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The targets of antitrust agencies vary depending on jurisdiction. This guide offers the latest legal information on competition practices in four places of interest

Unpacking China’s antitrust law regime

As one of the world’s largest economies, China has been dedicated to improving its antitrust system in recent years to strengthen enforcement against monopolistic practices and provide clearer guidance to undertakings.

This article aims to provide an introduction and insight into China’s antitrust law regime based on the authors’ practical experience.

Legislation

The Anti-Monopoly Law (AML) is fundamental in China’s antitrust regime, providing a general framework for regulation that outlines key rules on the applicable scope, prohibited monopolistic behaviour, and penalties. First enacted in 2008, the revised AML was promulgated on 22 June 2022.

These amendments respond to calls for clearer guidance for both authorities and undertakings, as well as stricter enforcement against monopolistic practices. The main amendments to the AML reflect an alignment with evolving economic trends, including:

• Increased focus on monopolistic behaviour by using data and algorithms, technology, capital advantages, platform rules, etc.;
• Establishment of prohibitions and identification rules on hub-and-spoke agreements;
• Introduction of “safe harbours” for vertical monopoly agreements; and
• Significant increases in penalties.

Following the AML amendments, five implementing provisions were issued in 2023. The provisions respectively focus on prohibiting monopoly agreements, preventing abuse of market dominance, refining the merger control system, combating the abuse of administrative power (administrative monopoly), and addressing IPR monopoly.

In addition, Chinese authorities have provided detailed rules and guidelines to sectors such as automobiles, platform economy, Active Pharmaceutical Ingredients (API), etc.

Enforcement authorities

Public enforcement. Before 2018, AML enforcement was led by the State Council Anti-Monopoly Commission (SCAC) through three separate authorities. After the institution reform in 2018, the public enforcement right was consolidated under the State Administration for Market Regulation (SAMR).

To enhance antitrust enforcement, the SAMR authorised provincial administration for market regulation (local AMRs) to investigate monopoly agreements, abuse of market dominance and administrative monopoly within their administrative regions. With regard to merger filings, the local AMRs of Beijing, Shanghai, Guangdong, Chongqing, and Shaanxi were commissioned to assist in merger control review of selected simplified cases on a pilot basis.

Private Enforcement. Recently, enterprises harmed by monopolistic practices have become more aware of using litigation for self-protection. According to the judicial interpretation issued on 24 June 2024, first-instance civil monopoly cases are brought before the intellectual property courts and intermediate people’s courts designated by the Supreme People’s Court.

As for territorial jurisdiction, antitrust disputes follow the general rules applicable to tort disputes, contract disputes, etc., which mainly involve the courts in the locations where the tortious acts were committed, or where the result occurred, where the contract was concluded or performed, and where the defendant is domiciled.

Monopolistic behaviour

The AML mainly regulates monopolistic behaviour including monopoly agreements, abuse of market dominance, and concentrations that have or might have the effect of excluding or limiting the competition.

It also covers administrative monopoly and establishes a fair competition review system for the policies by administrative agencies or authorised organisations before issuance. Undertakings can also use the AML to address anti-competitive behaviour by the government.

(1) Monopoly agreements. In principle, the AML prohibits horizontal monopoly agreements between competitors, including those to: (a) fix or change the price; (b) limit production or sales volume; (c) divide markets; (d) restrict new technology or new products; and (e) boycott other undertakings.

The AML also identified two typical vertical monopoly agreements: Fixing the resale price; and setting the minimum resale price, which is also known as resale price maintenance (RPM). Undertakings can defend against RPM claims by demonstrating the absence of anti-competitive effects.

The AML can also cover non-price vertical agreements such as territory and client restrictions, but no precedents have focused solely on these no-price issues so far. And to prohibit non-price vertical agreements, the authorities should prove their anti-competitive effects.

In addition, safe harbours have been introduced into the AML. Vertical monopoly agreements are not prohibited if the market shares of undertakings involved are lower than a certain threshold, and if other conditions set by the authorities are met. The precise market share threshold and other conditions to apply the safe harbour rule have not yet been specified.

Organising and substantially assisting in monopoly agreements is also prohibited under the AML, which includes hub-and-spoke agreements within its scope.

Hub-and-spoke agreements involve both vertical and horizontal relationships, typically where a supplier sets prices with multiple dealers, leading to uniform pricing. Such behaviour is also subject to penalties similar to those for reaching or implementing monopoly agreements.

