Building on Past Achievements and Launching a New Journey: 2024 China Antitrust Year in Review

Summary:

• In the area of merger control, the State Administration for Market Regulation is shifting focus to higher-profile cases, and continues to be active in enforcing regulations and consulting with the public
• A number of cases concerning monopoly agreements and the abuse of market dominance indicate the success of flexible supervision measures
• There has also been a strengthened emphasis on fair competition review, legislation and enforcement
• As antitrust judicial proceedings continue to increase, clearer guidance has been issued in relation to compliance in China

1. Merger Control

(i)      New filing threshold officially published and implemented
With a sharp increase in the turnover threshold, the number of cases closed in 2024 dropped significantly, with 514 cases reported—a 36% decrease compared to the previous year. In the future, it is expected that the State Administration for Market Regulation (SAMR) will dedicate more resources to handling high-profile cases.
Additionally, although the proposed market value-based threshold targeting so-called “killer acquisitions” was not included in the officially published version, SAMR reviewed at least two below-threshold cases, including the Ansys/Synopsys case, due to potential competition concerns.

(ii)    Increasing risk of “gun-jumping”
In 2024, SAMR imposed penalties in three cases of illegal concentrations that were implemented without prior approval from the authorities, applying the revised Anti-Monopoly Law (AML) （反垄断法）, which significantly increased the upper limit of legal liability for ”gun-jumping".
In August 2024, SAMR publicly sought opinions on the Discretion Benchmark for Administrative Punishment for Implementing Concentrations against AML (Draft for Comments) (违反〈中华人民共和国反垄断法〉实施经营者集中行政处罚裁量权基准（征求意见稿）). The Exposure Draft outlines SAMR’s stance on the methodology it intends to employ in determining penalties for gun-jumping cases. Notably, it suggests that the illegal implementation of concentrations that have or may have the effect of excluding or restricting competition should be subject to a direct fine amounting to 10% of the sales revenue of the parties from the preceding year. This could also apply to situations such as below-threshold but call-in cases where the filing party failed to make the necessary filing, as well as remedy cases where the obligor did not fully comply with the restrictive conditions. This signals a strong priority for law enforcement.

(iii)   Aligning with international standards for horizontal mergers
In December 2024, SAMR released the Guidelines for the Review of Horizontal Concentrations of Business Operators (Horizontal Merger Guidelines) (横向经营者集中审查指引). The guidelines are grounded in recent Chinese merger review practices and methodologies and, in many respects, align closely with the analytical factors and review priorities of both the EU and the U.S.
The Guidelines highlight several key points. For instance, it is important to note that greater emphasis will be placed on the parties’ internal documents. If these documents suggest objectives such as ”eliminating the threat of competition”, agencies are more likely to conclude that the transaction could result in the exclusion or restriction of competition.
Meanwhile, the guidelines emphasize that the establishment of a joint venture focused solely on joint sales could raise significant competitive concerns, necessitating a thorough review. Companies must carefully assess the risks based on the specific market segment in which the joint venture operates, especially when designing non-compete clauses.

(iv)   First judicial review of SAMR’s merger decisions
In 2024, administrative lawsuits were filed against SAMR concerning its merger decisions. This was the first time that the agency’s merger decisions were subjected to judicial scrutiny. One of the cases involved a hostile takeover of a Chinese packaging company, where the target challenged SAMR’s unconditional approval of the transaction and subsequently filed an administrative lawsuit against the agency.
Another case relates to a conditional approval decision in the pharmaceutical sector, which began with an administrative reconsideration, followed by an administrative lawsuit. The first instance court upheld the decision in December 2024, rejecting all the plaintiff’s claims.

(v)    Enforcement against non-compliance in remedy cases
The other case worth noting is an investigation into the suspected failure to comply with obligations imposed in the conditional approval decision. On December 9, 2024, SAMR announced an investigation into Nvidia, suspecting that the company may have breached its commitments made during conditional approval of the Nvidia/Mellanox case in 2020. The future developments of this case remain to be observed.

“The SAMR continues to closely monitor below-threshold transactions that may raise competition concerns”

Key takeaways:
Considering the active legislative, law enforcement, and judicial review activities in the merger control regime during 2024, the outlook for 2025 suggests that enterprises involved in or contemplating M&A deals with potential links to China should pay attention to the following points:
■          The SAMR continues to closely monitor below-threshold transactions that may raise competition concerns. Transactions in key sectors, such as semiconductors, pharmaceuticals, AI, high-tech, and the internet, which could have “killer acquisition” characteristics, should be carefully prepared for potential scrutiny.
■          In addition to the Horizontal Merger Guidelines, SAMR is working on the Non-Horizontal Merger Guidelines, which are expected to be released in 2025. These guidelines offer a clearer understanding of SAMR's concerns and approach to merger reviews, enabling parties to better assess the risks associated with their proposed transactions or deals. Enterprises can also use these guidelines to design their transactions and prepare for the filing process more effectively.
■          Recent developments in merger control suggest that filing assessments must be more sophisticated and comprehensive. Notably, judicial review cases show that SAMR conducts a thorough review process before making a merger decision. The agency may carry out market surveys, collect stakeholder feedback, seek third-party analyses, hold expert consultations, and perform market testing to evaluate market definition, potential harm theories, and feasibility of remedies. This high standard of scrutiny means that filing parties must ensure they are thoroughly prepared, especially for complex cases.

