16 August 2013
Part I – SAIC Developments
A series of high-profile investigations involving foreign firms operating in China by the National Development and Reform Commission (NDRC) and the State Administration for Industry and Commerce (SAIC) has put China's antitrust regulators under the international spotlight in recent weeks.
In the first of a special three-part legal update advising clients on the significant increase in Anti-Monopoly Law (AML) enforcement activity and what this means for their businesses, we look at the SAIC, the regulator responsible for enforcing the law's non-pricing-related behavioural prohibitions, i.e., prohibitions of monopoly agreements and abuse of dominance in all cases except where the NDRC has jurisdiction.
SAIC's first abuse of dominance investigation
On 10 July 2013, the SAIC announced its investigation of Tetra Pak, the agency's first relating to abuse of dominance that it has made public. According to a short statement made by the SAIC, more than 20 provincial and municipal AICs are involved in the investigation, which has been launched in response to complaints received by the agency in recent years about the company's alleged abuse of its dominance position in relation to liquid food packaging, including through bundling practices and preferential treatment.
Tetra Pak has confirmed it has received requests from the SAIC and that it is cooperating with the regulator.
New online portal and previously unreported investigations
On 29 July 2013, the SAIC set up a new online platform through which all completed SAIC AML investigations will be made public. There are currently 12 cases published on the platform, details of which have previously been disclosed by the SAIC except for the most recent three investigations.
Nine of the 12 investigations involved industry associations (almost all were in the insurance and building/construction industries), and in most cases the SAIC found written evidence of a prohibited monopoly agreement or arrangement. Penalties ranged from around RMB 50,000 to RMB 2.5 million per operator, most of which were under RMB 500,000. The highest total fines to date remain those imposed in a 2012 case involving the Building Materials Industry Association of Liaoning Province, which the SAIC found to have facilitated business operators in reaching monopoly agreements with each other. Fines for the 14 operators totalled around RMB 16 million.
The most recent case published on the portal was a year long investigation which concluded in April 2013, and involved bundling by a large number of tourism operators in Xishuangbanna County of Yunnan Province, including 46 hotels, 15 tourist attraction sites, 2 coach companies and 20 travel agencies. The SAIC imposed fines of RMB 400,000 each on only the Yunnan Tourism Association and the Yunnan Travel Agency Association, rather than on the individual operators themselves.
The other two previously unreported cases both involved trade associations in the construction industry in Zhejiang Province and Sichuan Province respectively.
While the launch of the portal appears largely a consolidation exercise at this stage and has yet to offer new insights into the authority's approach to cases, the new system is certainly a welcome move towards greater transparency, consistency and completeness in respect of the reporting of AML investigations undertaken by the SAIC.
In Part II – The NDRC's recent RPM and price fixing investigations
Mayer Brown JSM will shortly publish Part II of this legal update, which provides an overview of the NDRC's recent cases, including the completed investigations into the pricing of infant formula and jewellery, as well as the new investigation into alleged resale price maintenance practices by foreign car makers and inquiries into the pricing of drugs.
In Part III – What to do?
Part III of this legal update will give practical guidance on how businesses should respond to the launch of an AML-related investigation into their operations.