Llinks Client Alert - Antitrust and Competition

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I. Highlights
Four central government authorities establish a 3-year plan for fair competition review framework;
The State Administration for Market Regulation (“SAMR”) issues the Announcement on Antitrust Law Enforcement in Support of Prevention and Control of Epidemic and Resumption of Production;
The SAMR issues an administrative penalty decision concerning abuse of dominance (葡萄糖酸钙原料药垄断案行政处罚决定书);
The SAMR issues an administrative penalty decision concerning abuse of dominance and refusal and obstruction of antitrust investigation (青海省民和川中石油天然气有限责任公司滥用市场支配地位案行政处罚决定书);
The SAMR conditionally approves Nvidia’ acquisition of Mellanox Technologies (附加限制性条件批准英伟达公司收购迈络思科技有限公司股权案反垄断审查决定);
"Tongda" courier companies changed their rhetoric after increasing prices in concert;
The SAMR publishes the first merger review case in which a party to the transaction involves VIE (上海明察哲刚管理咨询有限公司与环胜信息技术(上海)有限公司新设合营企业案);
Germany approves CRRC’s Vossloh Locomotive acquisition.
In light of a deterioration in Deliveroo’s financial position as a result of coronavirus, the UK’s CMA has provisionally cleared Amazon’s investment in Deliveroo
II. Legislation
The General Office of the Supreme People’s Court issues the 2020 Plan of Judicial Interpretation of the Supreme People’s Court, which envisages the issuance of a total of 49 judicial interpretations (38 to be issued by the end of 2020; 11 to be issued by the first half of 2021). Among these judicial interpretation plans, the Provisions on Issues Concerning the Application of Laws in the Adjudication of Civil Disputes Arising from Monopolistic Behaviors (Volume II) is directly related to the antitrust field.
The CPC Central Committee and the State Council issue the Opinions on Expediting the Perfection of the Socialist Market Economy in the New Era (hereinafter, the “Opinions”). The Opinions require steady reform of natural monopoly industries, in particular (1) to create an effective and competitive electricity market, orderly open up electricity exploitation and consumption and competitive segment electricity prices, and improve the degree of marketization of electricity transactions; (2) to open up oil and gas pipeline networks to entities in the market, relax the control of natural gas sources and sales prices in a timely manner, and strengthen the competitive oil and gas circulation market; (3) to deepen the reform of the railway industry, encourage the diversification and moderate competition of entities engaged in the railway transportation business, and achieve separated operations of general postal service business and competitive business; and (4) to optimize the tobacco monopolization system and build a new mechanism for moderate competition. The Opinions were issued on May 18, 2020. Visit the link below for more information (available in Chinese only):
http://www.gov.cn/zhengce/2020-05/18/content5512696.htm
Four central government authorities including the SAMR issue the Notice on Further Promoting Fair Competition Review, which specifically provides that "a fair competition review framework with full coverage, complete rules, clear rights and obligations, efficient operation and strong supervision will be largely established in 3 years". The notice was issued on May 12, 2020. Visit the link below for more information (available in Chinese only):
http://gkml.samr.gov.cn/nsjg/fldj/202005/t20200512315127.html
The SAMR issues the Announcement on Antitrust Law Enforcement in Support of Prevention and Control of Epidemic and Resumption of Production. The announcement specifically provides: (1) the SAMR has established an expedited process for merger review, targeting the areas closely related to the prevention and control of the epidemic and basic livelihoods such as pharmaceutical manufacturing, medical device and protection equipment manufacturing, food production, transportation, wholesale and retail, and industries heavily affected by the epidemic, such as catering, accommodation and tourism, as well as the concentration implemented for resumption of production; (2) the SAMR will exempt the agreement which is in accordance with the PRC Anti-monopoly Law, entered into for the epidemic prevention and control and resumption of production, and conducive to technology development, efficiency enhancement, realization of social interests and protection of consumer interests. The announcement was issued on April 5, 2020. Visit the link below for more information (available in Chinese only):
http://www.samr.gov.cn/fldj/sjdt/gzdt/202004/t20200405313858.html
Shandong Administration for Market Regulation issues the Guideline for Anti-Monopoly Compliance for Undertakings in Shandong and the Guideline for Anti-Monopoly Compliance for Industry Associations in Shandong, aiming to help undertakings and industry associations strengthen their awareness of monopolistic activities, enhance anti-monopoly compliance governance, effectively prevent and reduce legal risks arising from illegal activities, and jointly maintain a unified, open, and orderly modern market economy system. The guidelines were issued on April 14, 2020. Visit the link below for more information (available in Chinese only):
