PRC Anti-monopoly Law

Article 3: The monopolistic acts addressed by this Law include the following:

(1) monopoly agreements reached between or among business operators;

(2) abuse by business operators of their market dominance; and

(3) concentrations of business operators that have or could have the effect of eliminating or restricting competition.

Article 4: The state shall formulate and implement competition rules suitable for a socialist market economy, improve macro regulation and enhance a uniform, open, competitive and orderly market system.

Article 5: Business operators may, through fair competition and a voluntary alliance, organize concentrations and expand the size of their business in accordance with the law in order to improve their market competitiveness.

Article 6: Business operators that have market dominance may not abuse such dominance to eliminate or restrict competition.

Article 7: The state protects the lawful business activities of business operators in sectors that affect the national economic lifeline and state security and are controlled by the state-owned part of the economy as well as sectors in which exclusive operation and exclusive sale are implemented, it oversees and regulates the business acts and prices of the goods and services of such business operators in accordance with the law, safeguards the interests of consumers and promotes technological progress.

Business operators in the sectors specified in the preceding paragraph shall operate in accordance with the law, act in good faith, implement strict self-regulation, accept monitoring by the public and may not use their controlling position or exclusive operation/exclusive sale position to harm the interests of consumers.

Article 8: Administrative authorities, and organizations authorized by laws and regulations with the administration of public affairs may not abuse their administrative authority to eliminate or restrict competition.

Article 9: The State Council has established an anti-monopoly commission that is responsible for organizing, coordinating and guiding anti-monopoly work and performs the following duties:

(1) researching and drafting relevant competition policies;

(2) arranging for the investigation and assessment of the overall status of competition in the market and issuing assessment reports;

(3) formulating and issuing anti-monopoly guidelines;

(4) coordinating anti-monopoly administrative law enforcement work; and

(5) other duties as specified by the State Council.

The rules for the organization and work of the State Council's anti-monopoly commission shall be formulated by the State Council.

Article 10: The authorities charged with the duties of anti-monopoly law enforcement as specified by the State Council (hereinafter collectively referred to as the "State Council's Anti-monopoly Law Enforcement Authorities") shall be responsible for anti-monopoly law enforcement work in accordance herewith.

The State Council's Anti-monopoly Law Enforcement Authorities may, based on work requirements, authorize the relevant authorities of people's governments of provinces, autonomous regions and municipalities directly under the central government to be responsible for relevant anti-monopoly law enforcement work in accordance herewith.

Article 11: Industry associations shall strengthen industry self-regulation, guide business operators in their industries in competing in accordance with the law and safeguard the competitive order in the market.

Article 12: For the purposes of this Law, the term "business operator" means a natural person, legal person or other organization that engages in the production of and/or dealing in goods or the provision of services.

For the purposes of this Law, the term "relevant market" means the spectrum of goods and geographical area within which a business operator competes during a certain period with respect to specific goods or services (hereinafter collectively referred to as ¡°Goods¡±).

PART TWO: MONOPOLY AGREEMENTS

Article 13: Business operators that are in competition with each other are prohibited from reaching the following types of monopoly agreements:

(1) agreements that fix or change the prices of Goods;

(2) agreements that limit the quantity of Goods produced or sold;

(3) agreements that divide up the sales market or raw materials procurement market;

(4) agreements that restrict the purchase of new technology or new equipment or that restrict the development of new technology or new products;

(5) agreements for the joint boycotting of trade; and

(6) other types of monopoly agreements as determined by the State Council's Anti-monopoly Law Enforcement Authorities.

For the purposes of this Law, the term "Monopoly Agreement" means an agreement, decision or other concerted act that eliminates or restricts competition.

Article 14: Business operators are prohibited from reaching the following types of monopoly agreements with trade counterparties:

(1) agreements that fix the price of Goods sold on to third parties;

(2) agreements that limit the minimum price at which Goods are sold on to third parties; and

(3) other types of Monopoly Agreement as determined by the State Council's Anti-monopoly Law Enforcement Authorities.

Article 15: If a business operator can demonstrate that an agreement was reached for any of the following reasons, it shall not be subject to Article 13 or 14 hereof:

(1) for the purpose of improving technology or researching and developing a new product;

(2) for the purpose of improving product quality, reducing costs, increasing efficiency, unifying product specifications and standards or implementing a specialized division of labour;

(3) for the purpose of improving the operational efficiency of small and medium-sized business operators or strengthening the competitiveness of small and medium-sized business operators;

(4) for the purpose of saving energy, protecting the environment, providing disaster relief and for other such public-interest causes;

(5) for the purpose of mitigating a serious decline in sales or marked overproduction in an economic downturn;

(6) for the purpose of securing legitimate interests in foreign trade and foreign economic cooperation; or

(7) for other reasons as specified in law or by the State Council.

