Tech giants are under a microscope in China as the State Administration for Market Regulation (SAMR) will launch a case and investigate Google over suspected Anti-monopoly Law violations, while a Bloomberg report says Apple’s App Store may become the next target.
Although details of these investigations have yet to be disclosed, they have undoubtedly drawn widespread attention from the global tech industry. Kenneth Zhou, head of legal and compliance of SIG Group’s Asia-Pacific North region, spoke to China Business Law Journal about the origins and mechanism behind the anti-monopoly investigation.
Zhou said the market watchdog’s investigation follows the “Three Documents and One Letter” system, which was designed to ascertain facts and gather evidence. The SAMR and the Anti-Monopoly Commission of the State Council launched the system in November 2023 to combat monopolistic behaviour.
One of the three “documents” is the notice of case initiation, which informs companies that a case has been launched on it and the enterprise faces scrutiny. “There are several forms of investigation. Upon issuing the notice of case initiation, most commonly, law enforcement agencies will notify companies to co-operate with the investigation by sending a letter and requesting them to submit relevant documents,” Zhou said.
A more aggressive approach in an investigation is known as a dawn raid, where law enforcement agencies enter a company’s premises without prior notice. While this method was efficient, Zhou said a dawn raid could affect the company’s image and normal operations to some extent.
He noted that before the “Three Documents and One Letter” system was launched, there had been news reports about law enforcement agencies conducting dawn raids at companies suspected of violating the Anti-monopoly Law.
However, watchdogs had been more inclined to adopt a softer approach after the system kicked in, said Zhou. The softer approach includes issuing a reminder letter, a notification of an interview, or a notice of case initiation. The SAMR could also issue an administrative penalty decision on anti-monopoly violators.
The SAMR issues a reminder letter to urge companies to rectify anti-monopolistic issues. Companies that have received a notification of an interview are required to send their legal representative or relevant personnel to attend. During the interview, the SAMR will propose rectification measures. If companies fail to address their problems within a stated timeframe, the SAMR might take further actions by issuing the notice of case initiation.
Zhou said large multinational companies often had guidelines in place to respond to dawn raids, and some could also be applied to deal with investigations as part of the notice of case initiation.
“The companies’ first mission [on receiving the letter] is to proactively co-operate with the anti-monopoly body’s investigation and ensure all staff are informed and will comply with the probe. On top of that, some companies will further launch internal investigations to examine whether there are any violations,” he said.
“Companies might adopt additional response measures, such as simulating dawn raid scenarios to put their emergency response to the test.”
Article 62 of the Anti-monopoly Law states that if business operators refuse to provide information to law enforcement agencies or provide false materials, a fine of up to 1% of the company’s sales revenue from the previous year or a fine of up to RMB5 million (USD684,300) could be imposed. For individual violators, the maximum fine can reach RMB500,000.
Zhou said companies must take the investigation seriously and co-operate with law enforcement bodies if an investigation had been initiated. They should also engage lawyers familiar with Anti-monopoly Law to liaise with the authorities to seek a suspension of the investigation, through the commitment mechanism, to avoid severe legal consequences.
