The number of cartel cases reached a peak in 2018. The SAMR and local agencies concluded and published 13 cartel cases in 2018. The investigation and penalties targeted industries including manufacturing, training, shipping and ports, architecture, gas, medical, furniture, engineering testing, fireworks, etc. However, the amount of fines imposed by the SAMR was relatively low compared with that of previous years. The most significant case was the Tianjin Storage Yard cartel case, in which 17 enterprises were imposed a total fine of 45 million yuan. In addition, the identification of competitors was further clarified by the SAMR in the Shenzhen tally companies case. Also, trade associations remained one of the focuses in the antimonopoly law enforcement by the SAMR. Trade associations were involved in five out of the 13 cartel cases.i Significant casesShenzhen tally companies case
On 20 July 2018, the SAMR published a decision fining two Shenzhen tally companies a total of 3,163,108 yuan for entering into a horizontal monopoly agreement. According to the decision, China United Tally Shenzhen and China Ocean Shipping Tally Shenzhen reached and implemented an agreement to divide sales and service areas for the tallying market in the western area of the Port of Shenzhen. In addition, the two companies raised tallying prices from May 2013 to August 2016.
The notable feature of this case lays in the identification of the companies as independent competitors, for the two companies share the same shareholder, who owns a 50 per cent share in the two companies respectively. First, the SAMR found that the companies' ownership structures did not negate their competitive relationship. Although the shareholder owned a 50 per cent interest in both companies, it performed different roles for each. The shareholder was the controlling shareholder in one tallying company while it did not hold a controlling position in the other tallying company. Second, the SAMR found that the two companies had been independently operated and managed. In addition, the SAMR relied on the companies' articles of association and inquiry records of relevant staff to prove that there had been a competitive relationship between the two tallying companies. However, such detailed information was not disclosed in the SAMR's decision.
During the investigation, the two companies argued that they were not competitors since they were both affiliates within the same group. However, the SAMR dismissed this argument for a number of reasons. It noted that according to the relevant provision regulating port management issued by the State Council and the Ministry of Transport: (1) port tally companies should introduce a competition mechanism to the market; and (2) any two tally companies in one port cannot be controlled by the same investment entity.
It seems that the SAMR adopts a strict view on the identification of competitors. Normally, if one shareholder owns 50 per cent of the shares respectively in two companies, the two companies will be regarded as jointly controlled by the same shareholder (i.e., the same entity). Moreover, the fact that two companies are actually competing with each other does not necessarily mean that they constitute competitors in the sense of the Anti-monopoly Law, for the reason that different subsidiaries in the same group can also compete with each other.
This is one of the first cases to be announced by the newly established SAMR and may therefore indicate its attitude towards certain industries and behaviours. In particular, the way in which the competitors in this case were identified could raise new compliance challenges for companies operating business in China.Tianjin Storage Yard cartel case
On 16 November 2018, Tianjin Development and Reform Commission concluded the most high-profile cartel case of the year in terms of the total amount of penalties. A total of 17 port logistics companies were accused of reaching and implementing price collusion in connection with general surcharges and unloading charges in Tianjin port. The 17 port logistics companies were fined a total of 45 million yuan.
The SAMR's probe into this case was triggered by a voluntary self-reporter – Tianjin Waidai Logistic, which was eventually exempted from punishment by virtue of the leniency programme.
According to the penalty decision, from 2010, the port logistics companies had discussed the price of general surcharges and unloading charges in Tianjin port by means of signing proposals, holding meetings, and exchanging emails and telephone discussions. Particularly, these logistics companies reached many proposals on fixing the price of general surcharges and unloading charges in December 2010, April 2011, March 2012 and December 2012. In this way, these logistics port companies formed a relatively stable price alliance with each other.
According to the evidence, the involved companies collectively increased the price of general surcharges and unloading charges several times. The duration and degree of such price rises were basically the same as those agreed in the monopoly agreements. The SAMR concluded that the evidence showed that the involved enterprises reached and implemented the horizontal monopoly agreement, which violated Article 13 of the Anti-monopoly Law.
As to the penalties, considering the responsive cooperation, rectification made by the companies involved, along with the nature, extent and duration of the illegal behaviours, the SAMR imposed fines amounting to 2 to 5 per cent of their respective revenues in 2017. However, the first reporter that voluntarily disclosed its collusion to the SAMR enjoyed the benefits of the leniency programme – being exempted from penalties.
In recent years, the antitrust authorities have paid great attention to the shipping and port industry. In late 2016, the NDRC launched investigations into container shipping companies for suspected price fixing. A total of 18 shipping companies voluntarily reduced their terminal handling charges following the NDRC's probe. Before that, the NDRC cracked down on international ocean shipping companies in 2014. Furthermore, in 2018 the SAMR remained its concerns on the shipping and port industry and concluded three cases in this industry. The anti-monopoly enforcement authorities will keep an eye on this industry and regulate the anticompetitive behaviours as well as the disorder phenomenon in the coming year.ii Trends, developments and strategies
2018 saw a significant increase in the number of cartel cases. However, the total amount of penalties was relatively low. Trade association remains the target of antitrust agencies. Five of the 13 cases involved trade associations. For example, Zhongshan Gas Trade Association was fined 150,000 yuan by Guangdong Provincial Development and Reform Commission for organising its members to conduct market segmentation and Beihai Driver Training Association was fined 250,000 yuan for organising its members to reach and implement price collusion agreements. Trade associations are self-regulatory agencies that provide industry services, of which members are usually 'peer' competitors that share a fierce competitive relationship. Industry associations cannot organise their members to reach and implement horizontal monopoly agreements even though industry associations may be exploited by some leading members on occasion.
Moreover, the SAMR holds a strict view in cartel cases, particularly on the identification of competitors. Two companies in the same industry with their 50 per cent shares respectively owned by the same shareholder may still be regarded as competitors. When enterprises assess whether their affiliates could be identified as competing parties, the equity structure should not be the only consideration. The actual operating situation ( the decision power, the board of directors and the concurrent of senior executives, etc.) should also be considered.iii Outlook
The supervision and investigation of cartel cases remains the focus of the antitrust authorities. It is expected that in 2019 the SAMR and local agencies will reinforce their supervision on cartel and enforcement efforts so as to uphold fair market competition. According to the Interim Provisions on Administrative Penalty Procedures of the SAMR promulgated in 2018, the provincial level Administrations for Market Regulation (AMRs) will be responsible for enforcing the antimonopoly law in their respective province. However, the SAMR may take over the antitrust probe from local AMRs when it comes to high-profile cases. At the same time, the authorities will strengthen their cooperation with competition authorities from other jurisdictions in dealing with international cartel cases.
Moreover, the SAMR published the Rules on Prohibition of Monopoly Agreements for public consultation on 3 January 2019. The formal rules are expected to be published in 2019. The guidelines may provide enterprises with a more comprehensive and clearer guidance on antimonopoly compliance.