November 6, 2007

ANTI-MONOPOLY LAW OF THE

PEOPLE'S REPUBLIC OF CHINA

(Promulgated by the 29th Session of the Standing Committee of the
10th National People’s Congress on 30 August 2007 and effective as of 1 August 2008.)

Unofficial Translation for Discussion Purposes Only
© 2007 by DLA Piper US LLP

CONTENTS

Chapter One General Principles
Chapter Two Monopoly Agreements
Chapter Three Abuse of Dominant Market Position
Chapter Four Concentration of Undertakings
Chapter Five Abuse of Administrative Powers to Eliminate or Restrict Competition
Chapter Six Investigation of Suspect Monopolistic Conduct
Chapter Seven Legal Liability
Chapter Eight Supplementary Provisions

 



CHAPTER ONE

GENERAL PRINCIPLES

Article 1

This Law is formulated for the purposes of preventing and prohibiting monopolistic conducts, protecting fair market competition, improving the operational efficiency of the economy, safeguarding the consumers’ welfare and public interests of the society, and promoting the healthy development of the socialist market economy.

Article 2

This Law shall be applicable to monopolistic conducts in economic activities within the territory of the People’s Republic of China. This Law shall also be applicable to monopolistic conducts outside the territory of the People’s Republic of China that causes the effect of eliminating or restricting competition in the domestic market of the People’s Republic of China.

Article 3

Monopolistic conduct stipulated in this Law shall include:

  1. Monopoly agreements among undertakings;
  2. Abuse of dominant market position by undertakings; and
  3. Concentration of undertakings that have or may have the effect of eliminating or restricting competition.

Article 4

The State will formulate and implement competition rules that are appropriate for the socialist market economy, improve macroeconomic measures for a healthy, uniform, open, competitive and orderly market system.

Article 5

Undertakings may implement concentrations through fair competition and voluntary union in accordance with the laws, in order to expand their scale of operation and improve their market competitiveness.

Article 6

Undertakings with a dominant market position shall not abuse the dominant market position to eliminate or restrict competition.

Article 7

The State protects the lawful operation activities of undertakings who engage in industries controlled by the State-owned economy that have a vital bearing on the lifeline of the national economy and national security and industries that implement exclusive operation and sales in accordance with the laws. The State supervises and controls the operation of undertakings and the prices of their commodities and services in accordance with the laws in order to protect the consumers' welfare and promote technological improvement.

Undertakings of the industries stipulated in the preceding paragraph shall operate in accordance with the laws, in good faith, in a strict
self-disciplinary manner, accept public supervision and shall not harm the consumers' welfare by using their dominant position or exclusive dealing position.

Article 8

Administrative agencies or organizations empowered by the laws and regulations to exercise the duties of managing public affairs shall not abuse their administrative power to eliminate and restrict competition.

Article 9

The State Council will set up the Anti-Monopoly Committee that is responsible for organizing, coordinating and guiding the anti-monopoly work, and shall perform the following responsibilities:

  1. Researching and drafting the relevant competition policies;
  2. Organizing the investigation and assessment of the overall competition status in the market and publicizing assessment reports;
  3. Formulating and publicizing anti-monopoly guidelines;
  4. Coordinating the anti-monopoly administrative enforcement; and
  5. Any other duties as stipulated by the State Council.

The formation and work procedure of the Anti-Monopoly Committee of the State Council shall be formulated by the State Council.

Article 10

The authority responsible for anti-monopoly enforcement duties as appointed by the State Council (hereinafter referred to as the “State Council Anti-Monopoly Enforcement Authority) shall be responsible for anti-monopoly enforcement in accordance with this Law.

The State Council Anti-Monopoly Enforcement Authority may, if necessary, empower the corresponding authorities of the People’s Governments of the provinces, autonomous regions and municipalities to be responsible for relevant anti-monopoly enforcement in accordance with this Law.

Article 11

The industries’ associations shall strengthen the self-discipline of the industries, guide the undertakings of their industries in carrying out lawful competition and maintain the market competition order.

