused of engaging in price dumping through its subsidiary brand Fumanduo. Kangshifu contests both assertions.

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Conditional approval for Novartis's acquisition of Alcon

Introduction

The Ministry of Commerce's Anti-monopoly Bureau approved Novartis's acquisition of Alcon on August 13 2010, subject to conditions.(1) The ministry accepted the filing in respect of the acquisition on April 20 2010 and decided on May 17 2010 that a further review period was needed. The ministry reviewed information on:

  • the overlap of the two companies' products in the Chinese and global markets;
  • their respective market shares;
  • the characteristics, applications, prices and sales methods of their products;
  • the supervisory policies in the relevant market; and
  • the two companies' relationships with competitors in the market.

Opinions were sought from other companies in the field. After negotiating with the filing parties, consensus was reached on how to reduce the acquisition's undesirable effects on competition in the relevant markets.

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Clarification from Senior Official of the Antimonopoly Bureau of the Ministry of Commerce

On August 12th 2010, the Ministry of Commerce held a press conference regarding the development of the antimonopoly practice in China. The Chief of the Antimonopoly Bureau, Mr. Shang Ming, answered questions raised by the journalists. For the first time in 2 years since the China Anti-Monopoly Law (“AML”) came into effect that some of the most controversial questions were clarified directly by the official from the enforcement institution.

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Divestiture Regulation: A Giant Leap in Chinese Concentration Review Regime

On July 8th, MOFCOM (Ministry of Commerce of People’s Republic of China) released The Provisional Rules on Implementing Divestiture of Assets or Businesses(“Provisional Rules”). This legislative move can be seen as China’s aggressive while at the same time, practical effort in the perfection of Chinese concentration review regime within the framework of Chinese Anti-monopoly Law (“AML”).

So far, China has only slightly less than two years of antitrust enforcement. Yet some antitrust professionals have already been amazed by how China has quickly become the world’s third most important merger control jurisdictions, and its influence is still ascending. MOFCOM, SAIC and NDRC, China’s three AML enforcement authorities, have issued nearly 20 regulations, guidelines, notices and provisions to implement AML in the areas of concentration, cartels, abusing dominance and administrative monopoly.

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SAIC Published New Draft Rules on Cartels, Abuse of Dominant Position and Administrative Monopoly

On May 27, State Administration of Industry and Commerce (“SAIC”) published new draft regulations on monopoly agreements, abuse of dominant position and administrative monopoly for public comments. These sets of unveiled draft rules are resulted from pubic opinions and comments which SAIC has collected since June 2010, this is when SAIC first published the draft regulations. Within China’s antitrust law enforcement system, SAIC has the mandate to condemn non-price-related monopoly agreements, non-price-related abuse of dominant position and administrative monopoly. Furthermore, it has mandate to fashion implementing rules for the Anti-Monopoly Law of PRC (“AML”) too.

 

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China's Leniency Program Taking a Hazy Shape

Leniency program is an effective tool in exposing cartels. This has been confirmed by over 20 antitrust jurisdictions having leniency program around the world. China joined the club on August 1, 2008, when the Anti-Monopoly Law of PRC (“AML”) came into effect. For the first time, AML expressly recognized leniency program in its intention to condemn monopoly agreements. However, AML only makes a passing reference to the policy in which “undertakings who voluntarily report to antitrust enforcement authorities on monopoly agreements and advance key evidence MAY be reduced or exempted from penalties”. Thus, it takes China’s trust busters to fashion rules to implement leniency policy.

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The Ending of the 'China Mobile' Case

This is an article corresponding to the China Mobile case which was discussed at China Law Vision on April 21, 2009. On 23 October 2009 the Beijing Dongcheng District People's Court announced the settlement of an Anti-Monopoly Law (AML) case brought by Zhou Ze, an activist lawyer in Beijing, against China Mobile, China's largest mobile network operator.

Zhou alleged that China Mobile abused its dominant market position (DMP) and engaged in illegal price discrimination activities by charging additional monthly fees for services that he, as a subscriber, was not using. Zhou sought 1,200 yuan in compensation (an amount equal to his basic mobile fees for the last two years), and for China Mobile to stop charging its subscribers such fees. Consequentially,the state-owned giant agreed to pay Mr. Zhou 1,000 yuan ($146) to settle his claims over mandatory fees.

