Skip to main content

  • AddRemove
  • Build a Report 

2009 — The Year of China’s Anti-Monopoly Law?

25 June 2009
Mayer Brown Article

2009 is the “year of the ox,” according to the Chinese zodiac, which is said to bring prosperity for those who work hard and demonstrate fortitude.  Those businesses that are striving to tap into China’s burgeoning markets will hope there is truth in this prophecy.

However, there are signs this Chinese lunar year may also herald more rigorous enforcement of competition laws in China, which could raise problems for businesses that have not factored competition compliance into their China-endeavours.

Since early January, the Chinese authorities have begun to release regulations, rules and guidelines to supplement the country’s new Anti-Monopoly Law (AML).  These documents go a long way toward transforming China’s competition regime from a broad but unfinished framework of legislative provisions into a more comprehensive system for enforcing competition policy.  As a result, it is expected that China will soon escape the administrative delays and regulatory inaction that has characterised much of this first year of the AML’s operation, and that more rigorous and sophisticated enforcement will follow.

This article outlines the major AML-related developments that have occurred since the commencement of the law on 1 August 2008, and briefly considers what further progress the  Chinese authorities are likely to make in developing the AML regime in the coming months.

Enforcement structure

In the lead up to the AML’s commencement, concerns were raised about the many uncertainties that existed in relation to the law.  In particular, there was growing frustration with the fact that the Chinese authorities had failed to announce which bodies would administer the law, and what role (if any) China’s pre-existing agencies with competition-related responsibilities would have.  Thankfully, a number of these matters were addressed in the days immediately following the law’s commencement.

Establishment of the Anti-Monopoly Commission

Article 9 of the AML contemplates that China’s State Council will set up an Anti-Monopoly Commission (AMC) to undertake tasks such as developing competition policies and coordinating the work of the several Anti-Monopoly Enforcement Authorities (AMEAs) that were to be authorised to enforce the law.  Fulfilling this mandate, the State Council formally established the AMC on 1 August 2008.

Interestingly, the AMC comprises 14 ministries and other departments of China’s central government, including bodies with responsibilities relating to China’s banking, insurance, electricity and transport sectors.  This has led some commentators to question whether there is a potential for the AMC to become bogged down in disputes over policy affecting businesses with which its constituent agencies may have close ties.

Shortly after the establishment of the AMC, the various AMEAs were named and their responsibilities outlined.


A new Anti-Monopoly Bureau under the Ministry of Commerce (Mofcom) has been assigned responsibilities in relation to merger control, continuing the work that Mofcom conducted in this area under the Regulations on the Acquisition of Domestic Enterprises by Foreign Investors and related regulations since 2003.  

Interestingly, Mofcom is also responsible for assisting Chinese parties participating in foreign competition-related proceedings.  Commentators have noted that this dual responsibility may give rise to problems if Mofcom is asked to cooperate with its foreign peers in multi-jurisdiction cartel investigations involving Chinese businesses.


The Anti-Monopoly Law & Anti-Unfair Competition Law Enforcement Bureau
(formerly called the Fair Trade Bureau) under the State Administration for Industry and Commerce (SAIC) has been granted broad enforcement responsibilities in relation to the AML prohibitions concerning monopoly agreements and abuse of dominance.  However, price-related conduct is excluded from the scope of the SAIC’s authority.

The SAIC is also responsible for enforcing China’s Anti-Unfair Competition Law (AUCL), which was the country’s primary competition law prior to the introduction of the AML.  Although the level of enforcement of the AUCL was relatively low, the experience gained by officials in administering the law may provide a useful basis on which the SAIC can build a strong AML-related enforcement capacity.  However, it is widely acknowledged that the SAIC will need to strengthen its economic analysis capabilities if relevant AML provisions are to be enforced in a manner consistent with international norms.


The Department of Price Supervision under the National Development and Reform Commission (NDRC) has been authorised to investigate all price-related monopoly cases, which may either arise from a case of monopoly agreement or the abuse of a dominant market position.  

The NDRC also administers China’s Price Law, which contains a number of provisions that  overlap with the AML and relate to anti-competitive conduct, including price fixing, predatory pricing, and price discrimination.  However, as with the AUCL, there were relatively few significant enforcement actions brought under the Price Law.  Indeed, NDRC officials have been far more active in fulfilling their other price-monitoring and price-setting responsibilities in relation to various heavily regulated industry sectors in China, leading some commentators to wonder whether there is a risk of the NDRC being more willing to use their AML-related powers to effectively dictate market prices in some sectors rather than to protect the mechanisms that would transfer this power to market forces.

Additionally, the division of authority between the SAIC and NDRC has raised concerns.   In particular, it has been suggested that there is too much potential for overlap in investigations and policy coordination.  