Article 12

The term “undertakings” in this Law shall refer to the natural persons, legal persons and other organizations that engage in the production or operation of commodities, or provision of services.

The term “relevant market” in this Law shall refer to the scope of commodities and geographical area in which the undertakings compete against each other during a certain period of time with respect to specific commodities or services (hereinafter referred to as the “commodities”).

CHAPTER TWO

MONOPOLY AGREEMENTS

Article 13

The following monopoly agreements between competing undertakings shall be prohibited:

  1. Fixing or changing the price of commodities;
  2. Restricting the output or sales for commodities;
  3. Dividing the sales market or raw materials purchasing market;
  4. Restricting the purchase of new technology or new facilities, or restricting the development of new technology or new products;
  5. Boycotting transactions jointly; and
  6. Any other monopoly agreements as determined by the State Council Anti-Monopoly Enforcement Authority.

The term “monopoly agreements” in this Law shall refer to the agreements, decisions or other concerted behavior that eliminate or restrict competition.

Article 14

The following monopoly agreements between undertakings and another party to the transaction shall be prohibited:

  1. Fixing the resale price of commodities to a third party;
  2. Restricting the minimum resale price of commodities to a third party; and
  3. Any other monopoly agreements as determined by the State Council Anti-Monopoly Enforcement Authority.

Article 15

Any agreement between undertakings that fall under any of the following circumstances as proved by the undertakings shall be exempted from the application of Articles 13 and 14:

  1. For improving technology, researching and developing new products;
  2. For upgrading product quality, reducing costs, improving efficiency, unifying product specifications and standards, or implementing division of work based on specialization;
  3. For improving the operational efficiency and enhancing the competitiveness of small and medium-sized undertakings;
  4. For serving public interests such as conservation of energy, protection of the environment, provision of disaster relief, etc.;
  5. For mitigating a serious decrease in sales volume or excessive overstock from production during the economic recession;
  6. For protecting the legitimate interests of foreign trade and foreign economic cooperation; or
  7. Any other circumstances as stipulated by the laws and the State Council.

In order to be exempted from application of Articles 13 and 14, in addition to any of the circumstances set out in items (1) to (5) of the preceding paragraph, the undertakings shall also prove that the agreements reached will not seriously restrict competition in the relevant market and the consumers are able to share the benefits derived therefrom.

Article 16

The industries’ associations shall not organize undertakings’ operators of their industries to engage in any monopolistic conduct prohibited by this chapter.

CHAPTER THREE

ABUSE OF DOMINANT MARKET POSITION

Article 17

Undertakings with a dominant market position are prohibited from engaging in the following behavior that abuse the dominant market position:

  1. Selling commodities at unfairly high prices or buying commodities at unfairly low prices;
  2. Selling commodities at prices below the cost without justified reasons;
  3. Refusing to deal with another party to the transaction without justified reasons;
  4. Limiting another party to the transaction to trade exclusively with them or with their designated undertakings without justified reasons;
  5. Tying products or imposing other supplementary unreasonable trading conditions in the transaction without justified reasons;
  6. Implementing discriminatory treatment on transaction prices and other trading conditions with parties to the transaction of equal standing without justified reasons; or
  7. Any other behavior that abuses the dominant market position as determined by the State Council Anti-Monopoly Enforcement Authority.

The term “dominant market position” in this Law shall refer to the market position that is held by undertakings in the relevant market which is capable of controlling the price and quantity of the commodities or other trading conditions, or can block or affect the entry of other undertakings into the relevant market.

Article 18

The dominant market position of undertakings shall be determined according to the following factors:

  1. The market share of that undertaking and the competition status in the relevant market;
  2. The ability of that undertaking to control the sales market or the raw materials purchasing market;
  3. The financial power and technical conditions of that undertaking;
  4. The degree of reliance of other undertakings on that undertaking in a transaction;
  5. The degree of difficulty of other undertakings to enter into the relevant market; and
  6. Other relevant factors in determining the dominant market position of that undertaking.

