China: A Practical Review Of The Amended Anti-Monopoly Law Of China: Highlighting Nine Areas With Twenty-three Changes

Foreword

Jet Deng, Ken Dai¹

On June 24, 2022, the amendment to the Anti-Monopoly Law of China ("AML") was deliberated and passed by the Standing Committee of the National People's Congress ("NPC")², and was officially announced by the President Decree No. 116 on the same day.³ The new AML will take effect on August 1, 2022. This is the first amendment to this "economic constitution" of China after its fourteen-year's implementation (2008-2022).

Enacted on August 30, 2007 and implemented on August 1, 2008, the current AML is about to step into its 15th year, and has seen a series of profound changes in the domestic and international economic environment, the policy goals and the governance concepts of the Chinese government, the characteristics of market competition, and the institutional structure of the anti-monopoly authorities. In the course of its enforcement, various problems about the existing provisions of the AML have gradually emerged, along with experience continuously accumulated by the authorities. This has been partially reflected in the implementing regulations of the AML. In contrast, some provisions in the AML can no longer fully adapt to the current practices, nor provide sufficient certainty for the latest enforcement cases, thus hindering the achievement of the AML's legislative goals to ensure fair market competition and to safeguard consumers' interests.

In countries with a long-established market economy, antitrust law (known as "Antitrust Law" in the United States, "Competition Law" in Europe, and translated as "Anti-Monopoly Law" in China) is honored as the "economic constitution", since it is the primary legal basis for governments to intervene in the operation of the economy at the micro-level. China's amendment to the AML is the first major overhaul of this "economic constitution" since it took effect 14 years ago. The significance of the amendment is self-evident, especially at a time of economic downturn, the escalation of international economic and trade frictions, the impact of the COVID-19 pandemic, and the critical challenge of optimizing the economic structure. As lawyers who have witnessed the entire evolution of China's antitrust enforcement, we will make remarks about the new AML from a practical standpoint using real cases, with a view to making some modest contribution to the effective implementation of this law, which could influence the operation of the economy, millions of enterprises, and the vital interests of hundreds of millions of consumers.

1. Looking Back at the AML Legislative Process

There is no single fixed law in the world. The same goes for competition law. The Sherman Act of the United States has undergone several amendments or supplements in the past 130 years, the last of which was made in the early 2000s. For a late-developing market economy such as China, which enacted an antitrust law as late as 30 years after its "Reform and Opening-up", it is imperative to revise laws in response to the demands of economic development and the needs of practice.

According to the legislative process, as stipulated by the Legislative Law of China, the amendment process of a statute generally includes three stages. First, relevant ministries or commissions propose a draft of the amendment. For example, the draft amendment here was proposed by the State Administration for Market Regulation of China ("SAMR") on the basis of its past law enforcement practices.⁴ Second, the ministries or commissions then submitted the draft proposal to the State Council's legislative department, currently a task undertaken by the Ministry of Justice,⁵ which formed a new draft based on opinions from all sectors of society. Then the State Council submitted the new draft proposal to the legislative department of the NPC – for the AML, the Economic Law Office under the Legislative Affairs Commission of the NPC Standing Committee – which deliberated and produced a new version to submit to the NPC for discussion. After being deliberated and passed by the Standing Committee of the NPC, the amendment was signed by the President and announced.

At the time of its birth on August 30, 2007, the AML was passed by the NPC Standing Committee, since it was not included in the scope of "basic laws" (such as the Civil Code or Criminal Code) that need to be reviewed and passed by the NPC's plenary. The same applies to the amendment of the AML; it need not be passed at the NPC's plenary session, which takes place in March every year, but only need be considered and approved at the session of the NPC Standing Committee, which is held every two months.

When the amendment to the AML was included in the 2015 State Council's Legislative Work Plan, it signaled the kick-off. In 2018, it was again included in the Legislative Plan of the Thirteenth NPC Standing Committee. On January 2, 2020, the SAMR, as the AML enforcement authority, released a draft for comment of the proposed amendment to the AML. On October 23, 2021, the Standing Committee of the NPC deliberated the draft amendment to the AML for the first time and solicited public comments.⁶ After revision and improvement, on June 24, 2022, the amendment to the AML was passed by the Standing Committee of the NPC after the second deliberation, officially announced by the President Decree No. 116 on the same day⁷ and scheduled to take effect on August 1, 2022.

2. Overview of the Amendment: Nine Areas with Twenty-three Changes

The new AML retains the core structure of eight chapters and four pillars in the current law. There are more articles added than removed, the total number increasing from 57 to 70. The contents of some preserved provisions are also modified. In response to this new AML, there have been comments from antitrust academia and officials all over the media. We would like to examine the amendment from a lawyer's practical perspective. The changes can be summarized as "nine areas with twenty-three changes." The former AML is hereinafter referred to as the "Old Law", and the amended AML is hereinafter referred to as the "New Law" or "New AML".

1. Strengthening the position of the "economic constitution": legislative goals, leadership of the Communist Party of China, competition policy and fair competition review added

In the chapter "General Provisions", the New AML embodied the position of the AML as the "economic constitution" in three aspects: (1) adding "encouraging innovation" as one of the legislative goals; (2) adding expressions of "adhering to the leadership of the Communist Party of China" and "the fundamental status of competition policies"; and (3) enshrining the fair competition review system.

1. Adding "encouraging innovation" as a legislative goal

Article 1 of the Old Law establishes a number of legislative goals of this law, including: preventing and restraining monopolistic acts; protecting fair market competition; improving the efficiency of economic operations; safeguarding consumer interests and public welfare; and promoting the healthy development of the socialist market economy. The amendment includes "encouraging innovation" in the legislative purpose in Article 1, a move that has multiple meanings. For example, it shows that the goal of the AML is compatible with that of the intellectual property laws, and reflects its support for the new economy and new industries. It also means that when it is necessary to interpret the law, encouraging innovation could be one of the considerations to be balanced against.

In the past 14 years in China, there have been many antitrust enforcement and litigation cases in the field of intellectual property, particularly those concerning patents. Qualcomm's Abuse of Dominant Market Position(2015) – a six-year record of the highest fine (CNY 6.088 billion) in China before the Alibaba case (2021) – as well as Huawei Technologies Co., Ltd. v. InterDigital Inc. (2013), Xi'an Xidianjietong Radio Network Co. v. Sony Mobile Communications Products (China) Co., Ltd. (2017), all involve the abuse of standard essential patents to eliminate or restrict competition. In 2019, SAMR carried out a raid on Ericsson's China office, pointing to its alleged abuse of standard essential patents.⁸ As the economic structure in China is undergoing a remarkable transformation nowadays, it is undoubtedly of huge significance to assert that the AML has the same legislative goal to "encourage innovation" as the intellectual property laws.⁹

In addition, since the end of 2020, the AML authority has shifted its regulatory attitude towards digital economy from "inclusive and prudent regulation" to "strengthening the anti-monopoly efforts and preventing disorderly expansion of capital". In recent years, the Internet industry has experienced a downward spiral with business contraction, and as the once glorious bubbles have burst, overall entered the stage of reformation. However, this amendment still retained "encouraging innovation" as the new legislative purpose of the AML, which can be interpreted to some extent to encourage the innovation in the digital economy, together with the harsh attitude of strengthening regulation – a carrot and stick policy with equal emphasis on regulation and development.

2. Adhering to the leadership of the Communist Party of China and establishing the fundamental status of competition policy to embody the position of "economic constitution"

The leadership of the Communist Party of China ("CPC") was established in the Constitution of the People's Republic of China, but such assertion or its similarities were rarely seen in the numerous existing departmental laws. The explicit addition of "the leadership of the Communist Party of China shall be adhered to in anti-monopoly work" in Article 4 of the New Law is not only an expression of its due meaning, but also a symbol of the AML's position of "economic constitution". This reflects that China's understanding of the status and role of the AML has been sublimated after its 14-year implementation.

Since it is an economic constitution, it is a logical step for the New Law to specify the fundamental status of competition policy. Under the premise that the central government attaches great importance to the "unified national market", the change is particularly remarkable.

