The Chinese Supreme People’s Court (Supreme Court) recently published in its official newspaper a Q&A session with the media, in which the head of the Supreme Court tribunal responsible for trials in administrative litigation (Administrative Tribunal) set forth crucial guidance applicable to trials of administrative lawsuits relating to China’s Antimonopoly Law (AML). In this Q&A, the Supreme Court explained the applicability of the Administrative Procedure Law in dealing with antitrust administrative cases, and further established several rules applicable to courts at all levels hearing such lawsuits. In the text below, we will summarize for you the highlights of these rules that could be essential to antitrust administrative litigations.
Jurisdiction Over Antitrust Administrative Lawsuits
Article 14 of the Administrative Procedure Law1 stipulates that an intermediate court (a court at the city level) should hear administrative lawsuits that: (1) pertain to the granting of patent rights or involve customs; (2) are filed against any ministry of the State Council or provincial government; and (3) are influential and complicated within their jurisdiction. The Supreme Court previously explained the phrase “influential and complicated” in one of its judicial interpretation2 by providing several examples, one of which is when “the defendant is a government agency at or above the county level.” In the Q&A, the Supreme Court stated that, considering that all of the authorities responsible for the enforcement of the AML are above the provincial level and that antitrust administrative cases always involve extremely specific and technical problems, all antitrust administrative cases will be heard by the intermediate or high court (a court at the provincial level) where the defendant is located.
Qualified Defendants in Antitrust Administrative Lawsuits
The Administrative Procedure Law prohibits enterprises and individuals from challenging a general administrative act carried out by a government agency (General Administrative Act). A General Administrative Act refers to a government agency’s act conducted with the aim of having an overall binding force on the public at large rather than a specific enterprise or individual. These acts include ratification of administrative provisions, regulations, decrees and orders. Instead, the plaintiff is only able to sue the government agency or any other agency that has administrative authority to carry out a specific administrative act (Specific Administrative Act), which refers to an agency’s act that would only legally affect a specific enterprise or individual. Examples of such acts include granting an approval or a license and imposing a fine.
The AML establishes that the Antimonopoly Commission under China’s State Council and the antimonopoly enforcement authorities designated by the State Council (AMEA) govern monopolistic conduct. The Antimonopoly Commission is responsible for general policy, organization, and regulatory and coordination tasks, while the AMEA deals with day-to-day enforcement relating to antimonopoly activities. The structure of the AMEA involves a three-way split of authority among the Ministry of Commerce (MOFCOM), the National Development and Reform Commission (NDRC), and the State Administration of Industry and Commerce (SAIC). OFCOM will be solely in charge of pre-merger antitrust review. SAIC will have the authority to investigate antimonopoly agreements, abuses of market dominance by undertakings, and abuses of administrative power that restrict or eliminate competition (excluding pricing-related agreements or abuses). NDRC will handle investigations on pricing-related agreements or abuses. As the AMEA and its agencies undertake Specific Administrative Acts in enforcing the AML, dissatisfied enterprises or individuals may bring a claim against the AMEA. However, such claims may not be lodged against the Antimonopoly Commission under China’s State Council, which undertakes only General Administrative Acts immune from suit under the Administrative Procedure Law.
Differentiation Between a General Administrative Act and a Specific Administrative Act
As stated above, a General Administrative Act is aimed at regulating the public at large, while a Specific Administrative Act is intended to be binding only for a specific enterprise or individual or a specific group of enterprises or individuals. Despite this textual distinction, it remains difficult to draw a clear line between the two types of acts in practice. In an attempt to further clarify the difference, the Supreme Court in the Q&A outlined several factors to be taken into consideration in distinguishing between a General Administrative Act or a Specific Administrative Act. These factors include
- Whether the involved administrative act is conducted for the purpose of regulating a specific or general target group or individual;
- Whether the involved administrative act is intended to be in force repeatedly or only once; and
- Whether the involved administrative act can be directly enforced or remains only a general rule.
Agency action designed to regulate a specific group, meant to be enforced only once, and/or which can be directly enforced are generally Specific Administrative Acts. Agency action undertaken for the purpose of regulating a general group, meant to be enforced repeatedly and/or undertaken to establish a general rule more likely constitutes a General Administrative Act.
Allocation of Burden of Proof Between the Parties
As in all administrative proceedings in China, as a general rule the plaintiff does not need to prove that the defendant has violated the law when conducting a certain Specific Administrative Act. Rather, it is the defendant that normally must prove the legitimacy of the Specific Administrative Act being challenged. However, under certain circumstances, the plaintiff may be required to assume the burden of proof. For example, in an administrative lawsuit where the plaintiff alleges that the defendant has failed to perform a certain duty, the plaintiff must prove that it has filed an application with the defendant or requested it to take actions, but the defendant failed to do so. Once this is established, the defendant must prove that it has not breached that duty.
Apart from that, if an antitrust administrative case involves technical problems, both parties may request the court to allow relevant experts and professionals to provide assistance in solving these problems, and the judge may also require relevant experts and professionals to attend the trial. Additionally, the tribunal may require experts or professionals to take part in the cross-examination process.
Relationship Between an Antitrust Administrative Litigation and Antitrust Civil Litigation
The AML offers an aggrieved party two types of major remedies – the aggrieved party may claim compensation from a company conducting monopolistic acts by taking civil action, and it may also challenge AMEA’s administrative decisions or accuse it of failing to perform its duties by initiating an administrative proceeding. In most cases, both proceedings are separate from and run parallel to each other, and both remedies may be granted. Nevertheless, if the court requires the final decision of one litigation in order to proceed with the other (which sometimes may happen because the final decision of one litigation may serve as proof in the other), the other litigation may be placed on hold until a final decision in the first proceeding is made.
No Interference with the Administrative Authority
The Supreme Court requires courts at all levels to restrain from interfering with the AMEA when hearing antitrust administrative cases. In cases where the AMEA enjoys a substantial amount of discretion, or where public interest is involved, the law stipulates that a court should conform to the separation of powers established by the Constitution and not supplant the AMEA by significantly altering its administrative decision. Conversely, in cases where the AMEA must render a decision on the spot, or where the AMEA does not have much discretion in the decision-making process, the court may change the AMEA’s decision to a greater extent where it deems necessary. If the court believes that an accused administrative fine is noticeably unfair, it may alter the AMEA’s decision to a significant extent according to the Rule of Reason.
The Administrative Tribunal of the Supreme Court has been studying the above issues and may set forth specific judicial interpretations if necessary. We will closely track its development.