Since the implementation of China's first Anti-Monopoly Law (“AML (2008)" or "Old AML") in August 2008, it has played a very important role in protecting fair competition, improving the efficiency of economic operation, safeguarding the interests of consumers and the public interest, and promoting high-quality development. However, in the midst of unprecedented changes in the Chinese economy and foreign political and economic, some provisions of the AML (2008) are no longer well adapted to the present and future needs. In this context, the legislature formally adopted the first amendment to Anti-Monopoly Law of the People's Republic of China ("AML (2022)" or "New AML") on June 24, 2022 after taking into account opinions from judicial authorities, administrative departments, business circles, academia and lawyers. The New AML will come into effect on August 1, 2022.
The New AML puts forward a series of new rules, standards and requirements in many aspects, such as strengthening the basic position of competition policy, establishing a fair competition review system, clarifying the scope and criteria for determining monopoly agreements, improving the regulation of abusive behavior in the field of digital economy, and raising the penalties for failing to notify a reportable transaction. In addition, for the first time, encouraging innovation is included in the legislative purpose.
At the same time, compared with the Draft Amendment of Anti-monopoly Law of the People's Republic of China (“Draft Amendment"), which solicited public opinions in October 2021, the AML (2022) further clarifies the applicable rules in the field of digital economy, and improves the "safe harbor" rules for monopoly agreements. The investigative procedures for the concentration of undertakings that fails to meet the notification thresholds have also been improved, and specific requirements have been put forward for the review of the concentration of undertakings.[1]
This article will focus on the most significant changes the AML (2022) introduces based on our more than ten years of experiences in anti-monopoly practice, including:
I. Establishment and Boundaries of the "Safe Harbor" System
II. Reforms and Changes to the Merger Review System
III. How to Link up the Old AML and New AML when the Intensity of Punishment is Greatly Increased
IV. Regulate the Digital Economy, Prohibiting Monopolistic Behaviors Through New Methods
V. Organizers of Monopoly Agreements may Bear Liabilities
VI. Establish the Fair Competition Review Mechanism, Aiming at Breaking up Regional Restrictions
I. Establishment and Boundaries of the "Safe Harbor" System
1. The "Safe Harbor" rules help to reduce the uncertainty and enhance expectations for compliance work.
One of the most prominent features of this amendment is the establishment of the "Safe Harbor" rules. Based on the newly added "Safe Harbor" rules, if an undertaking can prove that its market share in the relevant market is below a certain standard and meets other conditions stipulated by the anti-monopoly law enforcement agency of the State Council, arrangements or agreements between the undertaking and its upstream suppliers or downstream customers or distributors will not be prohibited even if they constitute monopoly agreements. Considering the wide application of such arrangements or agreements in business, the "Safe Harbor" rules will give undertakings more flexibility, and help to reduce the uncertainty in anti-monopoly compliance and enhance compliance expectations, while also facilitating law enforcement agencies to concentrate their limited law enforcement resources on areas with greater market impact.
2. Scope and conditions of application of “Safe Harbor” rules under the AML (2022)
The AML (2022) is not the first try of "Safe Harbor" rules by antitrust authorities. Article 14 of the Provisions on the Prohibition of Monopoly Agreement (Consultation Draft) issued by the State Administration for Market Regulation in 2019 (“Consultation Draft on Monopoly Agreement") included a market share standard for presuming no competitive damage. However, in the end, the Interim Provisions on the Prohibition of Monopoly Agreements did not adopt this clause. In addition, some anti-monopoly guidelines have tried to establish a "Safe Harbor" to varying degrees, such as Article 13 of the Anti-monopoly Guidelines of the Anti-monopoly Committee of the State Council on Intellectual Property Rights ("Intellectual Property Guidelines"). Article 4 of the Anti-Monopoly Guidelines of the Anti-Monopoly Committee of the State Council on the Automobile Industry (“Automobile Guidelines") lists a number of situations in which vertical geographical restrictions and customer restrictions set by undertakings without significant market power can be presumed to be exempted. It has also been interpreted by the industry as a certain application of the "Safe Harbor" rules.
Compared with non-legally binding guidelines, AML (2022) formally establishes a “safe harbor” for vertical monopoly agreements, and is not limited to specific scenarios (such as intellectual property licensing) or specific industries (automotive industry).
