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.
Upon a review of the drafts, substantial detail is revealed. Instructions as well as amendments have been provided making the AML a more practical and effective tool. What is more, new content has also been included in the regulations.
Citing an example to illustrate these amendments is the Regulation on Abuse of Dominant Market Position. What is considered a dominant market position is restated as in the AML. However, two amendments are made regarding the definition. First is clarification of what other transaction conditions are. Other transaction conditions in this provision include factors which can exert substantial influence on a market transaction outside the realm of price and quantity. Such examples include quality of goods, payment terms, transfer measures and warranty services. The second amendment stipulates what can be labeled as having the capability to block or exert influence on other competitors’ entry to the relevant market. It includes expulsion or delay of entry, or dramatically increasing the cost of entry which makes competition uneconomical.
Additional amendments included in the regulation also warrant our attention. For example, within the Regulation on Abuse of Dominant Market Position, the relevant market is stated as the basis in analyzing and presuming a position of dominance. In addition, the behaviors associated with abuse of dominance are rephrased by the above regulation: they are not in one provision as in the AML, rather they are separate terms allowing for a fuller explanation. Article 8 of the regulation may be seen as the core concept: it is the general principle on deciding what constitutes abuse of dominance. It stipulates that those who possess dominance shall not decrease, block or stop a current transaction with another party without justified reason, or decline to enter into new transactions. Under the same transaction terms, decrease, block or stop the transaction can be interpreted as without justified reasons. That is to say, if under the same transaction conditions, the dominant party declines to further a transaction with the other party, without justifiable cause, the behavior will likely constitute an abuse of dominance. Finally, within the Regulation on Monopoly agreements, Collaborative Bidding is added as a form of monopoly agreement.
Overall these draft regulations should be welcomed by the AML. They provide further detail which has been anxiously anticipated. These details will help increase the certainty of the ALM and it is hoped further regulations and guidelines will be promulgated in the future.