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How to Calculate Turnovers under AML of China

1. According to China Anti-Monopoly Law, we need the following information in order to evaluate whether a deal reaches the threshold of concentration filing in China:

a. The worldwide turnovers of the two parties.

To evaluate whether a certain concentration triggers anti-monopoly review, China’s authority looks at all turnover figures of all concentrating parties, regardless of spheres of business those turnovers are derived from. The only exception is that where the concentration involves asset acquisition, the turnover calculation for the seller refers to the turnover specific to the concentration.

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China's National Security Check on Foreign Investment About To Be Unveiled

The absence of specific rules on national security investigation on foreign investment in China has been labeled as one of the imperfections of the Anti-Monopoly Law of PRC (“AML”). Article 31 of AML only makes a passing reference to the necessity of conducting national security review when foreign capitals engage in acquisitions or other forms of concentrations that implicate China’s national security. Critics point to the general provision as inoperable in curtailing the massive inflow of foreign acquisitions into strategically important industries in China. To the author’s knowledge, no such investigation has been performed in China, since AML became effective on August 1, 2008.

It may be changed soon. Media reports say that a so called “National Security Investigation Mechanism” (国家安全审查机制) is probably going to be unveiled at the end of this year. At that time, an inter-agency committee charged with the investigation will be established. According to the reports, the committee shall have members from a galaxy of government bodies that represent broad and varied state interest, i.e., National Development and Reform Commission, Ministry of Industry and Information Technology, Ministry of Science and Technology, Ministry of Commerce, Commission of Science, Technology and Industry of National Defense, Ministry of Agriculture, State-owned Assets Supervision and Administration Commission of the State Council, China Banking Regulatory Commission, State Administration for Industry & Commerce, State Administration of Taxation and several trade associations in key sectors of economy. It is reported that the draft bill on the national security policy was submitted to the State Council in March. The prelude to the unveiling came when Premier Wen Jiabao made the work report to the 3rd Session of the 11th National People’s Congress on March 5, when he is quoted to say that “in encouraging foreign capitals to participate in the restructuring and M&A of domestic enterprises, China shall accelerate the establishment of national security investigation regime.

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Can Foreign Capital "Drink" China's Oldest White Wine?

In early March, 2010Diageo, the world’s leading spirits maker signed a deal whereby it acquires majority shares of SiChuan Quanxing Group, a holding company that owns Shui Jing Fang(水井坊), reputedly China’s oldest white wine. What is remarkable about the transaction is that it is the first case in which foreign capital takes over Chinese white wine. To further make the deal unique is how surreally the white whine came into being. In 1998, Quanxing Group discovered a relic site when its workers were in the process of renovating factories. Archeological excavation showed that the site was originally a wine making workshop that dates back to Yuan Dynasty, over 600 years ago. With state-of-art bio technology, several active microbes were obtained from the workshop and used to produce the white whine, branded Shui Jing Fang(水井坊). The relic site was also listed by Guinness World Records as the world’s oldest wine making workshop.

On a rough look, the Diageo/Shui Jing Fang deal is remarkably similar to the Coca-Cola bid for Hui Yuan . For example, both involve world famous brands buying Chinese famous local brands, in effort to tap into the ever increasing beverage market in China. Given the doomed Coca Cola/Hui Yuan transaction on antitrust account, one is tempted to ask whether history will not repeat itself this time. Meanwhile, media report says Diageo is preparing regulatory filing with MOFCOM, which is the authority charged with policing merger market to prevent anticompetitive consequences. There are also market speculations on the fate of the deal in the hand of MOFCOM.

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A Look At the New Rule On Financial Integrated Operation: From the Perspective of Competition Law

On November 26, 2009, China’s Banking Regulatory Commission (CBRC) issued the Pilot Administrative Measures for Commercial Banks to Make Equity Investment in Insurance Companies (the “Measures”). The Measures cover several key aspects of commercial banks’ equity investment in insurance companies, i.e., market access, risk control and regulatory supervision. Its enactment marks the official recognition of cross-sector operations within the banking and insurance industries. By and large, the Measures establishes the regulatory framework for enhanced partnership between the banking and insurance industry. Interestingly though, it has streaks of competition law in its provisions, which has the effect of fostering healthier competition in the future financial market of integrated operation.