In addition, the New AML sets two preconditions for the application of the "Safe Harbor" rules. Firstly, "the market share is lower than the standard set by the anti-monopoly law enforcement agency of the State Council". At present, the AML (2022) has not yet specified the specific market share threshold of "Safe Harbor" rules, which needs to be further clarified by supporting guidelines or rules. For your information, we have summarized the contents of the market share standard in the documents published by the antitrust law enforcement agencies before:
Another precondition for the application of "Safe Harbor" rule is "meeting other conditions stipulated by the anti-monopoly law enforcement agency of the State Council". What is "other conditions" is also not clearly defined in the New AML. It is worth noting that there are many exemption mechanisms under the EU competition law system. According to the De Minimis Notice promulgated by the European Commission, the application of the “Safe Harbor” rules requires, in addition to the market share criterion, that (1) the agreement itself does not have the purpose of eliminating or restricting competition, and (2) it is not a "hardcore cartel".
In a gist, the “Safe Harbor” rules is a major breakthrough in China's anti-monopoly law after years of practical experience, but its application is still limited by many preconditions. We look forward to further guidance from anti-monopoly law enforcement agencies on how to implement the “Safe Harbor” rules, including how to determine market share threshold and how to define "other conditions".
II. Reforms and Changes to the Merger Review System
1. Introduce the “Stop-the-Clock” mechanism
The AML (2022) establishes the “stop-the-clock” mechanism in the review procedure of concentration of undertakings, and specifies the applicable circumstances. According to Article 32, law enforcement agencies may decide to suspend the calculation of the review period and notify relevant parties in writing, in any of the following circumstances: (1) the parties fail to submit documents and materials in accordance with relevant provisions, resulting in a review being unable to be conducted; (2) there are new circumstances and new facts that have a significant impact on the review of the concentration, without the verification of which the review cannot be conducted; (3) additional restrictive conditions for the concentration need to be further evaluated, and the parties make a request for suspension.
According to the AML (2008) and the Interim Provisions on the Review of Concentration of Undertakings, the review period shall not exceed 180 days since the official acceptance of the case. In fact, cases under simplified procedures generally can be cleared within the time limit. For some complex cases under normal procedures, which may involve complex competition assessment, negotiation of restrictive conditions, or after the initial submission, some new situations with significant impact emerge, such as significant changes to the transaction structure or the transacting parties, the 180-day review period often appears to be quite tight. Under these circumstances, law enforcement agencies often consider asking relevant parties to withdraw the case and then refile, in order to earn more time for their review. Especially in conditionally-approved cases, most of the parties had adopted withdrawal-and-refile approach in the review. Since 2021, the SAMR has published six conditionally-approved cases and one prohibition case. All the parties of these cases have withdrawn their cases and then refiled, and some even withdrew twice, lasting for over one year. When the parties refile the case, the review period will restart, which makes the timing of the whole review process more uncertain.
In order to optimize the review process based on the practical experience in complex cases, the New AML introduces the “stop-the-clock” mechanism. In the future, when there exists the circumstance specified by the AML (2022), law enforcement agencies can start the “stop-the-clock” mechanism to suspend the calculation of the review period, and continue to calculate the review period until relevant circumstances are eliminated.
In order to make the merger review process more predictable or “controllable”, and reduce the possibility that law enforcement agencies repeatedly suspend the review, it is necessary for the notifying parties to fully prepare the filing materials in the preparation stage, and strengthen communication with law enforcement agencies during the review. Therefore, if the contemplated transaction is notifiable, we suggest the parties to consult with external antitrust lawyers as early as possible, and prepare the filing materials more effectively in order not to cause any delay to the overall timeline of the transaction.
2. For transactions not meeting the notification thresholds, the parties still may need to evaluate carefully in certain cases
As early as 2008, the Rules of the State Council on Notification Thresholds for Concentration of Undertakings (the “Notification Thresholds”) already stipulated that, law enforcement agencies reserve the right to investigate transactions that do not meet the notification thresholds. For the field of platform economy, the Anti-Monopoly Guideline of the Anti-Monopoly Committee of the State Council on Platform Economy (the “Platform Guideline”) issued in February 2021, also emphasizes that, if the concentration of undertakings does not meet the notification thresholds, but relevant facts and evidence show that the concentration has or may have the effect of excluding or restricting market competition, law enforcement agencies should investigate in accordance with relevant provisions.