“In addition to penalty cases, flexible supervision measures have been actively implemented under the Circular on Establishing Anti-Monopoly “Three Notices and One Letter” System”

2. Law Enforcement against Monopoly Conducts

(i)      Diversified regulatory tools
In 2024, the Administration for Market Regulation at the provincial level concluded a total of 11 cases concerning monopoly agreements and the abuse of market dominance.
In addition to penalty cases, flexible supervision measures have been actively implemented under the Circular on Establishing Anti-Monopoly “Three Notices and One Letter” System (关于建立反垄断“三书一函”制度的通知). This system allows SAMR to adopt different measures based on the assessed risk and severity of antitrust concerns, offering enterprises varying levels of antitrust risk alerts. Since the system came into effect, a total of 2,615 legal documents have been issued, of which 2,385 were Reminder and Urging Letters (提醒敦促函) and Regulatory Talk Notices (约谈通知书), accounting for 91.2% of the total.

(ii)    Greater importance of ex-ante compliance
In 2024, SAMR held nine antitrust compliance lectures, covering sectors such as SEP, automotive, pharmaceuticals, gas, air transportation, and insurance. These lectures serve as a reminder—particularly to enterprises in these sectors—to strengthen their antitrust compliance efforts.
The Anti-Monopoly Compliance Guidelines for Concentrations of Business Operators (经营者集中反垄断合规指引), released in April 2024, provide further insights into the importance of proactive compliance measures. Notably, the compliance incentive mechanism outlined in these guidelines offers incentives to enterprises that have proactively established and implemented antitrust compliance management systems. Such enterprises may invoke the compliance incentive mechanism to seek reduced, mitigated, or even exempted penalties if investigated.

(iii)   Enhanced enforcement in the SEP-related field
The SEP-related area has been one of SAMR’s key regulatory focuses in recent years. On November 4, 2024, SAMR released the Anti-Monopoly Guidelines for Standard Essential Patents (标准必要专利反垄断指引), which marks China’s first set of antitrust guidelines for the SEP regime and reflects the SAMR’s targeted approach to regulation in this area.
The guidance outlines the responsibilities of SEP holders in terms of disclosing information, licensing commitment, and good faith negotiations, while also establishing criteria for determining monopoly agreements and the abuse of market dominance in the SEP field. Additionally, the “Three Notices and One Letter” system applies in this context. For instance, an Urging Letter issued to a foreign patent pool on June 27, 2024, underscores the SAMR’s ongoing regulatory efforts.

(iv)   Strengthened fair competition review
Since the establishment of the “one unified market” (全国统一大市场) and the emphasis on fair competition review, legislation and enforcement have been strengthened. The Regulations on Fair Competition Reviews (公平竞争审查条例) was released on June 6, 2024, and came into effect on August 1. SAMR has also issued the Working Rules on Handling Reports on Fair Competition Reviews (公平竞争审查举报处理工作规则). Additional implementation rules are currently being developed and are open for consultation. Public sources suggest significant law enforcement activities in this area for 2024, and fair competition review is expected to remain a key focus going forward.

“For companies in industries of high monopolistic risk or under close regulatory scrutiny, it is advisable to proactively establish and implement antitrust compliance management systems”

Key takeaways:
Although the number of penalty cases appears to suggest that “soft regulation” was the dominant theme for the year 2024, it is still worth noting that:
■          Since the implementation of the "Three Notices and One Letter" system, the issuance of related documents has shown a significant number of ongoing cases and active law enforcement efforts. It remains to be seen how these cases further develop in 2025.
■          For companies in industries of high monopolistic risk or under close regulatory scrutiny, it is advisable to proactively establish and implement antitrust compliance management systems. This not only helps mitigate potential monopolistic risks early on but also enhances the ability to invoke compliance incentives effectively when facing enforcement scrutiny, ultimately aiming for more favorable outcomes in case handling.
■          As China continues to strengthen the fair competition review system, the emphasis on fair competition and opposition to administrative monopolies will remain central to China’s antitrust law enforcement. Enterprises can also make full use of this system to seek solutions to challenges they may encounter in their operations, such as difficulties in market entry, discriminatory treatment, selective law enforcement, etc. .


