Competition Law/ Anti-Monopoly Law

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

Four months after seeking comments, the National Development and Reform Commission ("NDRC") released “Price Conduct Guidelines on Operators of Drugs prone to Shortages and APIs ” (“Guidelines”) on 16 November 2017. This is the first price-related anti-monopoly guidelines for a specific industry since the Anti-Monopoly Law was implemented. The Guidelines provide risk assessment warning and compliance guidance for pricing monopolistic behaviours involving both drugs prone to shortages and active pharmaceutical ingredients (“APIs”). For the first time, the Guidelines clarify that enforcement agencies use the "Prohibition plus Exemption" principle to identify pricing monopolistic agreements and refine the consideration of certain abusive activities (e.g. unfair pricing and refusal to deal). In addition, the Guidelines remove controversial provisions such as exclusive dealing that is included in the draft Guidelines. We recommend that the relevant pharmaceutical enterprises should conduct the anti-monopoly risk audit by reference to the Guidelines and adopt more strict compliance measures to identify and prevent the relevant legal risks.

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Authored by Michael Gu (michaelgu@anjielaw.com) and Charles Xiang (xiangwenlei@anjielaw.com) at AnJie Law Firm

Introduction

On 4 November 2017, the Standing Committee of the National People’s Congress of China finally passed the long-awaited amendments to the Anti-Unfair Competition Law (AUCL), which takes effect on 1 January 2018.This is the first time the AUCL has been amended since it came into effect in 1993, and it will have significant impact on business practice in China.

The revision of the AUCL covers various legal issues, such as acts of confusion (Article 6), commercial bribery (Article 7), false or misleading business promotion (Article 8), infringement upon trade secrets (Article 9), illegal prize-giving sales (Article 10), spread of rumors or misleading information (Article 11), and Internet-related unfair competition by technical means (Article 12).

In particular, the revised AUCL included a new section addressing the Internet-related unfair competition. Some of the unfair competition behaviour(e.g. false or misleading online business promotion)are more like an online version of the traditional acts of unfair competition. Other Internet-related unfair competition behaviour is unique in the digital age driven by information technical means.

This article mainly focuses on the latter, i.e. unique unfair completion in the digital world,and endeavors to illustrate some precedents and interpretations of Article 12 of the AUCL and analyze how Article 12 will be applied and enforced inpractice.

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  Authored by Zhan Hao (zhanhao@anjielaw.com), Sharif Hendry(sharifhendry@anjielaw.com), Song Ying(songying@anjielaw.com)at AnJie Law Firm.

At the China Competition Policy Forum in Shanghai on August 31, 2017, a high standing official of the Price Supervision and Antimonopoly Bureau (PSAB) gave comment on the potential enactment of regulations on Standard Essential Patent (SEP) licensing practice by China’s National Development and Reform Commission (NDRC). This proposal follows in the wake of forthcoming draft Intellectual Property Rights (IPR) related antitrust guidelines that are expected to provide an analytical framework and recommended approaches to SEP related issues in China. The new proposed SEP guidelines will advise on a more fixed approach to the pricing mechanism for SEP licenses, as they apply to products used or sold in China , since these would not be covered under the forthcoming IPR guidelines.

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 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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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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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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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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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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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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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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