The New Law adds that "the State adheres to the principles of marketization and the rule of law, strengthens the fundamental status of competition policies" in Article 4. On the one hand, it confirms how competition policy system is based on the AML, and on the other hand, it legalizes the fundamental status of competition policy in the overall national economic policies. The fundamental status of competition policy had already been introduced in the Notice of the State Council on Issuing the Plan for Market Regulation during the 13th Five-Year Plan Period (State Council, No. 6, 2017) and other documents issued by the Party and the State Council, especially the Decision of the Central Committee of the Communist Party of China on Some Major Issues concerning Comprehensively Deepening the Reform. Credit should be given to the continuous efforts by far-sighted people in the antitrust academic and practice community. The amendment would substantially improve the position of the AML in national governance, promote the balancing and coordination between competition policy and other economic policies such as industrial policy, and further demonstrate the state's latest governance concepts such as administrative decentralization, state-owned enterprises reform, industrial transformation and upgrading, promoting innovation, business environment optimization, and accelerating the development of the unified national market.

3. Enshrining the fair competition review system

The fair competition review system is also known as "semi-judicial review" because it is an ex ante review of the compliance with the AML of all government's normative documents. In June 2016, the issuance of the Opinions on Establishing the Fair Competition Review System in the Construction of the Market System (State Council, No. 34, 2016) by the State Council marked the establishment of the fair competition review system. Since then, supplementary mechanisms such as the Letter of theGeneral Office of the State Council on Approval of the Establishment of the Inter-Ministerial Joint Meeting System for Fair Competition Review, the Detailed Rules for the Implementation of the Fair Competition Review System and the Implementation Guide of Assessment of Fair Competition Review by Third Party, have further perfected the system. At the end of June 2021, five departments – the SAMR, the National Development and Reform Commission ("NDRC"), the Ministry of Finance, the Ministry of Commerce and the Ministry of Justice – jointly issued the revised version of Implementing Rules for the Fair Competition Review System seeking to further promote the implementation of the system. To date, government at all levels has conducted the fair competition review of a large number of regulatory documents, and have revised or withdrawn many documents that violate the AML.

The amendment enshrines and specifies the fair competition review system in Article 5 of the AML as "the State establishes the fair competition review system", thereby further implementing the fundamental status of competition policy and establishing an institutionalized and normalized "semi-judicial review" system – i.e., a system which allows review of the compliance of regulatory documents by government at all levels with the "economic constitution", the AML.

2. Improving the anti-monopoly law enforcement system, reinforcing the anti-monopoly regulatory force

The effective implementation of the AML depends on the normalization of AML enforcement and the timely settlement of monopoly problems, which requires a well-established AML enforcement system and sufficient professional officials. Under the background that the State pays more and more attention to the AML enforcement with increasingly higher requirements and expectations, the New Law provides an important support for AML enforcement.

1. Establishing a specialized "Anti-Monopoly Law Enforcement Authority of the State Council"

In the Old Law, the law enforcement authority is referred to as "the authorities responsible for the anti-monopoly law enforcement specified by the State Council (hereinafter collectively referred to as the Anti-Monopoly Law Enforcement Authority under the State Council)", while it is directly referred to as "the Anti-Monopoly Law Enforcement Authority of the State Council" in Article 13 of the New Law. It is not only a literal change, but also means that China will establish a specialized anti-monopoly law enforcement authority.

Before 2018, the Ministry of Commerce (Anti-Monopoly Bureau), the NDRC (Price Supervision, Inspection and Anti-Monopoly Bureau) and the State Administration for Industry and Commerce (Anti-Monopoly and Anti-Unfair Competition Law Enforcement Bureau) were all responsible for the AML enforcement. They were "the authorities responsible for the anti-monopoly law enforcement", and also commonly known as a "Troika". The SAMR was established in March 2018 to take over the anti-monopoly function of the "Troika", thus opening an era of unified AML enforcement in China. In November 2021, the State Anti-Monopoly Bureau was officially inaugurated in the same building as the SAMR, with anti-monopoly divisions increased from one to three, respectively responsible for competition policies, law enforcement of monopoly agreements and abuse of market dominance, and the review of concentration of undertakings.

In the process of this amendment, the draft for the first deliberation adopted the term "the Department of Market Administration and Regulation of the State Council", but it was changed to "the Anti-Monopoly Law Enforcement Authority of the State Council" in the second draft. This indicates that "the Anti-Monopoly Law Enforcement Authority of the State Council" can refer to the current SAMR (i.e., the State Anti-Monopoly Bureau), or other authorities of the State Council. In the future, it is possible that the State Anti-Monopoly Bureau will become an independent authority and enjoy the exclusive administrative power of "the Anti-Monopoly Law Enforcement Authority of the State Council".

2. Reinforcing the anti-monopoly regulatory force, enriching law enforcement and judicial resources

Article 11 of the New Law clearly stipulates that the State "reinforces the anti-monopoly regulatory force" and "strengthens the anti-monopoly law enforcement and judicial work", which is a legislative response to China's long-term shortage of AML enforcement and judicial force.

After the institutional reform of the AML enforcement authorities in 2018, the headcount of law enforcement officials at the central level was only 41, which was even less than that before the institutional reform. In contrast, at the beginning of 2021, there were 849 officials in the European Commission Directorate-General for Competition. The shortage of law enforcement resources leads to the fact that the violation of the law by enterprises cannot be punished in time, and the authorities have no choice but to tilt the resources to a few cases. In order to solve this problem, the central government and the authorities have taken measures, for example, the establishment of the State Anti-Monopoly Bureau, the expansion of staffing, the establishment of the Competition Policy and Big Data Center, and the increase of budget. However, compared with the United States and Europe, China's anti-monopoly law enforcement resources are still in short supply, and support is still needed to reach sufficient human and financial resources.

In recent years, with the increasing attention from the State and the market on intellectual property and innovation, intellectual property litigation has become increasingly professional, and there has been a call for the establishment of "National Intellectual Property Court". Since 2008, it has been established in China that anti-monopoly civil litigations are under the jurisdiction of the intellectual property tribunals of designated intermediate people's courts. Since 2019, the Intellectual Property Tribunal of the Supreme People's Court has unified jurisdiction over the second instance cases of anti-monopoly civil litigations nationwide. The expression of "strengthening the anti-monopoly law enforcement and judicial work" in the New Law can be regarded as the top-level design to enrich the anti-monopoly judicial resources in the future.

3. Strengthening the anti-monopoly judicial work, specifying that the Procuratorate may file an anti-monopoly civil public interest litigation

Internationally, the antitrust law can be implemented through public enforcement and private enforcement. The former corresponds to China's AML administrative enforcement, and the latter corresponds to China's anti-monopoly judicial work. Both of them are indispensable and act as the dual cores of the effective implementation of the AML. For a long time, China's anti-monopoly administrative enforcement has played a more crucial role in the implementation of the AML. This amendment acknowledges and clarifies the importance of anti-monopoly judicial work, meanwhile adding the Procuratorate as a vital force for the effective implementation of the AML.

1. Strengthening the anti-monopoly judicial work, improving the mechanism to bridge administrative enforcement with judicial work

During the 14 years' implementation of the AML, anti-monopoly judicial work has played an important role. Many typical precedents are of great significance for clarifying anti-monopoly rules, deterring domestic and foreign monopolistic acts, and safeguarding the legitimate rights and interests of the parties. In particular, since the leapfrog appeal system was established in 2019, the jurisdiction of the second instance anti-monopoly cases nationwide have belonged to the Intellectual Property Tribunal of the Supreme Court, which greatly increased the incentives of the parties to seek anti-monopoly judicial relief.

Nevertheless, the proportion of anti-monopoly judicial work and the AML administrative enforcement is still unbalanced on the whole, and the legal standards of identifying some monopolistic acts are still not unified. In this regard, Article 11 of this amendment stipulates that the State strengthens the anti-monopoly judicial work, handles various monopoly cases in a fair and efficient manner according to law, and improves the mechanism to bridge administrative enforcement with judicial work. Following such provisions and assertions made by the AML this time, we expect that the vitality of anti-monopoly judicial work will continue to grow, and the administrative enforcement and judicial work will be more coordinated, which will further increase the predictability of the AML for undertakings.

