From March to April 2023[1], in the legislation and policy-making area, the State Administration for Market Regulation (the “SAMR”) released four supporting regulations of the Anti-Monopoly Law (the “AML”), deployed key legislative goals for 2023; the Supreme People's Procuratorate (the “SPP”) issued opinions stressing the exploration of anti-monopoly public interest litigation in the digital market to prevent monopolistic acts of abusing market dominance and data algorithm advantages. In the law enforcement area, the SAMR unconditionally approved 115 merger cases in March and April 2023, involving sectors of aviation, real estate, food, energy, environmental protection, transportation, automobile, materials, pharmaceutical, private equity fund management, etc., and conditionally approved the Share Acquisition of Yantai Juli Fine Chemical Co., Ltd. by Wanhua Chemical Group Co., Ltd. The Shanghai Administration for Market Regulation announced the Decisions of Administrative Penalty on monopoly agreement reached and implemented by Shanghai Xudong Haipu Pharmaceutical Co., Ltd. and Tianjin Tianyao Pharmaceuticals Technology Co., Ltd., and the SAMR published the Decisions of Administrative Penalty on abuse of market dominance of Tianjin Jinyao Pharmaceutical Co., Ltd. and Rizhao WaterSupply Company Limited. In the judicial area, the Beijing Intellectual Property Court ruled on China’s first case of unfair competition dispute related to data collection on short video platforms.
On March 24, 2023, the SAMR issued four supporting regulations of the AML, namely the Provisions on Suppression of the Abuse of Administrative Power to Exclude and Restrict Competition, the Provisions on Prohibition of Monopoly Agreements, the Provisions on Prohibition of Abuse of Market Dominance, and the Provisions on the Review of Concentrations of Undertakings, which has come into effect on April 14, 2023[3]. Based on our observations in practice, the key takeaways of the amendments to the four regulations are summarized as follows:
○ The Provisions on the Review of Concentrations of Undertakingsclarify the notification and investigation procedures for concentrations of undertakings that do not meet the notification thresholds but are of competitive concerns; optimize the factors for identifying the “acquisition of control or the ability to exert decisive influence”; clarify the calculation of turnover of undertakings to the concentration and the criteria for determining the “implementation of the concentration”; refine and optimize the “stop the clock regime”; improve the selection and supervision system of trustees; and supplement new investigation methods that can be adopted in merger review by the antitrust enforcement agencies, etc.;
○ The Provisions on Prohibition of Monopoly Agreements delete the 15% market share criterion and application procedure for applying the “safe harbor” regime stated in the previous exposure draft; improve the regulations on conducts of “organizing” and “substantially assisting” monopoly agreements; further standardize the investigation procedures and the leniency system; and newly introduce the interview regime;
○ The Provisions on Prohibition of Abuse of Market Dominance improve the antitrust regulations in the sector of platform economy by adding some of the “reasonable grounds” and forms of conducts to the relevant abusive behaviors, providing more perspectives for the compliance assessment of relevant business models in this sector; delete the relevant provisions on “self-preferencing” in the previous exposure draft; and provide more detailed guidance on the specific analysis on various types of abusive conducts;
○ The Provisions on Suppression of the Abuse of Administrative Power to Exclude and Restrict Competition introduce the interview regime; provide for an administrative discipline interface system; and establish an interface with the fair competition review system.
For more comments in this regard, please see Haiwen Alert: Four Supporting Regulations of the Anti-Monopoly Law Promulgated.[4]
In early April, 2023, the SAMR deployed key legislative goals for 2023, and inclined to further implement fair competition policies, optimize a fair competition environment, actively promote the draft of the Regulations on Fair Competition Review, revise the Provisions on Prohibition of Abuse of Intellectual Property Rights to Exclude and Restrict Competition and other provisions; effectively improve the level of normalized supervision of the platform economy, and formulate the Regulations on Supervision and Management of Internet Platform Enterprises in Implementing the Responsibility for Compliance Management and other regulations.
On April 13, 2023, the State Council Information Office held a series of themed press conferences on “Authorities Talking about the Opening”[5]. Luo Wen (the minister of the SAMR) and Gan Lin (the vice minister of the SAMR) introduced that:
○ The SAMR will take administrative penalties, interviews and reminders, administrative guidance, rules and guidelines, and other gradual and regular antitrust regulatory measures to regulate the online platform service market; strengthen the guidance on competition compliance, and investigate and handle monopoly cases in accordance with the law while urging the complete cessation of monopolistic conducts such as “choosing one from two”.
