The NDRC's antitrust ascendance

Nate Bush

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The National Development and Reform Commission (NDRC) dramatically intensified its enforcement of the Anti-monopoly Law (AML) in 2013, reviving debate about the optimal structure, substance and goals of Chinese antitrust and calls for greater transparency in AML enforcement.

The NDRC did not visibly prioritise the AML when it first took effect on the eve of the financial crisis in 2008. Implementing rules were not finalised until 2011, and early cases targeted blatant cartels in local markets (often orchestrated by local trade associations). But 2013 brought high-profile penalties of Korean and Taiwanese LCD manufacturers for price-fixing, of Chinese distillers for resale price maintenance (RPM), and of domestic and foreign infant formula makers for RPM.

Emphasis on antitrust

This enforcement surge reflects China's renewed emphasis on market-oriented economic reforms under President Xi Jinping. The NDRC has strong institutional incentives to be seen pressing competition rules in sectors crucial to average Chinese citizens and long-term economic policy. The NDRC confirmed it is concentrating on the aviation, chemicals, automobile, telecommunications, pharmaceuticals and consumer appliance sectors.

Increased enforcement also reflects growing headcount in the Price Supervision and Antimonopoly Bureau. Moreover, in December 2013 an NDRC official advocated consolidating AML enforcement in a single agency. The NDRC's authority is now limited to price-related violations of the AML rules against monopoly agreements and abuse of dominance, while the State Administration of Industry and Commerce addresses non-price-related infractions and the Ministry of Commerce reviews mergers. Commentators have long derided the distinction between price and non-price elements of anticompetitive conduct and warned of inconsistent enforcement. If politically feasible, creating a single dedicated AML agency (independent of other policy mandates) could mitigate these risks, but it would also impact the overall approach to antitrust enforcement in China.

Concerns about the NDRC's approach have surfaced. In December 2013, the US Trade Representative reported growing concerns about the NDRC's “lack of predictability and transparency”, highlighting reports of pressure “to “cooperate” or “face steep fines” and to discourage engagement of outside legal counsel. Media similarly reported that NDRC officials admonished representatives of major international companies at a meeting in July 2013 to confess violations and forgo representation by counsel if investigated by the NDRC. In December 2013, InterDigital disclosed that it would not participate in a scheduled meeting with NDRC investigators because the NDRC was “unable to guarantee” the safety of the company representatives from arrest or detention. The circumstances are perplexing, and further details have not yet surfaced publicly. The NDRC itself lacks detention and arrest powers, and the AML does not establish criminal penalties (although obstruction of an NDRC investigation might constitute a crime). In any case, this episode echoes growing apprehension about NDRC procedures.