On the other hand, how to "improve the mechanism to bridge administrative law enforcement with judicial work" still needs to be explored. For example, in the process of this amendment, stakeholders agreed that "when hearing and ruling on monopoly cases, the People's Court needs to decide on whether a monopolistic act is constituted according to law, including deciding on monopolistic acts other than those expressly listed in the law". However, "considering the lack of practical exploration and the divided opinions on this issue, the law may only provide principles. The left issues can be further studied and explored and the consensus can be reached in practice by strengthening the coordination between administrative enforcement and judicial work".¹⁰ In this regard, we believe that the way to bridge should not be limited to administrative enforcement (such as decisions of administrative punishment). The way of "opinion letter" can also be considered, that is, when a court needs to rule on whether there is a monopolistic act other than those expressly stated in the law, a law enforcement authority can send a brief to express its opinions. For example, in Lenovo (United States) Inc. and Motorola Mobility, LLC v. IPCom GmbH & Co., KG, the U.S. Department of Justice sent an amicus curiae brief to the court to express its opinion on whether IPCom violated the Antitrust Act.¹¹

2. Establishing the system allowing the Procuratorate to file anti-monopoly civil public interest litigations

Paragraph 2 of Article 60 of the New AML stipulates that where an undertaking commits a monopolistic act that damages the public interests, the People's Procuratorate at or above the level of cities with districts may file a civil public interest litigation in the People's Court in accordance with law. This new provision establishes the anti-monopoly civil public interest litigation system by the Procuratorate, which not only is a response to the requirements of the Fourth Plenary Session of the 19th CPC Central Committee on "expanding the scope of public interest litigation cases", but also conforms to the requirements of "actively and steadily promoting public interest prosecution" in the 2021 Opinions of the CPC Central Committee on Strengthening the Legal Supervision Work of Procuratorial Organs in the New Era.

For a long time, the anti-monopoly law enforcement authorities are the main public power to implement the AML, due to the difficulties such as the burden of proof, high economic cost, insufficient compensation incentives, and low success rate of anti-monopoly litigation filed by enterprises or consumers themselves. However, due to the limited manpower of anti-monopoly law enforcement authorities, there are still a large number of potential anti-monopoly violations undiscovered in practice. Explicitly introducing the civil public interest litigation system by the Procuratorate will help promote the parallel implementation of administrative enforcement and judicial work, pushing the procuratorial organs to participate more effectively in maintaining the order of market competition. It can be reasonably expected that anti-monopoly public interest litigation may be filed by the Procuratorate in the future against monopoly acts involving domains of people's livelihood, such as "big data killing familiarity".

4. Adjusting the regulatory structure of monopoly agreements

The New Law clarifies the regulatory principles and system of monopoly agreements, which is mainly reflected in defining monopoly agreements in a separate clause, adding a clause prohibiting the organizing and assisting in monopoly agreements, and adding the safe harbor rules.

1. Providing a standalone definition of monopoly agreements, clarifying the burden of proof in vertical monopoly agreement cases

The New Law repositions Article 13, Paragraph 2 of the Old Law – the definition of a monopoly agreement – as a separate clause governing the subsequent provisions of horizontal and vertical monopoly agreements, so as to clarify that vertical monopoly agreements also belong to agreements that eliminate or restrict competition. Meanwhile, in order to solve the divergence between the enforcement authorities and the courts over vertical monopoly agreements, especially where it concerns the regulatory principle of the resale price maintenance ("RPM"), Paragraph 2 of Article 18 of the New law stipulates that the undertakings engaged in vertical monopoly agreements have the obligation to prove that their agreements do not have the effect of eliminating or restricting competition.

Previously in Hainan Yutai Scientific Feed Company v. Hainan Provincial Price Bureau (2018), it was acknowledged that the enforcement authorities may directly presume that the RPM conduct is illegal adopting the "strict prohibition + exemption" approach against RPM, and the rule of reason may be applied by courts – i.e., whether RPM is illegal or not depends on whether it has the effect of eliminating or restricting competition. The current amendment will address such non-uniformity in this case. In the future, whether for administrative enforcement or judicial work, the parties involved in vertical monopoly agreements will have the obligation to prove that their agreements do not have the effect of eliminating or restricting competition, for example, their pricing is competition-based, which nevertheless may need to rely more on quantitative economic analysis.

2. Prohibiting of organizing and aiding other undertakings in entering into monopoly agreements

The New Law adds Article 19 under Chapter II "Monopoly Agreements", under which "no undertaking may organize other undertakings to reach a monopoly agreement or provide them with substantive assistance for reaching a monopoly agreement", and penalties equivalent to that of monopoly agreements are stated under Chapter VII "Legal Liabilities".

Under the Old Law, monopoly agreements mainly regulate three kinds of subjects (excluding administrative agencies and organizations under administrative monopoly): the first kind are "competing undertakings" in horizontal agreements; the second are "undertakings and their trading parties" in vertical agreements; the third are "trade associations" which organize undertakings in reaching and implementing monopoly agreements. In the past 14 years of enforcement, most horizontal monopoly agreements cases involve the organization, assistance and implementation of monopoly agreements by industry associations. Examples can be found in Sheyang County Rice Association Case (2022), Fengcheng City Ready-mixed Concrete Monopoly Agreement (2021), Guangdong Huizhou City Motor Vehicle Testing Industry Monopoly Agreement (2020), Chifeng City Bahrain Left Banner Catering Industry Monopoly Agreement (2019), Heze City Automobile Industry Association Organizing Undertakings to Reach Monopoly Agreement (2019), Beijing Driving Training Association and 11 Driving Training Institutions Reaching Horizontal Monopoly Agreement (2018), Guangdong Zhongshan City Gas Association Organizing Members to Allocate Sales Market (2018), Beijing Real Estate Management Evaluation Industry Price Monopoly Agreement (2017), Hunan Insurance Industry Association Monopoly Agreement (2016), Guangzhou Fanyu Animation Industry Association Monopoly Agreement (2015), Zhejiang Auto Insurance Price Monopoly Agreement (2014), Shanghai Gold Industry Monopoly Agreement (2013), Zhejiang Fuyang Papermaking Industry Price Monopoly Agreement (2011), etc.

However, in practice there have been some undertakings which do not belong to the above three categories but have played a major role in reaching and implementing monopoly agreements, for example, the (unpunished) wholesaler which helped the three active pharmaceutical ingredient (API) manufacturers reach a monopoly agreement in the Glacial Acetic Acid Monopoly Agreement (2018), and the insurance brokerage company (which was handed over to the competent authority) which led 11 property insurance companies to reach a monopoly agreement in the Loudi Insurance Industry Monopoly Agreement (2012). Due to the absence of legal basis in the AML, it is difficult for the enforcement authorities to punish them accordingly, leaving a loophole in the enforcement of the AML. In other jurisdictions, this type of undertaking may be characterized as a "hub-and-spoke agreement" and be severely punished accordingly (for example, undertakings that assumed the hub role in the British Toy Company Case – Hasbro/Argos/Littlewoods (2003) and the United States v. Apple Inc. (2012) were deemed to be engaged in monopolistic conduct), either being fined or being required to pay a settlement. This amendment keeps up with other jurisdictions and provides a clear legal basis for China's antitrust authorities to investigate into and deal with conduct of this kind.

3. Adding "safe harbor" rule for vertical monopoly agreement

Paragraph 3 of Article 18 of the New Law adds the "safe harbor" rules for vertical monopoly agreements. The so-called "safe harbor" rule refers to the provision under which the monopolistic acts by undertakings who meet certain conditions are presumed not having anti-competitive effects, thus are exempted by the law. In major antitrust jurisdictions around the world, the "safe harbor" rules are universally applied. Previously, safe harbor rules applicable to vertical agreements were established in both the Antitrust Guidelines of the Anti-Monopoly Commission under the State Council for the Automotive Industry and the Antitrust Guidelines of the Anti-Monopoly Commission under the State Council for the Field of Intellectual Property Rights, but there was still a lack of rule that could be universally applicable to any industries. This amendment fills the gap.

