Antitrust Investigations in China: Putting Things in Perspective

by Sheppard Mullin Richter & Hampton LLP
Contact

The current press is buzzing with news about the recent increase in antitrust investigations involving foreign companies with operations in China, and reports of foreign companies being told to expect higher fines if they “put up a fight” during investigations. At the same time, the Chinese enforcement agencies have started to make their decisions public. Putting these developments in perspective, the take-away is that antitrust in China should be taken seriously, the enforcement agencies are still in the development stage, and some progress is being made in transparency of decision-making.

China’s Anti-Monopoly Law (“AML”) is a mere five years old. The National Development and Reform Commission (“NDRC”) enforces the AML with regard to price-related anti-competitive conduct such as price-fixing and retail price maintenance while the State Administration for Industry and Commerce (“SAIC”) enforces the AML with regard to non-price related anticompetitive conduct such as market allocation, output restriction and joint boycotting. There are instances where the enforcement will be overlapping and the agencies decide amongst themselves who will take the lead. In general, the penalties for violating the AML include fines that can range from 1% to 10% of the turnover of the preceding year, orders to terminate illegal conduct or confiscation of illegal gains. The AML and relevant rules do not explain what type of turnover—worldwide, China, or solely the business related to the violation—will be the basis for the fines. But so far, the agencies have interpreted turnover as commerce related to the relevant business.

The NDRC has been particularly active, fining infant formula producers as well as the gold jewelry trade association and five stores, in addition to investigating companies in the pharmaceutical and medical equipment industries. The NDRC has also authorized industry associations, such as the Chinese Auto Dealers Association, to solicit from foreign companies information related to contracts and sales structures for purposes of antitrust compliance review. These “private inquiries” may imply government fines and even potentially antitrust action if they are not satisfied. In addition to the NDRC, SAIC is also active. It is currently investigating, for example, Tetrapak, the food-packaging giant, for abuse of market dominance.

According to a Reuters news article, in-house lawyers from foreign companies recently attended a training workshop conducted by officials from the three antitrust enforcement agencies. During the meeting, an official from the NDRC stated that if they “put up a fight” during investigations, “I could double or triple your fines.” According to the article, the NDRC did not respond to follow-up inquire from Reuters. The latest reports indicate that the NDRC is trying to soft-pedal the incident, suggesting its official was “misunderstood”.

Chinese enforcement agencies acknowledge the need for transparency in decision-making. Merger filing decisions for conditional approvals have been published since the AML has come into effect, in 2008. In 2012 the Ministry of Commerce (“MOFCOM”), the agency responsible for reviewing mergers, started to publish a list of all transactions that have been cleared. SAIC, starting this August, implemented its new transparency program by publishing its decisions on antitrust investigations that were concluded between 2010 and 2013. NDRC is contemplating a platform for releasing decisions.

It is important to remember, however, that China’s antitrust enforcement agencies are not independent, and are also advocates of government policies for promoting the development, management and regulation of private investment. For example, the January 22, 2013 policy guidelines issued by 13 agencies (including the agencies responsible for enforcing the AML) contain broad sweeping statements about how consolidations will put Chinese companies on a better footing to compete globally and identify nine key industries dear to China—automobile, steel, cement, shipbuilding, electrolytic aluminum, rare earths, electronic information, pharmaceuticals and agricultural processing. Although the respective antitrust departments of each of the agencies maintain that they are independent of the other departments responsible for promoting domestic industries, it is still a very different structure from other enforcement regimes, particularly in the West.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Sheppard Mullin Richter & Hampton LLP | Attorney Advertising

Written by:

Sheppard Mullin Richter & Hampton LLP
Contact
more
less

Sheppard Mullin Richter & Hampton LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.
Feedback? Tell us what you think of the new jdsupra.com!