http://amr.shandong.gov.cn/art/2020/4/14/art765109004243.html?xxgkhide=1
Heilongjiang Administration for Market Regulation issues the Guideline for Anti-Monopoly in China (Heilongjiang) Pilot Free Trade Zone, which contains 20 clauses for anti-monopoly enforcement, covering the application scope, the job responsibilities of the antitrust authorities in Ha’erbin, Heihe, and Suifenhe area of the China (Heilongjiang) Pilot Free Trade Area (hereinafter referred to as the “Area”), the implementation of law enforcement cooperation, the provision of anti-monopoly services for the Area, and the innovation of the Area’s anti-monopoly regulation. The guideline was issued on March 20, 2020. Visit the link below for more information (available in Chinese only):
http://www.cqn.com.cn/ms/content/2020-03/23/content8413728.htm
III. Law Enforcement
The SAMR issues an administrative penalty decision concerning abuse of dominance (葡萄糖酸钙原料药垄断案行政处罚决定书).Three companies (山东康惠医药有限公司、潍坊普云惠医药有限公司、潍坊太阳神医药有限公司) colluded to abuse their dominant position in the sales market of calcium gluconate original drug for injection in China and jointly sold products at unfairly high prices and imposed unreasonable terms of transaction, thus eliminating and restricting competition and harming the interests of patients and downstream businesses engaged in production of calcium gluconate for injection. The SAMR finds that the action constitutes abuse of dominance, thus violating Article 17.1(a) and 17.1(e) of the PRC Anti-Monopoly Law, and consequently imposes fines of 10%, 9% or 7% of their sales for the preceding year (2018) on the three companies respectively depending on their primary, secondary and auxiliary roles in the monopolistic behavior, and confiscates their illegal gains, totaling RMB 325 million. The decision was issued on April 14, 2020. Visit the link below for more information (available in Chinese only)：
http://www.samr.gov.cn/fldj/tzgg/xzcf/202004/t20200414314227.html
The SAMR issues an administrative penalty decision concerning refusal and obstruction of antitrust investigation (山东康惠医药有限公司、潍坊普云惠医药有限公司及相关人员拒绝、阻碍反垄断调查违法行为行政处罚决定书).The parties involved in this case refused to cooperate with competition authorities in law enforcement and substantially obstructed the law enforcement, thus violating Article 42 of the PRC Anti-Monopoly Law. The SAMR issues a total of 16 administrative penalty decisions, which impose a fine of RMB 1 million on the companies involved and fines ranging from RMB 20,000 to RMB 100,000 on the individuals involved. The decision was issued on April 14, 2020. Visit the link below for more information (available in Chinese only)：
http://www.samr.gov.cn/fldj/tzgg/xzcf/202004/t20200414314229.html
The SAMR issues an administrative penalty decision concerning abuse of dominance and refusal and obstruction of antitrust investigation (青海省民和川中石油天然气有限责任公司滥用市场支配地位案行政处罚决定书).During 2009 to 2018, a company (青海省民和川中石油天然气有限责任公司) engaged in bundled selling without a just reason. The Administration of Market Regulation of Qinghai Province (hereinafter, the “QAMR”) finds that the company abused its dominant position in the natural gas pipeline service market for urban residents in the main urban area of Minhe, thus violating Article 17.1(e) of the PRC Anti-Monopoly Law, and imposes a fine of 9% of its sales for the preceding year (2017), totaling RMB 4,461,954.43. Moreover, the company attempted to obstruct antitrust investigation, conceal evidence, transfer, hide and destroy materials related to the case, and continued its illegal activities during the investigation. The QAMR finds that the action violated Article 42 of the PRC Anti-Monopoly Law and imposes a fine of RMB 700,000 on the company. The decision was issued on May 19, 2020. Visit the link below for more information (available in Chinese only)：
http://www.samr.gov.cn/fldj/tzgg/xzcf/202005/t20200519315357.html
The SAMR issues an administrative penalty decision concerning monopoly agreement (广东省惠州市机动车检测行业垄断协议案行政处罚决定书).31 member companies which provide motor vehicle inspection services in Huizhou, under the organization of the Huizhou Motor Vehicle Inspection Association, reached and implemented a monopoly agreement on concerted price increase. The association violates Article 16 of the PRC Anti-monopoly Law and the member companies violate provisions of “fixing or altering product prices” stipulated in Article 14. Therefore, the Administration for Market Regulation of Guangdong Province imposes a fine of RMB 400,000 on the association, fines of 3% of their respective sales for the preceding year (2017) on 8 member companies as the chairman, vice chairman, secretary-general and director of the association, fines of 1% of their respective sales on 17 member companies involved, and exempted 6 member companies from fines for no sales. The total amount of fines exceeds RMB 1,700,000. The decision was issued on May 14, 2020. Visit the link below for more information (available in Chinese only)：
http://www.samr.gov.cn/fldj/tzgg/xzcf/202005/t20200514315212.html