The AML (2022), for the first time, explicitly established the investigation power of anti-monopoly law enforcement agencies towards concentrations of undertakings that do not meet the notification thresholds. The Article 26 provides that:
a. For the concentration of undertakings that does not meet the notification thresholds, but relevant facts and evidence show that the concentration has or may have the effect of excluding or restricting market competition, law enforcement agencies may firstly request relevant parties to make a notification (paragraph 2 of the Article 26);
b. If relevant parties fail to notify, law enforcement agencies then have the power to investigate (paragraph 3 of the Article 26).
How the law enforcement agencies will exert their investigative power remain to be seen. However, business operators of different industries may refer to the Platform Guideline for more guidance. To be specific, if (1) the concentration involves start-ups or emerging platforms, (2) the parties involved in the concentration generate low revenues due to the adoption of free or low-price business mode, (3) the concentration degree of relevant market(s) is relatively high, or (4) the number of market participants is limited, the parties should evaluate carefully whether a notification is required, even if the concentration does not meet the notification thresholds. In order not to cause any delay to the overall timeline of the transaction, we suggest the parties consult with external antitrust lawyers as early as possible, to timely conduct relevant analysis on the market definition and competition landscape.
3. Gradually optimize the allocation of resources for merger review, improve the review efficiency and facilitate business operators to make notifications
The Article 37 of the AML (2022) stipulates, for the first time, that the anti-monopoly law enforcement agencies of the State Council should improve the classified and graded review system, strengthen the review in important areas, such as those concerning national economy and people’s livelihood, and improve the quality and efficiency of the review. We notice that several documents, such as the draft Amendment to the AML released in October 2021, and the Opinions on Accelerating the Establishment of a Unified Domestic Market by the Central Committee of the Communist Party of China and the State Council released in April 2022, have already mentioned “important areas”, “finance”, “science and technology”, and “media”. For the important areas related to the national economy and the people’s livelihood, since they are closely related to people’s welfare, business operators should strengthen their anti-monopoly compliance in various aspects, including making notifications in accordance with the AML. On the other hand, law enforcement agencies will also improve the quality and efficiency of the review, guide and encourage business operators in relevant industries to operate in compliance with the law.
In addition, we note that the Annual Report on China’s Anti-monopoly Law Enforcement (2021) published by the State Anti-monopoly Bureau on June 8, 2022 also mentioned that, “exploring pilot programs of delegating the power to review concentrations of undertakings to certain law enforcement agencies at provincial-level.”
Although detailed rules of the relevant system have not been issued, it can be generally expected that the merger review system in China will explore to gradually optimize the allocation of review resources, improve the review efficiency and facilitate business operators to make notifications.
III. How to Link up the Old AML and New AML when the Intensity of Punishment is Greatly Increased
1. Increase the cost of illegal acts of operators and to urge operators to comply with competition regulations.
One of the prominent problems of the Anti-monopoly Law (2008) is that many penalties are too light and the cost of violation is too low. The AML (2022) mainly increases penalties from the following aspects:
a. Increase penalties for monopoly agreements and add personal liability. It is specified that a fine of less than 5 million yuan may be imposed if a monopoly agreement is reached and implemented but there is no sales in the previous year; the maximum penalty has been raised from 500,000 yuan in the Old AML to 3 million yuan in the New AML. The legal representative, the principal person in charge and the person directly responsible of the operator who are personally liable for the conclusion of the monopoly agreement may be fined not more than one million yuan.[2]
b. Increase the penalties for failing to notify a concentration of operators in accordance with the law (detailed below). Compared with the maximum fine of 500,000 yuan in the Old AML, the New AML imposes a fine of up to 10% of the sales in the previous year for those who may have the effect of excluding or restricting competition, and a fine of up to 5 million yuan for those who do not have the effect of excluding or restricting competition.[3]
c. Increase the penalties for refusing to cooperate with the investigation. Compared with the maximum fine of 1 million yuan for operators and 100,000 yuan for individuals in the Old AML, the maximum fine for operators in the New AML is 1% of the sales in the previous year, 5 million yuan for no sales or the sales being difficult to calculate, and 500,000 yuan for individuals.[4]
d. A new clause of particularly serious circumstances is added. If the circumstances of the illegal act are particularly serious and the consequences are particularly serious, the law enforcement authorities may determine the specific amount of the fine based on two to five times the amount of the fine under general circumstances.[5]
e. Add a credit record clause. Operators subject to anti-monopoly administrative penalties will be recorded in credit records in accordance with the relevant provisions of the State and publicized to the public.[6]Enterprises with poor credit records may be adversely affected in applying for administrative licenses and bank loans, enjoying preferential tax and land policies, the frequency of accepting spot checks by administrative authorities and participating in bidding.
