I. New Antitrust Compliance Guidelines
Nearly four years following the issuance of the Anti-Monopoly Compliance Guidelines for Undertakings (“Compliance Guidielines”) on 11 September 2020, the Anti-Monopoly and Anti-Unfair Competition Commission of the State Council released a significantly revised version of the guidelines on 26 April 2024. This updated Compliance Guidelines respond to the evolving requirements of enforcing the new Anti-Monolopy Law amended in 2022, cultivating a fair competitive market, and promoting high-quality development among businesses.
The newly revised Compliance Guidelines expand from 30 to 41 articles across six chapters, marking a significant enhancement in both scope and detail. This revision provides comprehensive guidance for businesses on several fronts, including compliance management organization, risk management, and operational safeguards. Notably, a new chapter on "Compliance Incentives" has been added to enhance the motivation for undertakings to develop antitrust compliance initiatives. Furthermore, 22 new scenario-based examples have been included to aid undertakings in understanding and implementing the compliance programs effectively.
II. Compliance Incentives: Viewing Compliance as an Investment Rather than a Cost
A major highlight of the new Compliance Guidelines is the addition of a dedicated chapter on compliance incentives, clarifying that undertakings (including those outside China) can apply for such incentives. Chapter Five of the guidelines stipulates that antitrust enforcement agencies may consider the establishment and implementation of an undertaking's antitrust compliance program when investigating and penalizing monopolistic practices. It outlines four scenarios where compliance incentives may be applied, including incentives before investigation, within the commitment system, under leniency programs, and within the discretionary range of fines.
A. Compliance Incentives Prior to Investigation
If an undertaking has ceased suspected monopolistic practices before an investigation is opened by the anti-monopoly enforcement authorities, and if these practices are minor and have not caused competitive harm, the antitrust authority may consider the establishment and implementation of the undertaking’s antitrust compliance program as a factor in determining whether the undertaking has made timely corrections. According to Article 33 of the Administrative Penalty Law, the authority may exercise discretion to forego administrative penalties.
B. Compliance Incentives under the Commitment Procedure
If an undertakings commits to taking specific measures within a timeframe approved by the anti-monolopy enforcement authority to eliminate the effects of suspected monopolistic practices, the authority may consider the implementation of the undertakings's antitrust compliance program as a factor in deciding whether to suspend the investigation. Also, if the antitrust compliance program function well during the period of suspension of the investigation, the authority will finally terminate or close the investigation.
C. Compliance Incentives within the Leniency Program
When an undertaking proactively reports its involvement in a monopoly agreement and supplies crucial evidence to the antitrust authorities, and can demonstrate that it has actively developed or enhanced its antitrust compliance program to effectively mitigate or eliminate the outcomes of unlawful activities, the authorities may grant significant leniency within the allowed discretionary limits.
D. Compliance Incentives within the Scope of Fine Discretion
If an undertaking actively establishes or improves its antitrust compliance program before an administrative penalty is determined by the antitrust authorities, and this system significantly contributes to reducing or eliminating the repercussions of the illegal activities, the authorities may opt to reduce or lighten the administrative penalties in accordance with Article 59 of the Anti-Monopoly Law and Article 32 of the Administrative Penalty Law.
The implementation of a compliance incentive system reinforces the notion that for undertakings, compliance is not a “cost” but an “investment”. A robust and effective antitrust compliance program not only helps undertakings avert antitrust risks proactively but can also significantly reduce legal liabilities, such as substantial fines, when antitrust risks spiral out of control.
III. Compliance Management: Clear Responsibilities for Effective Operation
A common challenge in corporate compliance is the misalignment of coordination across various internal departments, often causing well-drafted policies to fail in practical application. To tackle this issue, the Compliance Guidelines clearly outline the responsibilities of various departments and establish mechanisms for operation and oversight, thus crafting an effective framework for collaborative compliance efforts across the company.
Chapter 2 of the Compliance Guidelines directs undertakings on structuring their compliance management organizations, detailing the roles and responsibilities of compliance governance bodies, compliance officers, lead compliance departments, as well as the responsibilities of business and functional departments.
Chapter 3 specifically notes that undertakings may conduct regular risk assessments tailored to the compliance risk variations across different roles, and provide intensified risk alerts for individuals at higher risk. High-risk personnel typically include legal representatives, senior management, and members of key business departments privy to competitively sensitive information or those who might interact with competing firms or entities along the supply chain. Generally, the main business departments involved are those in charge of sales, procurement, pricing and commercial policy development, mergers and acquisitions management, sales network management, and industry association liaison activities.
Chapter 4 of outlines a range of safeguards including compliance reviews, consultations, reporting, training, commitments and guarantees, rewards and disciplinary measures, supervision, management evaluations and improvements, and the development of information systems. These mechanisms are strategically designed to support the effective implementation of compliance management systems within undertakings.
IV. Risk Identification: Practical Scenario-Based Cases
Chapter 3 of the Compliance Guidelines elaborates on the key risks associated with antitrust compliance management for businesses, including the identification of compliance risks related to monopoly agreements, abuse of market dominance, merger control, and administrative monopoly. Notably, the Compliance Guidelines provides 22 scenario-based reference examples to help undertakings grasp the more principled and technical content within the guidelines. These examples are closely aligned with the best practices of compliance, providing businesses with practical templates and clear directives that can be directly implemented and applied.
V. Summary and Outlook
The 2022 amendments to the Anti-Monopoly Law significantly increased corporate liabilities and made legal representatives and senior executives liable for violations. Moreover, the antitrust public enforcement in China has become more regular, with substantial fines becoming a common occurrence. Consequently, managing antitrust compliance has become crucial for businesses to mitigate compliance risks and ensure sustainable growth. With the release of the new Compliance Guidelines, especially the introduction of a compliance incentive system, it's imperative for companies to embrace the idea that compliance is an investment rather than a cost. Businesses must rapidly establish and enhance their antitrust compliance frameworks to align with the evolving enforcement landscape and avoid being unprepared for antitrust scrutiny.