More generally, the involvement of three enforcement bodies in administering the AML has raised concern about the potential for inconsistent decision making and approaches to be taken to key concepts such as market definition and the application of exemptions.

The AMC will need to play a strong role in resolving conflicts in this area, and in ensuring coordinated enforcement programs more generally.

Merger control

The uncertainties that surrounded the AML’s merger control regime were a major concern for the legal and business communities in the lead up to the law’s commencement.   While it was expected that there would be limited enforcement of the prohibitions relating to monopoly agreements and abuse of dominance until relevant supplementary regulations, rules and guidance were introduced, the Chinese authorities made it clear that the merger control processes would continue unabated.

Although the AML contains an entire chapter dealing with the prohibition of concentrations that have the effect, or likely effect, of eliminating or restricting competition, and the requirement for parties to submit notifications regarding concentrations that meet stipulated thresholds, there were a number of key matters that remained unresolved by 1 August 2008.

For example, it was not clear which transactions qualified as concentrations under the law, what the thresholds for notification of concentrations were, or what information needed to be included in notification documents.  Many other uncertainties existed.

One by one, these issues are now being addressed, as explained below. 

Notification thresholds

The notification thresholds were published by the State Council on 3 August 2008 in theRules on Notification Threshold for Concentration of Undertakings (Rules).

These thresholds appear to be largely modelled on the European Union’s merger notification tests.  They require notification of a concentration where, in the previous year:

  • The combined global turnover of all parties to a concentration exceeds RMB 10 billion, and the turnover from within China of at least two parties each exceeds RMB 400 million; or

  • The combined turnover from within China of all parties exceeds RMB 2 billion and the turnover from within China of at least two parties each exceeds RMB 400 million.

However, unlike a previous consultation draft of these Rules, the finalised document contained no elaboration on the AML’s brief and imprecise definition of a “concentration.”  Instead, this matter was left to be addressed in subsequent implementation measures.

Guidance and directions on the notification process and related matters

In January 2009, Mofcom published further documents explaining key procedural aspects of the AML merger control regime.  These documents include the Directive Opinions on Notification of Concentration of Undertakings, the Directive Opinions on Documents and Information Submitted for Notification of Concentration of Undertakings, and the Guidelines for Anti-monopoly Review of Concentration of Undertakings.

Among other things, these documents:

  • Set out the procedures for requests for consultations with MOFCOM to discuss a concentration prior to the submission of a notification;
  • Outline in detail the required contents of a notification;
  • Describe the circumstances and manner in which Mofcom will investigate concentrations that do not otherwise trigger the notification threshold specified in the Rules; and
  • Effectively provide a roadmap for the submission of a notification.

Mofcom has also released public consultation drafts of four further documents: the Interim Measures for Notification of Concentration of Undertakings (Interim Notification Measures), the Interim Measures for Investigating and Disposing of Suspected Concentration of Undertakings Failing to File Notification in Accordance with the Law, the Interim Measures for Collecting Evidence on Suspected Monopolistic Concentration of Undertakings below the Thresholdsand the Interim Measures for Investigating and Disposing of Suspected Monopolistic Concentrations of Undertakings below the Thresholds for Notification.

The Interim Notification Measures may be the most significant of these documents, as it provides significant elaboration on the AML’s existing definition of a “concentration,” and also describes in detail the required method for calculation of an undertaking’s turnover for the purposes of applying the notification thresholds in the Rules.  It is hoped that this document will be finalised promptly, to allow for more certainty on these key issues.

Additionally, it is known that Mofcom is continuing to develop rules relating to how turnover should be calculated for financial companies.  Mofcom has also published a draft of Guidelines for Defining the Relevant Market, which guidelines will in principle apply to all of the AMEAs.

Mofcom’s merger review decisions to date

It is understood that Mofcom has already reviewed a significant number of notifications under the AML, and that more than 24 transactions have been cleared to proceed unconditionally.  Mofcom is not required to issue a written decision in relation to such clearances, but can communicate the outcome directly to the parties or simply let the 30-day first phase suspension period expire (at which time the concentration may proceed if Mofcom has not formally advised that it will conduct second phase review).

Three decisions have been published by Mofcom to date — two conditional clearance decisions and one outright prohibition.  Each of these decisions has been the subject of some criticism from international observers.

The first conditional clearance was published by Mofcom on 18 November 2008, and related to InBev B.V.’s acquisition of Anheuser-Busch, Inc.  Although this transaction received clearance, Mofcom did restrict the transacting parties from acquiring shares (or increasing their existing shareholdings) in certain specified Chinese brewers without prior Mofcom approval.  Mofcom also required InBev to notify Mofcom of any change to its controlling shareholders (or their shareholders in turn).

