Competition Law China Monthly Briefing (April 2020)

Contents
Enforcement Activities
Three Active Pharmaceutical Ingredients Distributors Fined for Collective Dominance on the Calcium Gluconate API Market
Two Firms and Personnel Relating to the Calcium Gluconate API Dominance Case Fined for Obstruction of Investigation
Hearing Announcement: Jiangsu Dongkun's Suspected Monopoly Case
Merger Review
SAMR Lifts Conditions Imposed on the Establishment of Joint Venture by Keliyuan, Toyota China, PEVE, Xinzhongyuan and Toyota Tsusho
SAMR Conditionally Approves Nvidia's Acquisition of Mellanox
Zall Development Fined 300,000 RMB for Gun-jumping in Acquisition of Shenzhen Zhongnong
SAMR Conditionally Approves Infineon's Acquisition of Cypress Semiconductor
Regulatory Watch
Jiujiang AMR Warned Motor Vehicle Inspection Industry: Monopoly Agreements and Price Manipulation Will Be Severely Punished
Ningde Real Estate Brokers Association Interviewed for Uniform Price Increase
Shandong AMR Issued Two Guidelines for Anti-monopoly Compliance
Beijing's Fiscal Policies Under Scrutiny of Fair Competition Review
Wenzhou Funeral Parlour Compulsory Tying of Urns Suspected a Violation
Jilin AMR Issued "Five Tips" for Anti-monopoly Compliance to Businesses
Judicial Front
Court in Heilongjiang Finds Income Sharing and Fixed Price Agreements by Three Car Inspectors in Violation of Law
Shenzhen Court Releases 2019 Intellectual Property White Paper
Supreme People's Court: Court at the Place where Horizontal Monopoly Agreement was Reached Has Jurisdiction
Supreme People's Court IP Tribunal: 9 Antitrust Disputes Accepted in 2019
Nanjing Intermediate Court: Monopoly Agreement Involving API Invalid, nearly 70 Million RMB of Compensation Granted at the First Instance
Hangzhou Intermediate Court: Dynamic Restriction on Sales Volume of Taobao Stores Invalid
Enforcement Activities
Three Active Pharmaceutical Ingredients Distributors Fined for Collective Dominance on the Calcium Gluconate API Market
14 Apr 2020
Source: SAMR
On 14 April 2020, the State Administration for Market Regulation (SAMR) announced the infringement decision on three Shandong calcium gluconate active pharmaceutical ingredients (API) distributors. The three companies abused their dominant market position and were punished with confiscation of illegal gains and fines with a total sum of 325.5 million RMB. Shandong Kanghui Pharmaceutical Co., Ltd., one of the enterprises involved in the case, was fined at 10% of its sales value in the previous year. This case marks the first time in the past 12 years since the implementation of the Anti-monopoly Law that China has applied a maximum penalty level of 10% to illegal enterprises.
The Chinese version of the Decision is available at: http://www.samr.gov.cn/fldj/tzgg/xzcf/202004/t20200414314227.html
Two Firms and Personnel Relating to the Calcium Gluconate API Dominance Case Fined for Obstruction of Investigation
14 Apr 2020
Source: SAMR
On the same day that the 325.5 million RMB anti-monopoly fines were imposed on the three calcium gluconate API distributors, the SAMR issued 16 administrative penalty decisions for illegal refusal or obstruction of investigation by the anti-monopoly law enforcement agencies. According to the administrative penalty decisions, Shandong Kanghui Pharmaceutical Co., Ltd. and Weifang Puyunhui Pharmaceutical Co., Ltd. refused to provide relevant materials and information, concealed, destroyed, and removed evidence during the investigation and caused injury to the law enforcement officers, which constituted refusal or obstruction of investigation. According to Article 52 of the Anti-monopoly Law, fines are imposed on the two companies and related personnel, totaling 2.53 million RMB.