It is worth noting that the "safe harbor" rule stipulated in the New Law is only applicable to the vertical monopoly agreement concluded between an undertaking and its trading counterparties, but not to the horizontal monopoly agreement concluded between competitors. This reflects the prudent attitude of legislators and is also in line with the general understanding of the safe harbor system. Compared with vertical agreements, horizontal monopoly agreements are generally considered to have a serious effect of eliminating or restricting competition, which will not be reduced when the market size of undertakings is small. Therefore, even if the enterprises that reach horizontal monopoly agreements are small, their collusion may also have a serious effect of eliminating or restricting competition. Based on this, the New Law excludes horizontal monopoly agreements from the scope of application, which is also coordinated with the practice of antitrust law in other jurisdictions. Referring to the EU competition law, the safe harbor system is not applicable to core restrictions (including fixed price, market allocation, output restraint, boycotts, restricting research and development, RPM, etc.).

The safe harbor rule is a rule of thumb. However, due to the relatively short history of the implementation of China's AML, experience has to be accumulated and prudence is needed in the design of the safe harbor rule. If too lax, a large number of small and divided markets may result, which is inconsistent with the goal of accelerating the development of a unified national market. If too narrow, the value of this rule may not be realized. Therefore, it is still necessary at present to learn from the safe harbor rules of foreign antitrust jurisdictions with longer histories and more experience.

In the case of limited law enforcement resources, the "safe harbor" rule is conducive to the realization of "focusing on the large and letting the small go". Small enterprises are exempted through the safe harbor rule, so as to shield the law enforcement authorities and enterprises from carrying out complex and costly antitrust legal, economic and industrial analysis, and to provide more space and more flexibility as well as the predictability of legitimate behaviors for the development of small and medium-sized enterprises. At the same time, enterprises should note that under no circumstances can they reach horizontal monopoly agreements with competitors, and they cannot take chances for illegal acts just because of being small. Definitely, the specific applicable conditions of the "safe harbor" and its role in practice need to be explored in the subsequent formulation of supportive regulations and law enforcement activities.

5. Continuing to strengthen the anti-monopoly regulation of platform companies

At the end of 2020, the Chinese central government proposed to "strengthen the anti-monopoly efforts and prevent the disorderly expansion of capital". Since then, it has repeatedly emphasized the anti-monopoly regulation of platform companies. These requirements have been implemented by the AML enforcement authorities. In 2021, dozens of platform companies such as Alibaba were punished or interviewed by anti-monopoly authorities. This amendment also demonstrates that the anti-monopoly regulation of platform companies will be a continuous and long-term work.

1. Emphasizing that platform companies shall not engage in monopolistic acts

In this amendment, Article 9 is specially added to the general provisions, which stipulates that undertakings shall not use data, algorithms, technology, capital advantages and platform rules to engage in monopolistic acts prohibited by the Law. This principle has been refined by the Antitrust Guidelines of the Anti-Monopoly Commission under the State Council for the Platform Economy Sector issued on February 7, 2021.

2. Prohibiting platform companies from abusing the position of "gatekeeper"

The New Law adds Paragraph 2 of Article 22 in Chapter III "Abuse of Dominant Market Position", which stipulates that an undertaking with a dominant market position shall not use data, algorithms, technology and platform rules to engage in acts of abusing its dominant market position as prescribed in the preceding paragraph. We understand that, the significance of this paragraph actually lies in prohibiting platform companies from abusing their "gatekeeper" positions to create obstacles to market entry, and eliminate or restrict market competition.

In recent years, the EU Digital Markets Act and the US Ending Platform Monopolies Act have stipulated the "gatekeeper" system, which imposes stricter regulation on platform companies meeting the certain standards. These new regulation methods have transcended the regulation scope of antitrust laws, and may even replace antitrust laws. At present, there is no similar legislation in China. The possibility of future legislation depends on whether it is necessary and whether positive experience can be accumulated in Europe and the US. Therefore, the provisions added in this amendment can be regarded as the "quasi-gatekeeper system", which is still under the scope of the AML.

6. Systematically modifying the review system of concentrations of undertakings

This amendment has made substantial changes to the review system of concentrations of undertakings. It not only integrates the provisions previously scattered in other regulations and policy documents into the AML, but also adjusts a large number of provisions based on practical problems, which can be called an innovative change.

1. Review of the concentration of undertakings that do not meet the notification thresholds

With respect to the notification thresholds for the concentration of undertakings, in addition to the original mandatory ex-ante notification system for concentrations of undertakings that meet the notification thresholds, this amendment has added Paragraph 2 and Paragraph 3 of Article 26. Paragraph 2 empowers the anti-monopoly enforcement authorities to review the concentration of undertakings that does not meet the notification thresholds but may have the effect of eliminating or restricting market competition.

In fact, this is not the first time that the anti-monopoly enforcement authorities are empowered to investigate the below-threshold concentration of undertakings under the AML legal system. For example, Article 4 of the Provisions of the State Council on the Notification Thresholds for Concentrations of Undertakings stipulates that "where a concentration of undertakings does not reach any of the thresholds specified in Article 3 of these Provisions, but facts and evidence collected in accordance with the prescribed procedures establish that such concentration has or may have the effect of eliminating or restricting competition, the Anti-Monopoly Law Enforcement Authority of the State Council shall initiate an investigation according to law." In addition, there are similar stipulations in the Interim Provisions on the Review of the Concentration of Undertakings.¹² However, this is the first time that it is confirmed in the AML as a basic law. This will provide a higher-level legal basis for the review of below-threshold concentration of undertakings. Meanwhile, this is also a manifestation of the anti-monopoly regulation and intervention of the digital economy, platform economy and other fields which have adopted new business models in the aspect of concentration of undertakings. In addition, this revision can also effectively incorporate any possible new business models which cannot be reasonably predicted now into the scope of the anti-monopoly regulation.

What is particularly noteworthy is that compared with the previous administrative regulations and department rules, one of the improvements in this amendment is that it has greatly enhanced the predictability on the concentration of undertakings that doesn't meet the notification thresholds. Paragraph 2 stipulates that "the Anti-Monopoly Law Enforcement Authority of the State Council may require the undertakings to notify" for such concentration. Then Paragraph 3 stipulates that "where the undertakings fail to notify in accordance with the provisions of the preceding paragraph, the Anti-Monopoly Law Enforcement Authority of the State Council shall investigate in accordance with the law." Based on the above, we understand that, where a concentration of undertakings fails to meet the notification thresholds, if the authority requires the undertakings to notify, the notification shall follow the normal procedure and it is a normal obligation to notify for undertakings, rather than an investigation procedure directly initiated by the authority. Only if the undertakings concerned fail to notify as required, the authority shall then initiate an investigation. 

This revision is commendable. In general, most concentration of undertakings that does not meet the notification thresholds has no effect of eliminating or restricting market competition, and it is unnecessary to expend enforcement resources on the review of such concentration. This is one of the important reasons for setting the notification thresholds. The decisions on the definition of relevant market and the assessment of competition analysis involved in the notification for concentration of undertakings are highly professional. Therefore, it is unreasonable and undoubtedly a very heavy burden to leave the professional work of determining whether there are effects of eliminating or restricting competition to the undertakings that have not met the notification thresholds. The solution provided by this amendment – an investigation shall be initiated only under the circumstance where a concentration is required to be notified by the authority but the undertakings concerned fail to notify – not only enables the authority to regulate the below-threshold concentration of undertakings, but also greatly enhances the predictability for undertakings and effectively saves law enforcement resources. 

2. Introducing "stop-the-clock" mechanism for merger review

Article 32 has been added to the chapter of concentration of undertakings, introducing "stop-the-clock" mechanism into the AML legal system. Article 32 sets out three circumstances that will not be included in the review period, i.e. the failure to submit documents in accordance with the relevant provisions, the need to verify new information and the further evaluation of additional restrictive conditions. In particular, the further evaluation of additional restrictive conditions is of great practical significance from the perspective of AML enforcement practice. This will effectively help avoid the compromise where the notifying parties have to withdraw and re-submit the notification in order to move forward with the deal due to the expiration of the statutory period.