2. The penalties for failing to notify a concentration of operators in accordance with the law have been greatly increased.
According to the analysis of the trend of punishment in recent years, anti-monopoly law enforcement agencies have continuously strengthened the enforcement of cases involving failure to notify, including increasing the number and amount of penalties, focusing on warning and deterrence, and effectively strengthening the compliance awareness of market participants. According to the Annual Report on China's Anti-monopoly Law Enforcement over the years, the data in 2021 reached the highest point in history in terms of the number of cases and the amount of penalties punished, and the vast majority of cases were fined the maximum penalties of 500,000 yuan.
Article 58 of the AML (2022) continues this trend of law enforcement by updating the system, substantially increasing the penalties for illegal concentration of operators, and differentiating the penalty standards according to the different circumstances of cases, so as to promote the refinement of law enforcement。 Specifically, in cases of failure to notify that have or may have the effect of excluding or restricting competition, the law enforcement agency may order to suspend the implementation of the concentration, dispose of shares or assets within a time limit, transfer of business within a time limit and the adoption of other necessary measures to restore the state before the concentration, and impose a fine of less than 10% of the sales volume of the previous year. A fine of not more than five million yuan shall be imposed on those cases in which do not have the effect of eliminating or restricting competition.
The New AML greatly increases the cost of illegal acts of operators from the perspective of the amount of penalties, and has the effect of strengthening warning and deterrence for relevant operators. On the other hand, it further enhances and maintains the authority of the examination system of concentration of operators, and guides operators to take the initiative to assess their concentration notification obligations before transaction. If the standards of concentration notification are met, the operators shall notify according to the regulations and reduce the risk of non-compliance.
While the AML (2022) updates the punishment system, there are still some details to be further clarified by the anti-monopoly law enforcement agencies on how to accurately interpret the new system and apply it in practice, for example:
a. For the cases of failure to notify where have or may have the effect of excluding or restricting competition, the specific connotation of "sales volume" is yet to be clarified in the detailed rules or law enforcement cases, for example, whether it is limited to the total domestic sales volume of the operator or extended to the total global sales volume; whether it only considers the sales of relevant products/services in the relevant market or extends to the total sales of the enterprise; whether it only relates to total sales of the operator involved or rising to the sales of the whole group level when it comes to the calculation of penalties.
b. For the cases of failure to notify that do not have the effect of excluding or restricting competition, in the context of the maximum penalty of 5 million yuan, whether there are corresponding considerations for determining the specific amount of punishment, such as whether the market share of operators and the degree of cooperation in the investigation will be taken into account.
3. The transition between the Old AML and New AML--Which law should apply?
As mentioned above, the AML (2022) has significantly increased the legal liabilities. This brings up the question of application: Which law should apply if the violation occurred during the Old AML? To answer that, we will discuss the following scenarios for your reference.
1) If the violation has ended before the New AML takes effect, business operators may claim to apply the Old AML.
Article 37 of the Law of the People's Republic of China on Administrative Penalties (2021 Revision) stipulates the principle that if the violation occurred during previous law, the previous law shall apply unless there is a lighter penalty or no penalty under current law. Therefore, business operators may claim to apply the law effective at the time the violation occurred to avoid harsher penalties of the new law.
We must add here a further note that business operators should always preserve evidence of the conclusion of the violation, such as internal corrective action reports, to better prove to AML enforcement agencies that the relevant violations have indeed ended before the new law.
2) If the violation occurred during the Old AML but continued after the New AML takes effect, business operators may find it difficult to claim to apply the Old AML.
