For the past two years, the State Administration for Industry and Commerce (SAIC) has exercised its law enforcement powers in a controlled manner. This contrasts with the National Development and Reform Commission, which has frequently issued heavy antitrust fines and undertaken convoluted antitrust enforcement actions. With the exceptions of the Microsoft and Tetra Pak cases, the SAIC's cases have garnered little attention.
According to SAIC official Zhao Guobin, who addressed the subject at a recent antitrust seminar,(1) as of October 2015 the SAIC had authorised local commerce and industry administrations to undertake 57 cases, of which 23 had been closed and four had been suspended. In those cases, the entities were punished for monopolistic conduct that violated the Anti-monopoly Law and related regulations. While more than half involved monopoly agreements, the percentage of cases involving an abuse of dominant market position had gradually increased.
On October 13 2015 the Anhui Administration for Industry and Commerce (AIC) published a case in which the party was fined for failing to cooperate with its investigation.(2) This is the first case to be published by an antitrust law enforcement agency that involved a penalty for failing to cooperate with an investigation.
Sunyard System Engineering is incorporated in Hangzhou. Its principal business activities are financial software development and consulting. Authorised by the SAIC, the Anhui AIC initiated an investigation into Sunyard's suspected monopolistic behaviour on February 5 2015.
The Anhui AIC issued an investigation notice to Sunyard on June 18 2015, requesting that it actively cooperate with it within 10 working days. To do so, Sunyard had to submit relevant agreements, transaction documents, accounting books, business correspondence letters, electronic data and other related documents. However, Sunyard failed to submit any of the requested materials to the Anhui AIC by the deadline. On July 8 2015 the Anhui AIC sent another notice requiring the materials within three working days. Once again, Sunyard did not respond or provide any of the relevant materials. Instead, it provided a rebuttal letter opposing the Anhui AIC's allegations the day after the three working days had ended. According to the Anhui AIC's September 18 2015 decision, Sunyard's behaviour constituted a refusal to provide materials for the investigation. After receiving the Anhui AIC's investigation notice, Sunyard had failed to provide relevant materials and refused to offer relevant materials after the Anhui AIC's warning. This refusal constituted a violation of the Anti-monopoly Law. The Anhui AIC fined Sunyard Rmb200,000 and ordered it to take remedial action.
Article 42 of the Anti-monopoly Law specifies that all interested parties – whether the undertakings under investigation or other relevant organisations – must cooperate with the authority to enforce the Anti-monopoly Law and must not refuse to submit documents or otherwise hinder the investigation. In addition, Article 14 of the Provisions on the Procedures of the Administration for Industry and Commerce to Investigate Cases Concerning Monopoly Agreements and Abuses of Dominant Market Positions states that the following behaviour may be deemed as refusing or hindering the investigation and is punishable in accordance with Article 52 of the Anti-monopoly Law:
- refusal to provide materials;
- failure to provide all of the requested materials; and
- failure to provide materials before the deadline.
Article 52 also stipulates the measures that may be taken if an undertaking or individual that is subject to review:
- refuses to provide relevant materials or information;
- provides false materials or information;
- conceals, destroys or transfers evidence; or
- obstructs the investigation in any other manner.
The authority for enforcement of the Anti-monopoly Law shall instruct the undertaking or individual to rectify the conduct and may impose a fine. The fine shall not exceed Rmb20,000 for individuals or Rmb200,000 for undertakings. If the circumstances are serious, a fine of between Rmb20,000 and Rmb100,000 shall be imposed on the individual, or between Rmb200,000 and Rmb1 million on the undertaking. If the conduct is criminal, criminal liability shall be investigated and prosecuted in accordance with the law.