In other major jurisdictions, such as the EU, the time frame of merger review by the antitrust authorities is relatively comfortable. In addition to the pre-notification consultation period which could last several months, the EU antitrust authorities have an aggregate time of up to 160 working days (35+125) after the formal notification to review the case, during which the "stop-the-clock" mechanism may be applied.¹³ In contrast, on the one hand, China's relatively limited law enforcement resources have aggravated the pressure of merger review on the authority to some extent; on the other hand, the maximum review period of 180 calendar days (30 + 90 + 60) cannot satisfy the need of complex cases (such as cases that may need to be subject to conditions or prohibitions). Therefore, it is necessary to introduce the "stop-the-clock" mechanism. At the same time, we also expect that the implementation rules of the "stop-the-clock" mechanism will be detailed in subsequent supportive documents of the AML, so as to provide undertakings with sufficient predictability in the future.

3. Improving the classification and grading system for the review of concentration of undertakings

This revision also introduces Article 37, "the classification and grading system for the review of concentration of undertakings". The classification and grading system for the review of concentration of undertakings, on the one hand, is helpful to improve the efficiency of the authority, save transaction time and reduce institutional transaction costs; on the other hand, it helps to focus law enforcement resources on those concentrations which may really cause competition concerns, prevent market monopoly and promote market competition. Therefore, the classification and grading system for the review of concentration of undertakings can provide an institutional guarantee to accelerate the construction of a unified national market.

In practice, since the beginning of this year, the State Anti-Monopoly Bureau has already begun to require the parties to indicate whether platform enterprises are involved when filing, which shows that it has started classifying and focusing on specific types of cases. In addition to platform enterprises, other enterprises in sectors such as finance, media, technology and people's livelihood may also be divided into different categories respectively and be subject to classification, grading and focused review according to the scale of the enterprise's turnover or other indicators. In general, the classification and grading system for the review of concentration of undertakings is reasonable. Considering the classification of simple cases and normal cases in practice for many years, it can be seen that classified review is helpful to improve the efficiency when law enforcement resources are limited.

4. Getting much tougher on gun jumping

Since the central government proposed "strengthen the anti-monopoly efforts and prevent the disorderly expansion of capital" at the end of 2020, the investigation and punishment for gun jumping, especially in the platform economy sector, has been significantly intensified. Over the past 14 years, the authority has publicly imposed 174 administrative penalty decisions in total for gun jumping, of which 107 were published in 2021 (up to eight times the 13 cases in 2020) and of which 97 involved platform companies.¹⁴ In addition, according to the Annual Report on Anti-Monopoly Law Enforcement in China (2021) published by the State Anti-Monopoly Bureau, in 2021, the SAMR has verified more than 1,000 clues for suspected gun jumping and opened investigation into nearly 200 cases. Since the maximum fine for gun jumping is only CNY 500,000, the deterrence effect is obviously insufficient for commercial mergers and acquisitions which often amount to millions, billions or even tens of billions of dollars, there are thus a large number of gun jumping cases in reality. 

In response to this issue, Article 58 of the New AML substantially increases the maximum fine for illegal activities such as gun jumping. For the concentration that does not have the effect of eliminating or restricting competition, the maximum fine is increased from CNY 500,000 to 5 million; for the concentration that has or may have the effect of eliminating or restricting competition, the maximum fine has been increased from CNY 500,000 to "a fine of less than 10% of the turnover of the previous year" for the undertakings. The severity of punishment reaches the same level as monopoly agreement and abuse of dominant market position, greatly increasing the deterrence of punishment for gun jumping. It can be expected that after the New AML takes effect, undertakings' initiative consultation and notifications will increase greatly. 

7. Expanding the regulatory scope of administrative monopoly and providing support for AML enforcement

Administrative monopoly is a major obstacle for China to accelerate the development of a unified national market and is also the target of anti-monopoly enforcement authorities' dedicated enforcement activities this year. This amendment introduces some scenarios of administrative monopoly and provides better supports for anti-monopoly law enforcement authorities to launch investigations into administrative monopoly.

1. Expanding the regulatory scope of administrative monopoly

The regulation of administrative monopoly under the Old Law mainly focused on the impediment of inter-regional trade, but did not explicitly regulate the restriction on competition within certain region. This is undoubtedly extremely narrow compared with the actual administrative monopoly and its harmful consequences. The New AML removes restrictive descriptions of "non-local" and "local" in several articles, expanding the scope of regulation of administrative monopoly to all kinds of restraints, including not only eliminating or restricting non-local enterprises from participating in local competition, but also restricting market entry and business development of local enterprises, which is more comprehensive than before.

In addition, Article 40 is added, which clarifies that not only a unilateral conduct of the administrative agencies, but also the arrangement to impede competition reached between administrative agencies and an undertaking constitutes administrative monopoly. Recently, government departments have cooperated with a small number of enterprises or even a single enterprise to exclude other enterprises from competition, e.g., in the issuance of coupons, introduction of bicycle-sharing, etc., the New Law brings these government-enterprise cooperation into the scope of regulation. ¹⁵

2. Providing institutional support for anti-monopoly enforcement authorities in their investigation of administrative monopoly cases

In practice, without the cooperation of administrative agencies, it is often difficult for law enforcement authorities to successfully conduct and complete administrative monopoly investigations. Article 54 is introduced, clarifying that the administrative agencies shall cooperate with the investigation of anti-monopoly law enforcement authorities, and providing a legal basis for the anti-monopoly law enforcement authorities to conduct investigations and request relevant information. In the meantime, according to the newly added Article 55, the person in charge of an agency alleged to engage in administrative monopoly is obliged to cooperate with the anti-monopoly law enforcement authorities for interviews.

8. Substantially increase the severity of administrative penalties for monopolistic acts and enhance the deterrence of the AML

A major highlight of this amendment is that the severity of administrative penalties is substantially increased, and the liability of individuals such as the legal representative involved in monopoly agreements is added.

1. Increasing fines and introducing special penalty

Chapter VII of the New AML substantially increases the amount of penalties for monopolistic acts and adds a special deterrence clause. In addition to the significant increase in the fines for gun jumping as mentioned above, fines for other types of illegal conducts have also been substantially increased:

1. The maximum fine for unimplemented monopoly agreements has been increased by five times (from CNY 500,000 to CNY 3 million);
2. The maximum fine for individuals obstructing investigations and reviews has been increased by four times (from CNY 100,000 to CNY 500,000); and the maximum fine for entities obstructing investigations and reviews may reach 1% of last year's turnover or CNY 5 million;
3. The maximum fine for monopoly agreements organized by trade associations has been increased by five times (from CNY 500,000 to CNY 3 million).

In addition, if the violation is particularly serious, has particularly serious impact or causes particularly serious consequences, the authority may impose a fine not less than twice but not more than five times the amount of the relevant fines.¹⁶ It is worth noting that the only authority that has the power to impose such fines is the State Anti-Monopoly Bureau, excluding the local anti-monopoly law enforcement authorities.

2. Adding individual liability for monopoly agreements and introducing enterprise credit punishment mechanism

Chapter VII of the New AML also adds individual liability for monopoly agreements and introduces the credit punishment mechanism. Specifically, Paragraph 1 of Article 56 provides that "if the legal representative, person in charge or directly liable persons of the undertakings is personally responsible for reaching the monopoly agreement, a fine of up to CNY 1,000,000 may be imposed". Article 64 provides that "where an undertaking is subject to administrative punishment for violating the provisions of this Law, it shall be recorded in the credit records in accordance with the relevant provisions of the State, and publicized to the society." 

The penalties for anti-monopoly violations in China has long been questioned for being too low to deter and warn the parties.¹⁷ For example, for monopoly agreement that have not been implemented, in Hunan Yongzhou Aodu Concrete Co., Ltd. and Other Six Companies Monopoly Agreement (2015),¹⁸ Hunan Provincial Administration for Industry and Commerce only imposed a fine of CNY 30,000 on the parties involved; for behaviors impeding the investigation, in AnhuiXinyada Limited's Refusal to Provide Relevant Materials to the Authority (2016),¹⁹ Anhui Provincial Administration for Industry and Commerce imposed only a fine of CNY 200,000; for monopoly agreement organized by industry associations, in the Loudi Insurance Industry Association in Hunan Province Case (2012),²⁰ Hunan Price Supervision Bureau only imposed a fine of CNY 200,000. These fines are obviously insignificant considering the size of the enterprises and transactions. With this amendment, the deterrence of the AML is enhanced by greatly increasing the fines and introducing the individual liability mechanism and the credit punishment mechanism.