○ With respect to the digital economy and the platform economy regulatory initiatives, the SAMR will improve fundamental regulations and rules on the digital economy, perfect the guidelines, standards and other supporting systems; investigate and explore the establishment of a sound hierarchical layered and corresponded regime of regulatory accountability; innovate the normalized regulatory model, implement the responsibility of the Internet platform enterprises compliance management; improve the dynamic management mechanism of compliance risk of the Internet platform, formulate the indicators of compliance evaluation on segmented sectors, and improve government departments’ sampling and assessment, daily supervision, positive incentives, penalties for violations; and promote the conscious implementation of the responsibility of Internet platform enterprises.
○ The SAMR will complete the revision of the Anti-Unfair Competition Law soon.
Enforcement Area
Merger Review
○ Non-conditional Clearance: From March to April 2023, 115 cases were cleared without condition by the SAMR (a year-on-year increase of 0.87% compared with that from March to April 2022, and a month-on-month decrease of 4.95% compared with that from January to February 2023), involving industrial sectors of aviation, real estate, food, energy, environmental protection, transportation, automobile, materials, pharmaceutical, private equity fund management, etc.
○ Conditional Clearance: On April 7, 2023, the case of Share Acquisition of Yantai Juli Fine Chemical Co., Ltd. (“Yantai Juli”) by Wanhua Chemical Group Co., Ltd. (“Wanhua Chemical”) was approved by the SAMR with condition[7]. The review of this case lasted for nearly eight months, and the parties once withdrew and then refiled the case. Both Yantai Juli and Wanhua Chemical are engaged in the production and sale of caustic soda and toluene diisocyanate (TDI). After the transaction, Wanhua Chemical will obtain sole control over Yantai Juli. The SAMR found that the proposed transaction will or is likely to eliminate and restrict competition to the domestic market of TDI in China, and has cleared the transaction with conditions listed as below, and the post-concentration entity may apply to the SAMR for the lifting of the conditions after five years from the date of closing:
(1) After closing the transaction, the annual average price of parties supplying TDI to customers in domestic China market shall not be higher than the average price for the 24 months before the commitment date under similar trade terms. In the event that the price of major raw materials decreases to a certain extent, the price of supplying TDI to customers in China’s domestic market shall be adjusted downward in a fair and reasonable manner;
(2) After closing the transaction and unless otherwise justified, the parties shall maintain or expand the production of TDI in China, and continue the R&D and innovation;
(3) Supply TDI to customers in the domestic China market adhering to the principles of fairness, reasonableness and non-discrimination. Unless otherwise justified, the parties shall not refuse, restrict or delay the supply of products to customers in the domestic China market; the parties shall not reduce the quality of supply and the level of service to customers in the domestic China market; and they shall not treat customers in the domestic China market who are under same conditions differently , except for reasonable commercial practices.
(4) Unless otherwise justified, the parties shall not force the customers in the domestic China market to purchase TDI products exclusively from them or carry out tying arrangements.
Cartel Agreements
○ On April 13, 2023, The Shanghai Administration for Market Regulation (the “Shanghai AMR”) published an administrative penalty on Shanghai Xudong Haipu Pharmaceutical Co., Ltd. (“Haipu Pharmaceutical”) and Tianjin Tianyao Pharmaceuticals Technology Co., Ltd. (“Pharmaceuticals Technology”, together with Haipu Pharmaceutical, the “Parties”) for entering into and implementing a monopoly agreement to fix or change the price of products and divide the sales market. In this case, the Parties entered into a “horizontal alliance” agreement, consensus and long-term tacit understanding for fluorouracil injection in October 2015, agreeing that (1) the Parties jointly increased the bidding price of fluorouracil injection and the supply price of business companies in various regions by communicating with each other during bidding, refraining from price wars and continuously negotiating prices, etc.; (2) the Parties divided the domestic China market based on their respective traditional advantageous sales regions, occupying the sales markets in 15 provinces respectively, cooperating and ensuring that the other Parties won the tenders in their respective designated markets by not participating or quoting high prices during the bidding process, and limiting the other Parties’ sales volume in their own designated markets. The Shanghai AMR ordered the Parties to cease their unlawful act, and imposed on Haipu Pharmaceutical and Pharmaceuticals Technology a fine of 3% of their turnover in 2020, approximately RMB 57.05 million in total.
