Competition Law China Monthly Briefing (May 2020)

Contents
Legislative Activities
Fair Competition in Premier Li’s Government Work Report of 2020
Proposals involving Anti-monopoly Submitted by the NPC Deputies and the CPPCC Members
Enforcement Activities
Qinghai Petroleum and Gas Company Fined for Abuse of Dominance and Obstruction of Investigation
Huizhou Motor Vehicle Inspection Association and 31 Inspection Agencies Fined for Price-Fixing and Joint Price Increase
Merger Review
SAMR Unconditionally Approved 34 Concentrations of Undertakings
SAMR Conditionally Approved ZF’s Acquisition of WABCO
Regulatory Watch
Zhejiang AMR Signed Strategic Cooperation Agreement with Alibaba
Zhejiang AMR Conducted Anti-monopoly Investigation against Huzhou Second-hand Cars Market
Sichuan AMR Signed Cooperation Agreement with Chongqing AMR
Zhejiang Launched Anti-monopoly Campaign in the Production and Circulation of Epidemic Prevention Supplies
CPC and the State Council: Steadily Advance Reform of Natural Monopoly Industries
SAMR and Three Other Departments Announced Notice on Further Promoting Fair Competition Review
Sharp Accused of Suspected Abuse of Intellectual Property to Exclude or Restrict Competition
Judicial Front
Agreement on Suspending Production and Internal Compensation Invalid for Monopoly Nature
Plaintiff Lost the First Trial in the First State Compensation Case for Administrative Monopoly
Legislative Activities
Fair Competition in Premier Li’s Government Work Report of 2020
22 May 2020
Source: Chinese State Council Website
Premier Li Keqiang has clarified in the Government Work Report of 2020 that this year’s main goal and one of the overall deployments of the next phase is to ensure the stability of the supply chain and the industrial chain. Other work focuses include deepening the reform of delegating power, improving regulation and upgrading services, maintaining fair competition with fair supervision, and continuing to create a market-oriented, rule-of-law, and international business environment. In addition, the basics of foreign trade and foreign investment must be stabilized to create an equal and fair-competition market environment.
The Chinese version of the Government Work Report of 2020 can be accessed at:
http://www.gov.cn/premier/2020-05/22/content5513757.htm
Proposals involving Anti-monopoly Submitted by the NPC Deputies and the CPPCC Members
22 May 2020
Source: WORKERCN and Other News Agencies
The deputies to the National People's Congress (NPC) and members of the National Committee of the Chinese People's Political Consultative Committee (CPPCC) put forward many proposals on anti-monopoly law making. Some proposals are as follows.
Li Shouzhen, member of CPPCC, proposes to eliminate the misunderstanding of ‘tolerance, prudence and non-supervision’ and to strengthen China’s competition law enforcement against Internet monopoly. He proposes to establish the basic position of competition policy in the digital economy, and conduct legal review of the concentration of undertakings in the Internet sector, prevent excessive market concentration and elevated entry barriers through mergers and acquisitions.
Gao Zicheng, deputy to NPC and Chairman of Beijing Lawyers Association, proposes to add to the Draft Amendments to the Anti-monopoly Law provisions to prohibit the monopoly or abusive conducts in the cyberspace and online platforms to provide a competitive and legal environment for medium-size, small and micro internet companies.
Gu Ben, member of CPPCC, suggests that anti-monopoly law enforcement agencies should investigate the suspected monopolistic behaviors of major online literature platforms, strengthen the supervision against irregular operating behaviors of online literature platforms.
Xu Ziqiang, member of CPPCC, proposes to crack down on the monopolies of active pharmaceutical ingredients (API), and regulate the production and operation of API.
Mo Tianquan, member of CPPCC, suggests establishing a cross-departmental national housing market regulatory agency to strengthen the supervision of oligopolies and prevent real-estate intermediaries in some cities from gradually forming a monopoly oligopolistic structure with high market share.
Enforcement Activities
Qinghai Petroleum and Gas Company Fined for Abuse of Dominance and Obstruction of Investigation
19 May 2020
Source: SAMR
On 19 May 2020, SAMR issued infringement decisions for the case of abuse of market dominance by Minhe Chuanzhong Petroleum and Natural Gas Company in Qinghai Province (Minhe). After investigation Qinghai AMR found that Minhe required real estate companies or resident users to purchase wall-mounted boilers and sign a wall-mounted boiler sales contract from its gas service department, otherwise they would refuse to accept gas applications. The tying was found to have no valid reason and have excluded or restricted market competition. In view of the fact that Minhe’s illegal act was serious and lasted for a long time, the company was fined 9% of its 2017 annual sales, which amounted to 4,461,954.43 yuan.
During the investigation, its staff transferred, concealed and destroyed its sales contracts and financial accounts, maliciously refused and hindered the investigation work. Qinghai AMR fined the relevant staff 700,000 yuan.
