The Chinese government announced on March 13, 2018, that it will consolidate the duties of three competition agencies into a new government agency to handle all antitrust matters. While it is too early to tell how this reorganization will impact China’s review of transactions and conduct cases, we believe that this change could lead to greater consistency and potentially more experienced attorneys reviewing competition matters.
by John Z.L. Huang, Alex An, Bryan Fu and Cook Xu
China’s National Development and Reform Commission (NDRC) recently outlined its latest efforts in the enforcement of the Anti-Monopoly Law and price supervision. This newsletter summarizes the noteworthy information NDRC disclosed.
Recently China’s National Development and Reform Commission (NDRC) imposed an RMB 353 million (USD 56.7 million) penalty against an international price-fixing cartel of LCD manufacturers, the largest the NDRC has ever imposed for antitrust infringement. The penalty is China’s first enforcement action against an international cartel and sends a strong signal to multinational corporations operating in China that enforcement actions against cartels will not be limited to Chinese entities.
To read the full article, click here.
Energy Sector A Target – China’s Antitrust Enforcement Agencies to Take Action Against International Cartels
In the last six months, China’s antitrust enforcement agencies have signed five Memorandums of Cooperation with antitrust authorities in the United States, European Union, South Korea, Australia and Brazil. During this same period, Chinese antitrust enforcement agencies have substantially increased their personnel resources. So far, in 2012 more than 10 cartel investigations have been opened by China’s antitrust enforcement agencies, resulting in fines of millions of dollars in four cases in the last four months alone. (In the previous three years there had been only three cartel cases with total reported fines of less than US$1 million).
Why all of this activity? The implications seem clear, and it is not just a matter of reading the tea leaves (so to speak): the Chinese antitrust enforcement agencies are clearly gearing up to implement an even more aggressive enforcement agenda that will now include international cartels that affect China. As a Director of China’s antitrust enforcement agency – the National Development and Reform Commission (NDRC) – stated in a speech on November 2, 2012: "We will increase our anti-price monopoly enforcement capability and strive to investigate and penalize a number of large cases that are influential domestically and internationally". Senior Chinese antitrust officials have privately confirmed that they were planning to execute on this agenda as soon as the new Politburo was in place. Now that this has occurred, we can expect to see a significant uptick in the number of cartel investigations and prosecutions in China, which can subject offenders to fines of up to 10 percent of their annual revenues and confiscation of illegal gains. The "priority" industries reportedly targeted for scrutiny include energy, insurance, motor vehicles, travel and the internet.
The risks associated with the enforcement agencies more aggressive enforcement agenda are compounded by the fact that companies will now be subjected to heightened risk of follow-on private class actions in China. In particular, the Court rules now make it easier for private plaintiffs to commence class actions in Chinese courts and the Supreme People’s Court recently held that once a cartel agreement has been found to exist, the burden of proof shifts to the defendant to prove that the agreement did not result in any restriction of competition.
These developments demonstrate that corporations active in China need to ramp up their antitrust compliance efforts without delay to reduce the risk of being targeted for investigation and serious financial exposure. As a first step, conducting an antitrust compliance audit is advisable to assess potential risk areas and, where appropriate, to position the company to take advantage of the Chinese enforcement agencies’ leniency application procedures.
On September 20 , 2012, European Commission officials concluded a Memorandum of Understanding (MoU) with Chinese officials in respect of antitrust law. Signed by the Directorate General for Competition and two of China’s antitrust law enforcement authorities, the National Development and Reform Commission (NDRC) and the State Administration of Industry and Commerce (SAIC), the MoU strengthens the relationship between the two jurisdictions’ respective antitrust authorities.
To read the full article, click here.
McDermott Will & Emery has released the latest China Law Alert: Focus on Competition, which provides insight on current issues surrounding cross-border antitrust and transactional issues.
China’s New Merger Control Regime Makes Major Progress in Its First Three Years
It is now just more than three years since China’s Anti-Monopoly Law (AML) was introduced. Compared with the well-established practices of US antitrust and EU competition authorities, AML enforcement is still in its infancy. However, China’s AML regulators, especially the authority in charge of merger control, the Ministry of Commerce (MOFCOM), has moved quickly to make its mark on international business. Now, most large, cross-border mergers, acquisitions and joint ventures must also successfully pass the rigors of review by MOFCOM as well as the European Commission and the US Department of Justice (DOJ) and/or Federal Trade Commission (FTC). Read the full article here.
NDRC and SAIC’s Actions in 2011 and Prospects in 2012
China’s National Development and Reform Commission (NDRC) and State Administration for Industry and Commerce (SAIC) are the two authorities in charge of investigation and supervision of “monopoly” agreements and abuses of dominant market position. NDRC focuses on price-related cases while SAIC takes care of non-price related violations of the law. Compared to MOFCOM, which is responsible for merger control, NDRC and SAIC have been relatively quite since China’s AML came into force on 1 August 2008. Read the full article here.
Civil Litigation under China’s Anti-Monopoly Law
Since the introduction of the China AML in August 2008, Chinese courts have experimented with various methods of civil dispute adjudication based on breach of the AML. In general, China’s courts have very limited judicial experience with such cases. A number of civil cases have been brought before the courts, but very few, if any, have resulted in a successful judgment for breach of the AML. Read the full article here.
Might the Ministry of Industry and Information Technology (MIIT) Become A New Enforcement Authority for China’s Competition Laws?
In addition to MOFCOM, SAIC and NDRC, the three major enforcement authorities for the anti-unfair competition and anti-monopoly laws, it seems the MIIT might also become a regulator of competition in the telecommunications sector. In addition to a Draft Regulation on Internet Information Services, published for consultation in January 2012, MIIT released an “Opinion on Regulating the Business Activities of Basic Telecommunications Carriers on Campuses” (the Opinion) on 30 June 2011. Read the full article here.
Recently, ENN Energy Holdings Limited and China Petroleum & Chemical Corporation jointly announced the acquisition of all outstanding shares in China Gas Holdings Limited. This acquisition triggers a requirement to notify and obtain clearance from China’s Ministry of Commerce (MOFCOM). Therefore, MOFCOM’s approval will be one of the preconditions for ENN Energy and Sinopec to close the transaction.
To read the full article, please click here.
Recently,China’s National Development and Reform Commission (NDRC) imposed large fines on two pharmaceutical distributors. This move indicates the enforcement agency, which supervises price-related monopolistic practices, is beginning to take a more active role in enforcing the country’s Anti-Monopoly Law.
To read the full article, click here.