Obligations to cooperate with investigations, as prescribed in Article 42 of the Anti-monopoly Law, extend beyond direct suspects to related enterprises such as upstream and downstream trading parties of the alleged violators and even third parties that may possess case-related information. For example, after Microsoft was suspected of having abused its dominant market position, the SAIC raided its outsourcing service company, Accenture. Therefore, any enterprise or individual that receives a notice from an Anti-monopoly Law enforcement authority must cooperate with the investigation in a timely manner by promptly and truthfully providing information in response to the request. Sunyard disregarded the notice of investigation from the Anhui AIC and failed to cooperate with the investigation even after several notices from the Anhui AIC. Such behaviour is considered to be passive resistance, which nonetheless violates the obligations prescribed in Article 42 of the Anti-monopoly Law and Article 14 of the procedure provisions for monopoly cases. The Anhui AIC demonstrated its determination to strengthen the enforcement of the law through its prompt and decisive penalty issued against Sunyard in accordance with Article 52 of the Anti-monopoly Law.
This is the first penalty case published by the Anhui AIC that concerns an enterprise's failure to cooperate with an investigation conducted by an antitrust law enforcement authority. As such, it is meant to act as a deterrent. Everybody is obliged to cooperate honestly and faithfully with antitrust investigations – either as the direct subjects of such an investigation or merely as a relevant party called on to assist the investigation – and the consequences of doing otherwise are serious. In addition, according to the relevant laws and regulations, punishment may extend beyond the enterprise level to individuals who fail to cooperate with the investigation. In serious cases, a fine of up to Rmb100,000 may be imposed on individuals and up to Rmb1 million on enterprises. Although the Criminal Law and the Anti-monopoly Law include no provisions on criminal liability for monopolistic behaviour, obstructing an Anti-monopoly Law investigation may constitute a crime and the obstructing party may be held criminally responsible if it refuses to cooperate with an antitrust investigation in a deliberate manner. The investigated enterprise can advocate on its own behalf in accordance with the law during the investigation process, but such defence does not replace the obligation to supply information. Further, the party cannot passively resist the investigation requests of antitrust law enforcement agencies. Enterprises refusing to supply information may be punished for negligently failing to comply with the investigation procedure, even if their behaviour is not ultimately designated as monopolistic in character. Besides, if it is determined that the investigated enterprise engaged in monopolistic conduct, the antitrust enforcement authority will usually consider whether it actively cooperated with the investigation when determining the level of punishment.
The penalty decision reflects how much antitrust agencies value the investigation procedure. By punishing uncooperative enterprises, authorities effectively safeguard the integrity of law enforcement and strengthen enforcement efforts. Relevant undertakings must be substantively familiar with the antitrust laws and regulations. They must conduct internal antitrust risk inspections and ensure that their business activities comply with requirements under the Anti-monopoly Law. They must also:
- familiarise themselves with antitrust investigation procedures;
- observe statutory procedural obligations;
- actively cooperate with investigations;
- submit relevant materials and evidence; and
- safeguard their legitimate rights and interests, even while complying with enforcement agency requests.
When faced with an investigation (especially a raid), undertakings should respond calmly and avoid carelessness. An enterprise under investigation can communicate with law enforcement officers and present its arguments and defences as to why and how its behaviour does not constitute a monopoly. However, in the course of this advocacy, an enterprise must not neglect its obligation to submit materials.
The SAIC's serious approach towards its enforcement measures is welcome. Nevertheless, the SAIC and the National Development and Reform Commission should consider publishing more detailed procedural rules or guidelines for antitrust investigations to enhance further the transparency of investigations and law enforcement and help enterprises to understand their rights and obligations in the investigation process. Straightforward guidance will improve compliance with law enforcement.
For further information on this topic please contact Michael Gu or Sun Sihui at AnJie Law Firm by telephone (+86 10 8567 5988) or email (email@example.com or firstname.lastname@example.org). The AnJie Law Firm website can be accessed at www.anjielaw.com.
(2) The original punishment decision is available at www.ahaic.gov.cn/art/2015/10/13/art_503_41542.html.
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