In a circumstance as specified in items (1) to (5) of the preceding paragraph where Articles 13 and 14 do not apply, the business operator shall additionally demonstrate that the agreement reached will not seriously restrict competition in the relevant market and that it will enable consumers to share in the benefits arising therefrom.

Article 16: An industry association may not organize business operators in its industry to engage in the monopolistic acts prohibited in this Part.

PART THREE: ABUSE OF MARKET DOMINANCE

Article 17: A business operator that has market dominance is prohibited from engaging in the following acts of abusing such dominance:

(1) selling Goods at an unfairly high price or purchasing Goods at an unfairly low price;

(2) selling Goods at below cost without legitimate reason;

(3) refusing to deal with trade counterparties without legitimate reason;

(4) restricting trade counterparties to dealing exclusively with it or with business operators designated by it without legitimate reason;

(5) selling Goods through a tying arrangement without legitimate reason or imposing other unreasonable trade conditions in the course of trading;

(6) treating equally qualified trade counterparties differently in terms of transaction price or other such transaction conditions without legitimate reason; or

(7) carrying out other acts of abuse of market dominance as determined by the State Council's Anti-monopoly Law Enforcement Authorities.

For the purposes of this Law, the term "market dominance" means a market position where a business operator has the ability to control the price or quantity of Goods or other trade conditions in the relevant market or to impede or affect the entry of other business operators into the relevant market.

Article 18: The determination of whether a business operator has market dominance shall be based on the following factors:

(1) the business operator's market share in the relevant market and the status of competition in the relevant market;

(2) the business operator's ability to control the sales market or raw materials procurement market;

(3) the business operator's financial resources and technical conditions;

(4) the degree to which other business operators rely on the business operator in their trading;

(5) the degree of difficulty faced by other business operators in entering the relevant market; and

(6) other factors relevant to the determination of the market dominance of the business operator.

Article 19: Business operators may be presumed to have market dominance if:

(1) one business operator has a market share of at least one half in the relevant market;

(2) two business operators have a total market share of at least two-thirds in the relevant market; or

(3) three business operators have a total market share of at least three-fourths in the relevant market.

Where a circumstance such as that specified in Item (2) or (3) exists, if the market share of certain business operators is less than one-tenth, such business operators shall not be presumed to have market dominance.

If a business operator that has been presumed to have market dominance has evidence substantiating that it does not have market dominance, it shall not be determined as having market dominance.

PART FOUR: CONCENTRATION OF BUSINESS OPERATORS

Article 20: The term "concentration of business operators" refers to the following circumstances:

(1) mergers of business operators;

(2) a business operator obtaining control of other business operators through the acquisition of their equity or assets; or

(3) a business operator obtaining the control of, or being able to exercise a decisive influence on, other business operators through contractual or other means.

Article 21: If a concentration of business operators reaches the report triggering level specified by the State Council, the business operators shall first file a report with the State Council's Anti-monopoly Law Enforcement Authorities. If they fail to file such report, they may not create the concentration.

Article 22: Business operators may be exempted from filing with the State Council's Anti-monopoly Law Enforcement Authorities if:

(1) one of the business operators involved in the concentration holds at least 50% of the voting shares or assets of each of the other business operators; or

(2) at least 50% of the voting shares or assets of each business operator involved in the concentration are held by one business operator not involved in the concentration.

Article 23: When filing a concentration report with the State Council's Anti-monopoly Law Enforcement Authorities, the business operators shall submit the following documents and information:

(1) a written report;

(2) an explanation of the effect that the concentration will have on competition in the relevant market;

(3) the concentration agreement;

(4) the financial accounting reports for the preceding financial year of the business operators involved in the concentration as audited by their accounting firms; and

(5) other documents and information as specified by the State Council's Anti-monopoly Law Enforcement Authorities.

The written report shall state the names, domiciles and scopes of business of the business operators involved in the concentration, the proposed date on which the concentration will be created and other matters as specified by the State Council's Anti-monopoly Law Enforcement Authorities.