The SAMR issues an administrative penalty decision concerning concentration in the absence of merger filing (卓尔发展收购深圳中农网股权未依法申报案的行政处罚决定书).Zall Group acquired 60.49% equity of Sino Agri. The acquisition constituted a concentration of undertakings that met merger filing thresholds. The parties completed the transaction without merger filing clearance. The action constituted concentration in the absence of merger filing, thus violating Article 21 of the PRC Anti-Monopoly Law. Considering that the concentration would not have an adverse effect on market competition, the SAMR imposed a fine of RMB 300,000 on Zall Group. The decision was issued on April 8, 2020. Visit the link below for more information (available in Chinese only):
http://www.samr.gov.cn/fldj/tzgg/xzcf/202004/t20200408313988.html
The SAMR conditionally approves ZF Friedrichshafen AG’ acquisition of Wabco (附加限制性条件批准采埃孚股份公司收购威伯科控股公司股权案反垄断审查决定).The SAMR concludes that the relevant markets in this case are 9 global markets including the global market of steering column of medium and heavy commercial vehicles, and 4 Chinese markets including the Chinese market of cab air suspension valve for medium and heavy commercial vehicles, and the concentration may have an adverse effect on market competition in the global and Chinese mechanical automatic transmission controller market (upstream) and mechanical automatic transmission market (downstream). Accordingly, the SAMR conditionally approved the acquisition. ZF Friedrichshafen AG, Wabco and the entity resulted from the concentration are required: (1) to continuously supply to existing customers and ensure that the level of products in all aspects is not lower than the level specified in the existing customer contract; (2) to continuously supply Chinese customers in accordance with FRAND terms; and (3) to continuously provide Chinese customers with opportunities to develop products for subsequent supply in accordance with FRAND terms. The restrictive conditions are effective for 6 years upon issuance of the decision, and will automatically terminate after the 6-year period expires. The decision was issued on May 15, 2020. Visit the link below for more information (available in Chinese only):
http://www.samr.gov.cn/fldj/tzgg/ftjpz/202005/t20200515315255.html
The SAMR conditionally approves Nvidia’ acquisition of Mellanox Technologies (附加限制性条件批准英伟达公司收购迈络思科技有限公司股权案反垄断审查决定).The SAMR concludes that the relevant markets in this case are 4 global markets including the global GPU accelerator market, and the concentration may have an adverse effect on market competition in 3 global and Chinese market including the global and Chinese GPU accelerator market, thus conditionally approved the acquisition. Nvidia, Mellanox Technologies and the entity resulted from the concentration are required: (1) not to engage in bundled selling without a just reason or impose unreasonable terms of transaction in Chinese market; not to hinder or restrict customers from purchasing or using individual products; not to discriminate against customers in terms of services, price, software functions, etc. (2) to continuously supply in the Chinese market in accordance with FRAND terms; (3) to ensure the interoperability of Nvidia GPU accelerators and third-party products; (4) to maintain Mellanox Technologies’ open source commitment; (5) to take measures to protect information of third parties. The restrictive conditions are effective for 6 years upon issuance of the decision, and will terminate upon application after the 6-year period expires. The decision was issued on April 16, 2020. Visit the link below for more information (available in Chinese only):
http://www.samr.gov.cn/fldj/tzgg/ftjpz/202004/t20200416314327.html
The SAMR conditionally approves Infineon Technologies’ acquisition of Cypress (附加限制性条件批准英飞凌科技公司收购赛普拉斯半导体公司股权案反垄断审查决定).The SAMR concludes that the relevant markets in this case are 7 global markets including the global microcontroller market, and the concentration may have an adverse effect on market competition in the global automotive grade microcontroller market, and conditionally approved the acquisition. Infineon Technologies, Cypress and the entity resulted from the concentration are required: (1) not to engage in bundled selling without a just reason, or impose unreasonable terms of transaction; not to refuse to supply individual products to Chinese customers; (2) to ensure that products sold to Chinese customers meet the industry standard, and are compatible with standard-compliant products from third parties; (3) to continuously supply Chinese customers in accordance with FRAND terms. (4) If the related products are integrated into a single product or solution in the future, Chinese customers must have the right to choose to purchase separately or wholly. The restrictive conditions are effective for 5 years upon issuance of the decision, and will automatically terminate after the 5-year period expires. The decision was issued on April 8, 2020. Visit the link below for more information (available in Chinese only):
http://www.samr.gov.cn/fldj/tzgg/ftjpz/202004/t20200408313950.html
The SAMR lifts the restrictive conditions imposed on the concentration among Corun Energy, Toyota China, PEVE, Xin Zhongyuan and Toyota Tsusho.
