Anti-price Monopoly Provisions

Article 3: For the purposes of these Provisions, the term “price monopoly act” includes:

(1) instances where business operators reach a price monopoly agreement; and

(2) instances where a business operator that has a dominant market position uses pricing means to eliminate or restrict competition.

Where an administrative authority or an organisation authorised by laws or regulations with the function of administrating public affairs abuses its administrative authority to eliminate or restrict competition in pricing, these Provisions shall apply thereto.

Article 4: With respect to industries that are controlled by the state-owned portion of the economy and affect the lifeblood of the national economy or state security, as well as industries subject to monopolies in accordance with the law, the state protects the lawful business activities of the business operators therein, and exercises oversight over and adjusts the business acts of the business operators and the prices of their goods and services in accordance with the law so as to safeguard the interests of consumers and promote technological progress.

Business operators in the industries mentioned in the preceding paragraph shall operate lawfully, act in good faith, regulate themselves strictly, subject themselves to monitoring by the public and may not use their controlling positions or monopoly positions to harm the interests of consumers.

Article 5: For the purposes of these Provisions, the term “price monopoly agreement” means an agreement, decision or other act of coordination that eliminates or restricts competition in pricing.

Article 6: When determining the existence of other acts of coordination, such determination shall be made based on the following factors:

(1) consistency in the pricing acts of the business operators; and

(2) a communication of intentions among the business operators.

When determining the existence of another act of coordination, consideration shall additionally be given to matters such as the market structure and market changes.

Article 7: Competing business operators are prohibited from reaching the following types of price monopoly agreements:

(1) those that fix or change the price level of goods or services (hereinafter collectively referred to as “Goods”);

(2) those that fix or change the band for price changes;

(3) those that fix or change the handling charges, discounts or other charges that affect prices;

(4) those under which an agreed upon price is used as the basis for transactions with third parties;

(5) those that specify a standard formula for the calculation of prices;

(6) those that specify that prices may not be changed without the consent of the other business operators that are parties to the agreement;

(7) those that fix or change prices in a disguised fashion by other means; and

(8) other price monopoly agreements as determined by the State Council's department in charge of pricing.

Article 8: Business operators are prohibited from reaching the following types of price monopoly agreements with transaction counterparties:

(1) those that fix the price at which Goods are resold to third parties;

(2) those that limit the minimum price at which Goods are resold to third parties; and

(3) other price monopoly agreements as determined by the State Council's department in charge of pricing.

Article 9: Industry associations are prohibited from engaging in the following acts:

(1) formulating rules, decisions, notices, etc. that eliminate or restrict price competition;

(2) arranging for business operators to reach price monopoly agreements prohibited by these Provisions; or

(3) arranging for business operators to reach agreement on or carry out other price monopoly agreement acts.

Article 10: If business operators can show that the agreement that they have reached complies with Article 15 of the Anti-monopoly Law, Articles 7 and 8 hereof shall not apply.

Article 11: A business operator that has a dominant market position may not sell Goods at an unfair high price or buy Goods at an unfair low price.

When determining an “unfair high price” or “unfair low price”, the following factors shall be considered:

(1) whether the sales price or purchase price is markedly higher or lower than the price at which other business operators sell or purchase the same type of Goods;

(2) where costs are essentially stable, whether the sales price was raised or the purchase price lowered beyond the normal range;

(3) whether the range of the price increase for the sale of Goods is markedly higher than the cost increase range, or whether the range of the price reduction for the purchase of goods is markedly greater than the transaction counterparty's cost reduction range; and

(4) other related factors that need to be taken into consideration.

Article 12: A business operator that has a dominant market position may not sell its Goods at below cost price without a legitimate reason.

For the purposes of this Article, the term “legitimate reason” includes:

(1) a price reduction to dispose of fresh or live Goods, seasonal Goods, Goods whose shelf life is about to expire and a backlog of Goods;

(2) a price reduction to sell Goods in order to discharge debts, change production or close down the business;

(3) promotion of the sale of a new product; or

(4) another reason that can establish that doing so is legitimate.

Article 13: A business operator that has a dominant market position may not, through the setting of excessively high sales prices or excessively low purchase prices, refuse to trade with a transaction counterparty in a disguised manner without a legitimate reason.

For the purposes of this Article, the term “legitimate reason” includes:

(1) the transaction counterparty having a serious bad credit record, or its business position being in a state of ongoing deterioration, which could expose the safety of the transaction to a greater risk;

(2) the transaction counterparty's being able to purchase the same type of Goods or substitute Goods from another business operator at a reasonable price or sell its Goods to another business operator at a reasonable price; or

(3) another reason that can establish that doing so is legitimate.

Article 14: A business operator that has a dominant market position may not, through price discounts or other such means, restrict a transaction counterparty to only dealing with the business operator itself or to only dealing with business operators designated by the business operator without a legitimate reason.