Article 19

Undertakings shall be presumed to have a dominant market position in any of the following circumstances:

  1. The market share of one undertaking accounts for 1/2 or more of the relevant market;
  2. The joint market share of two undertakings accounts for 2/3 or more of the relevant market; or
  3. The joint market share of three undertakings accounts for 3/4 or more of the relevant market.

In circumstances falling within items (2) or (3) of the preceding paragraph, where an undertaking has less than 1/10 of the market share, it shall not be presumed that such undertaking has the dominant market position.

The undertakings who have been presumed to have the dominant market position shall not be determined to have the dominant market position if they have evidence to prove that they do not have the dominant market position.

CHAPTER FOUR

CONCENTRATION OF UNDERTAKINGS

Article 20

Concentration of undertakings refers to the following circumstances:

  1. Consolidation of undertakings;
  2. Acquisition of control of other undertakings through acquisition of shares or assets; or
  3. Acquisition of control of undertakings or capability of exercising decisive influence over other undertakings by contract or other means.

Article 21

A prior notification shall be filed with the State Council Anti-Monopoly Enforcement Authority by the undertakings if the concentration of undertakings reaches the threshold for notification stipulated by the State Council, otherwise such concentration is not allowed.

Article 22

Undertakings are not required to notify the State Council Anti-Monopoly Enforcement Authority when the concentration falls within any one of the following circumstances:

  1. One undertaking involved in the concentration possesses more than 50% of the voting shares or assets of every other undertaking; or
  2. The same undertaking that does not participate in the concentration possesses more than 50% of the voting shares or assets of every undertaking that participate in the concentration.

Article 23

Undertakings shall submit the following documents and information to the State Council Anti-Monopoly Enforcement Authority for notification of concentration:

  1. A notification letter;
  2. A description of the effects of concentration on the competition status in the relevant market;
  3. A concentration agreement;
  4. A financial accounting report of the undertakings that participate in the concentration for the previous accounting year, which is audited by an accounting firm; and
  5. Other documents and information as required by the State Council Anti-Monopoly Enforcement Authority.

The notification letter shall contain the names, domiciles and the scope of business operation of the undertakings that participate in the concentration, the anticipated date for the implementation of concentration and other matters as stipulated by the State Council Anti-Monopoly Enforcement Authority.

Article 24

Where the documents and information submitted by the undertakings are incomplete, they shall supplement the documents and information within the time limit stipulated by the State Council Anti-Monopoly Enforcement Authority. Where the undertakings fail to supplement the documents and information within the stipulated period, notification shall be deemed not filed.

Article 25

The State Council Anti-Monopoly Enforcement Authority shall, within
30 days of receiving the documents and information submitted by the undertakings in accordance with Article 23 of this Law, conduct a preliminary review of the notified concentration of undertakings, and make a decision as to whether to conduct a further review and shall inform the undertakings in writing. The undertakings shall not implement the concentration prior to the decision of the State Council Anti-Monopoly Enforcement Authority.

The undertakings may implement the concentration when the State Council Anti-Monopoly Enforcement Authority makes a decision that no further review is required or it does not make a decision within the stipulated period.

Article 26

Where the State Council Anti-Monopoly Enforcement Authority decides to conduct a further review, it shall finish the review within 90 days from the date of such decision, and shall make a decision as to whether to prohibit the concentration of undertakings and notify the undertakings in writing. Where it makes a decision to prohibit the concentration of undertakings, it shall give an explanation of the reasons. The undertakings shall not implement the concentration during the period of review.

In any of the following circumstances, the State Council Anti-Monopoly Enforcement Authority may extend the review period stipulated in the preceding paragraph upon notifying the undertakings in writing, but the extension shall not exceed 60 days in maximum:

  1. Where the undertakings agree to extend the review period;
  2. Where the documents and information submitted by the undertakings are inaccurate and need further verification; or
  3. Where the relevant circumstances have significantly changed after the notification by the undertakings.

The undertakings may implement the concentration where the State Council Anti-Monopoly Enforcement Authority fails to make a decision within the stipulated period.

