Antitrust Investigations In China: Putting Things In Perspective
The current press is buzzing with news about the recent increase in antitrust investigations involving foreign companies with operations in China, and reports of foreign companies being told to expect higher fines if they "put up a fight" during investigations. At the same time, the Chinese enforcement agencies have started to make their decisions public. Putting these developments in perspective, the take-away is that antitrust in China should be taken seriously, the enforcement agencies are still in the development stage, and some progress is being made in transparency of decision-making.
China's Anti-Monopoly Law ("AML") is a mere five years old. The National Development and Reform Commission ("NDRC") enforces the AML with regard to price-related anti-competitive conduct such as price-fixing and retail price maintenance while the State Administration for Industry and Commerce ("SAIC") enforces the AML with regard to non-price related anticompetitive conduct such as market allocation, output restriction and joint boycotting. There are instances where the enforcement will be overlapping and the agencies decide amongst themselves who will take the lead. In general, the penalties for violating the AML include fines that can range from 1% to 10% of the turnover of the preceding year, orders to terminate illegal conduct or confiscation of illegal gains. The AML and relevant rules do not explain what type of turnoverworldwide, China, or solely the business related to the violationwill be the basis for the fines. But so far, the agencies have interpreted turnover as commerce related to the relevant business.
The NDRC has been particularly active, fining infant formula producers as well as the gold jewelry trade association and five stores, in addition to investigating companies in the pharmaceutical and medical equipment industries. The NDRC has also authorized industry associations, such as the Chinese Auto Dealers Association, to solicit from foreign companies information related to contracts and sales structures for purposes of antitrust compliance review. These "private inquiries" may imply government fines and even potentially antitrust action if they are not satisfied. In addition to the NDRC, SAIC is also active. It is currently investigating, for example, Tetrapak, the food-packaging giant, for abuse of market dominance.
According to a Reuters news article, in-house lawyers from foreign companies...
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