Provisions for the Prohibition by Administrations for Industry and Commerce of Acts of Monopolistic Agreements

The term “monopolistic agreement” means an agreement, decision or other act of coordination that eliminates or restricts competition reached by business operators or arranged by an industry association among business operators in the industry and that violates Article 13, 14 or 16 of the Anti-monopoly Law.

Agreements and decisions include both those in written format and those made orally.

The term “other act of coordination” means that although the business operators have not expressly entered into a written or oral agreement or decision, concerted acts nevertheless exist in reality.

Article 3: When determining the existence of other acts of coordination, the following factors shall be considered:

(1) whether the market acts of the business operators are in concert;

(2) whether a communication of intentions or exchange of information among the business operators has occurred; and

(3) whether the business operators are able to provide a reasonable explanation for their concerted acts.

When determining the existence of another act of coordination, consideration shall additionally be given to the market structure, competitive situation, market changes, industry circumstances, etc. of the relevant market.

Article 4: Competing business operators are prohibited from reaching the following types of monopolistic agreements regarding the restriction of the production volume or sales volume of goods:

(1) those that limit the production volume of goods or the production volume of certain types or models of goods by limiting output, fixing output, halting production, etc.; and

(2) those that limit the sales volume of goods or the sales volume of certain types or models of goods by means such as refusing to supply the goods, limiting the quantity of the goods placed on the market, etc.

Article 5: Competing business operators are prohibited from reaching the following types of monopolistic agreements regarding the segmentation of the sales market or raw materials procurement market:

(1) those that divide up sales territories, sales counterparties or the types or quantities of the goods sold;

(2) those that divide up the procurement territory for, or types or quantities of, basic materials such as raw materials, semi-finished products, parts and components, and related equipment; and

(3) those that divide up the suppliers of basic materials such as raw materials, semi-finished products, parts and components, and related equipment.

Article 6: Competing business operators are prohibited from reaching the following types of monopolistic agreements regarding the restriction of the purchase of new technologies or new equipment or the restriction of the development of new technologies or new products:

(1) those that restrict the purchase or use of new technologies or new production processes;

(2) those that restrict the purchase, lease or use of new equipment;

(3) those that restrict the investment in or research and development of new technologies, new production processes or new products;

(4) those that provide for a refusal to use new technologies, new production processes or new equipment; and

(5) those that provide for a refusal to adopt new technical standards.

Article 7: Competing business operators are prohibited from reaching the following types of monopolistic agreements regarding a joint refusal to trade:

(1) those that provide for a joint refusal to supply or sell goods to certain business operators;

(2) those that provide for a joint refusal to procure or sell the goods of certain business operators; and

(3) those that jointly require certain business operators that they may not trade with competing business operators.

Article 8: Other monopolistic agreements not expressly provided for herein, with the exception of price monopolistic agreements, shall be determined by the State Administration for Industry and Commerce in accordance with the law.

Article 9: Industry associations are prohibited from using the following means to arrange for business operators in the industry to engage in acts of monopolistic agreement prohibited hereby:

(1) formulating or issuing an industry association charter, rules, decisions, notices, standards, etc. with provisions that eliminate or restrict competition; or

(2) convening, arranging or spurring business operators in the industry to reach an agreement, resolution, minutes, memorandum, etc. with provisions that eliminate or restrict competition.

Article 10: If business operators violate the provisions of any of Articles 4 to 8 hereof by reaching and implementing a monopolistic agreement, the administration for industry and commerce shall order them 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; if the monopolistic agreement has yet to be implemented, a fine of up to Rmb500,000 may be imposed.

If an industry association violates Article 9 hereof by arranging for business operators in the industry to reach a monopolistic agreement, the administration for industry and commerce may impose on it a fine of up to Rmb500,000; if the circumstances are serious, the administration for industry and commerce may request that the authority charged with the registration and administration of associations revoke its registration in accordance with the law.

When an 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 there is collusion among business operators or an industry association has arranged for collusion among business operators but no monopolistic agreement has been reached, the administration for industry and commerce shall promptly put a stop to such collusion.

If (a) business operator(s) halt(s) an act of monopolistic agreement at its/their own initiative, the administration for industry and commerce may, in view of the circumstances, reduce the penalties on such business operator(s) or exempt it/them from such penalties.

Article 11: If (a) business operator(s) report(s) to the administration for industry and commerce at its/their own initiative relevant matters concerning a monopolistic agreement that has been reached and provide(s) important evidence, the administration for industry and commerce may, in view of the circumstances, reduce the penalties on such business operator(s) or exempt it/them from such penalties.

When the administration for industry and commerce is deciding to reduce or exempt the penalties, it shall make its determination based on the time sequence in which the business operators reported at their own initiative, the importance of the evidence they provided, the circumstances of the reaching and implementation of the monopolistic agreement and their cooperation in the investigation.

The term “important evidence” means evidence that can play a critical role in the launching of an investigation or the determination of the existence of an act of monopolistic agreement by the administration for industry and commerce, including the business operators that are parties to the monopolistic agreement, the scope of the products involved, the details of the agreement reached and the method of reaching so, and specific details on the implementation of the agreement.

Article 12: The business operator that is the first to report at its own initiative details of the monopolistic agreement reached, provides important evidence and fully cooperates in the investigation at its own initiative shall be exempted from penalties. The penalties imposed on the other business operators that report at their own initiative details of the monopolistic agreement reached and provide important evidence shall be reduced by taking into account the actual circumstances.

Article 13: For the purposes of Articles 11 and 12 hereof, the terms “reduction of penalties” and “exemption from penalties” mainly refer to a reduction of, or exemption from, the fines specified in Article 46 of the Anti-monopoly Law.

Article 14: If business operators are able to provide material evidencing that the agreement they have reached complies with Article 15 of the Anti-monopoly Law and the same is so determined by the administration for industry and commerce, these Provisions shall not apply.

Article 15: In the event of dissatisfaction with a decision on administrative penalties 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: 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 18: For the purposes of these Provisions, the term “goods” includes services.

Article 19: The State Administration for Industry and Commerce is in charge of interpreting these Provisions.

Article 20: These Provisions shall be effective as of February 1 2011.