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Two Antitrust Cases in Insurance Law Area

I focus mainly on two legal areas: insurance law and anti-monopoly law. Both these two areas experienced a dramatic progress in 2009. In my personal practice, I see some interesting overlapping of these two areas. In this article, I will address two cases in vehicle insurance market regarding the accusation of violation of China Anti-Monopoly Law (AML).

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Will Rio Tinto and BHP Billiton Make It This Time? A Few Comments From The Perspective Of Antitrust Law

On 25 January 2010, European Commission said that it is ready to review a plan by the world’s second and third largest iron ore miners, Rio Tinto and BHP Biliton, to combine some iron ore mining operations in Australia. The European antitrust watchdog said that it would investigate whether the companies’ plan to pool iron ore mining in western Australia would affect the global prices or supply for iron ore transported by sea, known as seaborne iron ore. The Commission set no deadline for completion of the investigation, citing the complexity of the case, cooperation from the companies involved and exercise of the rights of defense, among other factors, to justify the open-ended time limit.

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Chinese Readers Upset Over No-Discount Rule

On January 8th, the China Publishers Association(中国出版工作者协会),the China Book Distribution Industry Association(中国书刊发行业协会)and the China Xinhua Bookstore Association(中国新华书店协会)(collectively the “Three Associations”) jointly published the “Book Fair Trade Rules” (“BFTR”). Its enactment generated widespread outcry at its suspected violation of China’s Anti-Monopoly Law (“AML”). BFTR became effective upon its release.

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China Chapter:The International Comparative Legal Guide to: Cartels & Leniency 2010

This article appeared in the 3rd edition of The International Comparative Legal Guide to Cartels and Leniency 2010; published by Global Legal Group Ltd, London(www.iclg.co.uk)

You can aslo download a bookmarked PDF version of this guide book at the following link:

http://www.iclg.co.uk/index.php?area=4&show_chapter=3380&ifocus=1&kh_publications_id=128

 1     The Legislative Framework of the Cartel Prohibition

1.1 What is the legal basis and general nature of the cartel prohibition, e.g. is it civil and/or criminal?

The principal legal basis for cartel prohibition is the Anti-Monopoly Law (AML) and the Price Law (Price Law). At the time of writing, two of China’s antitrust enforcement authorities—the State Administration for Industry & Commerce ( SAIC) and the National Development and Reform Commission (NDRC)—have also promulgated a series of implementing regulations for public comments: the Draft of the Regulations on Prohibiting Monopoly Agreements (SAIC) and the Draft of the Regulations on Prohibiting Price Monopoly (NDRC).

In China, violation of cartel prohibition carries administrative as well as civil liabilities. No criminal liability is provided for cartels in China.

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Second Chinese "Abusing Dominant Market Position" Case Decided

On December 18, 2009, Beijing No.1 Intermediate People’s Court (the “Court”) reached a decision in favor of defendant in China’s second “abusing dominant market position” case.

BACKGROUND

The Plaintiff, Tangshan Renren Information Service Company (“TRISC”) operates an online platform that brokers deals between pharmaceutical companies and distributors and consumers. The Defendant, Baidu, which is allegedly the largest Chinese search engine company is accused of artificially lowering TRISC’s ranking in Baidu search results in order to coerce TRISC into continuing to purchase bid ranking service from Baidu. It is alleged to have caused TRISC to lose traffic and revenue. TRISC brought the case to the Court under Paragraph 1 of Article 17 of Chinese Anti-Monopoly Law (“AML”), namely, the exclusive dealing provision that prohibits a firm with market dominance position from restricting a third party to dealing with itself or selected third parties exclusively without valid justification. TRISC petitioned the Court to grant an order to enjoin Baido from the conduct and asked for $163,000 in damage for lost revenues. Baidu defended itself by arguing that lowering TRISC’s ranking in its search result was a response to the “junk links” practice TRISC engaged in, i.e. TRISC created a robot to automatically post junk posts on websites and forums and sent out spam messages to elevate its ranking in Baidu’s search results. According to Baidu, it adopts “anti-junk links” policy and made it sufficiently clear to the outside world by putting it on its website.

