Get ready for more enforcement

China Law & Practice's Annual Review was released at the Awards Ceremony in Beijing this month. Part of the Annual Review comprises insights from leading lawyers. It also includes analysis of the most important news stories of the year. Please click here to view the Annual Review on issuu.

1. What have been the key changes in legislation affecting competition over the past 12 months?

The most important anti-monopoly legislation during the past year was the Supreme People's Court, Provisions on Several Issues Concerning the Application of the Law in Trials of Civil Dispute Cases Arising from Monopolistic Acts (the Judicial Interpretation) promulgated by the Adjudication Committee of the Supreme People's Court on May 3 2012 and implemented from June 1 2012.

a. How did these changes affect the competition regime?

The Judicial Interpretation comprises 16 articles covering important issues such as scope of application, standing of plaintiffs, jurisdiction, allocation of the burden of proof, the relationship between civil monopoly dispute cases and anti-monopoly administrative law enforcement, liability for compensation and limitation of actions. They have an extremely important guiding significance for civil anti-monopoly actions in China.

b. Did you expect these changes?

Private enforcement of anti-monopoly law is one of the essential integral parts of the entire enforcement of ministerial level laws in other relatively mature jurisdictions. To date, enforcement of the Anti-monopoly Law in China has largely relied on the power of the public authorities, but the issuance of the Judicial Interpretation, supports, at least from a systemic perspective, the value of the existence of private enforcement.

2. What developments are in the running for the next 12 months?

In the coming year, the developments that we are anticipating include:

Further improvement of the legal system

A legal system always requires continuous improvement in enforcement as this is the only way that it can become more reasonable and more pertinent. In the five years that the Anti-monopoly Law has been formally implemented, the authorities have accumulated extensive law enforcement practical experience. We anticipate that, in the coming year, the various authorities will further improve the existing systems by combining practical experience with means such as legislation or legal interpretations.

More specifically, in the civil procedure field, we anticipate the issuance of more detailed and practicable interpretations addressing the standing of entities involved in civil procedures, litigation methods and the issue of the dovetailing of civil procedure with administrative law enforcement. With respect to review of concentrations of business operators, we anticipate the establishment of a simplified procedure system and the formal issuance of regulations on the attachment of restrictive conditions to concentrations of business operators. As for administrative investigation, we are anticipating the formal issuance of guidelines for anti-monopoly law enforcement in the intellectual property field, the publication of guidelines on the issue of monopolistic agreements in certain industries and explanations of suspected illegal monopolistic acts other than those expressly set forth in the Anti-monopoly Law.

Greater transparency in law enforcement

The degree of transparency in the enforcement of the Anti-monopoly Law has increased markedly in the past year. In the civil procedure field, the decisions in two cases that have relatively great influence (the Qihoo 360 v Tencent abuse of dominant market position case and the Rainbow Medical v Johnson & Johnson vertical monopolistic agreement case) were made public, with the trial at first instance in the Qihoo case even being broadcast live on the internet. In the administrative investigation field, the National Development and Reform Commission (NDRC) and State Administration for Industry and Commerce (SAIC) published the details of their investigations of major cases on government home pages or in domestic mainstream media. Furthermore, with respect to review of concentrations of business operators, since last year, the Ministry of Commerce (MOFCOM) has regularly published the names and filing dates of all concentration reviews since the entry into effect of the Anti-monopoly Law. It can be said that the various anti-monopoly authorities have made great efforts to enhance the transparency of law enforcement.

We hope that, in the coming year, the authorities can continue in this spirit, disclosing to the public more information on the application of discretion involved in the admission of facts, interpretation of the law, law enforcement and review processes, thereby further increasing the transparency of law enforcement.

Increase in the number and influence of cases

With the accumulation of experience by the anti-monopoly law enforcement authorities and the increase in the competition awareness of the public, we foresee that there will be more anti-monopoly law enforcement and civil anti-monopoly cases in the coming year. The status of the Anti-monopoly Law in the overall legal system will also rise and genuinely fulfil its role as the “constitution of the economy”.

3. Over the past 12 months, have you seen the Anti-monopoly Law applied fairly to both domestic and foreign businesses?

Objectively speaking, the implementation of the Anti-monopoly Law in China has essentially achieved equality between domestic and foreign companies. Among the cases investigated and dealt with by the NDRC and the SAIC, a large percentage have targeted the acts of domestic enterprises. In terms of the amounts of the fines imposed, no special consideration has been given to domestic enterprises either. For example, in the Maotai/Wuliangye case investigated and dealt with by the NDRC at the beginning of 2013, each company was fined in excess of Rmb200 million, the highest fine amounts imposed in all final administrative investigation cases to date.

4. What are some the highlights of the year regarding AML cases? How do these help in understanding how the AML law is applied?

The anti-monopoly cases in the past year whose influence is relatively high include:

LCD case

Strictly speaking, the LCD case was in fact investigated and handled under the Pricing Law because the violation occurred before the the Anti-monopoly Law came into effect. However, this case involved typical cartel behaviour, targeted what is in global anti-monopoly enforcement history a very representative case and the law enforcement process additionally involved the application of extremely important systems under the Anti-monopoly Law, i.e. the tip reporting system and the leniency system. Accordingly, it will, in respect of future law enforcement relating to horizontal agreements under the Anti-monopoly Law, have extremely valuable referential significance.

Maotai/Wuliangye case

The Maotai/Wuliangye case is the first vertical monopolistic agreement case investigated and dealt with under the Anti-monopoly Law available through public channels. Furthermore, as at July 2013, the fines imposed are the largest ever imposed in any administrative investigation case.