Article 27

The following factors shall be considered in the review of the concentration of undertakings:

  1. The market share in the relevant market of the undertakings participating in the concentration and their ability to control the market;
  2. The degree of concentration in the relevant market;
  3. The effect of the proposed concentration over the market entry and the advancement of technology;
  4. The effect of the proposed concentration over consumers and other related undertakings;
  5. The effect of the proposed concentration over the development of the national economy; and
  6. Other factors that affect market competition as determined by the State Council Anti-Monopoly Enforcement Authority.

Article 28

Where the concentration of undertakings have or may have the effect of eliminating or restricting competition, the State Council Anti-Monopoly Enforcement Authority shall make a decision to prohibit the concentration. However, where the undertakings can prove that the positive effects of such concentration significantly outweigh the negative effects, or the concentration satisfies the public interest, the State Council Anti-Monopoly Enforcement Authority may make a decision not to prohibit the concentration.

Article 29

With respect to concentrations not prohibited, the State Council
Anti-Monopoly Enforcement Authority may decide to attach restrictive conditions to reduce the negative effects caused by the concentration over competition.

Article 30

The State Council Anti-Monopoly Enforcement Authority shall make an announcement to the public in a timely manner of the decision to prohibit the concentration or the decision to attach restrictive conditions to the concentration.

Article 31

Where national security is involved in the case of acquisition of domestic enterprises by foreign capital or the participation by foreign capital in the concentration of undertakings by other means, in addition to a review on the concentration in accordance with this Law, a review on national security shall also be conducted in accordance with the relevant laws and regulations.

CHAPTER FIVE

ABUSE OF ADMINISTRATIVE POWER TO ELIMINATE OR RESTRICT COMPETITION

Article 32

Administrative agencies and organizations empowered by the laws and regulations to exercise the duties of managing public affairs shall not abuse the administrative power by limiting or limiting in a disguised way, the undertakings or individuals to operate, purchase or use only the commodities provided by any undertakings designated by them.

Article 33

Administrative agencies and organizations empowered by the laws and regulations to exercise the duties of managing public affairs shall not abuse the administrative power to conduct the following behaviors to impede the free circulation of commodities between different regions:

  1. Setting discriminatory charging items, implementing discriminatory charging standards or discriminatory prices for commodities from other regions;
  2. Setting technical requirements or inspection standards for commodities from other regions which are different from the like commodities from the local region, or taking discriminatory measures such as repeated inspection or repeated certification for commodities from other regions to restrict their entry into the local market;
  3. Taking administrative licensing procedures specifically targeting the commodities from other regions to restrict their entry into the local market;
  4. Setting up checkpoints on the roads or using other means to restrict the entry of commodities from other regions or restrict the exit of commodities from the local region; and
  5. Other behaviors preventing the free circulation of the commodities between different regions.

Article 34

Administrative agencies and organizations empowered by the laws and regulations to exercise the duties of managing public affairs shall not abuse the administrative power to eliminate or restrict the participation of undertakings from other regions in local bidding activities by such means as setting up discriminatory quality requirements, assessment standards or not publicizing information in accordance with the laws.

Article 35

Administrative agencies and organizations empowered by the laws and regulations to exercise the duties of managing public affairs shall not abuse the administrative power to eliminate or restrict the investment or establishment of branches in the local region by undertakings from other regions, by adopting such means as unequal treatment different from that of the local undertakings.

Article 36

Administrative agencies and organizations empowered by the laws and regulations to exercise the duties of managing public affairs shall not abuse the administrative power to compel the undertakings to engage in the monopolistic activities stipulated by this Law.

Article 37

Administrative agencies shall not abuse their administrative power to formulate provisions that eliminate or restrict competition.

CHAPTER SIX

INVESTIGATION OF SUSPECTED MONOPOLISTIC CONDUCT

Article 38

The Anti-Monopoly Enforcement Authority shall investigate the suspected monopolistic conduct in accordance with the laws.

Any organization or individual may report any suspected monopolistic conduct to the Anti-Monopoly Enforcement Authority. The Anti-Monopoly Enforcement Authority shall keep the confidentiality of the informants.