The Ministry of Ecology and Environment of the PRC once consulted the Supreme People's Court (“SPC”) about the application of laws during the transition between previous and current laws. The SPC replied that when “conduct precedes the implementation of the new law,” it means “the end date of the conduct precedes the implementation of the new law.”[7]
That being said, AML enforcement agency have not yet given clear official guidance on how to correctly understand the time point of "occurrence of violation." Based on our past practical experience, we list the following scenarios that may be identified as "continuous violation" by AML enforcement agencies for open discussion:
a. If competitors reached agreements on price fixing, market division or boycott during the Old AML, will the legal representatives, principal responsible persons and directly responsible persons of operators who are personally responsible for the monopoly agreement bear personal responsibility?
b. If a business operator restricted the resale price of downstream distributors during the Old AML, is it still considered illegal and what is the legal responsibility?
c. If a business operator acquired control of the target company through agreements or acquisition of equity, or established a new joint venture during the Old AML, but failed to launch a merger filing and retained control of the target company after the new law, what is the legal liability?
IV. Regulate the Digital Economy, Prohibiting Monopolistic Behaviors Through New Methods
To regulate the platform economy from the anti-monopoly perspective, the AML (2022) stipulates in the chapter of General Provisions that, business operators shall not use data and algorithms, technologies, capital advantages, and platform rules, etc., to engage in monopolistic conduct prohibited by the AML. It is for the first time that rules on the digital economy were directly put into the AML, in addition to the previously published Platform Guideline. In the chapter of the Abuse of Market Dominance, the AML (2022) further provides that, business operators holding dominant market positions are prohibited from using data and algorithms, technologies, and platform rules, etc., to abuse market dominance.
From the perspective of abuse of market dominance, due to the specific competition structure and features of the platform economy, abusive behaviors are often conducted through technical means, which are therefore covert and difficult to recognize. Under the AML (2022), law enforcement agencies may directly use the newly-added rule to regulate these abusive behaviors. From the antitrust compliance perspective, the new rule also sets forth higher requirements for business operators of the platform economy, and behaviors using data and algorithms, technologies, capital advantages and platform rules, might bear more direct antitrust risks. For example,
a. On the video/live broadcasting platform, business operators favor the video producers contracted with their own multi-channel networks ( "MCNs") on the home page of the platform, through the algorithms; or use platform rules to ask video producers to sign with their own MCNs, if they want more traffic and exposure.
b. On the online car-booking platform, business operators use platform rules and algorithms to firstly recommend to end-users their own drivers, instead of third-party drivers; or without any justifications, set unreasonable quantity requirements of the orders allocated by their own platforms for drivers who have contracted with several online car-booking platforms.
c. In the field of search engine, business operators use data and algorithms to firstly displaying advertisements that are placed through their own advertising companies; or without any justifications, place these advertisements more effectively; or by using capital advantages, conduct bundle sales of advertising service and paid search service, etc., at a price lower than the cost of advertising service, but not lower than the overall cost.
The Platform Guideline provides detailed interpretation of the use of data and algorithms, technologies, capital advantages, and platform rules, etc. For example, the Article 6 provides that, business operators of the platform economy with competitive relationship, may use the platform to collect sensitive information, coordinate their behaviors by algorithms, etc. The Article 7 provides that, business operators of the platform economy and their trading counterparts may use algorithms or platform rules to set up the price. The Articles 14 to 17 provide that, abuses of market dominance in the platform economy include limiting the traffic, “pick one from two”, differential treatment by big data. For how to carry out anti-monopoly compliance programs under the Platform Guideline in practice, please kindly refer to the previous articles by us: New trends in antitrust compliance in the platform economy, and Trends in antitrust regulation in the platform economy.
Also, it should be emphasized that in the process of building China’s unified domestic market, the function of platform economy should not be underestimated. The AML enforcement undoubtedly needs to be carried out in accordance with the rule of law, which necessitates temper justice with mercy. The AML is by no means a “one-size-fits-all” restriction on business operators of the platform economy. The draft version of the amendment to the AML then stipulated that, business operators shall not abuse data and algorithms, technologies, capital advantages, and platform rules, etc., to exclude or restrict competition. It remained controversial on the interpretation of “abuse” in the draft article. However, the official AML (2022) has revised the article into-“Business operators shall not use data and algorithms, technologies, capital advantages, and platform rules, etc., to engage in monopolistic conduct prohibited by the AML”. The official version is more clearly to business operators, clarifying that the “abuse” in the draft article still refers to monopolistic conduct specifically prohibited by the AML.
