The State Administration for Industry and Commerce (“SAIC”), the regulatory authority in charge of enforcement against non-price related monopoly activities, has announced last week its decision to fine Swedish packaging company, Tetra Pak International S.A. and its five Chinese subsidiaries (“Tetra Pak”) for abuse of its dominant position. The penalty is RMB 667,724,176.88 (approximately EUR 91 million). Tetra Pak do not intend to appeal.
It was ruled that Tetra Pak violated articles 17.4, 17.5, and 17.7 of the PRC Anti-Monopoly Law (“AML”) based on the following reasons:
- With its dominant position in the liquid food aseptic carton packaging material market, Tetra Pak restricted its raw material suppliers from providing paper to its competitors. Such conduct violated Article 17.4 of the AML as it restricted trading counterparts’ abilities to trade with anyone else except for Tetra Pak and the operator appointed by Tetra Pak, without justification;
- Using its dominant position in the liquid food aseptic carton packaging and technical services market, Tetra Pak conducted tie-in sales of its package materials during the provision of equipment and technical services. Such conduct violated Article 17.5 of the AML because the tie-in sales had no justification and were unreasonable conditions to the trading;
- By adopting loyalty discounts schemes, such as cumulative sales volume discounts and personalised purchase volume target discounts, Tetra Pak prevented fair competition in the packaging material market, and so violated Article 17.7 of the AML, i.e. other practices determined by the AML enforcement authorities to be abuse of dominant market position.
The Tetra Pak investigation was initiated by SAIC in January 2012 following a filed complaint. SAIC found that between 2009 and 2013, Tetra Pak held a dominant position in the liquid food aseptic carton packaging equipment market, aseptic carton packaging technology service market and aseptic carton packaging material market. The final judgement was made after over four years of comprehensive investigation, which included dawn raids, onsite investigation, interviews and market surveys, which provoked much media coverage and interest. This is not Tetra Pak’s first antitrust penalty. In 1991 they were fined EUR 75 million by the European Commission for abuse of its dominant position in the then European Community market for packaging machinery and cartons.
This is the first abuse of a dominant position penalty imposed by SAIC, and also the first loyalty discounts related case in China. It demonstrates the Chinese authorities’ determination to enforce the AML, as well as an increased professional attitude taken to the investigation of AML offences. Multinational companies with large market shares should pay close attention to the rapid development of anti-monopoly enforcement in China, and prepare for the coming challenges.