Competition Law/ Anti-Monopoly Law

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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.

 Continue Reading The Ending of the ‘China Mobile’ Case

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. Continue Reading How to Calculate Turnovers under AML of China

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. Continue Reading China’s National Security Check on Foreign Investment About To Be Unveiled

In early March, 2010，Diageo, 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.Continue Reading Can Foreign Capital “Drink” China’s Oldest White Wine?

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

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).Continue Reading Two Antitrust Cases in Insurance Law Area

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

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. Continue Reading Chinese Readers Upset Over No-Discount Rule

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

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. Continue Reading Second Chinese “Abusing Dominant Market Position” Case Decided