(2) Abuse of market dominance. The premise of abuse is the possession of a market dominance. The AML outlines factors for determining market dominance, including shares in the relevant markets, ability to control over sales market or inputs market, financial and technological capabilities, other undertakings’ reliance, and market entry. Market share is the most intuitive factor, and the AML provides rules to presume a dominance based on shares.

Typical abusive behaviours include:

• Selling at unfairly high prices, or buying at unfairly low prices;
• Selling at a price lower than costs;
• Refusal to deal;
• Exclusive dealing;
• Conducting tie-in sales, or imposing unreasonable conditions; and
• Discriminatory treatment.

(3) Merger filing. According to the AML, a pre-merger filing shall be submitted if a concentration meets the turnover thresholds.

Specifically, acquisitions of equity or assets, establishment of new joint ventures and acquisitions of control by contracts or other means are all subject to merger control regulations. The turnover thresholds mainly consider the consolidated or respective group turnover of the undertakings involved in the concentration in the previous fiscal year, as follows:

• With the combined global turnover exceeding CNY 12 billion and the turnover of at least two undertakings within mainland China exceeding RMB800 million; or
• With the combined turnover within China exceeding RMB4 billion and the turnover of at least two undertakings within mainland China exceeding RMB800 million.

The Chinese authorities may also require the transaction parties to submit a filing if a transaction below the turnover thresholds is considered to have an anti-competitive effect.

Penalties

When a company is found to violate the AML, the authorities would order it to cease the infringements and may confiscate illegal gains. Both the company and the responsible individuals might be subjected to significant fines, including:

• Fines on monopoly agreements, abuse of market dominance and illegal concen-tration are up to 10% of the undertaking’s turnover in the last fiscal year;
• Individuals are subject to fines of up to RMB1 million and criminal liability may also apply in the case of obstructing an investigation; and
• Where serious circumstances exist, the fines may be up to five times the above-mentioned amount.

The commitment system applies to part of horizontal monopoly agreements, vertical monopoly agreements and abuse of market dominance. Under the commitment system, undertakings commit to implement specific measures to rectify the consequences of their behaviour, and the authorities may suspend or terminate the investigation if all these commitments are fulfilled.

China’s evolving antitrust regime aligns with its need for fair market competition. It is crucial for enterprises to leverage the AML as a strategic tool to safeguard their interests and to foster business growth.

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A critical look at antitrust violation assessment in Indonesia

The primary legislation governing antitrust practices in Indonesia is Law No. 5 of 1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition (last amended by Government Regulation in Lieu of Law Number 2 of 2022 Concerning Job Creation, which has been stipulated as Law by virtue of Law Number 6 of 2023), commonly known as the Indonesian Antitrust Law (IAL).

Enacted shortly after the monetary crisis that hit Indonesia in 1998, the IAL incorporates elements from German antitrust law, as well as internationally recognised standards issued by the United Nations Conference on Trade and Development (UNCTAD).

Key provisions of the IAL include, among other things, the prohibition of agreements or actions that restrict competition and unfair business practices, such as cartels, closed agreements, vertical integration and abuse of dominant positions, as well as the regulation of mergers.

For antitrust supervision purposes, the IAL mandates the establishment of the Commission for the Supervision of Business Competition (Komisi Pengawas Persaingan Usaha, or KPPU), a government body directly responsible to the president of the Republic of Indonesia. The KPPU is vested with broad powers to oversee business competition and enforce the law through investigations and the imposition of fines and/or other forms of penalties on companies found guilty of anticompetitive behaviour.

Due to its rushed enactment, the IAL has faced criticism for not adequately addressing Indonesia’s rapidly evolving economic landscape and complex antitrust issues. To fill regulatory gaps, the KPPU occasionally issues regulations and guidelines, although their legal standing within Indonesia’s legal hierarchy has been questioned by practitioners. Nonetheless, these regulations and guidelines are generally accepted and utilised by businesses as references in their day-to-day operations.

This article highlights several landmark cases adjudicated by the KPPU and focuses on its views and interpretations concerning closed agreements and cartels, particularly how the KPPU addresses regulatory gaps in these cases. It also briefly discusses merger control rules under the IAL, which adopts a post-merger approach, and highlights recent developments in the government’s plan to amend the IAL.

KPPU on landmark cases

Closed agreements. Article 15 of the IAL prohibits agreements that prevent other parties from engaging in similar transactions, including exclusive agreements, tying agreements and vertical agreements on discounts.