V. Organizers of Monopoly Agreements may Bear Liabilities
1. Establish a legal basis for monitoring organizers and facilitators of monopoly agreements
The Article 19 of the AML (2022) provides that, business operators shall not organize others, or provide substantive assistance for others, to reach monopoly agreements. Under the AML (2008), the Articles 13 and 14 only set forth rules for law enforcement agencies to regulate business operators with competitive relationship, and their trading counterparts. The AML (2022) lists individually organizing others to reach monopoly agreements, or providing substantive assistance as an unlawful act, thereby establishing a legal basis for law enforcement agencies to monitor such behaviors.
2. Possible application scenarios
The Article 19 of the AML (2022) does not further define “organizers” and business operators that “provide substantial assistance”. According to practical experience, the rule may regulate the business operator serving as the “hub” in the hub-and-spoke agreement, and the management platform of the cartel, etc.
(1) Hub-and-spoke agreement
Unlike horizontal and vertical monopoly agreements, which exist only among business operators with competitive relationship, or in different levels of the same supply chain, business operators in the hub-and-spoke agreement will act like the hub and spokes of a bicycle. The business operator serving as the “hub” may enter into vertical agreements with multiple business operators serving as “spokes”, and the latter will then reach the de facto horizontal agreement, under the assistance of the “hub”, which may exclude or restrict market competition. Therefore, according to the Article 19 of the AML (2022), the business operator serving as the “hub” in the hub-and-spoke agreement will also bear responsibilities.
(2) Management platform of the Cartel
Cartel is inherently unstable. It needs to have a self-correcting mechanism in order to operate for long. A stable cartel requires its members reach an agreement on production and sales (such as price, quantity, market division, etc.) and are bound by such agreement. In view of the instability of cartels, business operators with an attempt to collusion often coordinate, manage and monitor the production and sales of the members of the cartel through a management platform. Therefore, the management platform may as well be recognized by law enforcement agencies as the business operator that “provide substantive assistance for others to reach monopoly agreements”, and regulated by the Article 19 of the AML (2022).
VI. Establish the Fair Competition Review Mechanism in the AML, Aiming at Breaking up Regional Restrictions
1. Fair competition review
The impact of monopoly behaviors by business operators may be controversial in different economic theories. However, administrative monopolies are always considered to damage market competition. The fair competition review is an anti-monopoly review of policy measures by administrative departments and organizations authorized by laws and regulations with the function of managing public affairs. When a policy-making organ formulates policy measures involving economic activities of market entities, a fair competition review is required to assess the impact of relevant policy measures on market competition. If the policy measures have the effect of excluding or restricting competition and do not qualify for the exception provisions, they will not be implemented, or have to be modified until it complies with relevant requirements. As an ex ante review mechanism, fair competition review is essential to prevent administrative monopolies.
The fair competition review mechanism in China was firstly introduced through the Opinions on Establishing a Fair Competition Review Mechanism in the Development of Market System (the “Opinions”) in 2016. The SAMR further published Rules for the Implementation of the Fair Competition Review Mechanism (Interim), and some local regulatory authorities successively issued relevant guidance, in order to standardize the review process and effectively promote the mechanism. In addition, fair competition review plays an important role in “accelerating the establishment of a unified domestic market and smoothing domestic circulation”. The purpose of building a unified domestic market is to strengthen the circulation of commodity factors and resources across the country, which thereby requires the elimination of regional protection policies and the regulation of improper market intervention. At present, the unified national market is still under construction. The standards, market entry thresholds and rules of different regions vary, which create artificial barriers to the domestic circulation and making it difficult for enterprises to fairly compete in different regional markets.[8] The preventive fair competition review mechanism could reduce most of administrative monopolies from budding, which contributes to break up local protection and market segmentation.[9] The AML (2022) stipulates in the chapter of General Provisions that, the State shall establish and improve the fair competition review mechanism, and clarifies the application scope, i.e., administrative departments or organizations authorized by laws or regulations to perform the function of administering public affairs, shall conduct fair competition reviews when formulating regulations involving the economic activities of market entities. It is for the first time that the AML established the fair competition review mechanism in its text, which echoes with the current fair competition review regulations and rules. The Implementing Rules for the Fair Competition Review Mechanism published in 2021 set forth detailed rules on the review authority, review mechanism and procedures, review standards, etc. For more details, please kindly refer to the article by us: How to break up administrative monopolies?