3. Adding a general provision on criminal liability and providing an opening for criminalizing monopolistic acts

The Old Law only provided two specific provisions concerning criminal liability,²¹ however, these two provisions do not target monopolistic acts, but rather interference with public duties, malfeasance, and infringing trade secrets in the course of anti-monopoly law enforcement, for the purpose of protecting the implementation of the AML. The New AML deletes the provisions on criminal liability originally provided in these two articles and instead adds a general provision on criminal liability as Article 67: "whoever violates this Law and commits a crime shall be pursued for criminal responsibility according to law."

Currently, theCriminal Law does not specify criminal liability for monopolistic acts (only the crime of collusion in bidding activities). China adopts a unified legislative system for criminal code, according to which only the Criminal Law and specific criminal statutes have the legal criminalizing effect, excluding other non-criminal legal norms.²² Therefore, the supplement of criminal liability under the AML will not be completed through the AML itself and will have to wait for the NPC to amend theCriminal Law in the future. Nevertheless, the general provision on criminal liability in the AML at least lays a solid foundation for criminalizing monopolistic acts in the future. In light of international antitrust legislation,²³ it is probable that the three types of hardcore cartel (i.e. price fixing, output restriction and market division) may constitute crimes in the days to come.

Comparison of Fines under the New and Old AML
Violations		Fine under the Old AML	Fine under the New AML	Increased By
Anti-monopoly agreements
Concluded and implemented		Confiscation of illegal gains; 1-10% of turnover from the previous year.	Confiscation of illegal gains; 1-10% of turnover from the previous year; If there is no turnover from the previous year, a fine up to CNY 5 million shall be imposed.	【See Note】
Concluded, but not implemented		Not more than CNY 500,000.	Not more than CNY 3 million.	5 times
Personal liability (legal representative, person in charge or directly liable persons)		None.	Not more than CNY 1 million.	New
Organizing other undertakings or providing substantive assistance to other undertakings to conclude monopoly agreements (such as hub-and-spoke arrangements)		None.	Provisions above shall apply.	New
Where a trade association organize undertakings to conclude monopoly agreements		Not more than CNY 500,000; Revocation of registration.	Not more than CNY 3 million; Revocation of registration.	5 times
Abuse of dominant market position
Abuse of dominant market position		Confiscation of illegal gains; 1-10% of turnover from the previous year.	Confiscation of illegal gains; 1-10% of turnover from the previous year.	【See Note】
Concentration of undertakings
Gun jumping	Having or may have the effect of eliminating or restricting competition	Not more than CNY 500,000; Take necessary measures to restore the market competition state.	Not more than 10% of turnover from the previous year; Take necessary measures to restore the market competition state.	Geometric increase
	Not having the effect of eliminating or restricting competition	Not more than CNY 500,000.	Not more than CNY 5 million.	9 times
Refusal to cooperate with reviews and investigations by law enforcement authorities
Refusal to provide materials, providing false materials, or concealing, destroying or transferring evidence	Personal	Not more than CNY 100,000.	Not more than CNY 500,000.	4 times
	Entity	Not more than CNY 1 million.	Not more than 1% of turnover from the previous year; If there is no turnover from the previous year or it is hard to calculate the turnover, a fine of not more than CNY 5 million shall be imposed.	Geometric increase
Note: With regard to fines for all of the above violations, the New AML stipulates that Anti-monopoly Law Enforcement Authority of the State Council may determine the amount of the fine, which is more than twice and less than five times the amount of the above fine, for particularly serious circumstances which have particularly adverse impact and cause particularly serious consequences.

1. Enriching anti-monopoly investigative methods while paying attention to the protection of personal privacy and personal information

The decision-makers and implementers of monopolistic acts are concrete individuals, and anti-monopoly investigations focus on such key individuals to collect evidence. The New AML provides new methods to conduct anti-monopoly investigations against individuals and protects the legitimate rights and interests of individuals at the same time.

1. Adding interview with person-in-charge as an investigative method

Article 55 is added which allows the anti-monopoly law enforcement authorities to conduct investigations by interviewing the relevant legal representatives or persons-in-charge and require them to propose rectification measures. This method can be targeted not only at undertakings that are suspected of violating the AML, but also at administrative agencies and organizations empowered by laws and regulations to administer public affairs. In fact, in previous anti-monopoly administrative investigation cases, it is common practice for senior executives of undertakings to contact law enforcement authorities upon invitation or on their own initiative for interviews. For example, in the Qualcomm case (2015), it was disclosed that law enforcement officials had met with the president of Qualcomm for many times.²⁴ Article 39 (1) & (2) of the Old Law also provided that interviewing interested parties is a legitimate investigative measure. This revision further consolidates the legal basis for interview being an investigative method and proposing rectification measures by the interviewee is no less than a way to minimize the impact of eliminating and restricting competition as soon as possible. In addition, allowing the anti-monopoly enforcement authorities to interview the persons-in-charge of administrative agencies is also conducive to the effective conduct of investigations into administrative monopoly cases.

2. Supplementing the authority's duty of confidentiality for personal privacy and personal information

With the promulgation of the Personal Information Protection Law together with a series of other regulations, and the awakening of citizens' awareness of privacy protection, personal information protection has become one of the characteristics of the current era. The anti-monopoly raid system typified by "dawn raid" is a powerful tool for anti-monopoly administrative law enforcement. The existing law only stipulates that the anti-monopoly law enforcement authorities and its officials have the obligation to keep confidential the trade secrets they learn during the course of law enforcement, but in the actual process of investigation, due to its characteristics such as "arrival without notice" and "surprise raid", the law enforcement process will inevitably involve personal privacy of a large number of employees of the investigated enterprises. The revision adds "personal privacy" and "personal information" to the scope of confidentiality in Article 49, which responds to practical needs and the characteristics of the era.

3. Practical Issues Not Resolved by the New AML

Based on fourteen years of law enforcement practice, the New Law responds to many practical problems, involving various aspects of the anti-monopoly legal system, which is undoubtedly of great significance. On the other hand, it goes without saying that there are still some practical issues that have not been clearly addressed in the New Law, and there are also some provisions that have yet to be addressed by the subsequent supportive rules. From practical perspective, we will try to list several points as follows.

1. Law enforcement force to be strengthened: thoughts on authorizing the central enforcement authority to set up regional offices

Inadequate staffing of enforcement authorities has historically been an important factor affecting the normalization of anti-monopoly regulation in China. In early 2019, the SAMR issued an announcement, generally authorizing 31 provincial administrations for market regulation ("AMRs") to investigate monopolistic acts within their own jurisdiction.²⁵ Due to headcount limit, it is difficult for the central law enforcement authority to carry out effective and comprehensive investigation of anti-monopoly cases nationwide, considering China's vast territory and large population. Though this problem can be alleviated by authorizing provincial AMRs to conduct investigations, the manpower and budget of provincial AMRs are subject to local governments and shadowed by local protectionism. At the same time, the administrative efficiency of the 31 provincial law enforcement agencies is often unsatisfactory.

To address this issue, the practice in some jurisdictions is to set up regional offices of the central law enforcement authority, such as in Japan and the US. The Japan Fair Trade Commission ("JFTC") has set up regional offices in Hokkaido, Kyushu, Tohoku, Chubu, etc.²⁶ The Antitrust Division of the United States Department of Justice ("DOJ") has set up field offices in California, New York and Illinois.²⁷

The establishment of several regional offices by the central anti-monopoly enforcement authorities throughout the country, like the circuit courts set up by the Supreme Court of China, would solve this problem institutionally. In fact, during the process of this amendment, the Amendment Draft of the Anti-Monopoly Law (Draft for Comment) released by the SAMR in January 2020 had proposed to add a corresponding provision, allowing the State Anti-Monopoly Law Enforcement Authority to "establish regional offices", but such provision was deleted in the first and second drafts for deliberation, indicating that legislators still maintain a conservative attitude towards the establishment of the anti-monopoly law enforcement authorities. However, those practitioners who earnestly look forward to the intensification and normalization of anti-monopoly law enforcement in China cannot help but feel regretful.