The SAMR in the announcement analyzes the current market competition situation of the global automotive NiMH battery market and the Chinese hybrid vehicle market: (1) With the help of state preferential policies, new energy vehicle application technologies have made substantial breakthroughs, and the industry has developed rapidly, while the development of hybrid vehicle industry is relatively slow. Thus, the purchase demand for hybrid batteries by hybrid vehicle manufacturers has been compressed accordingly; (2) Lithium batteries have become the development direction of hybrid vehicles due to major breakthroughs in technology and cost advantages, consequently strengthening competition constraints on NiMH batteries. The announcement was issued on April 24, 2020. Visit the link below for more information (available in Chinese only):
http://www.samr.gov.cn/fldj/tzgg/ftjpz/202004/t20200424314597.html
The SAMR, during March 20, 2020 and May 20, 2020, published 65 cases qualified for expedited review and unconditionally approved 75 cases. No merger was prohibited cases during this period. Notably, the SAMR publishes a simplified case where a party to the transaction involves the VIE structure (上海明察哲刚管理咨询有限公司与环胜信息技术(上海)有限公司新设合营企业案). This case is a milestone because it is the first time that the SAMR officially accepts a merger filing involving the VIE structure. Due to the grey area surrounding the VIE structure, historically the SAMR has never reviewed or approved a merger filing involving the VIE structure. This new case may imply that undertakings involving in the VIE structure may be eligible for merger filing in the future.
IV. News Reports
“Tongda” courier companies changed their rhetoric after increasing their prices in concert. On May 8 and May 9, four major Chinese service providers, STO Express, Best Inc., YTO Express, ZTO Express and Yunda Express respectively issued their notices to customers on their official websites to announce price increases. All the courier companies mentioned "the resumption of highway toll charge" as a reason for price increase, which attracted negative comments. On May 11, STO Express, Best Inc. and Yunda Express withdrew their notices, and YTO Express and ZTO Express deleted the controversial expressions to update their notices.
Several domestic companies complained to the China Mobile Alliance for Sharp's overpricing and abuse of lawsuits in patent licensing negotiations, and the China Mobile Alliance reported to the antitrust authority. If the complaint is of merit, according to the Anti-monopoly Guidelines on the Abuse of Intellectual Property Rights (Exposure Draft), Sharp's actions may constitute abuse of intellectual property rights to exclude or restrict competition, thus violating the PRC Anti-monopoly Law.
The SAMR has successively released replies to the suggestions and proposals of the representatives raised in the “Two Sessions” of 2019. One representative suggested that the antitrust enforcement power granted by the PRC Anti-monopoly Law is concentrated in the upper-level authorities, and it is advisable to decentralize it properly. In response to this, the SAMR replied that the suggestion would be studied during the revision of the PRC Anti-monopoly Law.
