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.
On December 29 2010, pursuant to the Anti-monopoly Law, the NDRC issued the Regulation against Monopolistic Pricing and the Regulation on Administrative Enforcement Procedures Against Monopolistic Pricing, which will come into force on February 1 2011. The former regulates price maintenance agreements, abuse of market dominance, abuse of administrative powers and other price-related monopolistic activities. In addition, the regulation:
1. explicitly prohibits competitors in relevant markets from establishing any of eight forms of monopolistic pricing agreement in order to maintain or change prices; and
2. prohibits vendors from reaching agreements to fix resale prices or limit lowest resale prices.
According to the regulation, an operator that enjoys dominant position in a given market may not sell goods at an unfairly high price, purchase them at an unfairly low price, engage in differentiated price treatment or attach unreasonable fees to sales. Six other forms of monopolistic pricing activity are also prohibited. The regulation also stipulates that administrative bodies and authorised associations may not:
1. abuse their administrative powers;
2. force an operator to participate in monopolistic pricing activities;
3. make rules to exclude or limit price competition; or
4. establish discriminatory charging conditions in respect of particular items, standards or prices.
The accompanying enforcement regulation is intended to control the regulators’ activities and protect the legal rights of enterprises, associations and the public. It includes provisions on disclosure and hearings, investigations and exemption procedures.
The two regulations should give teeth to anti-monopolistic pricing enforcement, but it remains to be seen whether the NDRC can apply them effectively. For instance, identifying an unfairly high, monopolistic price remains problematic. The provisions require the regulator to consider two factors: whether the sale price is clearly higher than that of products of the same kind sold by competitors and whether the sale price increases abnormally when the cost is stable. The formula looks simple on paper, but could be difficult to apply in practice.