2. Lack of effective connection between administrative enforcement and follow-on litigation

In China, compared to vigorous anti-monopoly administrative enforcement, anti-monopoly litigation is not only difficult, but also with a low success rate. According to incomplete statistics, in the past 14 years, there have been more than 800 anti-monopoly civil litigations, while less than 10 litigations in which the plaintiff prevailed.²⁸ In the meantime, among over 200 anti-monopoly law enforcement cases, there were only less than 10 follow-on litigations filed (i.e., the civil litigations filed by the aggrieved party against the enterprise punished according to the administrative penalty decision after it is rendered), and fewer were successful. The reason is that, in the anti-monopoly law enforcement process, the administrative authorities can relatively easily obtain the evidence of illegal acts by the enterprises involved by using their administrative coercive powers and professional knowledge. In contrast, in the anti-monopoly civil litigation, while bearing heavy burden of proof, the plaintiff has extremely limited channels and capabilities to obtain evidence. Even in follow-on litigations, the plaintiffs have no access to any non-public evidence of illegal acts by the enterprises involved that has been collected by the anti-monopoly law enforcement authorities.²⁹

Unlike China, in order to reduce the burden of proof for plaintiffs in antitrust follow-on litigation, jurisdictions such as the EU not only render the anti-monopoly administrative penalty decision binding in follow-on litigation (such decision can be taken as prima facie evidence of monopoly), but also set out specific provisions on the disclosure of anti-monopoly administrative enforcement materials.³⁰ The New AML does not specify a mechanism for connecting administrative enforcement and follow-on litigation, but only vaguely provide a mechanism to bridge administrative enforcement with judicial work. Therefore, we hope that the new mechanism will be able to address the difficulties, obstacles and pain points faced by private follow-on litigation in the future.

3. Lack of effective controls on administrative monopoly

Compared with economic monopolistic acts such as monopoly agreements and abuse of dominant market position, administrative monopoly is actually the most serious problem in China. Under the Old Law, the rectification ordered by superior agencies and the discipline imposed on directly responsible persons were the only legal consequences the party implementing an administrative monopoly had to bear; in addition, as the anti-monopoly enforcement authority could only make suggestions to the superior agency, the deterrence was obviously insufficient. The New AML only adds the requirement of "report in writing regarding the relevant rectifications to the superior agency and the Anti-Monopoly Law Enforcement Authorities", which doesn't change the situation in reality.

In fact, "order to rectify" is generally used as remedies for administrative misconduct and violations of administrative procedures. Administrative monopoly is a serious administrative violation, which is neither administrative misconduct nor violations of administrative procedures. Therefore, it should be declared invalid by the competent authority.³¹ In addition, the damage to the competition mechanism caused by administrative monopoly practices needs to be remedied. On the one hand, market players sheltered by administrative power (i.e. the beneficiaries of administrative monopoly) shall bear legal liability in accordance with the AML. On the other hand, the administrative authority that has implemented the monopoly shall bear civil liability for the market players' losses through such means as administrative compensation.³² By establishing such an ex post legal liability system and strictly implementing the ex ante fair competition review system, administrative monopolistic issues frequently arising in China's practice may be able to be effectively curbed.

4. Base of fines not explicitly defined for monopolistic acts

According to both the Old Law and the New Law, for some monopolistic acts, fines ranging from 1% to 10% of the previous year's turnover can be imposed on the party that violates the law. However, whether the "turnover" here refers to the enterprise's total turnover or only the turnover of the products involved in the case is not clarified in either the Old Law or the New Law. In practice, although the SAMR has stated publicly that "turnover" refers to a company's total sales,³³ as the previous anti-monopoly enforcement authorities had used the sales of the products involved as the base of fines for many years, which is also the common practice internationally and supported by many authoritative scholars,³⁴ some companies which were penalized based on the total sales filed administrative litigations in recent years.³⁵

In addition, the Old Law and the New Law likewise do not clarify whether the geographical scope of sales should be global or within China, and whether the subject of the penalty should be the implementing entity or a group company. With respect to the former, considering that the AML is a domestic law, the Chinese anti-monopoly enforcement authorities shall only investigate and deal with the illegal conducts within China, while the illegal conducts in other countries shall be dealt with by local competition authorities. In practice, administrative fines will usually be based on sales in China only. For the latter, according to the administrative penalty decisions of Eastman case (2019) of abuse of market dominance, Yangtze Pharmaceuticals case (2021) of monopoly agreement and other cases, if the relevant illegal conduct is carried out as a result of the intention of a group company, the group company shall be the subject to penalties; otherwise, if the relevant illegal conduct is conducted independently by the implementing entity, the implementing entity shall be penalized alone. In this regard, since fines for gun jumping may also be imposed on a pro-rata basis, it will make a significant difference whether the subject to be penalized is the undertaking that signed the transaction document or the ultimate controller.

Since fines are closely related to the fundamental interests of the subjects of administrative decisions and amounts calculated with different bases may differ significantly in individual cases, it is more suitable to resolve this issue in a higher-level legal document. As it is not provided for in this amendment, it may be resolved through legislation at other levels in the future.

In general, the New AML keeps pace with the times and provide a powerful legal support for China to improve the socialist market economic system and accelerate the establishment of a unified national market. At the root of the shortcomings of the New AML rest issues arising from the overall system and the complex realities. For example, administrative monopoly issues involve the entire political and economic system, which need to be adjusted from the aspect of administrative law or even constitutional level, which is way beyond the scope of the AML. In a country like China that focuses on codified law system, laws are often presented in the form of principles rather than having many specific technical details. Perfecting these details will still await implementing rules or judicial interpretations in the future.

"There is no long-lasting monopoly in life, but only continuous competition."³⁶ It is said for individuals, so is it for the country. At the beginning of the 2020s, with China shouldering the pressure of structural adjustment and the mission of deepening reform, the amendment of the AML – the "economic constitution", which concerns the economic operation and the broad mass of business entities – is loaded with the earnest expectations of people from all walks of life, including practitioners as lawyers, to extend the rule of law and the development of the market economy in China. However, the whole meaning of this amendment, and its gains and loss, will take a longer time to reveal.

Footnotes

1 Jet Deng and Ken Dai are Partners with Dentons' China Antitrust team, respectively based in Beijing and Shanghai. They can be reached via zhisong.deng@dentons.cn and jianmin.dai@dentons.cn. The authors would like to thank Dentons' China Antitrust team, particularly Rangi He, Edith Qu, Goodall Feng, Ivana Zang and Shirley Ding for their valuable contribution.

2 The Decision of the Standing Committee of the National People's Congress on Amending the Anti-monopoly Law of the People's Republic of China, http://www.npc.gov.cn/npc/c30834/202206/e42c256faf7049449cdfaabf374a3595.shtml.

3 The President Decree of the People's Republic of China, http://www.npc.gov.cn/npc/c30834/202206/e6006036b84841379d28b41de36a0295.shtml.

4 The Draft Amendment to the Anti-Monopoly Law (Draft for Public Comments) issued by SAMR on Jan 2, 2020, https://www.samr.gov.cn/hd/zjdc/202001/t20200102_310120.html.

5 Before 2018, the State Council's legislative department was the Legislative Affairs Office. In 2018, the National People's Congress ("NPC") passed the reform scheme of the central ministries and commissions. The functions of the former Legislative Affairs Office merged with the current Ministry of Justice.

6 The Draft Amendment to the Anti-Monopoly Law after the first reading, http://www.npc.gov.cn/flcaw/flca/ff8081817ca258e9017ca5fa67290806/attachment.pdf.

7 Supra note 2&3.

8 Ericsson: Raided for Antitrust Investigation in China, TENCENT NEWS (15 Apr. 2019), https://new.qq.com/rain/a/20190415A0MJRM.

9 Xianlin Wang, Establishment and Development of China's Anti-monopoly Rules on Abuse of Intellectual Property, 2(00) COMPETITION LAW AND POLICY REVIEW 53 (2016).

10 Report of the Constitution and Law Committee of the National People's Congress on the Deliberation of the Anti-monopoly Law of the People's Republic of China (Draft Amendment), http://www.npc.gov.cn/npc/c30834/202206/850d885cacb947b5894527ef65829ff1.shtml.

