While the just-announced results of an investigation into a rice powder price-manipulation scheme have shed light on the application of recent pricing and anti-monopoly laws in the People's Republic of China, it remains to be seen how authorities will reconcile outstanding differences in the laws.

On 18 February 2010, MWE China Law Offices issued a newsletter, “Price Manipulation in China May Trigger Criminal Liability”, regarding a price-manipulating event in a southern city of China. (You may access the newsletter here.) It now appears that the price-manipulating event has escalated from a regional incident to a national event. On 30 March 2010, the Price Supervision and Inspection Department (PSID) of the National Development and Reform Commission (NDRC), a central governmental authority responsible for, among other governmental functions, investigating price cartels and other price-related anticompetitive practices, held a news conference about the price manipulation. The PSID of the NDRC also delivered the findings of its investigation and its final administrative decision.

According to the PSID of the NDRC, the price-increase behaviors in Liuzhou and Nanning are in violation of the Price Law, the Anti-Monopoly Law (AML) and the Provisions on Administrative Penalty Against Price-Related Unlawful Practices (Price Penalty Provisions) (coming into force as of 1 January 2008).

According to the PSID of the NDRC, the price authority meted out administrative punishments on the concerned rice powder factories. Collusion organizers Nanning Xian Yi Ge Food Factory (Xian Yi Ge), Liuzhou Brothers Rice Powder Factory and Yong Cai Rice Powder Factory were subject to fines of RMB 100,000 respectively;several other rice powder factories participating in the collusive price increase were subject to fines of RMB 30,000 to RMB 80,000. Some rice powder factories that took the initiative in assisting the price authority to conduct the investigation, provided important clues and voluntarily corrected their wrongdoings were given a warning without being fined. The rice powder factories that merely followed the price increase were given a price inspection opinion, according to which the factories were required to further strengthen price self-discipline and consciously maintain good market price order.

According to the People's Prosecuting Institute of Liunan District of Liuzhou City, the legal representative of Xian Yi Ge and another two concerned suspects had been criminally arrested on suspicion of committing the crime of illegal operation. Another two suspects who had been detained previously were not arrested because of insufficient evidence. The case is still under investigation by the local public security office.

With regard to the application of law, MWE China Law Offices made some phone inquiries with the PSID of NDRC and the price authorities in Liuzhou City and Nanning City. These authorities confirmed that the final administrative penalty was made mainly in compliance with the Price Law, the Price Penalty Provisions and the AML. However, it remains unclear as to how the governmental authorities could apply the Price Law (including the Price Penalty Provisions) and the AML simultaneously while the two laws are different in some important areas. For example, the maximum monetary penalty under the Price Law and the Price Penalty Provisions is RMB 1,000,000; the monetary penalty under the AML would be much higher (i.e., 1 to 10 per cent of the sales volume of the concerned company). It remains to be seen to what extent the overlap in law enforcement will last, and how the governmental authorities will reconcile the differences between the AML and the Price Law (and certain other laws such as the Anti-Unfair Competition Law).

It is also interesting to note that the penalties imposed on some companies were reduced or exempted because the companies were cooperating in the investigation (e.g., providing important clues and voluntarily correcting their wrongdoings).