The PRC Anti-monopoly Law: one year on

From a technical perspective, Huiyuan/Coca-Cola raised some significant AML concerns. One of these related to the concept of relevant market. The definition and analysis of relevant market in the Huiyuan case is both delicate and persuasive, and it established a very solid basis for the final decision as well as providing guidelines for the future cases.

Another issue in this case was the one of national security. Under the AML framework, the concept of national security is too broad and general to be defined: there are no detailed instructions on what the national security issue is and which institution has the authority to launch an investigation. The good news is that the National Development and Reform Commission has realised the problem and related regulations and measures may be released in the near future.

Another point that needs to be addressed is the concentration of state-owned enterprises. Last year, China Unicom merged with China Netcom. The turnovers of both parties reached the threshold to trigger the AML's notification process, but the merger was never notified to Mofcom. That is to say, this concentration was in violation of the AML.

As the law to regulate competition, the AML should in theory be used without discrimination. When turnovers reach the threshold before concentration, the notification process should be compulsory no matter the nature of the enterprise.

Monopoly agreement and abuse of dominant market position
Dramatic development has taken place in the areas of monopoly agreement and abuse of dominant market position since promulgation of the AML. For example, the State Administration for Industry and Commerce (SAIC) released the following procedural and substantial regulations: the Provisions on Procedures for Investigation and Handling of Cases of Monopolistic Agreements and Cases of Abuse of Dominant Market Position by Administrations for Industry and Commerce, the Provisions Relevant to the Prohibition of Behaviour of Abuse of Dominant Market Position (Draft for Comments) and the Provisions Relevant to the Prohibition of Acts of Monopolistic Agreements (Draft for Comments).

As is well known, provisions on these two areas in China's AML are very general and there are few detailed instructions that can be relied on in practice. The SAIC's regulations bring practicable amendments.

A noticeable phenomenon in these areas is the rise in litigation launched by a private party challenging the market behaviour of a large enterprise. Since last year, the likes of Baidu, China Telecom and China Unicom have been sued with the cases heard by court. And more recently, Nokia has been challenged by its distributors because of its price monopoly behaviour.

On the one hand this indicates that monopoly agreements and the abuse of dominant market positions do exist. On the other, the AML has been accepted and, from a practical perspective, can accessed by the general population.

Administrative monopoly
Although the SAIC releasing the Provisions on Procedures for Suppression by Administrations for Industry and Commerce of the Abuse of Administrative Power to Eliminate or Restrict Competitive Behaviour is just one small step, taking the historical background into consideration its significance should not be ignored.

Administrative monopoly may be the normal means of monopoly in China, but due to local protectionism and economic reasons the local administrative institute lacks the initiative to regulate it. The procedural regulation empowers the SAIC and its branches to offer suggestions to each level of government as to how to deal with these sorts of violations.

The next step is how to improve the regulation. It should be accessible to the general population, which means that it must be possible for a private party to trigger an investigation through a formal procedure. There should also be procedural provisions to the administrative institutions as to how to deal with the suggestions. And the disclosure of such suggestions to the public is also desirable.

Looking back over the last year, we feel comfortable that the AML and its practice have improved a great deal. But we also realise that it is still far from perfect and that we have a long way to go.