Article 24: If the documents and information submitted by the business operators are incomplete, they shall submit the missing documents and information by the deadline set by the State Council's Anti-monopoly Law Enforcement Authorities. If they fail to submit the missing documents and information by the deadline, they shall be deemed not to have made the filing.

Article 25: The State Council's Anti-monopoly Law Enforcement Authorities shall conduct their preliminary examination of the reported concentration of business operators, render a decision on whether or not to conduct a further examination and notify the business operators in writing within 30 days from the date of receipt of the documents and information complying with Article 23 hereof submitted by the business operators. The business operators may not create the concentration until the State Council's Anti-monopoly Law Enforcement Authorities have rendered their decision.

If the State Council's Anti-monopoly Law Enforcement Authorities render a decision not to conduct a further examination or do not render a decision by the specified deadline, the business operators may create the concentration.

Article 26: If the State Council's Anti-monopoly Law Enforcement Authorities decide to conduct a further examination, they shall complete the examination, render a decision on whether or not to prohibit the concentration of business operators and notify the business operators thereof in writing within 90 days from the date of rendering the decision on further examination. If they render a decision prohibiting the concentration of business operators, they shall give the reasons therefor. The business operators may not create the concentration while the examination is ongoing.

In any of the following circumstances, the State Council's Anti-monopoly Law Enforcement Authorities may extend the examination period specified in the preceding paragraph by giving written notice to the business operators, provided that such extension does not exceed 60 days:

(1) the business operators consent to the extension of the examination period;

(2) the documents and information submitted by the business operators are inaccurate, requiring further checking; or

(3) a material change in relevant circumstances occurs after the filing by the business operators.

If the State Council's Anti-monopoly Law Enforcement Authorities do not render a decision by the specified deadline, the business operators may create the concentration.

Article 27: When conducting an examination of a concentration of business operators, the following factors shall be considered:

(1) the market share of the business operators involved in the concentration in the relevant market and their degree of control of such market;

(2) the degree of concentration in the relevant market;

(3) the effect of the concentration of business operators on entry into the market and technological progress;

(4) the effect of the concentration of business operators on consumers and other relevant business operators;

(5) the effect of the concentration of business operators on the development of the national economy; and

(6) other factors that affect market competition that the State Council's Anti-monopoly Law Enforcement Authorities believe should be taken into consideration.

Article 28: If a concentration of business operators has or could have the effect of eliminating or restricting competition, the State Council's Anti-monopoly Law Enforcement Authorities shall render a decision prohibiting the concentration of business operators. However, if the business operators can demonstrate that the beneficial effects on competition of the concentration clearly outweigh the detrimental effects, or that such concentration is in the public interest, the State Council's Anti-monopoly Law Enforcement Authorities may render a decision not to prohibit the concentration of business operators.

Article 29: With respect to a concentration of business operators that they do not prohibit, the State Council's Anti-monopoly Law Enforcement Authorities may decide to attach restrictive conditions that reduce the concentration's detrimental effects on competition.

Article 30: The State Council's Anti-monopoly Law Enforcement Authorities shall publicly announce decisions they render to prohibit or attach restrictive conditions to concentrations of business operators in a timely manner.

Article 31: Where a foreign investor participates in a concentration of business operators through a merger or acquisition of a domestic enterprise or another method and state security is involved, a state security review shall be conducted in accordance with relevant state provisions in addition to the examination of the concentration of business operators conducted in accordance herewith.

PART FIVE: ABUSE OF ADMINISTRATIVE AUTHORITY TO ELIMINATE OR RESTRICT COMPETITION

Article 32: An administrative authority or organization authorized by laws and regulations with the administration of public affairs may not abuse its administrative authority to restrict or in a disguised manner restrict a work unit or individual to dealing in, purchasing or using the Goods supplied by business operators designated by it.

Article 33: An administrative authority or organization authorized by laws and regulations with the administration of public affairs may not abuse its administrative authority by carrying out the following acts in order to hinder the free flow of Goods between regions:

(1) imposing discriminatory charges on, implementing discriminatory charge rates for, or specifying discriminatory prices for, Goods from outside the region;

(2) specifying technical requirements or inspection standards for Goods from outside the region that are different from those for the same type of Goods of the region or taking discriminatory technical measures against Goods from outside the region such as redundant inspections, redundant certification to restrict the entry of Goods from outside the region into the regional market;

(3) imposing administrative permissions applicable exclusively to Goods from outside the region to restrict their entry into the regional market;

(4) establishing customs posts or taking other measures to obstruct the entry of Goods from outside the region or the exit of Goods from the region; or

(5) other acts that hinder the free flow of Goods between regions.