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The Extraterritorial Enforcement of China Anti-monopoly Law

Last week, Rio Tinto, a resource giant of Australia, withdrew its proposed transaction with China’s Chinalco, and announced that it will set up a joint venture with another rival miner, BHP Billiton. If the Rio Tinto - BHP Billiton deal is finished, as analysts estimated, there will be a great concert effect, because they will be able to share their ports and railroads in Western Australia, which considerably cuts costs for both parties.

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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.

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New Trend Regarding Price Fixing Agreements in Aviation Industry

Last month, nearly all domestic airline companies in China raise their price simultaneously. However, they denied that their decision based upon agreement between them. On 04.27.2009, SAIC promulgated the Draft Regulation on Prohibition of Monopoly Agreements and the Draft Regulation on Prohibition of Abuse of Dominance. The two drafted regulations offer detailed instruction and important amendments on how to regulate monopoly agreements and abuse of dominance.

 

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CHINA: "Gun Jumping" and the Anti-monopoly Law (AML)

Currently, there is an absence of legislation in China concerning gun jumping in the context of mergers and acquisitions. However, the Anti-monopoly Law (AML) could potentially be utilized as mode to curb and or prohibit gun jumping in the future. The following will attempt to analyze how the AML may be used in relation to gun jumping in the future.

 

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New Draft SAIC Regulations: Positive Affects for the AML

Last week, SAIC promulgated two draft regulations relating to China’s Anti-monopoly Law. The new regulations concern abuse of dominance and monopoly agreements.


A prohibition on anti-competitive monopoly agreements and a prohibition against the abuse of market dominance are two of AML’s main prongs; the third being a review of concentration. However, under the AML, the provisions of these two categories lack detail as they are only covered through the broad principles of China’s competition law. Hence, the new draft regulations are welcomed as a mode to increase the detail of and to further develop China’s competition law. Furthermore, substantial private litigation has emerged challenging the abuse of dominance and monopoly agreements. Therefore, SAIC’s promulgation of the two drafts is a welcomed response to this rising trend.
 

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Landmark case: Coca-cola & Huiyuan Concentration(2)

Another hotspot related to this case is national security issue.


The opponents argued that this concentration will threat the national security of our country. Huiyuan is a well-known domestic brand in Chinese juice beverage market. According to a survey made by AC Nielson, pre-concentration, Huiyuan’s market share in pure juice beverage market and middle-level concentration juice beverage market reached 42.10% and 43.60% respectively. If Huiyuan was acquired by Coca-cola, a foreign giant in soft drink market, this domestic brand will suffer the same fate as those who have been acquired by foreign corporations: disappear in the market. At that time, Chinese juice beverage market will be monopolized by foreign enterprise. It will be a huge threat to China’s economic and food security.
 

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Landmark case: Coca-cola & Huiyuan Concentration(1)

First, it is no doubt that this case has become a landmark case in the developing history of China anti-monopoly law. There are four points I should address under my first topic as to why this case is so significant to China AML.

 

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Baidu Denies Charge of Dominant Market Position

Last week, the so-called first case of abuse of dominant market position (DMP) was heard by the Beijing First Middle-level court. This time, the famous Chinese search-engine Baidu was brought under the sword of China’s Anti-monopoly law (AML).

 

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China's SAIC Faces New AML Hurdles

The first issue faced by SAIC (State Administration for Industry and Trade) is retaining an appropriate degree of manpower. According to the permission from State Council, SAIC has established a specific bureau to cope with monopoly behavior, though its manpower is far from adequate to deal with nationwide AML cases. Based on the provisions of the AML, SAIC may empower its subsidiaries at the provincial level in order to help resolve specific cases. This means SAIC can take advantage of nationwide resources under the present system. However, the question of how to prevent localism and how to guarantee strict compliance with the AML presents a challenging answer.

