Authored by Dr. Zhan Hao (, Michael Gu (, Dr. Song Ying (

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.

The above mentioned behaviors have violated the Anti-Monopoly Law (AML) as well as the Provisions for Administrative Authorities for Industry and Commerce on Prohibiting Conclusion of Monopoly Agreement (Provisions on Prohibiting Monopoly Agreement).

Article 13 of AML provides that competing undertakings are prohibited from concluding monopoly agreements by partitioning the sales market or the purchasing market for raw and intermediate goods.

Article 46 of AML further provides that where an undertaking, in violation of the provisions of the AML, concludes and implements a monopoly agreement, the authority for enforcement of AML shall instruct the undertaking to discontinue the violation, confiscate its unlawful gains, and, in addition, impose on the undertaking a fine of no less than one percent but no more than 10 percent of its sales achieved in the previous year. If such monopoly agreement has not yet been implemented, the undertaking may be fined no more than RMB 500,000

If the undertaking, on its own initiative, reports the monopoly agreement to the authority for enforcement of the Anti-monopoly Law and provides material evidence, the said authority may, at its discretion, mitigate, or exempt the undertaking from, punishment.

Where a trade association, in violation of the provisions of the AML, has arranged the member undertakings to reach a monopoly agreement, the authority for enforcement of AML may impose a fine of no more than RMB 500,000 on the association. If the circumstances are severe, the administrative department for the registration of public organizations may cancel the registration of the trade association in accordance with the law. Similar contents are also provided in the Provisions on Prohibiting Monopoly Agreement, such as in Article 5 and Article 10.

According to the above mentioned provisions, the Hunan administrative bureau has imposed a penalty of RMB 1.7 million to some of involved parties. As disclosed by the SAIC, the penalty was decided in accordance with the provisions of AML. The case is still at present being investigated by Hunan administrative bureau.

What worth noting is that it is not the first time for antitrust administrative authority to investigate on the monopoly behaviors in insurance industry. Just a few months ago, one of the provincial NDRC issued prior notice on administrative penalties to some property insurance companies in the province. As informed in the notice, NDRC imposed the penalty to the companies due to their violation of Article 13 of the AML as well as Article 7 of Provision on Anti-Price Monopoly.

As a fact, the monopoly agreement behavior organized by insurance associations is quiet normal in insurance industry. The most important reason is that the insurance industry is lack of good faith which caused the virulent price competition in the industry. In order to break this kind of disordered competition, some insurance associations organized the insurance companies to conclude price monopoly agreements.

Although the investigation on this kind of anticompetitive behaviors by administrative authorities has a good effect on putting a stop on monopoly behaviors in the insurance industry, it is highly suspicious whether it can fundamentally and essentially cure the unhealthy competition existed in the insurance market in the long run.