-- 11 Measures to Strengthen Shanghai’s Implementation of Competition Policies

On September 1, 2020, Shanghai Administration for Market Regulation announced a pilot program of 11 measures to strengthen competition policies in Lin’gang section of Shanghai Pilot Free Trade Zone,[1] including piloting merger review for selected sectors to be handled directly in Shanghai, exploring the implementation of exemption for monopoly agreement, improving fair competition review mechanism, etc..

In recent years, Shanghai has been very active in antitrust legislation and enforcement:

  • In the past nine months, Shanghai has issued Shanghai Anti-Monopoly Compliance Guide for Undertakings[2] and its three different foreign language versions, exposure draft of Local Standards for Competition Compliance Guide and the “2020 Shanghai Antitrust Compliance Promotional Video”, all designed to provide guidance for undertakings on carry out competition compliance work.
  • On frontier of enforcement, statistics show that the Shanghai antitrust authority has sanctioned more than a dozen of cases with economic fine exceeding RMB500 million, covering such sectors as automotive, chemical, healthcare, jewelry, pharmaceutical, etc.

The following are the details of these 11 measures:[3]

1. Pilot anti-monopoly review system of concentration of undertakings.  Conduct the pilot of anti-monopoly review of the concentration of undertakings, formulate and improve rules of merger review work, specify merger review procedures and standards, and promote the standardization and institutionalization of merger review.  Comprehensively utilization of legal, economic analysis and other approaches to promote the professionalism of merger review.  With regard to the concentration of undertakings in strategic emerging industries such as integrated circuit, artificial intelligence, biomedicine, aerospace, new energy vehicles and high-end smart equipment, further simplify review procedures, shorten review time, constantly improve the quality and efficiency of merger review, promote the facilitation of notification, and support the Lin’gang section and Shanghai’s strategic emerging industries and key enterprises to become larger and stronger.

2. Explore the implementation of exemption system of monopoly agreements.  Conduct classified regulation on monopoly agreements, determine the specific conditions for exemption of monopoly agreements by comprehensively considering the industry type, enterprise scale, market share, competition landscape and other factors, exempt qualified undertakings in accordance with the law, carry out inclusive and prudent regulation on new technologies, new sectors, new activities, new models and other emerging industries, and foster a more relaxed business environment for undertakings.

3. Innovate the mechanism for fair competition review.  Improve the operation mechanism of joint conference, explore the establishment of a joint review programme for material policies and measures, and strengthen the overall coordination, reporting, issue study and work guidance with regard to the implementation of the programme.  Optimize the procedures of fair competition review, establish a regular evaluation and clearance mechanism, support and explore the implementation of internal unified review in Lin'gang section, or submit it to a specific authority for review after the preliminary review by the business authority, encourage the implementation of the full-process recordability and traceability, and promote the improvement of professionalism and standardization of review.

4. Improve the third-party review and evaluation mechanism.  Encourage to entrust third-party institutions such as colleges and universities, scientific research institutes, and professional consulting institutions to conduct comprehensive evaluation and special assessment in key sectors of the implementation of the fair competition review programme in Lin’gang section, explore and strengthen the application of the assessment results, and release the relevant information to the public.  Encourage policy-making authorities to prioritize the introduction of third-party assessment of policies and measures proposed to apply exceptions or having a significant impact on social public interests, to fully evaluate the impact of policies and measures on market competition, and to ensure the quality and effectiveness of the review.

5. Improve the social supervision mechanism for fair competition.  Establish a green channel for reporting violations of fair competition, improve working procedures, and timely accept and respond to social and public appeals.  The higher-level authority shall, upon receipt of the relevant report, conduct timely verification and order rectification of any problems.  The market regulatory authority at the same level or above may, upon receipt of the relevant report, take the initiative to investigate and verify it, and may propose rectification suggestions to the policy-making authority or the higher-level authority for the violation of the fair competition review standards.  The situation of rectification shall be reported to relevant parties in a timely manner, and in case of refusal to rectify or failure to rectify in time, the liability of the relevant personnel shall be imposed in accordance with the laws and regulations.

6. Strengthen the rigid constraints of the fair competition review programme.  Promote the incorporation of fair competition review into the examination and assessment system of the business environment and the rule of law to further strengthen positive incentives and negative constraints.  Establish a random inspection mechanism for policies and measures, explore the application of information technology, conduct key random inspections on industries and districts that have stronger complaints from market players, more common issues, and more violations of the fair competition review standards, disclose the inspection results to the public in an appropriate manner, urge and guide the policy-making authorities to better fulfill their review responsibilities, standardize the review procedures, improve the accuracy of review conclusions, and prevent the abuse of powers.

7. Establish coordination mechanism between competition policy and other economic policies.  Strengthen the fundamental position of competition policy, enrich and optimize the policy implementation toolkit, persist to coordinate other relevant economic policies based on competition policy, explore the establishment of restriction mechanisms and assessment systems, give full play to the mutual promotion and superposition of various policies in promoting high-quality economic development, and ensure that various market entities equally use production factors in accordance with the law and equally enjoy national support policies.

8. Strengthen and improve the anti-monopoly enforcement.  Strengthen the anti-monopoly enforcement in the sectors of people's livelihood and key elements, strengthen the law enforcement on the abuse of administrative powers to eliminate or restrict competition, and further foster a lawful, international, and convenient business environment.  Strengthen the anti-monopoly enforcement by making full use of economic analysis and research/demonstration methods for significant and complicated cases.  Accelerate the informatization of the anti-monopoly enforcement, ensure strict, standardized, fair and civilized law enforcement, and constantly improve the level of rule of law and normalization.

9. Establish evaluation mechanism for the implementation of competition policies.  Explore the establishment of evaluation mechanism for the effectiveness of competition policies and market competition conditions, and specify evaluation indicators, standards and procedures.  Select key sectors in Shanghai which implement the national strategy of "Three Tasks and One Platform" and in the sectors of people's livelihood to carry out the evaluation of market competition conditions, study and publish the white paper on market competition in Lin'gang section of Shanghai Pilot Free Trade Zone, and enhance the pertinence and effectiveness of the implementation of competition policies, to provide support for competition enforcement practices and competition rules innovation.

10. Innovate the supply of competition policies and programmes.  On the core basis of the Anti-monopoly Law, for the purpose of serving the high-quality development of the economy, and for the direction of realizing the modernization of anti-monopoly work, and in combination with specific conditions of Lin’gang section, explore the establishment of more detailed and practicable rules of competition policies, and improve for a fair, open and transparent institutional system.

11. Advocate and promote the culture of fair competition.  Formulate the anti-monopoly compliance guidelines for undertakings, guide undertakings to establish competition compliance programme, and guide undertakings to compete in the market in compliance with laws and regulations.  Forge brands for anti-monopoly and competition compliance training, provide undertakings with training and guidance services on competition compliance, promote the undertakings' awareness and ability to compete in compliance, and further foster a fair competition market environment.