The Chinese version of the Decision is available at:
http://www.samr.gov.cn/fldj/tzgg/xzcf/202004/t20200414314229.html
Hearing Announcement: Jiangsu Dongkun's Suspected Monopoly Case
7 Apr 2020
Source: Jiangsu AMR
According to the Law of the People's Republic of China on Administrative Penalty, Jiangsu Administration for Market Regulation (Jiangsu AMR) were to hold a hearing on the alleged monopoly case against Jiangsu Dongkun Exhibition and Decoration Co., Ltd. in the meeting room No. 2123 of Longjiang Building at 107 Caochangmen Street, Gulou District, Nanjing, at 14:30 on 13 April 2020.
Merger Review
SAMR Lifts Conditions Imposed on the Establishment of Joint Venture by Keliyuan, Toyota China, PEVE, Xinzhongyuan and Toyota Tsusho
26 Apr 2020
Source: SAMR
On 26 April 2020, the SAMR issued an announcement to lift the restrictive conditions for the establishment of a joint venture by Keliyuan, Toyota China, PEVE, Xinzhongyuan and Toyota Tsusho. According to the assessment by the SAMR, substantial changes have taken place in the relevant markets and lifting the conditions will not have the effect of eliminating or restricting market competition. On 2 July 2014, the deal was conditionally approved by the Ministry of Commerce, which was responsible for the antitrust review of concentration of undertakings before the institutional reform launched in 2018.
The Chinese version of the Release Announcement is available at:
http://www.samr.gov.cn/fldj/tzgg/ftjpz/202004/t20200424314597.html
SAMR Conditionally Approves Nvidia's Acquisition of Mellanox
16 Apr 2020
Source: SAMR
On 24 April 2019, the SAMR received a merger notification for the proposed acquisition by Nvidia Corporation of the shares of Mellanox Technologies Ltd. After review, the SAMR approves the proposed transaction subject to restrictive conditions, requiring that Nvidia's GPU accelerators and Mellanox's high-speed network interconnection equipment be sold to the Chinese market without tying and no unreasonable transaction conditions be attached absent legitimate reasons. The parties are also ordered to conduct transactions on fair, reasonable and non-discriminatory (FRAND) terms and comply with their open source commitments.
The Chinese version of the Decision is available at:
http://www.samr.gov.cn/fldj/tzgg/ftjpz/202004/t20200416314327.html
Zall Development Fined 300,000 RMB for Gun-jumping in Acquisition of Shenzhen Zhongnong
8 Apr 2020
Source: SAMR
On 28 October 2016, Zall Development (BVI) Holdings Limited (Zall Development), EJC Group Limited, Great Morning Holding Limited, Chan Kit and Chen Huibao signed a Share Purchase Agreement regarding Zall Development's proposed acquisition of 60.49% of equity shares in Shenzhen Zhongnong Network. Zall Development completed the registration of two transfers of shares in 2017 and 2019 respectively, but failed to make merger notifications which is in violation of Article 21 of the Anti-monopoly Law. The SAMR imposed a fine of 300,000 RMB on Zall Development.
The Chinese version of the Decision is available at:
http://www.samr.gov.cn/fldj/tzgg/xzcf/202004/t20200408313988.html
SAMR Conditionally Approves Infineon's Acquisition of Cypress Semiconductor
2 Apr 2020
Source: SAMR
On 8 August 2019, the SAMR received a merger notification for Infineon Technologies' proposed acquisition of equity shares in Cypress Semiconductor. After review, the SAMR approves the proposed transaction with restrictive conditions, requiring Infineon, Cypress and the post-merger entity to sell automotive-grade IGBTs and automotive-grade MCUs, automotive-grade NOR flash memory to the Chinese market without tying and no unreasonable transaction conditions be attached absent legitimate reasons. The parties are also ordered to conducted transactions on fair, reasonable and non-discriminatory (FRAND) terms.