Ⅴ. Foreign Antitrust Trends
Germany approves CRRC’s Vossloh Locomotive acquisition. Federal Cartel Office president stated that “in the case of the CRRC/Vossloh Locomotives merger, we thoroughly examined all of the special features associated with the takeover of a European company by a Chinese state company. However, our existing concerns have not been able to justify a ban on the project.” [1]
The European Commission invites comments from interested parties on commitments offered by Broadcom to address competition concerns in relation to Broadcom's conduct in various TV set-top box and modem chipset markets. Specially, Broadcom committed not to require or induce by means of certain type of advantages an original equipment manufacturer (OEM) to obtain more than 50% of its requirements for SoCs for TV set top boxes, xDSL modems and fibre modems from Broadcom. [2]
Drugmaker AbbVie Inc wins U.S. antitrust approval to buy Botox maker Allergan for $63 billion. AbbVie, which has been under pressure to diversify its portfolio, said in June 2019 that it would acquire Allergan in a deal that gives AbbVie control over the lucrative wrinkle treatment Botox and buys time to seek new growth before its arthritis treatment Humira loses U.S. patent protection in 2023. To win approval from the Federal Trade Commission, the companies said they agreed to divest brazikumab, a drug in development to treat autoimmune diseases, to AstraZeneca. [3]
The UK government announces that elements of competition law will be temporarily relaxed for the food sector as part of a package of measures to allow supermarkets to work together to feed the nation during the COVID-19. The CMA has offered reassurance that, where agreements are not covered by that legal relaxation, "the CMA has no intention of taking competition law enforcement action against cooperation between businesses or rationing of products to the extent that this is necessary to protect consumers – for example, by ensuring security of supplies". [4]
In light of a deterioration in Deliveroo’s financial position as a result of coronavirus, the CMA has provisionally cleared Amazon’s investment in Deliveroo. Chair of the CMA’s independent inquiry group said that “without additional investment, it is clear that Deliveroo would not be able to meet its financial commitments and would have to exit the market. This could mean that some customers are cut off from online food delivery altogether, with others facing higher prices or a reduction in service quality. Faced with that stark outcome, we feel the best course of action is to provisionally clear Amazon’s investment in Deliveroo.” [5]
Amazon.com Inc. was hit with antitrust claims in Seattle federal court over an alleged “pricing scheme that broadly and anti-competitively impacts virtually all products offered for sale in the U.S. retail e-commerce market.” Amazon allegedly reached “fair pricing” agreements with third-party sellers, which explicitly required any product sold on Amazon to “have a price that is equal to or lower than the price of the same item being sold by the seller on other sites,” according to the complaint. [6]
DG COMP has put in place a number of measures to ensure business continuity and has continued to ensure the implementation of the EU Merger Regulation. But in the current situation, DG COMP faces difficulties in some cases in collecting information from the notifying parties and third parties, such as their customers, competitors and suppliers, given the disturbances caused by coronavirus outbreak. Consequently, DG COMP encourages parties to discuss the timing of notifications of transactions with the relevant case team and to use electronic means to notify their transactions. DG Competition will temporarily also accept and actually encourages all submissions in digital format. The delivery of paper originals will then be arranged at a later time. [7]
【Endnote】
[1] Reported by International Railway Journal on April 27, 2020. URL:
https://www.railjournal.com/financial/germany-approves-crrcs-vossloh-locomotive-acquisition/
[2] Reported by EU Commission on April 27, 2020. URL:
https://ec.europa.eu/commission/presscorner/detail/en/IP20755
[3] Reported by Reuters on May 6, 2020. URL:
https://www.reuters.com/article/us-allergan-m-a-abbvie/abbvie-wins-u-s-antitrust-approval-to-buy-allergan-idUSKBN22H33M
[4] Reported by Practical Law on March 19, 2020. URL: https://uk.practicallaw.thomsonreuters.com/w-024-5629?transitionType=Default&contextData=(sc.Default)&firstPage=true&bhcp=1
[5] Reported by the UK government on April 17, 2020. URL: https://www.gov.uk/government/news/cma-provisionally-clears-amazon-s-investment-in-deliveroo
[6] Reported by Bloomberg on March 20, 2020. URL: https://news.bloomberglaw.com/mergers-and-antitrust/amazon-accused-of-monopolization-massive-price-fixing-scheme
[7] Reported by EU Commission on March 16, 2020. URL: https://ec.europa.eu/competition/mergers/informationen.html
About Llinks’s Antitrust Compliance Services
To meet clients’ ever-growing needs in antitrust compliance, Llinks assembled a team consisting of experienced antitrust compliance experts. The antitrust compliance team is comprised of former general counsels and compliance heads of fortune 500 companies and other leading Chinese companies, former law enforcement officers as well as transaction and litigation lawyers specialized in antitrust compliance in relation to sectors under stringent antitrust compliance regulatory framework, such as drugs and health, automobiles and auto parts, energy and chemicals, and finance and insurance.
Llinks team is capable of utilizing its profound knowledge and experience in serving all kinds of antitrust compliance needs of clients, including monopoly agreements, compliance of companies with dominant position, and merger filings. Based on its deep understanding of antitrust laws and clients’ industries, Llinks team is well capable of advising clients on antitrust issues, assisting clients to establish internal antitrust compliance system, providing highly efficient merger filing services, and assisting clients to respond to administrative dawn raids.