On March 24, 2023, the State Administration for Market Regulation (the “SAMR”) promulgated four AML Relevant Rules – Provisions on Curbing the Abuse of Administrative Power to Exclude or Restrict Competition (the “Provisions”), Provisions on Prohibition of Monopoly Agreements, Provisions on Prohibition of the Abuse of Market Dominance, and Provisions on the Review of Concentration of Undertakings. These four rules take into effect from April 15, 2023.
The revision to the Provisions is the systemized summary and implementation of the past administrative law enforcement practice under the comprehensive background of accelerating the construction of a unified and large national market, comprehensively implementing the new Anti-monopoly Law (the “AML”), strengthening and improving the AML enforcement against the abuse of administrative powers to exclude or restrict competition.
Although the subjects of the abuse of administrative power are not business operators, the Provisions affect the daily operation of some enterprises in a large degree, which should be fully aware of the importance. On the one hand, when a strategic project between a business operator and a governmental department involved (e.g. tendering and bidding, signing of agreement/memorandum, implementing project, etc.), if the governmental department abuses its administrative power, the relevant agreement/memorandum may be deemed as a monopoly agreement and be invalid. Also, it is likely to lead to administrative penalty on the enterprise, which may have a serious impact on the enterprise’s business plan and reputation.
On the other hand, according to Article 4 of the Provisions of the Supreme people’s court on Several Issues concerning the Application of Law in the Trial of Civil Dispute Cases Involving Monopoly (Draft for Comments), although not effective yet, a plaintiff may have the right to file a civil lawsuit before the court in the future against a business operator who benefits from the abuse of administrative power and claim the civil compensation liability. Accordingly, once the above provisions are confirmed in the final version, the business operator that benefits from the abuse will face a risk of civil litigation, even though it is not the implementation subject of the administrative behavior.
Consequently, this article sorts out and summarizes the key points in the Previsions from the perspective of compliance of business operators, with the view to provide some reference to the compliance scheme of businesses.
- Further Refining the Forms of Abuse of Administrative Power
The new AML refines the specific forms of abuse of administrative power.Specifically, Articles 4 to 12 of the Provisions have been adjusted synchronously and further refined the forms of conduct. The major revisions are as follows:
- Article 4 is added: “restricting or restricting in a disguised form from operating, purchasing or using commodities provided by specific undertakings by setting unreasonable alternative databases, qualification databases”;
- Article 5 is added: “administrative authorities and other organizations authorized by laws and regulations to administer public affairs shall not abuse their administrative powers to obstruct other undertakings from entering the relevant market or apply unfair treatment to other undertakings to eliminate or restrict competition by signing cooperation agreements, memorandums with such undertakings or other means.”
- Paragraph 2 of Article 6 is added: the miscellaneous description of “discriminative technical measures” in the discriminative treatment of non-local commodities is supplemented, and relevant words of “record” are deleted.
- Article 7 is revised: deleting the restrictive words such as “outside” and “local”, which has been revised as “other acts of excluding or restricting undertakings from participating in bidding and other business activities.”
- Article 8 is added: with “refusing, forcing or forcing in a disguised manner non-local undertakings to make investment or set up branches locally.”
- Article 10 is revised: deleting the enumeration of measures to eliminate or restrict competition, that is, “rules, normative documents and other policy measures related to the economic activities of market players, such as market access, industrial development, investment promotion, tendering and bidding, government procurement, business conduct norms and qualification standards.”
【Comments】
Based on the antitrust law enforcement practice of China, the Provisions effectively connect and refine the forms of abuse of administrative powers in accordance with the revised provisions of the AML, and enhance the operability of the AML in regulating the abuse of administrative powers.
In practice, business operators may not pay enough attention to the behavior of abuse of administrative powers. If business operators under-estimate administrative monopoly risks in the process of reaching cooperation with governments, it may lead to disadvantageous consequences.
For example, a governmental department of Mudanjiang signed the Agreement on Standardized Parking Management of Bicycles Sharing with a tech company, and both parties agreed that the company shall be the only one which provide services for the Bicycles Sharing in Mudanjiang. After investigation, the Heilongjiang AMR believes that the agreement excludes or restricts other business operators with corresponding qualifications and service capabilities from participating in the competition in the Bicycles Sharing in Mudanjiang and deprives consumers of their independent choice. Thus, this governmental department’s behavior constitutes the abuse of administrative powers. In this case, although the tech company was not the subject of AML’s violation, its business plan has been greatly affected by this governmental department’s violation of the AML.
In another example, a governmental department of Zunyi organizes several business operators to sign the Joint Operation Agreement, divides the market share of liquefied gas in the urban area, guides business operators to unify the wholesale and retail prices of bottled gas, and facilitates business operators to reach a horizontal monopoly agreement. Such act is identified by the Guizhou AMR as an abuse of administrative power in violation of AML, and the business operators involved are more at risk of reaching a horizontal monopoly agreement.
For business operators, the Provisions provide clearer guidance and can help understand more accurately under which circumstances the behavior of relevant organizations may constitute administrative monopoly, so as to better prevent risks or protect their legitimate rights and interests.
- The real-name informant has the right to learn the handling result where appropriate
Article 14 of the Provisions adds the following paragraph, “For a real-name report made in writing, the anti-monopoly law enforcement agency may, after the completion of investigation and handling of the case, give feedback on the handling results to the whistleblower pursuant to the law at the written request of the whistleblower.” This new provision will help to protect the informant’s right to a reasonable extent, and promote informants to take whistle-blowing to the Antitrust Enforcement Agency as an effective measure to protect their legitimate rights and interests.