Qihoo 360 vs Tencent

This abuse of dominant market position case is the first civil procedure case available through public channels in which systematic professional anti-monopoly legal and economic analyses were carried out and is, to date, the civil anti-monopoly case available through public channels with the highest subject amount.

5. What practical advice would you give to foreign companies about to engage in an acquisition that would trigger an AML review?

Do not overlook the effect that a China review of a concentration of business operators could have on a transaction. As in the majority of jurisdictions, a review of a concentration of business operators in China takes the form of advance filing. That is to say that a transaction that requires a filing may not be carried out until the review approval decision has been obtained. As China has not yet established a rapid review mechanism, and as MOFCOM has relatively few case handling officers, the time required for case reviews is relatively long. Accordingly, we have seen numerous transactions that are held up for a long time because the China review of the concentration of business operators has not passed, which has a significant impact on the company. It is best if an enterprise can, at the acquisition transaction feasibility assessment stage, consider the requirements for the review of the concentration of business operators in all jurisdictions, including China.

6. There has been much talk about MOFCOM streamlining the approval process for simple mergers. How will these simple mergers be classified and who will it affect?

The principal criterion for the simplified review procedure for business operator concentrations is the shares of the relevant market of the business operators involved in the concentration. Accordingly, the soon to be issued simplified procedure system will greatly increase the speed of reviews of the acquisition transactions of certain financial investors and of transactions that will have a minimal impact on the China market. Furthermore, the establishment of the simplified procedure system may help concentrate the limited review resources on cases that could have the effect of eliminating or limiting competition, thereby accelerating to a certain extent the speed of reviews of cases not subject to the simplified procedure.

7. MOFCOM closely scrutinises M&A transactions. In your experience what is their focus during merger review and how do their practices compare with other foreign competition regulators?

In reviewing a business operator concentration, one of the factors that MOFCOM pays the closest attention to is the shares of the relevant market of the business operators involved in the concentration. This point is consistent with other jurisdictions. There are, however, also some differences in the review process. For example, MOFCOM's requirements in respect of the definition of the relevant market are comparatively stringent, whereas in jurisdictions such as the EU and the US, the importance of defining the relevant market is gradually declining.

8. What has been the highlight of your competition cases over the past 12 months and why was it challenging?

During the past year, we accepted many types of anti-monopoly cases, one of which was acting as counsel in the Qihoo 360 v Tencent abuse of dominant market position case. During the first few years after the entry into effect of the Anti-monopoly Law, the anti-monopoly business in China mainly consisted of business operator concentration filings. Although there was a small surge of anti-monopoly actions as early as 2008, in many cases there were no professional anti-monopoly legal and economic analyses and the adducement of evidence was also rather haphazard. Even more turned on a subjective perception of the term “anti-monopoly”.

We, on the other hand, in acting as counsel in this case, expended a great deal of effort in anti-monopoly legal analysis and economic analysis, carrying out detailed research and discussion on the definition of relevant market, constitution of abuse and determination of the effect of eliminating or limiting competition. Furthermore, we also brought in expert witnesses to participate in the court investigation for the first time. When the trial at first instance began in the Guangdong Provincial Higher Court in May 2012, it attracted the attention of a wide swathe of the public. The case has yet to conclude and has become the first anti-monopoly litigation case to go to appeal before the Supreme People's Court. However the case ultimately plays out, its effect on civil Anti-monopoly Law actions in China cannot be ignored.

9. If you had to give one piece of practical advice to foreign clients about the competition regime in China, what would it be?

Do not for a moment believe the adage that “the law does not punish when there is a surfeit of perpetrators” or the claim that “there is no precedent for punishment”. The Anti-monopoly Law in China has only been implemented for a short time, and many punishments that have been published recently are without precedent. Many multinational corporations have been assiduous in their legal compliance work in jurisdictions with sound anti-monopoly laws, but in China have followed the old saying of “when in Rome, do as the Romans do”, treating lightly Anti-monopoly Law compliance work. Such an attitude of relying on luck could result in the company incurring huge losses. Thus, we would recommend that, despite the fact that enforcement of the Anti-monopoly Law in China is only finding its feet, it still deserves to be treated with great seriousness so as to nip any problems in the bud.

Author biography

Susan Ning

Susan joined King & Wood Mallesons in 1995. She is a senior partner and the head of the International Trade, Antitrust & Competition Group. She is one of the first legal practitioners in China to set up an Antitrust and Competition specialist division.

Susan's current practice focuses on two main areas: securing MOFCOM merger clearance for clients; and advising on AML compliance issues. Since the enactment of the AML, Susan has undertaken more than 100 antitrust merger control filings on behalf of blue-chip clients, which consist mostly of multinational companies.

Susan took a very active role in terms of assisting and counselling with the Chinese Government on the enactment of the AML, and on drafting regulations and guidelines accompanying the AML. Through these consultations (and through her prior work with the Chinese Government on WTO issues), Susan has built and maintained a close working relationship with the antitrust authorities in China.

She is the deputy Chairman of the Antitrust Committee of the China Lawyers Association and is an active participant of the American Bar Association's antitrust forum. Susan holds a Bachelor of Laws from Peking University and a Masters in Law from McGill University. Susan was admitted as a Chinese lawyer in 1988.

预备迎接进一步的执法

金杜律师事务所的宁宣凤律师回顾了过去一年包括奇虎诉腾讯案等的重大竞争法案件和法律动向，并对来年的发展作出预测

1. 过去12个月，有什么影响竞争法的主要法规出台？

过去一年最重要的反垄断立法，是最高人民法院审判委员会于2012年5月3日公布，自2012年6月1日起施行的《最高人民法院关于审理因垄断行为引发的民事纠纷案件应用法律若干问题的规定》（以下简称“反垄断司法解释”）。