Observations about Two Antimonopoly Implementing Rules

On March 24, 2023 the State Administration for Market Regulation (“SAMR”) issued four implementing rules of the Anti-Monopoly Law (“AML”), namely, Provisions on Prohibiting Monopolistic Agreements (“Monopoly Agreement Provision”), Provisions on the Review of Concentration of Undertakings (“Concentration Review Provision”) , Provisions on Prohibiting Abuse of Dominant Market Positions and Provisions on Prohibiting Abuse of Administrative Power to Eliminate and/or Restrict Competition, all of which will come into effect on April 15, 2023.
The final rules have attracted attention since SAMR sought public consultation on the exposure-for-comment drafts on June 27, 2022. In this article, we analyze the Monopoly Agreement Provision and Concentration Review Provision and share our observations about some of the most noteworthy terms.
Monopoly Agreement Provision
1.The safe-harbor provision
The specifications of the safe harbor provision attracted attention when the draft was published last June. The official version has now removed the specifications, making the implementing regulations as general as the AML with respect to the safe harbor rule.
Compared with the previous draft, the final version does away with the 15% market share threshold and the implementing rules with respect to market share calculation and the determination of “control”, indicating that some discretion is to be given to enforcement authorities. Procedural requirements for undertakings to apply for exemption were also deleted from the final rules.
Given that the application of the safe harbor provision is still unclear, undertakings will need to continue to follow the previous per-se doctrine on the resale price maintenance conduct.
2. Rules on hub-and-spoke conspiracies
Whilst the AML imposes liabilities on an undertaking that organizes or provides substantial assistance to others in reaching a monopoly agreement, further elaboration is expected in the implementing regulation. The Monopoly Agreement Provision fills this gap.
According to Article 18, “organizing” is:
(1) where the undertaking is not a party of the monopoly agreement, but exerts a decisive influence or plays a predominant role in determining the parties to the agreement, the content of the agreement, or the implementation of the agreement; and (2) where the undertaking enters into an agreement with upstream/downstream counterparties, which enables these competing counterparties to reach monopoly agreements by communicating or exchanging information via such undertaking. It is worth noting that compared to the exposure-for-comment draft, the expression of “deliberately” was struck out. In other words, to determine whether an undertaking has organized a monopoly agreement, there is no need to consider whether an undertaking had such an intention.
Article 18 provides that “substantial assistance” includes the provision of necessary support, critical facilities, and other essential support. This article reduces the standard of proof set out in the previous draft, leaving much room and flexibility for enforcement discretion.
3.Expanding the application of the leniency programme.
In its amendment last year, the AML included personal liabilities for AML violations for the first time. The Monopoly Agreement Provision further specifies that leniency programmes can be applied to individuals as well.
Article 47.3 clarifies that in a successful application, personal liability may be exempted or reduced by 50%. For undertakings, those who organize or coerce other undertakings in reaching and/or implementing monopoly agreements or hinder others’ cessation of illegal acts are not eligible applicants. This application scope meets the standard set out in the Guideline for the Leniency Programin Cases Involving Horizontal Monopoly Agreements.
Concentration Review Provision
1.Determination of “control”
As a core evaluation aspect in China’s merger control regime, an unequivocal criterion to determine “control” has been absent. Although the current rules, i.e. Interim Provisions on the Review of Concentrations of Undertakings enumerated several factors for consideration, no clear indicators, whether positive or negative, were ever put into legislation.
The exposure-for-comment draft of the Concentration Review Provision once contained a positive-list-provision on this matter, listing the critical factors for consideration (i.e. the possession of voting rights; the impact on operation and management, including the appointment and removal of senior executives, financial budgets, and the business plans of other undertakings). Nevertheless, that provision was not retained in the final rules.
This leaves discretion to the enforcement agencies, although it is expected not to deviate greatly from the current merger filing practices.
2.Specifying rules on turnover calculations
The Concentration Review Provision adds new principles on the allocation of turnover for a jointly controlled undertaking. In such a case, the revenue generated by the undertaking under joint control shall be allocated to those controlling undertakings on an even basis. This calculation approach echoes international practices and SAMR’s enforcement practices, providing enterprises with clearer guidance when they undertake merger filing analysis.