In a notable 2006 case involving one of Indonesia’s largest cement producers, the KPPU ruled against the cement producer for establishing a consortium of distributors. Through this consortium, the cement producer restricted distributors from selling products from other producers and limited their sales to designated customers and regions only.

The KPPU determined that this action violated Article 15(1) of the IAL, which explicitly prohibits businesses from compelling or limiting their buyers to supply or otherwise not resupply goods to certain parties and/or locations.

The cement producer appealed up to the cassation level, but the appeal was rejected by the Indonesian Supreme Court, affirming the KPPU’s decision that the cement producer had violated the provisions of article 15(1) of the IAL.

While article 15 of the IAL is considered as per se illegal prohibition, requiring no analysis of the impact of the closed agreement, as also notably absent in the KPPU’s analysis of the cement case, yet many practitioners believe that it is crucial for the KPPU to assess the impact of the agreement on the market (rule of reason) for objective analysis.

This perspective is particularly relevant in cases involving multiple distributors where exclusive distribution agreements can be commercially sensible, for example, to avoid intra-brand competition at the distributor level. Some experts also support this view, adding that exclusive distribution agreements can provide certainty of distribution, reduce costs and eventually result in increased efficiency.

Acknowledging these concerns, the KPPU has signalled a shift towards adopting the rule of reason approach by issuing KPPU guidelines on closed agreements under KPPU Regulation No. 5 of 2011, where the KPPU indicates that the rule of reason approach is more sensible for adjudicating closed agreement cases under article 15 of the IAL.

Cartels. Article 11 of the IAL and its implementing regulations, issued by the KPPU, set the general rules on cartels, including: (1) price fixing (article 5 of the IAL); (2) market allocation (article 9 of the IAL); and (3) group boycotts (article 10 of the IAL).

Price fixing, also known as a hardcore cartel, and group boycotts fall under the “per se rule” principle.

In fact, cartels have been among the most “actively investigated cases” by the KPPU, with more than 20 cartel cases documented in the KPPU’s database between 2003 and 2023.

Proving the existence of a cartel has always been challenging for the KPPU due to stringent requirements under the IAL, which mandate the KPPU to rely only on direct evidence. In a landmark 2017 case, however, the KPPU insisted that communication between parties through high-level employee meetings and concerted actions linked to price parallelism should be deemed hard evidence of price fixing.

Despite facing criticism, the KPPU held its position and found the implicated companies guilty of price fixing based on circumstantial evidence. The KPPU’s decision was upheld by the Supreme Court, marking it as one of the first cases where the use of circumstantial evidence was accepted in Indonesian courts.

Following from this, in handling competition cases including cartel cases, the KPPU, through its regulations, continues to acknowledge the admissibility of circumstantial evidence, whether economic evidence (i.e. the use of economic postulates supported by quantitative and/or qualitative data processing methods) or communication evidence (i.e. a meeting or communication with or without explaining the substance of the meeting or communication).

This has prompted various reactions from practitioners and scholars who believe that reliance upon indirect evidence may pose serious challenges.
For example, the pattern of price parallelism in the market could naturally occur due to pure business competition rather than an intentional price fixing agreement.

To avoid potential legal and financial issues, businesses should carefully conduct their activities and seek advice from local counsel before engaging in communications with other businesses, including association meetings and even casual interactions.

Merger control

Unlike many other jurisdictions, Indonesia mandates a compulsory post-merger notification requirement, which also applies to offshore mergers and transfers of assets (both tangible, such as land and factories, and intangible, such as intellectual property rights and consumer data).

The post-merger notification obligation is triggered only if specific conditions are met cumulatively, such as involving non-affiliated parties, resulting in a change of control, exceeding certain Indonesian asset and/or sales thresholds, or with all transacting parties having assets and/or sales in Indonesia.

Notifications must be submitted to the KPPU within 30 business days of the merger’s effective date. Failure to meet the deadline may lead to substantial monetary fines. Therefore it is crucial for businesses to engage local counsel to effectively navigate compulsory post-merger notification requirements.

New antitrust bill

A new antitrust bill is currently under parliamentary review. The bill introduces a pre-merger filing regime to replace the existing IAL. The timeline for its enactment remains uncertain, but parties should monitor potential changes that could impact current transactions.

While the bill promises enhanced detection of anticompetitive practices before mergers, concerns linger about potential delays in the merger process that could affect the valuation of the target company.