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CBR January-February 2010 - Healthcare
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China Market Intelligence

Antitrust Regime Takes Shape

China's landmark Antimonopoly Law (AML), which took effect on August 1, 2008, aims to provide China with an antitrust policy and a regulator in line with international practice. Under the law, two interagency bodies will share implementation responsibilities: the Antimonopoly Commission (AMC) and the Antimonopoly Enforcement Agency (AMEA). The State Council announced the formation of the AMC on August 1 but released limited details on its composition. In early August several notices designed to guide implementation of the AML emerged, but as the CBR went to press, the government had not released detailed implementing regulations. Uncertainty has left businesses questioning how PRC authorities will enforce competition policy.

Antimonopoly Commission and Antimonopoly Enforcement Agency

According to the State Council announcement, the AMC will research and draft regulations that relate to competition, survey and report on the status of market competition, draft and release a forthcoming Antimonopoly Guidebook, and coordinate the work of agencies involved in the administrative enforcement of the AML. The announcement did not, however, include details about the composition of the AMC. PRC media reports and competition experts speculate that the AMC will be led by the heads of key PRC government agencies and will also include a contingent of experts.

Though the State Council has yet to release any formal information on the AMEA, PRC media reports point to a three-way split of enforcement authority among the key agencies involved in enforcing existing competition policy: the PRC Ministry of Commerce (MOFCOM), National Development and Reform Commission (NDRC), and State Administration for Industry and Commerce (SAIC). It is unclear how these agencies will work together on specific cases and how they will divide enforcement responsibilities. Companies will likely face bureaucratic hurdles as they navigate the process.

According to PRC press reports, MOFCOM's Antimonopoly Bureau will examine concentrations and merger filings and will act as the host organization for the AMC's formal office. NDRC will handle investigations of price-related abuses, likely through the Price Supervision Department. SAIC's new Antimonopoly and Irregular Competition Enforcement Bureau will investigate monopolistic agreements, company abuse of market dominance, and administrative monopolies. According to reports, SAIC plans to release a series of notices to clarify key issues and terms, including "related markets," "market-controlling positions," "monopoly agreements," and "monopolistic abuse of intellectual property rights."

Because complex antitrust cases or investigations will not easily fall into separate categories such as "pricing abuses" or "monopolistic agreements," the potential for turf battles among the three regulators remains.

Related developments

The State Council on August 3 released new regulations on reporting thresholds for mergers and acquisitions (M&A) and other transactions that involve transfers of decisionmaking power. The reporting thresholds in these new regulations are higher than earlier reporting thresholds (see Advance Notice: PRC Merger Notification Rules). Businesses must report M&A transactions if, during the previous fiscal year, at least two of the parties involved each had turnover in China that exceeded ¥400 million and either the global turnover of all parties involved exceeded ¥10 billion or the turnover in China of all parties involved exceeded ¥2 billion.

The rules also give enforcement agencies the authority to review any transaction that does not meet these thresholds but that "has, or could have, the effect of limiting or eliminating competition"--a broad formulation that gives authorities great leeway to review any commercial transaction. The brevity of the final regulations suggests that further State Council regulations could be forthcoming and that MOFCOM may have great latitude to interpret when and how companies should report M&A transactions.

In another development, PRC media reports indicate that NDRC on August 1 completed draft regulations on price monopolies that set quantitative standards for determining what prices are unfairly high or low and define the indicators that investigators will use to determine company abuse of market position: "monopolistic prices," "low-price dumping," and "price discrimination."




This article is adapted from a report that first appeared in China Market Intelligence, the US-China Business Council's (USCBC) weekly members-only newsletter. To find out more about USCBC member company benefits, see www.uschina.org/benefits.html.

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Copyright 2008 US-China Business Council

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