《反价格垄断规定》,《反价格垄断行政执法程序规定》(11/29/2010)

On December 29, 2010, China’s National Development and Reform Commission (NDRC) issued the Regulations on Anti-Price Monopoly (“APM Regulations”) and the Procedural Regulations on Administrative Enforcement of Anti-Price Monopoly (“Procedural Regulations”). Both regulations, taking effect on February 1, 2011, constitute a further step towards clarifying China’s existing anti-monopoly law regime.

  1. Regulations on Anti-Price Monopoly

The APM Regulations shall apply to any price monopoly activities occurring within China, as well as those occurring abroad, but have the impact of eliminating or restricting domestic market competition.

  1. Definition of Price Monopoly Activities

As stipulated therein, the price monopoly activities include:

  • Business operators entering into price monopoly agreements;
  • Business operators with dominant market positions use pricing means to eliminate or restrict market competition;
  • Administrative agencies or organizations authorized with administrative power that abuse their administrative power to eliminate or restrict competition from the perspective of pricing.
  1. Price Monopoly Agreements

Article 7 of the APM Regulations lists eight kinds of price monopoly agreements entered between competing operators, including:

  • Agreements that fix or adjust the price level of merchandise or services;
  • Agreements that fix or adjust ranges of price variations;
  • Agreements that fix or adjust fees, discounts or other charges which have an impact on prices;
  • Agreements that set agreed-upon prices as the basis for transactions with third parties;
  • Agreements that set a standard pricing formula;
  • Agreements that prohibit price adjustments without the consent of other contracting parties;
  • Agreements that fix or adjust pricing indirectly through other means;
  • Other price monopoly agreements recognized by the government authorities.

Meanwhile, agreements entered between operators and their trading counterparts to fix resell prices or lower resell prices are also defined as price monopoly agreements, which are prohibited. However, there are several exceptions to prohibition of price monopoly agreements, including, but not limited to, agreements regarding advancing technology, R&D of new products, improving product quality, enhancing resource conservation, environmental protection and relief efforts, addressing a serious drop in sales or obvious overproduction during an economic downturn, or protecting legitimate interests in foreign trade or foreign economic cooperation.

  1. Business Operators with Dominant Market Positions

The “dominant market position” refers to the market position that enables operators to control the price or quantity of merchandise or other trade terms in the relevant market, or to impede or affect other operators’ access to the relevant market. The APM Regulations seek to clarify the Anti-Monopoly Law by further defining the contours of prohibitions applicable to business operators with dominant market positions, including belowcost sales, refusal to deal, exclusive dealings, additional unreasonable fees or differentiated price treatment.

Below-Cost Sales. Operators with dominant market positions are prohibited from selling merchandise below cost without justifiable reasons. Justifiable reasons herein include, but are not limited to: (a) disposal of fresh, live, seasonal, expiring or overstocked products; (b) price reductions stemming from repaying debts, business transfer or cessation; or (c) promotion of new products.

Refusal to Deal. Operators are not allowed to refuse trading by setting excessively high sales prices or extremely low purchase prices without justifiable reasons. Justifiable reasons herein include, but are not limited to: (a) the trading counterparts have seriously bad credit records or continuous deteriorate economic condition, which would cause material risk to the transaction; (b) the trading counterparts are able to purchase the same merchandise or their substitutes from, or sell the merchandise to, other operators at reasonable prices; (c) other justifiable reasons duly established.

Exclusive Dealings. Operators with dominant market positions are prohibited from restricting the trading counterparties to merely trade with themselves or with designated entities by using price discounts or other means without justifiable reasons. Justifiable reasons herein include, but are not limited to: (a) ensuring product safety and quality; (b) maintaining the brand’s image or improving service quality; (c) obviously decreasing cost or improving efficiency, resulting in actual benefits enjoyed by consumers.

  1. Procedural Regulations on Administrative Enforcement of Anti-Price Monopoly

The Procedural Regulations generally cover all procedures relating to investigations of alleged price monopoly acts. Below we outline some special provisions regarding initiatives taken by operators engaging in price monopoly.

  1. Leniency Provisions

According to Article 14 of the Procedural Regulations, if a business operator initiates a report of price monopoly agreements and provides substantial evidence thereof, the government authority may at its discretion, partially or fully exempt punishment. The first whistleblower may be fully exempted. The second and subsequent whistleblowers may also be partially exempted to varying degrees.

 

  1. Suspension of Investigations

A business operator under investigation for alleged price monopoly may be able to suspend the investigation by submitting a written application. The written application should specify the following compulsory issues: (a) facts related to the alleged price monopoly; (b) a promise to take specific measures to remedy the alleged violation; (c) a timeline for remedial actions; (d) other promises, as required.

After suspension of the investigation is approved by the relevant authority, the investigation may be resumed if one of the following circumstances occurs:

  • The business operator does not fully perform its undertakings within the designated period; or
  • A material change occurs in the underlying factual basis in which the decision to suspend the investigation was granted; or
  • The decision to suspend the investigation was made on the basis of incomplete or untrue information provided by the applicant.
  • Regulations on Anti-Price Monopoly
  • 反价格垄断规定
  • Issuing Authority: National Development and Reform Commission
  • Date of Issuance: December 29, 2010 / Effective Date: February 1, 2011
  • Procedural Regulations on Administrative Enforcement of Anti-Price Monopoly
  • 反价格垄断行政执法程序规定
  • Issuing Authority: National Development and Reform Commission
  • Date of Issuance: December 29, 2010 / Effective Date: February 1, 2011