The Chinese version of the Decision is available at:
http://www.samr.gov.cn/fldj/tzgg/ftjpz/202004/t20200408313950.html
Regulatory Watch
Jiujiang AMR Warned Motor Vehicle Inspection Industry that Monopoly Agreements and Price Manipulation Will Be Severely Punished
27 Apr 2020
Source: Jiujiang Municipal AMR
Recently, Jiujiang Municipal AMR of Jiangxi Province held a meeting to regulate the pricing behavior of the motor vehicle inspection industry. At the meeting, a "Cautionary Note on Regulating Price Behavior of the Motor Vehicle Inspection Industry" was issued and read out. It is warned that if the following illegal acts will still occur, they can be considered as severe or relatively severe violations, including: 1) monopoly agreement is reached and implemented in violation of the Anti-monopoly Law, and 2) collusion with each other and manipulation of market price that have caused significant price rise in violation of the Price Law.
Ningde Real Estate Brokers Association Interviewed for Uniform Price Increase
23 Apr 2020
Source: Ningde Municipal AMR
On the morning of 23 April 2020, the Ningde Municipal AMR held a meeting on the price increase behavior of the Real Estate Brokers Association. The AMR requested the Association to immediately rectify the illegal acts, and refrain from formulating a unified fee standard and increasing the price jointly, withdraw the fee increase notice, notify the members to restore the original fee standard, eliminate the adverse effects in society, and report the rectification situation within a specified time limit. The AMR vowed to strictly investigate and punish all kinds of arbitrary charging behaviors such as charging clients without providing services and collusive price increase.
Shandong AMR Issued Two Guidelines for Anti-monopoly Compliance
14 Apr 2020
Source: Shandong AMR
In April 2020, Shandong AMR issued the Guidelines for Anti-monopoly Compliance of Operators of Shandong Province and Guidelines for Anti-monopoly Compliance of Industry Associations of Shandong Province.
The Chinese versions of the Guidelines are available at:
http://amr.shandong.gov.cn/art/2020/4/14/art765109004243.html?xxgkhide=1
Beijing's Fiscal Policies Under Scrutiny of Fair Competition Review
9 Apr 2020
Source: SAMR
Since the outbreak of the COVID-19 pandemic, the Beijing Municipal Bureau of Finance has continuously issued more than 20 "red-headed documents" that support the prevention and control of pandemic outbreaks and the resumption of work and production of enterprises. The legal department of the Bureau has carried out fair competition review of the fiscal and taxation policies in advance to ensure that various market players have enjoyed the fiscal and taxation policy benefits legally and equally.
Wenzhou Funeral House Compulsory Tying of Urns Suspected a Violation
9 Apr 2020
Source: Wenzhou Municipal AMR
The Wenzhou Civil Affairs Bureau informed the public about the investigation of the suspected monopoly of the only funeral house in Wenzhou that some its staff forcibly sell urns. The director and deputy director of the funeral house are subject to Party discipline and dismissal respectively.
Jilin AMR Issued "Five Tips" for Anti-monopoly Compliance to Businesses
1 Apr 2020
Source: Jilin Provincial AMR
On 1 April 2020, Jilin Provincial AMR issued "Five Tips" for the Anti-monopoly Compliance for businesses.
Details of the "Five Tips" in Chinese are available at: http://scjg.jl.gov.cn/zw/zxtz/202004/t20200401_7013676.html
Judicial Front
Court in Heilongjiang Finds Income Sharing and Fixed Price Agreements by Three Car Inspectors in Violation of Law
29 Apr 2020
Source: China Judgment Documents Website
The Heihe Intermediate People's Court of Heilongjiang Province made a final judgment on a dispute over a partnership agreement among Hongyun Inspection Company, Yulong Inspection Company and Nenjiang Inspection Station. Although the agreement involved did not clearly stipulate the inspection price, it was agreed that the operating income of the three Inspectors would be distributed evenly among them after accumulation of their operating income, and that when the agreement was actually implemented, the three inspection companies had unitedly fixed the inspection price and evenly distribute the income. The court found that the behavior of the three Inspectors constituted fixing service price in violation of the Anti-monopoly Law and the agreement were held to be invalid.