The Chinese versions of the infringement decisions can be found at:
http://www.samr.gov.cn/fldj/tzgg/xzcf/202005/t20200519315357.html
Huizhou Motor Vehicle Inspection Association and 31 Inspection Agencies Fined for Price-Fixing and Joint Price Increase
14 May 2020
Source: SAMR
On 14 May 2020, SAMR issued 32 infringement decisions for the monopoly agreement involving the Motor Vehicle Inspection Association and other 31 inspection agencies in Huizhou, Guangdong. Investigation revealed that the Association required member units not to promote preferential measures, promote sales or to reduce price. The agencies involved signed guarantee letter and paid a deposit of 20,000 yuan. After the market- price for motor vehicle inspection fees was adopted, the agencies raised prices uniformly. The Association was found to have played an organizer and facilitator role in the price increase and was fined 400,000 yuan. Eight agencies were fined at 3% of their 2017 sales value, totaling 1,228,155 yuan for jointly proposing to formulate the above-mentioned measures and refusing to admit their price increase behaviors. Having difficulties to withdraw, the other 23 member units were fined at 1% of their 2017 sales value, totaling 138,702 yuan.
The Chinese versions of the infringement decisions can be found at:
http://www.samr.gov.cn/fldj/tzgg/xzcf/202005/t20200514315212.html
Merger Review
SAMR Unconditionally Approved 34 Concentrations of Undertakings
31 May 2020
Source: SAMR
In May 2020, SAMR unconditionally approved 34 cases of concentrations of undertakings.
The Chinese versions of the announcements can be accessed at:
http://www.samr.gov.cn/fldj/ajgs/wtjjzajgs/202005/t20200512315137.html
http://www.samr.gov.cn/fldj/ajgs/wtjjzajgs/202005/t20200519315345.html
http://www.samr.gov.cn/fldj/ajgs/wtjjzajgs/202005/t20200525315524.html
http://www.samr.gov.cn/fldj/ajgs/wtjjzajgs/202006/t20200602316166.html
SAMR Conditionally Approved ZF’s Acquisition of WABCO
15 May 2020
Source: SAMR
On 15 May 2020, SAMR conditionally approved ZF’s Acquisition of WABCO, requiring ZF, WABCO and the post-concentration entity to perform the following obligations: continuously provide mechanical automatic transmission case controllers or components to the existing customers and ensure that the products provided are not less preferable than the existing contract level in terms of price, quality, quantity, delivery time, technological advancement and after-sales service. Based on the principles of fairness, reasonableness, and non-discrimination, the parties shall continue to supply Chinese customers with mechanical automatic transmission case controllers and opportunities to develop mechanical automatic transmission case controllers for subsequent supply.
The Chinese version of SAMR’s decision can be accessed at:
http://www.samr.gov.cn/fldj/tzgg/ftjpz/202005/t20200515315255.html
Regulatory Watch
Zhejiang AMR Signed Strategic Cooperation Agreement with Alibaba
26 May 2020
Source: China Quality News
On 26 May 2020, Zhejiang AMR and Alibaba Group signed a strategic cooperation agreement covering three major areas. This cooperation focuses on the internet governance capabilities and construction of modernized governance systems, and deepens areas such as helping to resume production and cultivate new business types. The cooperation contemplates an anti-monopoly compliance mechanism in the internet sector, collaboration in extraordinary times, joint promotion of the ‘digital wisdom’ and creating a ‘digital brain’ for market supervision.
Zhejiang AMR Conducted Anti-monopoly Investigation against Huzhou Second-hand Cars Market
22 May 2020
Source: Huzhou AMR
Recently, Zhejiang AMR set up a special team for investigating the suspected monopoly behaviors of second-hand car markets in Huzhou. The team consists of 10 enforcement officers from Huzhou AMR and related counties and districts. At present, tax reduction policies have been vigorously implemented to overcome the impact of the coronavirus pandemic on the economy, but the transaction service fees in Huzhou second-hand cars market are still double or even several times higher than those found in the surrounding cities, which seriously increase the burden of businesses and consumers.
Sichuan AMR Signed Cooperation Agreement with Chongqing AMR
14 May 2020
Source: Sichuan AMR
On 19 May 2020, Zhang Guangjie, director of Sichuan AMR, led a team to Chongqing to meet the relevant persons in charge of the Anti-monopoly and Unfair Competition Division and the Law Enforcement Division of Chongqing AMR to discuss about fair competition review and crackdown on multilevel marketing (MLM). Afterwards, both competition law enforcement departments are to strengthen communication, draft and sign collaboration agreements, steadily promote various agendas, and continuously deepen the coordination of market supervision and fair competition review and crackdown on MLM in the two provinces.