Please see below the flow chart of procedures of the fair competition review mechanism[10].
2. Impact of the EU White Paper
The government’s preferential policy and financial support to enterprises are the focus of fair competition review, especially some of case-by-case policy measures may directly target specific enterprises, bringing them unfair competitive advantages.
Fair competition review is not limited to domestic market. The European Commission began to exert “long-arm jurisdiction” on foreign government subsidies from competition law perspective a few years ago. In 2020, the European Commission released the White Paper on levelling the playing field as regards foreign subsidies (the “White Paper”), which establishing a framework for the review of government subsidies in non-EU countries (see our previous article: Introduction and Analysis of the White Paper-Challenges to Acquire and Invest in EU Companies). Following the White Paper, the European Commission proposed a new Regulation on Foreign Subsidies Distorting the Internal Market (the “Foreign Subsidies Regulation”) in May, 2021, which aims at identifying and eliminating market distortions caused by foreign subsidies in acquisitions, public procurement procedures, and other market situations, so as to restore a level playing field in the EU internal market. According to the Foreign Subsidies Regulation, subsidies may be considered as “foreign subsidies” if they are directly or indirectly provided by the government of a third country and give the enterprise a competitive advantage in the EU market, and the subsidies are only for specific enterprises/industries.
For non-EU enterprises receiving “foreign subsidies”, if they engage in mergers and acquisitions in EU countries, or conduct business or participate in government bidding in EU countries, they will be subject to relevant notification requirements, and the European Commission will have the power to investigate, or impose prohibition on transactions, or require these foreign enterprises to take remedial measures.
With more domestic enterprises “going to sea”, if the European Commission enacts the Foreign Subsidies Regulation, Chinese government’s policy support for enterprises out of goodwill may become the “obstacles” of these enterprises when going abroad. Although there is still some time before the Foreign Subsidies Regulation comes into effect, in order not to create barriers for enterprises to “go to sea”, Chinese administrative departments and other policy-making organs should consider to take a more neutral attitude when formulating relevant policies.
Conclusion
The amendment to the AML closely follows the reforms and development of China. During the course of the enforcement of AML for more than ten years, all sectors of society have raised a large number of questions, many of which may have not yet been fully solved in this amendment. We believe that, with the accompanied regulations and rules being released in the near future, we will see more clarity in terms of how the AML (2022) may shape the antitrust jurisprudence in China.
Thanks to Zhao Feiyan for her contributions to this article.
Press conference by the spokesperson of the Legislative Affairs Commission of the Standing Committee of the National People's Congress on June 16, 2022. Please refer to the https://mp.weixin.qq.com/s/HqGyBVzHXmmwvPV0k7HUTA.
Article 56 of the Anti-monopoly Law (2022)
Article 58 of the Anti-monopoly Law (2022)
Article 62 of the Anti-monopoly Law (2022)
Article 63 of the Anti-monopoly Law (2022)
Article 64 of the Anti-monopoly Law (2022)
Opinions of the Ministry of Ecology and Environment on Issues of Coordinating the Application of Old and New Regulations on Administrative Penalties against Illegal Acts of “Putting Construction Projects into Production before Inspection and Acceptance”
See: Accelerating the Establishment of a Unified Domestic Market and Smoothing Domestic Circulation, sourced from the official website of the NDRC; the link: https://www.ndrc.gov.cn/wsdwhfz/202204/t20220422_1322696.html?code=&state=123.
See: Zhang Guangyuan, Fair Competition Review and Construction of a Unified Domestic Market, Price Theory and Practice, dated June 22, 2022.
See: the Annex I “Basic Procedures of the Fair Competition Review Mechanism” of the Implementing Rules for the Fair Competition Review Mechanism.
