Chillin'Competition

The Year of the Rabbit is over, and the Year of the Dragon just started today in China.  This is thus a good moment to look at the rabbit in the rearview mirror, and reflect on what has been achieved in Chinese antitrust over the past year. Our colleague and friend Adrian Emch from Hogan Lovells Beijing has proposed us a series of posts on the Year of the antitrust Rabbit.  If time allows, Adrian has promised a “trilogy!” 

For this first post, let’s just review the main developments in Chinese antitrust law over the year of the rabbit (the description is not meant to be exhaustive)? The year started with a bang: on 1 February 2011, a total of five new regulations implementing the Anti-Monopoly Law came into effect.  Two of them were released by the National Development and Reform Commission (NDRC), and three of them issued by the State Administration for Industry and Commerce (SAIC).  (For in-depth analyses of these regulations, see here.)

Besides this, and focusing on case-work, here’s a flavor of what Chinese agencies and Courts have been busy working on.

NDRC.  As already reported, one of the highlights in NDRC’s activities was the Unilever decision in May.  In November, NDRC also adopted a decision against two domestic pharmaceutical companies, with the highest fines ever imposed for an infringement of competition law.  The case was about two of only a handful of distributors of a drug (promethazine hydrochloride) that entered exclusive supply arrangements with the two only domestic producers of the drug.  The result was rather obvious – significant price increases.  The legal reasoning in NDRC’s public announcement of the case, in turn, was less clear.  Press reports indicated that the two distributors were affiliated, so a possible theory that the two distributors had engaged in cartel conduct would not make much sense if one were to accept the “single economic entity” defense (which is not explicitly in the law inChina, though).  It seems that NDRC, instead, held that the distributors had abused their dominant position.  But there is no explanation on this in the announcement, so one can only speculate whether the dominance was found pre- or post-agreement, and whether it was single or collective dominance.

Finally, in December, NDRC officials told the domestic press that they were investigating a potential abuse of dominance by two ofChina’s three large telecoms companies, China Telecom and China Unicom.  In the absence of an official decision or announcement, the exact facts of the case are not fully clear.  For example, it is, again, not entirely clear whether the dominant position would be each company individually (China Telecom is strong in the South of China, and China Unicom in the North) or jointly (collective dominance can be presumed if the aggregate market share of two companies is two-thirds or more).  As for the alleged abuse, it seems it consisted of making difficult access to the broadband network.   The particular allegation may be that the two companies granted access on a discriminatory basis, with higher access charges for companies that compete with them downstream.

 Finally, in terms of human resources, NDRC has started restructuring its antitrust team in 2011.  In July, the main body was re-named Price Supervision and Anti-Monopoly Bureau (in English), and the antitrust team inBeijingis scheduled to grow from half a dozen to over 20 in the coming months.

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