It is noted that various models of commercial arrangements and activities having to some extent certain competition-constraint effect, which are commonly applied and accepted by industries until the recent past, come increasingly under the tightened scrutiny of PRC antitrust enforcement bodies at both central and provincial level. MOFCOM has been involving itself intensively in major business concentration transactions by means of its mandated pre-merger verification and review authority, NDRC is also stepping up its enforcement authority over price-related anti-monopoly misconducts. In January 2013, NDRC convicted six LCD producers - Samsung Electronics, LG Display, Chimei Innolux, AU Optronics, Chunghwa Picture Tubes and HannStar Display - for their concerted price fixing in the period as early as before 2006, and imposed a fine in the amount of RMB 353 million (approx. USD 56.7 million). In late January 2013, NDRC and local price authorities conducted investigation on two large Chinese liquor producers, Kweichow Moutai and Wuliangye. Both were consequently imposed a fine in the amount of RMB 247 million (approx. USD 39.5 million) and RMB 202 million (approx. USD 32.3 million) respectively, for their convicted misconduct in maintaining minimum resale price and punishing distributors for not observing the fixed minimum resale price. Most recently in August 2013, NDRC has just closed an coordinated investigation against a party of nine Chinese and international infant formula producers, six of whom were convicted for vertical anti-monopoly offenses in the form of resale price maintenance and imposed a total fine of RMB 667 million (approx. USD 110 million). The amount set a record high penalty among NDRC’s antitrust enforcement cases hitherto.
On the backdrop of these exorbitant penalty imposed on both foreign and domestic companies, the prospect of facing a government investigation initiated by NDRC or SAIC becomes a foremost compliance risk if any company’s operations are eventually found not PRC Anti-monopoly Law compliant.
The reality, however, shows that not every multinational or domestic company becomes fully aware of such risk and taken serious counteracting measures accordingly. For most high-risk companies, such insufficiency is commonly manifested in a number of ways, such as no awareness of the severity of antitrust violation risks and liabilities, lack of antitrust law expertise, failure in putting into place a robust antitrust compliance program and best practice at working place etc. Very often, management team and employees of concerned companies are caught offhanded and do not know how to appropriately respond or co-operate during an antitrust government investigation, in particular where extraordinary measure such as “dawn raid” is taken by NDRC1 or SAIC2 with a very short notice against the concerned companies under suspicion.
Given the urgency and high pressure brought about by an antitrust government investigation, most affected companies would agree that it is really a difficult and delicate task to deal with government antitrust investigation, which makes it imperative and indispensible to engage the expertise and professional supports from antitrust lawyers, who could accompany the affected companies through such trudging experiences and provide the following practical supports:
- Advise on whole process of antitrust government investigation
- Advise on and assess possible legal exposures and administrative penalties
- Design a tailor-made investigation responding strategy and working plan
- Prepare and review the documents and information to be submitted to investigation agencies
- Build a justifiable legal defense during investigation proceedings and strive for the most favorable decision
- Challenge an administrative decision through administrative review proceeding or administrative litigation proceeding (if necessary)
- Represent or defend in subsequent antitrust private lawsuits
Companies may also be interested in taking preventive measures to eliminate or mitigate non-compliance risk before any potential issues would brew and eventually lead to a daunting government investigation. Such preventive measures include 1) building a comprehensive and proactive compliance program and crisis handling procedures; 2) conducting antitrust compliance audit; 3) conducting an antitrust compliance training; and 4) providing regular antitrust counseling service.
Antitrust lawyers with China-specific expertise and on-the-ground government investigation experience would prove to be critical and necessary for the achievement of above-mentioned objectives before, during and after an antitrust investigation.