 

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China Mobile under Anti-monopoly Law Suit

On March 4th 2009, attorney Zhou Ze filed a claim in Beijing Dongcheng District Court. He accused China Mobile and Beijing Mobile of abusing their dominant market position (DMP) and price discrimination. The court has accepted the case and the hearing will be in the near future. For China mobile, the largest domestic mobile phone operator and the world's largest operator by subscribers, it is the first time an Anti-monopoly suit has been brought against the company.

 

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China's SAIC and the Enforcement of the AML

When referring to the anti-monopoly authority in China, many first mention the Ministry of Commerce of the People's Republic of China (MOFCOM). However, based on the provisions of the Anti-monopoly Law of the PRC (AML) and the power allocated by the State Council, the State Administration for Industry and Commerce (SAIC) will play a primary role in AML enforcement.

 

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Comments on China's new Anti-Monopoly Law (Anti-trust/Competition

The following is an excerpt from a recent interview on China's Anti-monopoly law conducted with Dr. Zhan Hao. The interview below briefly analyzes some of his comments and questions concerning China's stride towards a form of competition law.

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Coca-Cola & Huiyuan: Explanation, Theory, An attempt to Rationalize?

Since the Ministry of Commerce (MOFCOM) promulgated its decision to block the acquisition of Huiyuan Juice Group by The Coca-Cola Company, the decision has been subject to tremendous criticism from trade lawyers and economists. Some have argued China appears willing to wield its Anti-monopoly Law to fend off foreign attempts at buying promising domestic firms (though Huiyuan was incorporated in the Cayman Islands), even when the resulting market concentration would not be excessive.

 

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The First Steps toward Economic Analysis of the AML

On January 7 2009 the Ministry of Commerce (Mofcom), in hope of receiving comments, published draft guidelines for the demarcation of the relevant market.


Lack of detailed guidelines for the demarcation of the relevant market is a primary criticism of the PRC Anti-monopoly Law (AML) and its enforcement. Relating to the definition of the relevant market, there has been a tremendous difference in opinion amongst Chinese experts, including legal consultants and economists. The gap between such opinions is far too wide for consolidation. Thus, the State Council has intentionally ignored the demarcation of the relevant market in regulations following the AML concerning notification of concentrations.
 

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Private Litigation - Unresolved Problems of China's Anti-Monopoly Law

On August 1, the Chinese Anti-monopoly Law (AML) was enforceable and four plaintiffs filed an anti-monopoly case in the No1 Intermediate People's Court of Beijing. Some members of the media and laymen cheered it as the first anti-monopoly private litigation in China.


The plaintiffs were four anti-counterfeiting companies who sued the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ), an industry regulator. The original four plaintiffs were later joined by four other anti-counterfeiting Chinese companies from across the country . Claiming AQSIQ violated the AML, due to its efforts to popularize an online network.
 

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China's Anti-monopoly Law: Regulatory Institutions and Surrounding Issues

It is my pleasure to find some colleagues interested in Chinese AML issues. I would like to discuss with you the functions of the regulatory institutions and the possible issues surrounding investigation and litigation.


Presently, the profile of MOFCOM (Ministry of Commerce) is clear, however that of NDRC (National Development and Reform Commission) and SAIC (State Administration for Industry and Commerce) have not come into being.
 

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Progressing the Notion of Concentration under China's Anti-monopoly Law

From the beginning of 2009, the year of the ox, the legislative framework of the Chinese Anti-monopoly Law (AML) has been accelerated. The acceleration is necessary to correct some of the major disadvantages of the AML. It is hoped the corrections will prevent the AML from being seen as abstract and hard to enforce.


Until now, we have heard little from regulatory organizations related to the enforcement of Chinese Anti-monopoly law including the; Ministry of Commerce (MOFCOM); State Administration for Industry and Commerce (SAIC) and the National Reform and Development Commission (SDPC). However, there appears to be a consensus amongst the organizations for a need to focus on the legislation progress, and to promulgate Guiding Opinions, Guidelines, Working Guidelines and Regulation and Administrative Procedures in an expedited fashion. Among these three organizations, it seems MOFCOM is moving far quicker than the others.
 