The decision has raised some concerns among antitrust experts, with a number of commentators questioning whether it is appropriate and consistent with international practice for Mofcom to impose conditions on a transaction that it did not find to be anticompetitive.  Additionally, observers have queried whether Mofcom, by imposing controls on InBev’s future ability to make acquisitions in China, is signalling that there are “default” limits on the extent of consolidation it is prepared to countenance in the industry — rather than reserving this as an issue to be judged on the merits in the context, and at the time, of any future deal that may arise.

More recently, on 24 April 2009, Mofcom announced that it had imposed conditions on the 1.6 billion dollar takeover by Japanese group Mitsubishi Rayon Co., Ltd. of unlisted UK acrylics maker Lucite International Group Limited.  Specifically, Mofcom required that several aspects of the target company’s existing operations in China continue to be operated independently until they can be divested, effectively to ensure that a sufficient degree of competition is maintained in relevant Chinese markets. Additionally, Mitsubishi Rayon is required not to expand relevant aspects of its operations in China for five years by acquisition of capacity expansion — a restriction on organic growth that many commentators believe is out of step with international norms in the area of merger control.

Most international attention and concern, however, has focussed on Mofcom’s decision to prohibit  Coca-Cola’s proposed acquisition of the Beijing-based company China Huiyuan Juice Group.  According to the decision statement, Mofcom was concerned that if the deal was implemented Coca-Cola would be able to extend its dominant position in the carbonated drinks market into the fruit juice market, and leverage the valued “Huiyuan” brand to raise market entry barriers and squeeze out smaller rivals.  While some commentators have supported Mofcom’s reasoning, others have questioned whether protectionist and political motivations were more central to the outcome.

What is clear is that Mofcom attempted to negotiate the imposition of conditions on the deal with Coca-Cola, to address the various competition concerns that had been identified.  However, Coca-Cola was reportedly unwilling to accept the conditions that were proposed, leading some analysts to speculate that Coca-Cola’s desire to push through with the deal may have waned due to global financial conditions during the lengthy Mofcom review period. 

Perhaps the most significant point to be made about these three published decisions is that they are each relatively brief, sketching Mofcom’s primary areas of concern very broadly, and omitting any significant analysis or explanation regarding crucial matters such as market definition and how (if at all) Mofcom weighed any pro-competitive benefits of the relevant transactions against their identified anti-competitive aspects.  Instead, the decision statements focus primarily on setting out the mechanics of the review process undertaken and specifying the outcome and details of any conditions imposed.

Accordingly, uncertainties continue to pervade the AML review process.  This means that businesses that are required to submit transactions for review in the months ahead will need to consult frequently with Mofcom at the pre-filing stage, and during the period of formal review, in order to obtain the insights (and provide the input) necessary to maximise the prospect of a positive outcome.


Monopoly agreements and abuse of a dominant market position

While Mofcom is the only one of the AMEAs to have adopted any finalised supplementary documents or guidance with respect to the AML, the SAIC and NDRC are well advanced in developing their own implementation regulations and rules relating to the AML’s monopoly agreements and the abuse of dominance prohibitions.

The SAIC has held a series of seminars to invite comments on draft procedural regulations relating to the investigation and sanction of conduct in breach of these prohibitions (the Procedure Regulation for the Industry and Commerce Authorities to Investigate and Sanction Monopoly Agreement and Abuse of a Dominant Market Position), and has now published the drafts for public comment.  Additionally, it has sought comments on draft regulations explaining how the provisions relating to administrative monopoly will be enforced (the Procedure Regulation for the Industry and Commerce Authorities to Prohibit Excluding or Restricting Competition by Abusing Executive Power).

On 12 June 2008 the NDRC issued a draft of the Anti-Monopoly Pricing Rules of the People’s Republic of China to a select group of stakeholders for review. The draft rules include provisions explaining how the NDRC will interpret important aspects of the AML prohibitions relating to price fixing, resale price maintenance, and the setting of unfairly low, predatory or discriminatory prices by dominant undertakings.

Neither the SAIC nor the NDRC has announced when these documents are likely to be finalised, or whether a public consultation process will be held in relation to them.  However, it is understood that senior Chinese officials are eagerly pressing for their release.

To date, the drafts that have surfaced have been more notable for their omissions than for including significant guidance regarding how the AML’s behavioural rules will be applied. 

Nonetheless, they do contain some interesting content, including:

  • Provisions indicating that the authorities intend to apply an essential facilities doctrine in the context of the AML’s abuse of dominance prohibition (after wording relating to this issue that appeared in early drafts of the AML was removed from the promulgated version);

  • Suggestions that the law’s monopoly agreement prohibition may be applied to several types of vertical arrangements beyond resale price maintenance practices (notwithstanding that resale price maintenance practices were the only vertical arrangements expressly referenced in the long list of monopoly agreements examples in the text of the AML); and

  • An outline of how leniency arrangements may be applied in respect of undertakings that voluntarily report their involvement in cartels to the enforcement authorities.