For the purposes of this Article, the term “legitimate reason” includes:

(1) ensuring product quality and safety;

(2) protecting its brand image or enhancing its level of service;

(3) the ability to markedly reduce costs and/or increase efficiency while enabling consumers to share in the benefits derived therefrom; or

(4) another reason that can establish that doing so is legitimate.

Article 15: A business operator that has a dominant market position may not, at the time of a transaction, impose unreasonable charges additional to the price.

Article 16: A business operator that has a dominant market position may not treat equivalent transaction counterparties in a discriminatory manner with respect to transaction price without a legitimate reason.

Article 17: For the purposes of these Provisions, the term “dominant market position” means that a business operator has such a position in the relevant market that it possesses the capacity to control the price, quantity or other transaction conditions of Goods, or to obstruct or affect other business operators' entry into the relevant market.

The term “other transaction conditions” means factors other than the price and quantity of Goods that can have a material impact on market transactions, including the grade of Goods, payment conditions, delivery method, after-sales services, the right to choose in trading and technical constraint conditions.

The phrase “obstruct or affect other business operators' entry into the relevant market” means precluding or delaying other business operators' entry into the relevant market or, although other business operators can enter the relevant market, greatly increasing the cost of entry, such that it is impossible for them to effectively compete with existing business operators, etc.

Article 18: A determination of whether a business operator has a dominant market position shall be made on the basis of the demarcation of the relevant market and based on the following factors:

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

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

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

(4) the degree to which other business operators rely on the business operator for their transactions;

(5) the degree of difficulty other business operators face when entering the relevant market; and

(6) other factors pertinent to determining whether the business operator has a dominant market position.

Article 19: A business operator may be inferred to have a dominant market position if:

(1) a business operator's share of the relevant market reaches one-half;

(2) two business operators' share of the relevant market in total reaches two-thirds; or

(3) three business operators' share of the relevant market in total reaches three-fourths.

Where the circumstance specified in Item (2) or (3) above obtains, if the market share of certain of such business operators is less than one-tenth, such business operators shall not be inferred to have a dominant market position.

If a business operator inferred to have a dominant market position has evidence showing that it does not have a dominant market position, it shall not be deemed to have a dominant market position.

Article 20: An administrative authority or an organisation authorised by laws or regulations with the function of administrating public affairs may not abuse its administrative authority to carry out the following acts and hamper the free flow of Goods:

(1) setting discriminatory charge items for Goods from outside the region;

(2) implementing discriminatory charge rates for Goods from outside the region;

(3) setting discriminatory prices for Goods from outside the region; or

(4) other acts of fixing prices or charges that hamper the free flow of Goods.

Article 21: An administrative authority or an organisation authorised by laws or regulations with the function of administrating public affairs may not abuse its administrative authority to compel a business operator to carry out a price monopoly act prohibited hereby.

Article 22: An administrative authority may not abuse its administrative authority to formulate regulations with provisions that eliminate or restrict price competition.

Article 23: If a business operator commits a price monopoly act as specified herein, the State Council's department in charge of pricing and the authorised competent pricing department of the People's Government of the province, autonomous region or municipality directly under the central government shall impose penalties in accordance with Articles 46, 47 and 49 of the Anti-monopoly Law.

If an industry association violates these Provisions by arranging for business operators in the industry to reach a price monopoly agreement, penalties shall be imposed in accordance with Articles 46 and 49 of the Anti-monopoly Law.

Article 24: If an administrative authority or an organisation authorised by laws or regulations with the function of administrating public affairs commits an act as specified herein concerning the abuse of its administrative authority to eliminate or restrict competition, the matter shall be handled in accordance with Article 51 of the Anti-monopoly Law.

Article 25: If, with respect to an investigation conducted in accordance with the law by the competent government pricing department, the furnishing of relevant materials or information is refused, or fraudulent materials or information is provided, or evidence is concealed, destroyed or diverted elsewhere or the investigation is otherwise refused or obstructed, penalties shall be imposed in accordance with Article 52 of the Anti-monopoly Law.

Article 26: When a business operator exercises its intellectual property rights in accordance with relevant intellectual property laws and administrative regulations, these Provisions shall not apply; however, these Provisions shall apply where a business operator abuses its intellectual property rights to commit a price monopoly act that eliminates or restricts competition.

Article 27: These Provisions shall not apply to acts of cooperation or coordination by agricultural producers or rural economic organisations in the course of business activities such as the production, processing, sale, transport or storage of agricultural products.

Article 28: The National Development and Reform Commission is in charge of interpreting these Provisions.

Article 29: These Provisions shall be effective as of February 1 2011. The Tentative Provisions for the Halting of Price Monopoly Acts issued by the National Development and Reform Commission on June 18 2003 shall be repealed simultaneously.