Abuse of Market Dominance
○ On March 22, 2023, the SAMR released an administrative penalty issued by Tianjin Administration for Market Regulation (the “Tianjin AMR”) on Tianjin Jinyao(金耀) Pharmaceuticals Co., Ltd. (“Jinyao(金耀) Pharmaceuticals”) for its abuse of dominant market position. In this case, Jinyao(金耀) Pharmaceuticals had a dominant position in the market for carmustine injection in China, with a 100% market share and the ability to control the price, quantity and other trading conditions of relevant products, and it is difficult for other operators to enter the relevant market. From June 2017 to September 2020, with production and sales costs basically stable, Jinyao(金耀) Pharmaceuticals significantly increased the sales price of carmustine injection beyond normal extent , by approximately 7.5 times compared to the price in 2016. The Tianjin AMR determined that the conducts of Jinyao(金耀) Pharmaceuticals had constituted the abuse of market dominance by selling products at unfairly high prices, and on that account, the Tianjin AMR ordered Jinyao(金耀) Pharmaceuticals to cease its unlawful acts and imposed a fine of 2% of its annual sales in 2019, which was approximately RMB 27.72 million.
It is noteworthy that the Jinyao(金耀) Pharmaceuticals and the Pharmaceutical Technology are, respectively, the holding subsidiary and the subsidiary of holding subsidiary of Jinyao Pharmaceuticals Co., Ltd. (“Jinyao(津藥) Pharmaceuticals”). In April 2021, Tianyao Pharmaceuticals (the former name of Jinyao (津藥) Pharmaceuticals) had been ordered to cease unlawful acts, confiscated illegal income and imposed a fine of 4% of annual sales in 2019,approximately amounting to RMB 44.02 million, by the Tianjin AMR for entering into and implementing a monopoly agreement to divide the market and fix the price of fluphenazine acetate API. These facts demonstrate the trend of antitrust enforcement in China of being increasingly stringent, in the sense that companies in the same group may be repeatedly investigated and imposed with administrative penalties by antitrust authorities for their monopolistic conducts of all sorts, and strengthen the observation that the pharmaceutical industry has long been a key area of antitrust enforcement.
○ On April 27, 2023, the SAMR released an administrative penalty issued by Shandong Administration for Market Regulation (the “Shandong AMR”) on Rizhao Water Group Water Supply Co., Ltd. (“Rizhao Water”) for its abuse of dominant market position. In this case, Rizhao Water is the only public water supply company in main urban area of Rizhao City, thereby having a dominance in the public water supply market in main urban area of Rizhao City. In the process of renovating water facilities in residential areas and establishing new households for direct drinking water dispensers, Rizhao Water charged the operators of direct drinking water dispensers for pipeline access, renovation and construction of water meter wells, which should have been borne by Rizhao Water itself, on the pretext that direct drinking water dispensers are business facilities and the water shouldn’t be regarded as residential water. During the investigation, Rizhao Water has refunded all the fees charged to the payers and has stopped charging pipeline access fees for access to the direct drinking water dispensers. On these accounts, the Shandong AMR determined that Rizhao Water’s conducts had constituted the abuse of market dominance by attaching unreasonable conditions to transactions, and accordingly ordered it to cease illegal conducts and imposed a fine of 1% of its annual sales in 2020, approximately RMB 2.18 million.
Judicial Area
On April 20, 2023, the SPC held a press conference[8] at which the spokesperson said that since the establishment of the Intellectual Property Tribunal of the SPC, 156 monopoly cases were accepted, and in 2022, 47 new monopoly cases of second instance were received, 57 cases were concluded. In respect of cases concluded in 2022, the following types of cases were more often seen: (1) cases involving the exercise of intellectual property rights; (2) cases concerning people’s livelihood; and (3) cases involving the convergence and standardization of administrative enforcement and judicial procedures.
On March 16, 2023, Beijing Intellectual Property Court made a ruling on the dispute over anti-unfair competition behaviors between Beijing Chuangrui Culture Media Co., Ltd. (“Chuangrui”) and Beijing Weibo Shijie Technology Co., Ltd. (“Weibo”)[9]. This case is the first unfair competition case in China regarding data collection on short video platform, which clarifies the legal nature and independent economic value of non-original data collection, distinguishes the rights protected by copyright law and the rights and interests protected by anti-unfair competition law, and conferring legal protection to the legitimate rights and interests of short video platform operators in collecting, storing, processing and transmitting data.
○ Facts: Chuangrui and Weibo are both short video platform operation service providers. The Douyin App operated by Weibo has considerable popularity in short video market in China. Without consent from Weibo, Chuangrui used technical methods to obtain video files, comments, and users’ information from the Douyin App, and provided them to the public through the Shuabao App operated by Chuangrui. Weibo sued Chuangrui claiming that Chuangrui’s actions had constituted unfair competition, requiring it to cease the violations, publish a statement eliminating the impacts, and compensate Weibo for economic losses of RMB 40 million.
*寇梅若律師就本文亦有貢獻
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