Provisions for the Prohibition by Administrations for Industry and Commerce of Acts of Abuse of Dominant Market Position

Article 3: The term “dominant market position” means that a business operator has such a position in the relevant market that it possesses the ability to control the price, quantity or other transaction conditions of goods, or to obstruct or affect other business operators' entry into the relevant market.

For the purposes of this Article, 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 quality of the goods, payment conditions, delivery method and after-sales services.

For the purposes of this Article, the phrase “can obstruct or affect other business operators' entry into the relevant market” means precluding other business operators' entry into the relevant market or delaying the entry, within a reasonable period of time, of other business operators into the relevant market, or, although other business operators can enter the relevant market, the cost of entry is so raised that it is difficult for them to effectively compete in the market, etc.

Article 4: A business operator that has a dominant market position is prohibited, without a legitimate reason, from refusing to trade with a transaction counterparty by using the following means:

(1) reducing the existing trading volume with the transaction counterparty;

(2) delaying or suspending the existing transactions with the transaction counterparty;

(3) refusing to conduct new transactions with the transaction counterparty;

(4) setting restrictive conditions, such that it is difficult for the transaction counterparty to continue trading with the business operator; or

(5) refusing to allow the transaction counterparty to use its necessary facilities under reasonable conditions in its production and operating activities.

When making a determination with respect to Item (5) of the preceding paragraph, comprehensive consideration shall be given to factors such as the feasibility of separately investing and establishing or separately developing and constructing such facilities, the degree to which the transaction counterparty relies on such facilities to effectively carry on its production and operating activities, the possibility of the business operator providing such facilities and the effect that the same would have on the business operator's own production and operating activities.

Article 5: A business operator that has a dominant market position is prohibited, without a legitimate reason, from carrying out the following acts that restrict trading:

(1) limiting the transaction counterparty to trading only with the business operator;

(2) limiting the transaction counterparty to trading only with the business operators designated by the business operator; or

(3) requiring that the transaction counterparty may not trade with the business operator's competitors.

Article 6: A business operator that has a dominant market position is prohibited, without a legitimate reason, from tying the sale of goods or, in the course of a transaction, imposing other unreasonable transaction conditions:

(1) in a manner counter to trading practice, consumer habits, etc. or ignoring the functions of the goods, forcibly tying different goods together for sale or selling them as a bundle;

(2) imposing unreasonable restrictions on the contract term, payment method, method of transportation and delivery of the goods, or the method of provision of the services, etc.;

(3) imposing unreasonable restrictions on the sales territory or sales counterparties for the goods, after-sales services, etc.; or

(4) imposing transaction conditions that have no connection with the subject matter of the transaction.

Article 7: A business operator that has a dominant market position is prohibited, without a legitimate reason, from imposing the following discriminatory practices on equivalent transaction counterparties in respect of transaction conditions:

(1) imposing different transaction quantities, types of goods or quality grades;

(2) imposing different preferential conditions, such as quantity discounts, etc.

(3) imposing different payment conditions or delivery methods; or

(4) imposing different after-sales service conditions, such as warranty terms and term, repair conditions and times, provision of spare parts and components, and technical guidance.

Article 8: When determining whether a reason as specified in Articles 4 to 7 hereof is legitimate, the administration for industry and commerce shall comprehensively consider the following factors:

(1) whether the relevant act was taken by the business operator on the basis of its normal business activities and normal benefits; and

(2) the effect of the relevant act on economic operation efficiency, the public interest and economic development.

Article 9: Other acts of abuse of dominant market position not expressly provided for herein, with the exception of acts of price monopoly, shall be determined by the State Administration for Industry and Commerce in accordance with the law.

Article 10: A determination of whether a business operator has a dominant market position shall be made on the basis of the following factors:

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

the term “market share” means the percentage of the relevant market accounted for by the sales turnover, sales volume and other such indicators of the business operator's specific goods during a certain period of time;

when analysing the state of competition in the relevant market, the development of the relevant market, the number of existing competitors and their market shares, the degree of discrepancy in the goods and the details of potential competitors shall be considered;

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

when determining a business operator's capacity to control the sales market or raw materials procurement market, the business operator's capacity to control sales channels or procurement channels, capacity to affect or decide prices, quantities, the contract term or other transaction conditions and its capacity to obtain on a priority basis basic materials required for the enterprise's production and operations such as raw materials, semi-finished products, parts and components and related equipment shall be taken into consideration;

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

when determining a business operator's financial strength and technical conditions, the scale of the business operator's assets, its financial capabilities, profitability, financing capabilities, research and development capabilities, technical equipment, technical innovation and application capabilities, the intellectual property that it owns, etc. shall be taken into consideration;

when analysing and determining the financial strength and technical conditions of a business operator, the financial strength and technical conditions of its affiliates shall additionally be taken into consideration;

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

when determining the degree to which other business operators are reliant on the business operator for their transactions, the volume of transactions between the other business operators and the business operator, the length of time during which the trading relationships have persisted, the degree of difficulty in turning to other transaction counterparties, etc. shall be taken into consideration;

(5) the degree of difficulty for other business operators to enter the relevant market;

when determining the degree of difficulty for other business operators to enter the relevant market, the market access system, possession of the necessary facilities, sales channels, funding and technical requirements, costs, etc. shall be taken into consideration; and

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

Article 11: 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.

Article 12: If a business operator inferred to have a dominant market position can, based on the factors set forth in Article 10 hereof, demonstrate that it does not have the capacity to control the price, quantity or other transaction conditions of goods, or obstruct or affect other business operators' entry into the relevant market, it shall not be deemed to have a dominant market position.

Article 13: A business operator suspected of abusing its dominant market position may argue the reasonableness of its acts and provide relevant evidence during the time period specified by the administration for industry and commerce.

Article 14: If a business operator violates the provisions of any of Articles 4 to 7 or 9 hereof by abusing its dominant market position, the administration for industry and commerce shall order it to cease the illegal act, confiscate the illegal income and impose a fine of not less than 1% and not more than 10% of the previous year's sales turnover.

When the administration for industry and commerce is determining the specific amount of a fine, it shall consider factors such as the nature of the violation, the circumstances, its extent and its duration.

If a business operator halts the abuse of its dominant market position at its own initiative, the administration for industry and commerce may, in view of the circumstances, reduce the penalties on the business operator or exempt it from such penalties.

Article 15: In the event of dissatisfaction with a decision on administrative penalties, etc. rendered by an administration for industry and commerce in accordance herewith, an application for administrative review may be made or an administrative action instituted in accordance with the law.

Article 16: Anti-monopoly law enforcement personnel of an administration for industry and commerce shall, in accordance with 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, handle cases in strict accordance with the law.

If a member of the anti-monopoly law enforcement personnel of an administration for industry and commerce abuses his/her authority, is derelict in his/her duties, practises favouritism by committing fraud or discloses trade secrets learnt in the course of his/her law enforcement work, he/she shall be dealt with in accordance with relevant provisions.

Article 17: For the purposes of these Provisions, the term “goods” includes services.

Article 18: The State Administration for Industry and Commerce is in charge of interpreting these Provisions.

Article 19: These Provisions shall be effective as of February 1 2011.