Court processes

The AML authorises private actions for damages by parties who suffer loss as a result of breaches of the AML.  However, at the time of the AML’s commencement, no guidance had been issued regarding which courts would hear AML-related private actions, or whether it would be a precondition of such actions that there be a prior finding of violation by an AMEA.

Some clarity has now been provided on these issues.  In particular, a notice issued by China’s Supreme Court during August 2008 appears to indicate that stand-alone AML-related actions can be brought.

China’s Supreme People’s Court has also designated that specialist intellectual property (IP) courts will have responsibility for hearing AML-related civil cases. This led to the establishment of an anti-monopoly collegial panel by the Shanghai No.2 Intermediate People’s Court in late December 2008, which panel has been charged with tasks that include the training of judiciary in AML-related issues and facilitating cooperation and information exchange with other courts regarding anti-monopoly cases.

The involvement of the specialised IP courts has been welcomed by many commentators, as the judges of these courts are generally regarded as being among the most well trained of China’s judiciary.  The Supreme People’s Court has publicly urged these judges to “carefully study” and engage in “relevant research” on the AML, and there are reports that the IP Bench of the Supreme People’s Court has begun working on judicial interpretations that will address key procedural and substantive issues relevant to AML-related cases, such as the requirements for establishing standing.

In the interim, reports of several AML cases have begun to surface.  To date, the main cases reported in the Chinese press include the following:

  • An action filed with the Beijing No.1 Intermediate People’s Court in August 2008 by four companies against the General Administration of Quality Supervision, Inspection and Quarantine (GAQSIQ), a governmental body.  The plaintiffs alleged that GAQSIQ abused its administrative power in violation of the AML by requiring companies to pay annual fees to register for an online quality monitoring network administered by a commercial company in which GAQSIQ holds a 30 percent ownership stake.
  • An action against Baidu, China’s largest search engine, for alleged abuse of dominance in the form of favouring certain of its trading partners by making sure they appear unduly prominently in search results.  
  • An action against the Beijing branch of China Netcom, brought by a plaintiff alleging that the telecoms carrier had engaged in an abuse of its dominant market position by providing differentiated services to different users.

Additionally, there are reports of AML-related actions or complaints having been brought against the Chongqing Insurance Association (relating to alleged acts of price-monopoly), the Beijing Branch of China Petroleum & Chemical (relating to alleged unfair high pricing by a dominant business), and the Construction Bank of China (for alleged abuse of dominance).

Several of these cases have since been abandoned, while others were not accepted due to circumstances such as the expiration of relevant statute of limitations periods. 

In other instances, while China’s courts have reportedly agreed to accept relevant cases, it appears that limited progress has been made in hearing them.

It seems likely that this limited progress is due, at least in part, to the absence of detailed guidance on how the Chinese authorities intend for the AML’s broadly worded prohibitions to be applied.  The prospects for AML-related court actions may therefore change once the SAIC and the NDRC have published finalised implementation regulations and rules relating to the monopoly agreement and abuse of dominance prohibitions.

Concluding comments

It is clear that the Chinese authorities still have some way to go to finalise the procedures and guidance documents that are necessary in order for enforcement of the AML to occur in a rigorous and consistent fashion.  However, there is also clear evidence that their efforts are quickening, and the three merger review decisions published to date indicate that Mofcom, in particular, is keen to flex its new muscle in this field.

Therefore, in keeping with the current focus in China on the symbolism of the ox, the legal and business community would do well to heed the lesson of the old Chinese proverb: “The ox is slow, but the earth is patient.”   For, while the Chinese authorities cannot be accused of haste in implementing relevant administration and enforcement mechanisms (particularly those relating to the law’s behavioural rules), it is clear they are committed to the prolonged process of developing a comprehensive and far-reaching competition regime — and are gradually moving towards that goal.

Given the AML’s broad reach and the importance of the Chinese economy, understanding the AML and the obligations it places upon participants in China’s markets will need to be a priority for many businesses.  The AML’s merger review regime is now in full swing, and the “development” phase in relation to the behavioural rules may not have much longer to run.  Accordingly, the business community should take advantage of the remaining period before there is an even greater level of enforcement of the law to ensure they are in a position of compliance.


  • Hannah C. L. Ha
    T +852 2843 4378

Related People

  • Hannah C. L. Ha
    T +852 2843 4378

The Build a Report feature requires the use of cookies to function properly.  Cookies are small text files that are placed on your computer by websites that you visit. They are widely used in order to make websites work, or work more efficiently.  If you do not accept cookies, this function will not work.  For more information please see our Privacy Policy

You have no pages selected. Please select pages to email then resubmit.