An extract from The Dominance and Monopolies Review - 7th edition

Abuse

i Overview

Article 17 of the AML sets out a non-exhaustive list of seven types of behaviour that may be regarded as abuse of market dominance:

  1. excessive pricing or selling at an unfairly low price;
  2. selling below cost;
  3. refusal to deal;
  4. requiring a party to trade exclusively with the undertaking or other designated undertakings;
  5. tie-ins or the imposition of other unreasonable trading terms;
  6. price discrimination or the imposition of other discriminatory trading terms; and
  7. other behaviours defined as abuse of dominance by the antitrust regulators.

As early as 2015, the enforcement priority of the SAIC gradually shifted from monopoly agreements to abuse of dominance. In particular, practices including excessive pricing, tying and discriminatory treatment by public utility companies have frequently come under antitrust scrutiny. In 2018, the enforcement agencies continue to challenge the pharmaceutical and public utility sectors; for example, in February 2018, the Hubei provincial branch of the SAIC (Hubei AIC) fined roll on/roll off (RORO) port operator Hubei Yinxingtuo Co Ltd for abusing its market dominance by discriminating against RORO shipping companies.

ii Exclusionary abuses

'Exclusionary abuses' means the dominant undertaking abuses its market dominance by excluding its competitors; for example, by selling below cost, refusing to deal, or tying or bundling.

Concluded cases suggest that the enforcement agencies have an interest in exclusionary abuses. In December 2018, the SAMR imposed fines on Hunan Er-kang Pharmaceutical and Henan Jiutian Pharmaceutical for abuse of market dominance in relation to chlorpheniramine APIs. These two pharmaceutical firms allegedly engaged in unjustifiable refusal to trade, and bundling.

iii Discrimination

The Hubei AIC's investigation into Hubei Yinxingtuo Port focuses on discriminatory treatment. On 9 January 2018, the Hubei enforcer imposed a penalty on Hubei Yinxingtuo of 977,400 yuan (equivalent to 6 per cent of the company's 2016 sales revenue) for discriminating against RORO shipping transport companies by favouring its connected entity, Yichang H Transport.

iv Exploitative abuses

'Exploitative abuses' means that a dominant undertaking abuses its position by exploiting its customers or suppliers; for example, by selling at an unfairly high price or buying products at unfairly low prices.

In the Chlorpheniramine API case, Hunan Er-kang Pharmaceutical was fined 8,479,400 yuan, equivalent to 8 per cent of the company's 2017 sales revenue. The firm allegedly sold chlorpheniramine API at excessive prices and engaged in unjustifiable refusal to trade, as well as bundling. This demonstrates the antitrust enforcement agencies' willingness and capacity to deal with exploitative abuse behaviour.