The Anti-Monopoly Enforcement Authority shall conduct the necessary investigations on the reports that are in written form which contain the relevant facts and evidence.

Article 39

The Anti-Monopoly Enforcement Authority may take the following measures in investigating the suspected monopolistic conduct:

  1. Entering the business premises or other relevant premises of the undertakings that are under investigation to conduct the investigation;
  2. Questioning the undertakings, interested parties or other relevant entities or individuals that are under investigation, and requiring them to explain the relevant situation;
  3. Examining and copying the documents and information such as the relevant vouchers, agreements, accounting books, business correspondence and electronic data of the undertakings, interested parties or other relevant entities or individuals that are under investigation;
  4. Sealing up and distraining relevant evidence; and
  5. Inquiring into the bank accounts of the undertakings.

The measures stipulated in the preceding paragraph may be adopted only after a written report is submitted to the person in charge of the Anti-Monopoly Law and that person’s approval is obtained.

Article 40

The investigation of the suspected monopolistic conduct by the
Anti-Monopoly Enforcement Authority shall be conducted by at least two enforcement officers, and they shall present their enforcement certificates.

The enforcement officers who conduct the inquiry and investigation shall make a written record which shall be signed by the person under inquiry or the person under investigation.

Article 41

The Anti-Monopoly Enforcement Authority and its staff shall keep the confidentiality of the commercial secrets obtained in the course of their enforcement.

Article 42

The undertakings, interested parties or other relevant entities or individuals that are under investigation shall cooperate with the Anti-Monopoly Enforcement Authority in the performance of their functions in accordance with the laws, and shall not refuse or obstruct the investigation of the Anti-Monopoly Enforcement Authority.

Article 43

The undertakings or interested parties that are under investigation shall have the right to state their opinions. The Anti-Monopoly Enforcement Authority shall verify the facts, reasons and evidence supplied by the undertakings or interested parties that are under investigation.

Article 44

After the investigation and verification of the suspected monopolistic conduct, if the Anti-Monopoly Enforcement Authority holds that the monopolistic conduct is confirmed, it shall make a decision on the treatment of the case in accordance with the laws, and it may announce its decision to the public.

Article 45

Regarding the suspected monopolistic conduct being investigated by the Anti-Monopoly Enforcement Authority, where the undertakings under investigation commit to adopt concrete measures to eliminate the effect of such monopolistic conduct within the stipulated period recognized by the Anti-Monopoly Enforcement Authority, the Anti-Monopoly Enforcement Authority may decide to suspend the investigation. The decision of suspending the investigation shall state the concrete details of the commitment made by the undertakings under investigation.

Where the Anti-Monopoly Enforcement Authority decides to suspend the investigation, it shall supervise the performance of the commitments by the undertakings. When the undertakings fulfill the commitments, the Anti-Monopoly Enforcement Authority may decide to terminate the investigation.

The Anti-Monopoly Enforcement Authority shall resume investigation in any one of the following circumstances:

  1. Where the undertakings fail to perform the commitment;
  2. Where the facts on which the decision to suspend the investigation are based have undergone significant changes; or
  3. Where the decision to suspend investigation was based on the incomplete or untrue information given by the undertakings.

CHAPTER SEVEN

LEGAL LIABILITY

Article 46

Where undertakings violate the provisions of this Law and implement monopoly agreements, the Anti-Monopoly Enforcement Authority shall order them to cease the illegal conduct, confiscate the illegal gains and impose a fine of 1% to 10% of the total turnover for the previous year; where undertakings have not implemented the monopoly agreements, the Anti-Monopoly Enforcement Authority may impose a fine below RMB 500,000.

Where undertakings voluntarily report the relevant information concerning the conclusion of monopoly agreements to the Anti-Monopoly Enforcement Authority and provide important evidence, the Anti-Monopoly Enforcement Authority may, in accordance with the circumstances, mitigate or exempt the punishment of such undertakings involved in the monopoly agreement.