Zhejiang Launched Anti-monopoly Campaign in the Production and Circulation of Epidemic Prevention Supplies
11 May 2020
Source: Zhejiang AMR
Recently, Zhejiang AMR and Zhejiang Provincial Food and Drug Administration held a video deployment meeting. Zhejiang will immediately carry out a two-month special rectification operation for the quality of anti-pandemic supplies and market order. Five types of supplies will be mainly targeted: masks, protective clothing, infrared thermometers (forehead thermometers), ventilators as well as detection reagents and other important raw materials and auxiliary materials. The market price supervision and monopoly behavior investigation of raw and auxiliary materials such as melt-blown nonwovens and spunbond nonwovens will also be strengthened.
CPC and the State Council: Steadily Advance Reform of Natural Monopoly Industries
11 May 2020
Source: Chinese State Council Website
Recently, CPC and the State Council issued the Opinions on Accelerating the Improvement of the Socialist Market Economic System in the New Era. The Opinions pointed out that the reform of the natural monopoly industries needs to be steadily advanced, an effective and competitive electricity market to be built, electricity supply and demand and prices orderly liberalized, and the degree of marketization of electricity transactions increased. The Opinions also seeks to promote the fair and open access of oil and gas pipeline networks to market players, liberalize natural gas sources and sales prices in a timely manner, improve the competitive oil and gas circulation market, deepen the reform of the railway industry and promote the diversification of the main players in the railway transportation market. Furthermore, the Opinions also contemplates separating operations for universal postal services, competitive postal services and improving the tobacco monopoly franchise system.
SAMR and Three Other Departments Issued Notice on the Further Promotion of Fair Competition Review
9 May 2020
Source: SAMR
SAMR, together with the National Development and Reform Commission, Ministry of Finance and Ministry of Commerce, jointly issued the Notice on the Further Promotion of Fair Competition Review, clarifying that a fair competition review system will be basically established in three years. The Notice clarifies the requirements of improving review. Policies and measures issued after 1 January 2020 should be regularly evaluated and cleaned up, either once every three years or regularly reviewed together with regulations and regulatory documents.
Sharp Accused of Suspected Abuse of Intellectual Property to Exclude or Restrict Competition
8 May 2020
Source: ijiwei.com
A number of domestic companies have complained to Mobile China Alliance (MCA) about Sharp's unreasonably high prices and abuse of lawsuits during patent licensing negotiations. MCA has reported to SAMR that Sharp is suspected of abusing intellectual property rights to exclude or restrict competition. According to the Anti-monopoly Guidelines of the State Council's Anti-monopoly Committee on Abuse of Intellectual Property (Draft for Comment), Sharp licensed intellectual property at an unfairly high price, and forced the licensee to accept unfair license fees through injunction applications for standard essential patents.
Judicial Front
Agreement on Suspending Production and Internal Compensation Invalid Due to Its Monopolistic Nature
26 May 2020
Source: Judicial Documents Network
On 13 December 2019, the People’s Court of Nandan County, Guangxi Zhuang Autonomous Region issued a judgment dismissing the plaintiff’s claim for compensation under the Brick Factory Cooperation Agreement previously signed with four red brick factories. The four factories signed the agreement in the name of the Red Brick Industry Association established by themselves, and imposed on the plaintiff an obligation to suspend production in exchange of cooperation fee of 200,000 yuan per year. The plaintiff claimed that the agreement was valid and demanded the fee in arrears, while the defendants argued that the agreement is invalid for its monopolistic nature. The court determined that the purpose of the agreement was to restrict the competition of similar products and to monopolize the market and therefore invalid.
Plaintiff Lost the First Trial in the First State Compensation Case for Administrative Monopoly
11 May 2020
Source: Judicial Documents Network
On 2 January 2020, the People's Court of Yantian District, Shenzhen, Guangdong Province issued a judgment dismissing all the claims of the plaintiff Guangzhou Berthelot Pharma against the defendant Shenzhen Health Commission. The court held that the defendant was a proper defendant. However, with respect to the defendant’s liability of compensation, the announcement of the National Development and Reform Commission made it clear that the defendant’s behavior was ‘an act of allowing only one procurement group to provide pharmaceutical group procurement services’, rather than stating that the defendant committed an illegal act of excluding pharmaceutical manufacturers from participating in competition. Therefore, there is no causality between the defendant’s acts and the plaintiff’s claim for compensation as a drug manufacturer. Moreover, the plaintiff’s failure to win the bid in the bidding process was affected by various factors such as the quality and price of the drug, and those of other participating bidders, and it was not because the defendant carried out the reform of centralized drug procurement. In summary, the court of first instance held that the plaintiff’s claim for compensation for its loss in the decline in sales lacked factual and legal basis, and rejected all of the plaintiff’s claims.