Article 34: An administrative authority or organization authorized by laws and regulations with the administration of public affairs may not abuse its administrative authority by using methods such as setting discriminatory qualification requirements or assessment standards, or failing to issue information in accordance with the law to exclude or restrict business operators from outside the region from participating in bid invitation and submission activities in the region.

Article 35: An administrative authority or organization authorized by laws and regulations with the administration of public affairs may not abuse its administrative authority by using methods such as treating business operators from the region and business operators from outside the region unequally so as to exclude or restrict business operators from outside the region from investing in or establishing branches in the region.

Article 36: An administrative authority or organization authorized by laws and regulations with the administration of public affairs may not abuse its administrative authority by compelling business operators to engage in the monopolistic acts specified herein.

Article 37: An administrative authority may not abuse its administrative authority by formulating provisions that contain stipulations that eliminate or restrict competition.

PART SIX: INVESTIGATION OF SUSPECTED MONOPOLISTIC ACTS

Article 38: Anti-monopoly law enforcement authorities shall investigate suspected monopolistic acts in accordance with the law.

Work units and individuals shall have the right to report suspected monopolistic acts to anti-monopoly law enforcement authorities. Anti-monopoly law enforcement authorities shall maintain the confidentiality of persons who report such acts.

If a report is made in writing and provides the relevant facts and evidence, the anti-monopoly law enforcement authority shall conduct the necessary investigation.

Article 39: When conducting an investigation of suspected monopolistic acts, an anti-monopoly law enforcement authority may take the following measures:

(1) entering the place of business or other relevant premises of the business operator under investigation to conduct an inspection;

(2) questioning the business operator under investigation, materially interested parties or other work units or individuals and requiring them to explain relevant circumstances;

(3) reviewing and taking copies of documents and information such as relevant certificates, agreements, accounting books, business correspondence and electronic data of the business operator under investigation, materially interested parties or other work units or individuals;

(4) placing under seal or impounding relevant evidence; and

(5) making inquiries concerning the business operator's bank accounts.

If any of the measures specified in the preceding paragraph are to be taken, a written report thereon shall be submitted to the principal person in charge of the anti-monopoly law enforcement authority and require his/her approval.

Article 40: When an anti-monopoly law enforcement authority investigates suspected monopolistic acts, there may not be less than two law enforcement agents and they shall present their law enforcement credentials.

When questioning persons and conducting the investigation, the law enforcement agents shall keep a written record that shall be signed by the person being questioned or investigated.

Article 41: Anti-monopoly law enforcement authorities and their working personnel shall bear an obligation of confidentiality in respect of the trade secrets learned in the course of law enforcement.

Article 42: The business operator under investigation, materially interested parties and other relevant work units and individuals shall cooperate with the anti-monopoly law enforcement authority in the lawful performance of its duties and may not refuse or interfere with its investigation.

Article 43: The business operator under investigation and materially interested parties shall have the right to state their views. The anti-monopoly law enforcement authority shall check the facts, reasons and evidence presented by the business operator under investigation and materially interested parties.

Article 44: If an anti-monopoly law enforcement authority, after its investigation and checking of suspected monopolistic acts, is of the opinion that monopolistic acts are constituted, it shall, in accordance with the law, render a decision to handle the case and may publicly announce the same.

Article 45: With respect to the suspected monopolistic acts being investigated by an anti-monopoly law enforcement authority, if the business operator under investigation undertakes to take specific measures to eliminate the consequences of such acts within a period of time approved by the anti-monopoly law enforcement authority, the anti-monopoly law enforcement authority may decide to suspend the investigation. The decision suspending the investigation shall state the specifics of the undertaking given by the business operator under investigation.

If the anti-monopoly law enforcement authority decides to suspend the investigation, it shall monitor the performance by the business operator of its undertaking. If the business operator performs its undertaking, the anti-monopoly law enforcement authority may decide to terminate the investigation.

The anti-monopoly law enforcement authority shall resume the investigation if:

(1) the business operator fails to perform its undertaking;

(2) a material change in the facts on which the decision to suspend the investigation was based occurs; or

(3) the decision to suspend the investigation was made based on incomplete or false information provided by the business operator.