Shenzhen Court Releases 2019 Intellectual Property White Paper
22 Apr 2020
Source: Shenzhen Intermediate People's Court
On 22 April 2020, the Shenzhen Intermediate People's Court issued the 2019 White Paper on the Status of Judicial Protection of Intellectual Property Rights of Shenzhen Courts (the White Paper). The White Paper mentionsShenzhen Intellectual Property Court's trial of the Huawei v. Samsung standard essential patent (SEP) dispute with a size of claim exceeding 3.2 billion RMB. This case clarifies the standard of finding fault in the negotiation of SEP and lays a solid foundation for the two parties to reach a global settlement. This is the first time that China grants injunction order for an international SEP in the area of wireless communications.
Supreme People's Court: Court at the Place where Horizontal Monopoly Agreement was Reached Has Jurisdiction
20 Apr 2020
Source: China Judgment Documents Website
The Supreme People's Court made the final jurisdiction ruling on a horizontal monopoly agreement dispute between the appellant Gansu Yinguang Juyin Chemical Co., Ltd. and the respondent Mengbaihe Household Technology Co., Ltd. The ruling dismissed the appellant's objection to the jurisdiction of the case. The Supreme People's Court considers that the place where a horizontal monopoly agreement is reached constitutes the place where tortious conduct occurred and hence the court held the place where the horizontal monopoly agreement was reached has jurisdiction.
Supreme People's Court IP Tribunal: 9 Antitrust Disputes Accepted in 2019
17 Apr 2020
Source: Supreme People's Court
The Supreme People's Court Intellectual Property Tribunal released an Annual Report (2019) according to which, in 2019, the court accepted 9 civil appeal cases involving monopoly. The IP Tribunal has strengthened cooperation with the State Council's anti-monopoly enforcement department and provided amendments and suggestions on banning anti-monopoly agreements and making enforcement regulations. Judges are employed as members of the expert advisory group of the Anti-monopoly Committee of the State Council.
The Bilingual versions of the Report are available at:
http://www.court.gov.cn/zixun-xiangqing-225861.html
Nanjing Intermediate Court Found Monopoly Agreement Involving API Invalid and Awarded nearly 70 Million RMB in Compensation
9 Apr 2020
Source: China Judgment Documents Website
The Nanjing Intermediate Court applies standard procedures for trial over the dispute between the Plaintiffs Yangzijiang Pharmaceutical Group's Guangzhou Hairui Pharmaceutical Co., Ltd., Yangzijiang Pharmaceutical Group Co., Ltd. and the defendants Hefei Medical Industrial Pharmaceutical Co., Ltd. (Hefei Medical), Hefei Enruite Pharmaceutical Co., Ltd. (Hefei Enruite), and Nanjing Haichen Pharmaceutical Co., Ltd.
The two defendants restricted the plaintiffs to only purchase the active pharmaceutical ingredients (API) from them and restricted the quantity which can be purchased within a given time period, otherwise the plaintiffs would have to pay the two defendants a high amount of damages. The court found that the terms of the aforementioned contract violated the mandatory provisions of the Anti-monopoly Law and invalid. In addition to restricted transactions, the plaintiff also alleged that the two defendants had implemented monopolistic behaviors of excessive pricing, tying and unreasonable transaction conditions. The court of first instance ruled that the defendants Hefei Medical and Hefei Enruite compensated the two plaintiffs for a total of nearly 70 million RMB in economic loss.
Hangzhou Intermediate Court: Restriction on Dynamic Sales Volume of Taobao Stores Invalid
30 Mar 2020
Source: China Judgment Documents Website
In the monopoly agreement dispute of the plaintiff Mao Dongjun, the defendant Li Xudong, Chen Shu and the third party Qingdao Ego Hardware Tools Co., Ltd, the parties’ Cooperation Agreement restricted the sales volume of Li Xudong's hot glue guns in that the monthly sales of his stores are not allowed to exceed the maximum monthly sales of Mao Dongjun's stores. Although the agreement on the quantity of sales is in the form of dynamic values, the court held that it is still a sales restriction prohibited by the Anti-monopoly Law, and the agreement is invalid.