The much awaited Anti-Monopoly Law of China was promulgated on August 31 2007. It will come into effect on August 1 2008.

The Law prohibits monopoly in three major areas, as follows:

Entering into a monopoly agreement

This is an agreement, a decision or concerted action excluding or restraining competition. Exceptions include relief measures adopted during economic downturn where there is clear over supply. However, an exception may be conditional upon the parties to the agreement proving that the agreement would not seriously restrain competition and consumers will benefit.

Abuse of a dominant market position

A business operator has a dominant status in the market if it is in a position to control the price, quantity or other trade conditions of a commodity, or to hinder or influence entry by others into this market. Factors are stipulated to help determine whether or not a business operator has a dominant status. Abuse arises where, for example, a commodity is sold or bought at an unfairly high or low price.

Concentration of business operators

The law prohibits concentration of business operators as would, or likely would, exclude or restrain competition. A concentration of business operators arises where a merger takes place, or where there is a dealing such that an operator assumes control of or can yield decisive influence on other operators. In general, clearance will need to be obtained from the authorities if the concentration concerned reaches a certain level. In addition, foreign investments that can affect national security must undergo a state security review.

The Law also stipulates that government departments should not abuse their power to restrain competition. They are prohibited, for example, from appointing producers or suppliers for unit or individual procurement. Furthermore, local authorities should not adopt discriminatory measures hampering free movement of commodities from other regions.

The provisions of the Law have no application to state-owned enterprises in key sectors or in situations such as exercising intellectual property rights in accordance with the relevant law and rules unless the business operator abuses his rights excluding or restraining competition.

An Anti-Monopoly Commission will be set up to organize, coordinate and give guidance on anti-monopoly work, including formulating and preparing anti-monopoly policies and guidelines, and coordinating anti-monopoly enforcement action. This will be handled by an anti-monopoly enforcement agency, still to be set up. Sanctions against monopolistic practices include a cessation order, confiscation of unlawful gain and a fine.

Howard Tsang

Wilkinson & Grist
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Central, Hong Kong
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