【Comments】
Other newly issued Rules also provide for the rights of the real-name informant. However, different from the other monopolistic behaviors regulated by other Rules, the subjects of abuse of administrative power are usually administrative authorities, so business operators may have lots of concerns when reporting. After the promulgation of the Provisions, this will play a positive role in encouraging the business operators with interests being damaged to report and identify the abuse of administrative powers by real name, which is also conducive to the creation of a fair and competitive market environment.
- Implementing the Legal Representative/Person-in-charge Interview System
Article 55 of the new AML adds the interview system with the legal representative or the person-in-charge. Article 24 of the Provisions provides in detail the interview system. Meanwhile, Article 25 provides that “… the anti-monopoly law enforcement agency may disclose the interview information or invite the media, industry associations, experts, scholars, relevant business operators and representatives of the general public to sit in on the interview. “
【Comments】
The interview system is a new provision added after the amendment of AML. It is also provided in both Provisions on Prohibition of Monopoly Agreements and Provisions on Prohibition of the Abuse of Market Dominance. The rules in the Provisions regarding the interviewee, the content, the filing and approval of the interview results, and the methods for conducting the interview will enhance the transparency and operability of the interview system to a certain extent.
It is worth noting that a “relevant business operator” is also considered as one of the parties that the anti-monopoly enforcement agencies may invite to attend the interview. Therefore, business operators should pay particular attention to antitrust compliance when cooperating with the administrative authorities.
- Connection with Discipline Inspection and Supervision Authorities
Referring to the provision in Article 34 of the Supervision Law of the People’s Republic of China, the Provisions add in Article 28, “where the anti-monopoly law enforcement agency finds any clue of suspected duty-related illegal activities or crimes committed by a public official during an investigation, it shall promptly transfer the case to the disciplinary inspection and supervisory authority.”
【Comments】
In practice, cases of abuse of administrative powers may sometimes be associated with corruption and other phenomena. Therefore, the Provisions add a connection system between the Anti-monopoly Law Enforcement Agency and the discipline inspection and supervision authorities. Where the Anti-monopoly Law Enforcement Agency obtains any clue of violation of law or discipline, it may directly transfer such clue to the discipline inspection and supervision authority when investigating an abuse of administrative powers.
On the one hand, this system is conducive to fundamentally combat the occurrence of cases of abuse of administrative powers as a result of violation of law or discipline. On the other hand, it will increase the deterrence of the Anti-monopoly Law Enforcement Agency’s investigation of abuse of administrative monopolistic conduct, which is conducive to carrying out the investigation of administrative monopolistic conduct, safeguarding fair market competition and optimizing the overall business environment.
- Connection with Fair Competition Review
Article 29 of the Provisions clarifies the connection between fair competition review and abuse of administrative powers investigation: “When any administrative authority or other organization authorized by laws and regulations to administer public affairs formulates rules, regulatory documents and other policies and measures in relation to economic activities of market players, it shall carry out fair competition review in accordance with relevant provisions, assess the impact on market competition and prevent from excluding or restricting market competition. Where an abuse of administrative power to exclude or restrict competition is suspected, the anti-monopoly law enforcement agency shall make investigation in accordance with the law.”
In addition, Article 30 of the Provisions provides that market regulation authorities may provide support in fair competition review to administrative authorities to prevent the occurrence of abuse of dominant market position at the source, including publicizing laws, regulations and policies on fair competition, providing fair competition consultation in the process of formulating policies and measures, organizing the evaluation of the competition impact of implementation of the relevant policies and measures and releasing evaluation reports, organizing training and exchange and providing work guidance and suggestions.
【Comments】
The Provisions add a new principal provision relating to fair competition review, which ensures the effective connection between the two systems, and also leaves sufficient legislative space for the formulation of the fair competition review regulations.
Meanwhile, the competition advocacy system newly added in the Provisions is also quite valuable. In the previous law enforcement practice, the reason for the occurrence of most violations is that some parties have not yet fully understood the fundamental status of competition policies and the importance of fair market competition. The Provisions is of practical significance for promoting the implementation of fair competition policies and creating a favorable business environment.
- Conclusion
In recent years, the Anti-monopoly Law Enforcement Agency, by investigating, punishing and publishing typical cases of abuse of administrative powers, has constantly helped China build an efficient and regulated market with fair competition, and created a increasingly favorable business environment for enterprises. The promulgation of the Provisions undoubtably will help business operators more accurately identify the antitrust risks caused by the abuse of administrative powers when they cooperate with administrative authorities. We believe that business operators need to pay full attention to such risks and take timely measures to mitigate the potential risks in relation to the abuse of administrative powers or to protect their legitimate rights and interests.
At the same time, the Provisions can provide more effective institutional support for the Anti-monopoly Law Enforcement Agency to prohibit the abuse of administrative powers, further optimize the business environment, and provide a solid guarantee for accelerating the construction of a unified national market.
In 2022, the SAMR deployed a special law enforcement action to curb the abuse of administrative powers, published five batches of cases involving the special law enforcement action on June 9, July 29, November 18, November 25 2022 and January 11, 2023 respectively. For details, see: https://www.samr.gov.cn/jzxts/tzgg/qlpc/202206/t20220608_347613.html
https://www.samr.gov.cn/jzxts/tzgg/qlpc/202207/t20220729_349015.html
https://www.samr.gov.cn/jzxts/tzgg/qlpc/202211/t20221117_351752.html
https://www.samr.gov.cn/jzxts/tzgg/qlpc/202211/t20221122_351854.html
https://www.samr.gov.cn/jzxts/tzgg/qlpc/202301/t20230111_352803.html