Where the industries’ associations violate the provisions of this Law and organize the undertakings of their respective industries to conclude monopoly agreements, the Anti-Monopoly Enforcement Authority may impose a fine below RMB 500,000; where in serious circumstances, the social organizations registration and administration authority may revoke the registration in accordance with the laws.

Article 47

Where undertakings violate the provisions of this Law and abuse the dominant market position, the Anti-Monopoly Enforcement Authority shall order them to cease the illegal conduct, confiscate the illegal gains and impose a fine of 1% to 10% of the total turnover for the previous year.

Article 48

Where undertakings violate the provisions of this Law in implementing a concentration, the State Council Anti-Monopoly Enforcement Authority may order them to stop implementing the concentration, dispose of stocks or assets within a stipulated period, assign the business within a stipulated period and adopt other necessary measures to resume the status before the concentration, and may impose a fine below RMB 500,000.

Article 49

With respect to the fines specified in Articles 46, 47 and 48 of this Law, the Anti-Monopoly Enforcement Authority shall consider factors such as the nature, degree and duration of the illegal conduct in determining the specific amount of the fines.

Article 50

Where undertakings implement monopolistic conduct and cause losses to others, the undertakings shall bear civil liability in accordance with the laws.

Article 51

Where administrative agencies and organizations empowered by the laws and regulations to exercise the duties of managing public affairs abuse administrative power and implement conduct to eliminate or restrict competition, the higher-level authority shall order the rectification thereof and shall impose punishment on the persons directly in charge and other directly responsible persons in accordance with the laws. The Anti-Monopoly Enforcement Authority may put forward a proposal for handling the matter in accordance with the laws to the higher-level authority.

Where the laws and administrative regulations provide otherwise for the abuse of administrative power to implement conduct to eliminate or restrict competition by administrative agencies and organizations empowered by laws and regulations to exercise the duties of managing public affairs, such provisions shall prevail.

Article 52

When investigated by the Anti-Monopoly Enforcement Authority, if a person under investigation refuses to provide the relevant materials or information; provides false materials or information; hides, destroys or removes the evidence; or commits any other behaviors that prevent or obstruct the investigation, the Anti-Monopoly Enforcement Authority shall order a rectification thereof, and may impose a fine below RMB 20,000 on individuals and a fine below RMB 200,000 on entities. In serious circumstances, the Anti-Monopoly Enforcement Authority may impose a fine above RMB 20,000 and below RMB 100,000 on individuals, and a fine above RMB 200,000 and below RMB 1,000,000 on entities. Where the act constitutes a criminal offence, criminal liability shall be pursued in accordance with the laws.

Article 53

Where undertakings or interested parties are dissatisfied with the decision made by the Anti-Monopoly Enforcement Authority pursuant to Articles 28 and 29 of this Law, they may apply for the administrative review first in accordance with the laws; where they are dissatisfied with the decision of the administrative review, they may institute administrative litigation in accordance with the laws.

Where undertakings or interested parties are dissatisfied with the decision made by the Anti-Monopoly Enforcement Authority other than that stipulated in the preceding paragraph, they may apply for the administrative review or institute administrative litigation in accordance with the laws.

Article 54

Where any of the staff of the Anti-Monopoly Enforcement Authority engages in the abuse of power, dereliction of duty, acceptance of bribes or disclosure of the commercial secrets obtained in the course of enforcement, which constitutes a criminal offence, criminal liability shall be pursued in accordance with the laws; where the act does not constitute a criminal offence, administrative punishment shall be given in accordance with the laws.

CHAPTER EIGHT

SUPPLEMENTARY PROVISIONS

Article 55

This Law shall not be applicable to undertakings who exercise the intellectual property rights in accordance with the relevant provisions of the intellectual property laws and administrative regulations; however, this Law shall be applicable to those undertakings who abuse the intellectual property rights to eliminate or restrict competition.

Article 56

This Law shall not be applicable to the joint or concerted actions implemented in the course of operation activities of the agricultural producers and agricultural economic organizations such as production, processing, sales, transportation and storage of agricultural products.

Article 57

This Law shall be effective as of August 1, 2008.