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The Prohibition Decision Regarding M&A between Coca-Cola and Huiyuan

Today afternoon, just twenty minutes ago, Ministry of Commerce (MOFCOM) promulgated its decision regarding the concentration between The Coca-Cola Company and China Huiyuan Juice Group Limited, which prohibited this acquisition. This prohibition decision is the first prohibition decision issued by MOFCOM since the enforcement of Chinese Anti-monopoly Law (AML).
On September 3, 2008, The Coca-Cola Company announced its intention to make cash offers to purchase China Huiyuan Juice Group Limited; a Hong Kong listed company which owns the Huiyuan juice business throughout China.
 

 

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The Positive Attitude of Chinese Courts toward AML Enforcement

At the beginning of November, Mr. Xi Xiaoming, the Vice Chief Justice of the Chinese Supreme Court, informed the media at a press conference that the Chinese Supreme Court would initiate the drafting of judicial explanations to compliment the Chinese Anti-monopoly Law (AML). Before such formal expression, another Justice in the No.3 Civil Division of the Chinese Supreme Court publicly stated plaintiffs may file civil AML cases directly, bypassing the wait for administrative decisions.

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A vital need for Chinese Anti-monopoly lawyers

China’s Anti-monopoly Law was promulgated on August 30th 2008.  Although the legislation is constantly developing, experts have forecasted an urgent need for those willing to act as Chinese Anti-monopoly lawyers.  The need for Chinese Anti-monopoly lawyers stems from the intense concerns expressed by multi-national corporations.  These corporations fear harsh penalties, restrictions on business practices and complex regulatory burdens under the new regime.  Considering these fears, sound advice provided by a Chinese Anti-monopoly lawyer is of the utmost importance.

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How Private Oil Companies Face the Anti-monopoly Law in China

Since October 2008, Private oil companies in China have been urging one another to take advantage of the Anti-Monopoly Law(AML) to secure a stable supply of oil and avoid over-reliance on the country's two major oil producers for survival. They want new policies to create a level playing field. Currently they depend on the oil supplies of the China National Petroleum Corporation (CNPC) and the China Petroleum and Chemicals Corporation (Sinopec) as they are forbidden by law to extract or import their own.

 

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The Threshold of Concentration: Anti-monopoly Notification in China

During the drafting of the Chinese Anti-monopoly Law (AML), the level at which the threshold of concentration notification was to be set, aroused fierce debate. In the end however, AML did not specifically stipulate the notification criteria in detail.Article 21 of AML states:

 

Business operators shall declare in advance the concentration reaching the threshold of declaration prescribed by the State Council to the Anti-monopoly Law Enforcement Agency, otherwise, they shall not implement the concentration.

 

Such a vaguely worded clause has caused confusion within the legal profession. It certainly begs the question: Why did AML not explicitly stipulate the threshold of notification? Examining both the lawmaking process prior to the creation of AML as well as the drafting of AML itself may prove to be helpful. 

 

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The AML sword, How Chinese Courts "hold" it ?

November 2008, Mr. Xi Xiaoming, Vice Chief Justice of the Chinese Supreme Court, informed the media the Chinese Supreme Court would initiate drafting of judicial explanations complimenting the Chinese Anti-monopoly Law (AML). Before such formal expression, another Justice in the No.3 Civil Division of the Chinese Supreme Court publicly stated plaintiffs may file civil AML cases directly, bypassing the wait for administrative decisions.

Due to the characteristic of the AML, the administrative departments, other than courts, are the leading force in law enforcement. Presently, there is uncertainty in the AML administrative procedure and administrative departments take caution in announcements and practices. In such an atmosphere, Chinese courts come to the front.

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The Concept of Concentration under Chinese Anti-trust Law

It is difficult to overstate the importance of concentration control regulations in the broader context of Chinese Anti-trust law as regulated by the Anti-monopoly Law of the People's Republic of China (Anti-monopoly). No area of anti-monopoly enforcement commands closer scrutiny or arouses more impassioned debate. In fact, creating a proper definition for concentration was the most vigorously contested issue during the drafting of the new Anti-monopoly Law.

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