3. Antitrust Litigation

(i)      New breakthroughs in antitrust litigation rules
Since July 1, 2024, the revised Interpretation on Several Issues Concerning Application of the Law in the Trial of Civil Monopoly Dispute Cases (AJI) (关于审理垄断民事纠纷案件适用法律若干问题的解释) , reflecting China’s latest judicial practices and insights, came into effect.The revised AJI offers clearer guidance for compliance in China, particularly as the number of antitrust judicial proceedings continues to rise.For example, Paragraph 2 of Article 19 of the AJI states, "Where a specific operator gains control over other operators or can exert decisive influence on them, or where two or more operators are controlled or decisively influenced by the same third party, such operators will be considered a single economic entity and will not be regarded as competitors." This is the first time the "single economic entity" principle has been incorporated into China’s antitrust regulations outside the merger control framework. In fact, this principle has already been applied in enforcement cases, such as one in the cargo handling sector, where two companies sharing a same 50% shareholder were deemed as independent competitors as the common shareholder did not have sole control of the two companies, and they operated independently.
Additionally, stand-alone, follow-on, and civil public interest lawsuits have become increasingly common. The issue of civil liability and the damages that defendants may be required to pay has emerged as a significant area of concern, which the AJI addresses. Specifically, Article 44 outlines that plaintiffs are entitled to seek compensation for “direct loss” and “loss of expected benefits”. Furthermore, Article 46 of the AJI stipulates that losses arising from various monopolistic behaviors with interconnect impacts should be assessed comprehensively.

(ii)    Judicial practices serve as antitrust compliance insights
The Supreme People’s Court of China published a total of nine landmark antitrust judicial cases in 2024. These cases provide valuable insights into compliance from a judicial perspective. For instance:

■          The first judicial case concerning “hub-and-spoke” agreement. This case was brought by a distributor of a brand supplier of industrial lubricant, who required the brand supplier to immediately stop coordinating the distributors’ bidding. Although this case applies the 2008 AML (before its amendment) which did not officially recognize the “hub-and-spoke” arrangement as a monopoly agreement, it reflects the court’s stance on “hub-and-spoke”, i.e. that it is illegal for brand suppliers to coordinate distributors to reach a horizontal monopoly agreement, and both the brand suppliers and relevant distributors shall bear joint liability. This judicial practice also plays a significant role in shaping Article 26 of the AJI, which stipulates the liability issue in “hub-and-spoke” scenarios.
■          An API-related case that draws the boundary between IP protection and antitrust issues. A downstream pharmaceutical manufacturer initiated this case, claiming that the defendant, as the sole supplier of a specific API, engaged in the abuse of market dominance and seeking compensation for damages. The court examined whether the foreclosure effect of the alleged antitrust behavior was related to the exercise of patent rights, and stated that the lawful and proper exercise of patent rights shall not be deemed as excluding or restricting competition.
■          A case which clarifies and eases the plaintiff's burden of proof in follow-on administrative litigation. An individual consumer filed a lawsuit against an automotive OEM following a penalty decision made by an enforcement agency. The plaintiff sought compensation for overpayments during a period of alleged resale price maintenance by the OEM. The court ruled that the plaintiff could rely on the prior penalty decision that identified monopolistic behavior, without needing to prove it again in the current case. This differs from previous cases, such as Consumer v. Carrefour and Abbott, where clear evidence of a vertical monopoly agreement was still required despite an existing administrative penalty decision. As a result, the burden of proof for plaintiffs in follow-on cases is lessened, likely leading to an increase in lawsuits against companies that have been penalized.

“Companies need to be well prepared in handling more complex antitrust disputes that involve both litigation and administrative investigation”

Key takeaways:
■          Companies should assess the risks associated with their practices and strengthen antitrust compliance by referring to the guidelines in the recently published judicial interpretations and landmark cases. For example, in distributor management and other business situations with possible "hub-and-spoke" risks, companies should be proactive in implementing safeguards to mitigate potential risks.
■          Recent cases indicate that plaintiffs in antitrust lawsuits may simultaneously report monopolistic conduct to law enforcement agencies, thereby exerting additional pressure on the counterparty. Companies need to be well prepared in handling more complex antitrust disputes that involve both litigation and administrative investigation.
■          Additionally, companies operating outside of China may still face scrutiny from Chinese courts or enforcement agencies for suspected monopolistic practices impacting competition in the Chinese market, even if the alleged practices occur outside of China. As such, foreign businesses must remain vigilant and ensure that their compliance systems align with the latest AML regulations and practices.