PART SEVEN: LEGAL LIABILITY

Article 46: If a business operator violates this Law by reaching and implementing a Monopoly Agreement, the anti-monopoly law enforcement authority shall order it to cease its illegal acts, confiscate its illegal income and fine it not less then 1% and not more than 10% of its sales turnover for the preceding year. If the Monopoly Agreement reached has not been implemented, a fine of maximum Rmb500,000 may be imposed.

If the business operator reports to the anti-monopoly law enforcement authority of its own accord relevant information on the Monopoly Agreement that it reached and provides important evidence, the anti-monopoly law enforcement authority may, depending on the circumstances, reduce the penalties on the business operator or exempt it altogether from such penalties.

If an industry association violates this Law by organizing the business operators in its industry in reaching a Monopoly Agreement, the anti-monopoly law enforcement authority may impose a fine of less than Rmb500,000. If the circumstances are serious, the registration authority for social organizations may cancel its registration in accordance with the law.

Article 47: If a business operator violates this Law by abusing its market dominance, the anti-monopoly law enforcement authority shall order it to cease its illegal acts, confiscate its illegal income and fine it not less than 1% and not more than 10% of its sales turnover for the preceding year.

Article 48: If business operators create a concentration in violation of this Law, the State Council's Anti-monopoly Law Enforcement Authorities shall order them to halt their implementation of the concentration, dispose of the shares or assets within a specified period of time, transfer business within a specified period of time and take other necessary measures to return to the status quo ante, and may impose a fine of maximum Rmb500,000.

Article 49: When determining the specific amount of a fine as specified in Articles 46, 47 and 48 hereof, the anti-monopoly law enforcement authority shall take into consideration factors such as the nature, degree and duration of the violation.

Article 50: If in committing monopolistic acts a business operator causes third parties to incur losses, it shall bear civil liability in accordance with the law.

Article 51: If an administrative authority or organization authorized by laws and regulations with the administration of public affairs abuses its administrative authority to eliminate or restrict competition, it shall be ordered to rectify the matter by the authority at the next higher level; the supervisors directly in charge and other directly responsible persons shall be disciplined in accordance with the law. The anti-monopoly law enforcement authority may submit its recommendations on handling the matter in accordance with the law to the relevant higher level authority.

If laws or administrative regulations provide otherwise with respect to the handling of administrative authorities or organizations authorized by laws and regulations with the administration of public affairs that abuse their administrative authority to eliminate or restrict competition, such provisions shall apply.

Article 52: With respect to an examination or investigation conducted in accordance with the law by an anti-monopoly law enforcement authority, if a party refuses to provide relevant materials and information, provides false materials and information, conceals, destroys or diverts evidence or otherwise refuses or interferes with the investigation, the anti-monopoly law enforcement authority shall order him/her/it to rectify the matter and, in the case of an individual, fine him/her at a maximum of Rmb20,000 and, in the case of a work unit, fine it at a maximum of Rmb200,000. If the circumstances are serious, anti-monopoly law enforcement authority may, in the case of an individual, fine him/her not less than Rmb20,000 and not more than Rmb100,000, and, in the case of a work unit, fine it not less than Rmb200,000 and not more than Rmb1,000,000. If a criminal offence is constituted, criminal liability shall be pursued in accordance with the law.

Article 53: In the event of dissatisfaction with a decision made by an anti-monopoly law enforcement authority in accordance with Article 28 or 29 hereof, an application may first be made for administrative review in accordance with the law. In the event of dissatisfaction with the administrative review decision, an administrative action may be instituted in accordance with the law.

In the event of dissatisfaction with a decision made by an anti-monopoly law enforcement authority other than one specified in the preceding paragraph, an application for administrative review may be made or an administrative action may be instituted in accordance with the law.

Article 54: If a member of the working personnel of an anti-monopoly law enforcement authority abuses his/her authority, is derelict in his/her duties, practises favouritism, commits irregularities or divulges trade secrets learned in the course of law enforcement and the same constitutes a criminal offence, his/her criminal liability shall be pursued in accordance with the law; if a criminal offence is not constituted, he/she shall be disciplined in accordance with the law.

PART EIGHT: SUPPLEMENTARY PROVISIONS

Article 55: This Law shall not apply to the exercise of intellectual property rights by business operators in accordance with relevant intellectual property laws and administrative regulations. However, this Law shall apply where a business operator abuses his intellectual property rights to eliminate or restrict competition.

Article 56: This Law shall not apply to joint or concerted acts carried out by agricultural producers and rural economic organizations in the course of business activities such as agricultural product production, processing, sale, transport, storage, etc.

Article 57: This Law shall be effective as of August 1 2008.