The Landscape under China’s New Anti-Monopoly Law: An Economic Perspective

China recently celebrated the 15th anniversary of its Anti-Monopoly Law and the first anniversary of its recent amendments. In this article, Vanessa Yanhua Zhang, Rita Xiaoping Li and Verdi Choo [1] discuss developments in antitrust regulation in China and identify the trends that help navigate its evolving landscape.

The author's review is available in full here

The views expressed in this article are the views of the authors only and do not necessarily represent the views of Compass Lexecon, its management, its subsidiaries, its affiliates, its employees or its clients.

Introduction

China’s approach to antitrust is increasingly important, both for companies operating in China and for those operating globally. Its approach is also evolving. 2023 was particularly significant, as it marked the 15th anniversary of China’s Anti-Monopoly Law (AML) and the first anniversary of its recent amendments (AML Amendments).

In this article, we explore the changing landscape of antitrust regulation in China. We highlight key developments in China’s antitrust legislation, enforcement of mergers and antitrust investigations, and private litigation. For each area, we outline the main activities and provide insights and trends to help stakeholders navigate antitrust regulation in China.

Our goal is to give legal practitioners and litigators a thorough understanding of the latest developments in China to better advise clients on antitrust matters. Policymakers and antitrust enforcers may also find this analysis useful for understanding China's competition policies and their potential implications for global practices. Insights from China's antitrust enforcement and litigation cases, along with the analytical methods employed, may also serve as valuable references for experts and scholars in antitrust-related economics and legal research.

Our review shows that China is adopting a multifaceted approach to antitrust issues, aiming to promote competition, protect intellectual property rights, and ensure consumer welfare and innovation. We identify and explain the following developments in four sections.

First, China’s antitrust legislation is evolving. This legislative context affects the number and nature of transactions that the State Administration for Market Regulation (SAMR) investigates and clarifies how these assessments are conducted. We explore three important developments that demonstrate the evolving priorities and approach to antitrust investigations in China:

• Five provisions to support the new AML: These provisions offer clear guidance on business compliance by clarifying how the SAMR will handle specific matters, such as: cooperation agreements; “hub and spoke” agreements; various types of abuse of dominance; metrics for assessing concentration in markets; and abuse of Intellectual Property Rights (IPR).
• Guidelines on SEPs and trade associations: China, being a major jurisdiction for litigation related to standard essential patents (SEPs), has published draft guidelines that set out its priority in SEP cases: balancing the trade-off between implementers’ and IP owners’ financial interest. They have also published guidelines aimed to prohibit certain horizontal and vertical monopoly agreements relating to Trade Associations.
• Higher filing threshold for mergers: The State Council of the PRC has raised notification thresholds for mergers. This change should result in fewer transactions being reviewed, allowing the SAMR to focus on complex transactions in key sectors such as semiconductors and pharmaceuticals.

Second, China’s approach to merger enforcement is changing. We provide an overview of the SAMR and local AMRs’ merger reviews in 2023, analyse cases where the SAMR approved mergers subject to conditions, and identify trends for the future. In particular, we note:

• A more rigorous analysis of non-horizontal mergers: There has been an increase in non-horizontal cases, a trend that is likely to continue. In these cases, the SAMR has employed more rigorous economic theories of harm and gained experience using sophisticated economic methods and tools to assess anticompetitive effects.
• Greater uncertainty of the merger review process on complex cases: Recent administrative developments suggest that merging parties may face more uncertainty regarding the review process and the likelihood of obtaining clearance from the SAMR.
• Novel approaches to review and enforcement: The SAMR is increasingly applying new approaches to address its concerns and priorities. This includes reviewing mergers below the filing thresholds, developing novel theories of harm, and requiring behavioural remedies to address competitive concerns.

Third, China’s approach to antitrust investigations is advancing. We provide an overview of antitrust enforcement in 2023, analyse representative cases, and explore two trends relating the SAMR’s priorities and focus:

• A greater focus on industries affecting people’s livelihoods: Key sectors, such as the pharmaceutical industry, which directly affect people’s livelihoods and social well-being, have drawn the most attention from antitrust authorities.
• Resale price maintenance (RPM) regulation: The SAMR is expected to renew its emphasis on RPM regulation, granting operators the opportunity to assert their defence by demonstrating that the alleged RPM practice does not have the effect of excluding or restricting market competition.

Finally, we explore China’s private litigations regarding antitrust issues. We examine updates by the Supreme People’s Court (SPC) on its judicial interpretation in these cases, consider representative cases, and highlight two trends:

• Balancing antitrust and IPR protection: There is a focus on balancing antitrust concerns with IPR protection. Specifically, assessments of excessive pricing should consider both adverse effects on consumer welfare and the potential impacts on investment initiatives by incumbents and potential newcomers.
• Increasing role of economic analysis in court rulings: Economic analysis is being increasingly adopted in various forms in antitrust court rulings in China, a trend we expect to continue.

The author's review is available in full here

References