[CHINA] Anti-Monopoly: Published Annual Report

Recently, State Administration for Market Regulation released the Annual Report on China's Anti-monopoly Law Enforcement for 2021.It is the first annual report released by Anti-monopoly Commission after its establishment in November 2021.

The annual report starts with the overall summary of anti-monopoly law enforcement including legislation, supervision and international cooperation, which is followed by a detailed overview of the enforcement work through different monopolistic conducts and different industries.

Monopolistic conducts include monopoly agreements, abuse of dominant market position, concentration of undertakings, abuse of administrative power to exclude or limit competition. Otherwise, the industry law enforcement chapter focuses on the internet industry, utility industry, pharmaceuticals industry, building materials industry, semiconductor industry, warehousing and logistics industry, new energy vehicles and battery charging and swapping industries, chemical industry.

The report also cites some representative typical cases for specific monopolistic conducts and industries such as the famous Alibaba case and Meituan case.

Alibaba Group Holding Limited was investigated by State Administration for Market Regulation in December, 2020 for abusing its dominant market position to conduct “one out of two” option among the merchants using its platform. Alibaba prohibited these operators from opening stores or participating in promotional activities on other competitive platforms, in order to enhance its power to obtain unfair competitive advantage, eliminate market competition and harm the interest of customers with the help of technical means such as market forces, platform rules, platform data and algorithms. In April, 2021, State Administration for Market Regulation imposed an administrative penalty on Alibaba in accordance with Article 17 of the Antimonopoly Law, ordered Alibaba to stop its illegal acts. 

As a result, Alibaba was fined 4% of its domestic sales of 455.712 billion yuan in 2019, totaling 18.228 billion yuan.

It is not a unique case, the similar situation happened on another internet giant. In October, 2021, Meituan was fined 3.442 billion yuan for the almost same reason of “one out of two” option. The “exclusive cooperation deposit” collected by Meituan from merchants for the implementation of “one out of two” option was also ordered to be refunded, with a total amount of 1.829 billion yuan.

In order to provide a focused effective guidance for the enhancement of anti-monopoly supervision in the field of platform economy, Anti-monopoly Commission has published a guide for the platform economy sector which is also listed in the annex of the annual report, clarifying the definition of relevant markets, form of horizontal and vertical monopoly agreements, hub-and-spoke agreements, collaborative practices and other related factors. 

The detailed consideration of constituent of unfair price practices, sale below cost, refusal to transact, transaction limitation, tie-in-sales or attachment of unreasonable transaction terms and differentiated treatment are also speculated. 

The guide provides a clearer standard and solid foundation for the enforcement of Anti-monopoly Law.  For instance, the “one out of two” choice is explicitly stated by the guide as one of the measures of transaction limitation which belongs to the illegal act of operators in the platform economy sector with a dominant market position.

Another recent development is that the revision of Anti-monopoly Law has just been approved on June 24, 2022 and the new version will be valid since August 1.

There are several significant changes in the draft amendments.

For example, the illegal cost and punishment of various monopolistic conducts have been greatly increased  after the amendment, which reflects the increasingly strict law enforcement trend and also makes the connection between anti-monopoly law and criminal law possible.

In the procedure aspect, the authority may decide to suspend the calculation of the review period for the concentration of undertakings under review because of certain reasons such as the appearance of new circumstance or new fact which has a material impact on the review. It makes the time limit of review more flexible.

One article is added, regulating that the authority shall enhance the review of concentrations of undertaking in people's livelihood-related, financial, science and technology, media  and other fields of activities, which clarifies the areas which will be the focus of the anti-monopoly enforcement work in the future. 

In light of the rapid development of internet industry and previous enforcement achievement, the draft amendments also pay attention to the platform economy and set relevant regulation, which acts in cooperation with the above Meituan and Alibaba case.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Peggy Tong
HFG Law & Intellectual Property
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Wuding Road
Shanghai
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CHINA
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