11 DOJ Statement of Interest of the United States, https://www.justice.gov/atr/case-document/372352.

12 See Article 62 of the Interim Provisions on the Review of Concentrations of Undertakings. With regard to a concentration of undertakings that does not meet the declaration standards but has or may have the effect of eliminating or restricting competition, the SAMR may collect facts and evidence and conduct an investigation in accordance with these Provisions.

13 Merger control in the EU: Overview, Porter Elliott, Johan Van Acker and Catherine Gordley, Van Bael & Bellis, https://uk.practicallaw.thomsonreuters.com/6-578-2386?transitionType=Default&contextData=(sc.Default)&firstPage=true#:~:text=During%20both%20Phase%20I%20and,respond%20to%20a%20request%20for.

14 Annual Report on Anti-Monopoly Law Enforcement in China (2021), https://www.samr.gov.cn/xw/zj/202206/P020220608430645470953.pdf.

15 Notes to the Anti-Monopoly Law of the People's Republic of China (Draft Amendment), http://www.npc.gov.cn/npc/c30834/202206/d5eb7f283661462bb8af84e5929f62e7.shtml.

16 There are no further provisions on how to define "the violation is particularly serious, has particularly serious impact or causes particularly serious consequences". Referring to the practice of the EU, this may be defined as "refusing to correct its mistakes despite repeated admonition". EU Guidelines on the Method of Setting Fines provide that, "where a company is found by the European Commission or a competition authority to have violated Article 101 or Article 102 TFEU, the basic fine may be increased by 100% if the company continues or repeats the same or similar infringements of Article 101 or 102 TFEU, the basic fine may be increased by 100%." See Wang Xiaoye, Comments on Anti-Monopoly Law (Draft Amendment) [J], CONTEMPORARY LAW REVIEW, 2022 (5), 36-51.

17 For example, Wang Jian, Zhang Jing, Perfection of Deterrence Theory and Anti-Monopoly Fine System in China — — Research Approach of Jurisprudence and Econometrics [J], LEGAL SCIENCE (JOURNAL OF NORTHWESTERN UNIVERSITY OF POLITICAL SCIENCE AND LAW), 2016, 34 (04), 124-136; Jiang Yanbo, Research on the Confiscation of Illegal Gains — — From the Perspective of Jurisprudence and Econometrics [J], JOURNAL OF ECONOMIC LAW, 2017 (01), 119-153.

18 https://www.samr.gov.cn/fldes/tzgg/xzcf/202204/t20220424_342028.html.

19 https://www.samr.gov.cn/fldes/tzgg/xzcf/202204/t20220424_342048.html.

20 https://www.gov.cn/jrzg/2012-12/28/content_2301393.htm.

21 Article 52 of the Old Law provided that, with regard to the review and investigation by the anti-monopoly enforcement authority, if a party refuses to provide relevant materials and information, provides false materials and information, conceals, destroys or transfers evidence, or otherwise refuses or obstructs investigation, and if the case constitutes a crime, the party shall be prosecuted for criminal liability in accordance with the law. Article 54 provides that "where any official of the anti-monopoly enforcement authority abuses his/her power, neglects his/her duties, commits illegalities for personal gains or by fraudulent means or discloses trade secrets learned by him during the enforcement process, if such act constitutes a crime, the person shall be investigated for criminal liability in accordance with the law."

22 Wu Yunfeng, Research on the Nature of Criminal Liability Provisions in Non- criminal Rules [J], JOURNAL OF EAST CHINA UNIVERSITY OF POLITICS AND LAW, 2009, 2 (2), 41-48.

23 For example, the United States focuses its criminal sanctions on hardcore cartel, and the United Kingdom and Ireland only provide criminal sanctions for hardcore cartel.

24 https://it.sohu.com/20150211/n408914042.shtml.

25 The SAMR Notice on Authorization of Anti-monopoly Enforcement (SAMR Antitrust, No. 265, 2018), http://www.gov.cn/xinwen/2019-01/04/content_5354782.htm.

26 See the official website of the JFTC, "regional offices", https://www.jftc.go.jp/regional_office/.

27 See the official website of the DOJ, "ANTITRUST DIVISION FIELD OFFICES", https://www.justice.gov/jmd/antitrust-division-field-offices.

28 These cases include: (1) Beijing Ruibang Yonghe Science and Trading Co., Ltd. v. Johnson & Johnson (Shanghai) Medical Equipment Company Limited and Johnson & Johnson (China) Medical Equipment Company Limited (2013); (2) Huawei Technologies Limited v. IDC Patents Royalty Dispute – Standard Essential Patent Royalty (2013); (3) Wu Xiaoqin v. Shaanxi Broadcast & TV Network Intermediary (Group) Co., Ltd. (2016); (4) Wu Zongli and Wu Zongqu v. Water Supply Company of Yongfu County (2019); (5) The Yangtze River Pharmaceutical v. Hefei Medical and Enrite (2020); (6) Jiacheng Concrete Co., Ltd. and Fujian Sanjian Co., Ltd. (2020); (7) the Horizontal Monopoly Agreement Case of Gansu Yinguang, Meng Baihe et al. (2020); (8) the Horizontal Monopoly Agreement Case of Taizhou Luqiao Geely Motor Driving Training Co., Ltd., Taizhou Luqiao District Chengrong Driver Training Co., Ltd. v. Donggang Company and Other Twelve Accused Driving Training Entities (2021).

29 For example, in the subsequent litigations of the Abbott Laboratories case, both the courts of first and second instance hold that, since the penalty decision made by the NDRC did not make clear whether Carrefour was also the counterparty of the monopoly agreement reached by the Abbott Laboratories and Carrefour Shuangjing, the plaintiff cannot obtain civil damages due to purchase of Abbott Laboratories' baby formula from Abbott Laboratories. Zhang Chenying, Discussion of the Validity of Anti-Monopoly Administrative Decisions in Civil Proceedings [J], JOURNAL OF LAW APPLICATION, 2017, July, 31-38.

30 See EU Regulation 1/2003, Guidelines for the Action for Damage Compensation (2014).

31 Ding Maozhong, Legislative Improvements on Administrative Monopolistic Conduct in China [J], POLITICS AND LAW, 2018 (7), 136-146.

32 Xu Shiying, A New Exploration of Regulatory Approaches on Administrative Monopolistic Conduct from the Perspective of Competition Policy [J], JOURNAL OF EAST CHINA UNIVERSITY OF POLITICS AND LAW, 2015 (4), 27-39.

33 With respect to the antitrust fine base issue, Wu Zhenguo, Director of the Anti-monopoly Bureau stated in an exclusive interview in May 2019 that the fine base should be a company's total sales in the previous year, not the sales of the involved products. With respect to this issue, the State Administration for Market Regulation has requested instructions from the Legislative Affairs Commission of the Standing Committee of the National People's Congress and has received a clear reply. See China Market Supervision Report: Detailing Measures to Implement Competition Policy, Highlighting Antitrust Enforcement, Focusing on China's Antitrust Regulation and Enforcement, available at: http://www.cmrnn.com.cn/content/2019-05/22/content_117787.html.

34 See Wang Xiaoye, Comments on Anti-Monopoly Law (Draft Amendment) [J], CONTEMPORARY LAW REVIEW, 2022 (5), 36-51.

35 For example, Hainan Shenghua Construction Co., Ltd. filed an administrative litigation against the Market Administration of Hainan Province for using the total sales of its products as the base of fine. The court of first instance, Hainan First Intermediate Court, supported the claim of the plaintiff, but the court of second instance, Supreme People's Court, changed the judgment of the plaintiff. Through this case, the Supreme People's Court confirmed the practice that the AML enforcement agencies used the total sales of products as the base of administrative penalty. See (2021) Judgment No. 880 of the Supreme People's Court, http://mp.weixin.qq.com/s/KIYEkvqeIE87TewkUEbsPw.

36 The keynote address by Ms Yu Ling at the graduation ceremony of the class of 2022 undergraduates and graduates of Jiangxi University of Finance and Economics Law School, released on the WeChat official account of "Jiangxi University of Law Graduate Student Association" on June 16, 2022.

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