Comments to SAMR on the Draft Revisions to the Anti-monopoly Law

2020-01-31 | Beijing, Shanghai

The Draft has adapted to the current legal environment in China, strengthened the deterrent effect on monopolistic behaviour, and greatly increased the punishment; meanwhile, it has refined the investigation and enforcement regulations: stipulating that three types of core cartel agreements cannot suspend investigations, and list additional factors that determine the dominant position of internet operators; introduce new regulations for merger review, including definition of control rights, dynamic adjustment of the reporting threshold, "stop watch" system for review time limits, and responsibility for reporting false information; significant strengthened the investigation power of anti-monopoly law enforcement agencies, including stipulating that public security organs shall assist during investigations. However, while the State Council's anti-monopoly law enforcement agencies are more powerful, they lack clear definitions of the regulations in the implementation process and measures to prevent the abuse of power. The anti-monopoly law enforcement agencies have great discretion on the penalty.

Some of the proposed amendments raise serious risks of discouraging innovation in China by (1) forcing a business that has developed a new technology or product due solely to its investment, superior skill and foresight to give access to others who would “free ride” on that investment; or (2) deeming a business’s transient market advantage due to that innovation as evidence of  dominant market  power. Moreover, there is no need at this point to create a separate mode of analysis for “the internet sector” which is still evolving; the European Union and its Member States have effectively addressed competition law issues in this sector using existing modes of analysis. There is the risk that by codifying some modes of analyses that exist at the current time, other existing modes of analysis, and those that have yet to emerge, are missed and will be outside the scope of the law.

In addition, the SAMR in its Interim Provisions on the Prohibition of Monopoly Agreements promulgated in 2019 clearly stipulates the principle of "prohibition + exemption" for the conduct of monopoly agreements expressly prohibited by the Anti-Monopoly Law. However, in the judicial field, courts still tend to think that in civil lawsuits, even for a clearly listed act of reaching a monopoly agreement, one still needs to prove its effect of excluding or restricting competition, which results in the inconsistency between administrative law enforcement and civil litigation. The European Chamber recommends to clarify this issue to bridge the divergence between the administrative agencies and the judicial system over the years. Once this issue is solved, it will ensure the consistency and predictability of antitrust law enforcement.

The European Chamber expects that the new law and its following implementation regulations will explicitly “replace” and not just “amend” the Anti-monopoly Law of 2007 and all following orders issued by different authorities implementing the AML of 2007: namely, the Measures for the Declaration of the Concentrations between Undertakings, Interim Provisions on Prohibition of Monopoly Agreements issued by the SAMR, Interim Provisions on Prohibiting Acts of Abuse of a Dominant Market Position, Interim Provisions on Prohibiting Acts of Abuse of Administrative Authority to Eliminate or Restrict Competition, and the Provisions on the Threshold for the Reporting of Concentration of Business Operators, etc.