The Claim of the Abuse of Dominance and its Interpretation

Dependant on oil supplies from the China National Petroleum Corporation (CNPC) and the China Petroleum and Chemicals Corporation (Sinopec), and forbidden by law to extract or import their own, China's private oil companies had been urging the government to introduce policies aimed at creating a level playing field for all participants in the sector.

Some private entrepreneurs in the field of oil distribution told reporters at a recent conference that the AML would finally protect China's small private oil firms from the monopolistic practices of CNPC and Sinopec. After the conference, some Chinese lawyers confirmed they will approach the government or take judicial proceedings due to the abuse and market dominance of the giant oil companies.

In the chapter 3 of the AML, it stipulates the abuse of dominant market position in details.

Article 17 states: Business operators with a dominant market position are prohibited from committing any of the following acts of abusing the dominant market position (including). Refusing to trade with a trading party without any justifiable causes.

But if the private oil companies want to complain of CNPC's or Sinopec's abuse of dominance, they have a long way to go.

Firstly, they should prove CNPC or Sinopec has a dominant market position, which is subject to the abuse of dominance.

The term “dominant market position” as mentioned in the AML refers to a market position held by business operators that have the ability to control the price or quantity of commodities or other trading conditions in the relevant market or block or affect the entry of other business operators into the relevant market.

Article 18 of AML states: The dominant market position of a business operator shall be determined according to the following factors:

1. The market share of the business operator and its competitive status in the relevant market;

2. The ability of the business operator to control the sales market or the raw material supply market;

3. The financial and technological conditions of the business operator;

4. The extent of reliance on the business operator by other business operators in the transactions;

5. The degree of difficulty for other business operators to enter the relevant market; and6. Other factors relevant to the determination of the dominant market position of the business operator. ”

Article 19 of the AML also stipulates the presumption of dominant market position, and the associated standards that are related to market share.

Presently, according to the determination and presumption of dominant provisions in AML, the complainant should first identify the relevant market, and then determine the market share. But how to determine the relevant market is always a problem in China, and even The Provisions of the State Council on the Standard for Declaration of Concentration of Business Operators skirts around this sensitive issue and provides no declaration standard of market share.

The provision regarding the refusal to trade in the AML is too general and abstract to be enforced. Generally speaking, a business operator has no obligation to trade with its competitors, especially to supply its competitors. But the situation will become more complicated if a business operator has got a dominant market position when its competitors have considerably smaller market shares. In European cases, such small entities could not find an alternative supply and their business relationships therefore lasted for a considerable length of time. In such cases the dominant company may have been deemed to have an obligation to trade with smaller enterprises the purpose of such a decision is to protect the adequate competition in the market. In China, it is difficult to draw such a conclusion because no such precedents and specific guidelines apply for the abuse of dominance.

Finally there does appear to be a conflict between law and regulations. In 1999, there was a regulation issued by governmental departments stating that the wholesale of oil products is monopolised by CNPC and Sinopec, which related to concerns surrounding national economic security. Nowadays some experts criticise and articulate that deregulation of wholesale oil products will not do any harm to the economic security. However until now such a regulation is yet to be be modified.

Policy support has become crucial, and the government is currently considering a plan to provide a stable source of oil products with private firms and may attempt to make it easier for them to import oil. According to statistics, since the beginning of last year, 50 private oil enterprises have already gone bankrupt and a further 250 are suffering financial difficulties. To resolve this problem, the AML is far from doing enough.