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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:

1. 1. Fix or change the price;
   2. Limit production or sales volume;
   3. Divide markets;
   4. Restrict new technology or new products; and
   5. 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.