By: Cheng Liu、Audrey Li、Lushen Hong、Nicholas Torres、Qunfei Zhu、Jingru Yang、Mengzhen Wang、Hongtao Ye
2020 was a year clouded by COVID-19 and world trade tensions, which have certainly reshaped everyone’s life. Despite the disruption, the Chinese government articulated its intent for the future of antitrust in China.
Legislation: 2020 appeared to be the most active year in history:
The draft amendments of the Anti-Monopoly Law (“Draft Amendments to the AML”) were announced for public consultation in early 2020, and have been identified as one of China’s key legislative task for 2021.
The long-awaited guidelines, i.e. the Anti-monopoly Guidelines for Automobile Industry ("Automobile Industry Guidelines"), the Anti-monopoly Guidelines for Intellectual Property Rights ("IP Guidelines"), the Guidelines for Application of the Leniency Regime to Cases of Horizontal Monopoly Agreements ("Leniency Guidelines"), and the Guidelines on Commitments Made by Undertakings in Antitrust Cases ("Commitments Guidelines") were publicly released;
The Antitrust Guidelines for the Platform Economic Industry (draft for comments) ("Platform Guidelines") and the Antitrust Guidelines for Active Pharmaceutical Ingredients (draft for comments) ("API Guidelines") were publicly released for comments. The Internet industry and pharmaceutical industry will continue to be enforcement priorities;
Consolidation of previously issued regulations/provisions continued. The Interim Provisions on the Review of Concentration of Undertakings and the Provisions on Prohibition of Abuse of Intellectual Property Rights to Exclude and Restrict Competition (“Provisions on Abuse of IPs”) were promulgated and became effective in 2020;
In addition, State Administration for Market Regulation (“SAMR”) and its local counterparts issued antitrust compliance guidelines for companies to establish sound compliance systems. SAMR has also issued the Guidelines for Undertakings' Overseas Antitrust Compliance (draft for comments) to emphasize the importance for compliance of antitrust rules in other jurisdictions.
Enforcement: Merger control review and antitrust investigations in China were conducted in an efficient manner:
Unlike its peers in some other jurisdictions, which adopted a “stop-the-clock mechanism” in responding to the COVID-19 impact, SAMR introduced the“e-filing” system in the early stage of the pandemic, which improved the efficiency of its merger control review. In 2020, SAMR concluded 473 cases in total, among which 4 transactions were cleared conditionally. SAMR also adopted a hard stance against gun-jumping by punishing parties in 13 cases.
Regarding the investigations towards anti-competitive conduct, the Chinese authorities have published penalty decisions to a record high of 20 cases (administrative monopoly conducts excluded), among which 13 cases were related to horizontal agreements, 7 cases were related to abuse of dominant market positions. In the beginning of 2021, SAMR published another pharmaceutical company for refusal to deal. In addition, 2 investigations in 2020, 1 related to vertical agreement and 1 related to abuse of dominance, were terminated based on the parties’ fulfilling commitments.
Litigation: Private actions are becoming an effective tool for companies to achieve their commercial goals:
The dynamics between judicial proceedings and law enforcement are evolving. In 2020, we witnessed the first domestic follow-up litigation raised from international antitrust investigation and appeals against administrative decisions continue;
Regarding the Internet industry, the Supreme People's Court called for strengthening judicial scrutiny on antitrust; some provincial People's Congress authorized its local Public Prosecutor’s Office to conduct public interest litigation in relation to anti-competitive conduct and personal information infringement. In 2020, a number of antitrust litigations between Internet companies have emerged, and developments within these litigations will be particularly noteworthy.
At the beginning of 2021, Chinese authorities have re-emphasized the “strengthening of antitrust law enforcement.” In this article, we will review China's antitrust regime in 2020, summarize noteworthy highlights and predict the trend of China’s antitrust law developments from the following eight aspects:
I. More Frequent Enforcement based on Industry Characteristics;
II. Closer Scrutiny on the Internet Sector;
III. More Guidance for Antitrust Disputes involving Intellectual Property Rights;
IV. Detailed Procedural Rules During Antitrust Enforcement;
V. VIE Structures Required to File and Hard-Stance towards Gun-jumping;
VI. Conglomerate Mergers and Behavioral Remedies;
VII. Evolving Dynamics Between the Private Actions and Administrative Enforcement;
VIII. Increased Penalties for Antitrust Violations.
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Authors of this article: Cheng LIU (partner) Audrey LI (senior associate), Lushen HONG (lead associate) and associates Qunfei ZHU, Nicholas TORRES, Jingru YANG, Mengzhen WANG, Hongtao YE of King & Wood Mallesons. Statistics in this article are updated as of January 31, 2021. For details, see a speech of the spokesperson for the Legislative Affairs Commission of the NPC Standing Committee, located at https://www.sohu.com/a/439535076_115479.
On January 28, 2021, SAMR published its fail-–to-file decision regarding Xinjiang Xuefeng’s acquisition of Yuxiang huyang. Its decision was actually made on December 30, 2020.
According to the 2019 Annual Report of Antitrust Enforcement in China, in year 2018, SAMR and local antitrust enforcement authorities closed 16 cases of anti-competitive conducts (administrative monopoly conducts excluded); and for 2019, 16 cases as well.
In addition, according to the annual work review published by SAMR, the Chinese antitrust authorities concluded 108 cases in relation to anti-competitive conducts. See http://www.samr.gov.cn/xw/zj/202102/t20210205_325918.html. We understand that some of the 108 cases may involve administrative monopolies, which have not publicly released their decisions.
See The Supreme People's Court Proposes to Strengthen Judicial Scrutiny on Antitrust and Unfair Competition Regulation, located at http://www.xinhuanet.com/legal/2021-01/11/c_1126968393.htm.
See Supreme People's Procuratorate: Procuratorial Organs Authorized by 18 Provincial People's Congress to Explore Public Interest Litigation in the Internet Sector, located at https://www.spp.gov.cn/spp/zdgz/202101/t20210125_507510.shtml.
See Another Antitrust Signal Issued by the CPC Central Committee! The Political and Legal Working Conference requires the Strengthening of Competition Law Enforcement and Judicial Administration, located at http://cinic.org.cn/xw/zcdt/1014342.html?from=singlemessage.