On May 25, 2010, the State Administration of Industry and Commerce (“SAIC”) issued the draft Provisions on Prohibition of Abuse of Dominant Market Position (the “Draft Provisions”). The Draft Provisions, together with the draft Anti-Price Monopoly Provisions issued by the National Development and Reform Commission in August 2009 (the “NDRC Draft Provisions”), when issued in final form, will constitute a complete set of implementing rules for Chapter III of the Antimonopoly Law (“AML”).

The AML prohibits the following acts conducted by an operator with dominant position: (i) selling or purchasing products at unfair prices; (ii) selling products below cost without justifiable reasons; (iii) refusal to trade without justifiable reasons; (iv) restricting others to exclusively trade with it or other operators designated by it without justifiable reasons; (v) tying products or imposing other unreasonable conditions without justifiable reasons; and (iv) applying different treatments in price or other conditions without justifiable reasons. While the NDRC Draft Provisions focus on regulating those acts in connection with pricing under (i), (ii) and (vi), the Draft Provisions focus on acts of abuse by means of (iii) – (v) and using different treatments unrelated to pricing under (vi). These provisions set forth useful protocols for an operator that may be recognized as having a dominant position.

Apart from the per se violations under (i), all the other acts of abuse of dominant position under the AML are violations only if no justifiable reasons can be substantiated. The Draft Provisions provide that, when determining whether there is a justifiable reason, the following factors should be considered: whether the act has been conducted according to commercial customary practices, ordinary course of business and ordinary interests; whether the act exerts any adverse effects on market competition and consumer interests; and whether the act has any negative impact on economic efficiency and common interests. The Draft Provisions are silent on whether the intent of an operator with dominant position should be taken into account. According to the antitrust practices in the United States, unlike the per se violations, intent and motives are relevant when determining the consequences of such conducts. Thus, a specific intent to exclude or restrict competition should also be included in the “rule of reason” test.

Different from the business concentration, the prohibition on abuse of dominant position under the AML has not been put into effect. Therefore, the Draft Provisions and the NDRC Draft Provisions should be promulgated and implemented as soon as possible.