Introduction
Since its implementation in 2008, Anti-Monopoly Law of the People’s Republic of China (“Anti-Monopoly Law”) has produced positive effects in regulating monopolistic conduct and the market competition order, as well as protecting the rights and interests of consumers. However, in recent years, with the rapid development of the digital economy and artificial intelligence, many new competition models have emerged, posing great challenges to anti-monopoly enforcement practices. Under this background, the Anti-Monopoly Law of the People’s Republic of China Amendment (“Anti-Monopoly Law Amendment”) was introduced on June 24th, 2022, and formally implemented on August 1st, 2022. We will analyze the key points of the Amendment to assist companies in the understanding and provide compliance advice on how to respond to anti-monopoly enforcement in future.
Key Points of Anti-Monopoly Law Amendment
The Anti-Monopoly Law Amendment is the first substantial revision of China’s first anti-monopoly law in nearly 15 years, which has modified the mechanisms and rules in the field of anti-monopolistic behavior in many aspects and incorporated the relevant problems encountered in the anti-monopoly enforcement practice into the regulation. The revisions are mainly reflected in the following points:
1. Strengthening Liability for Violation
1) Increase the Monetary Fine
Compared to the previous Anti-Monopoly Law, which provided for a fine of less than RMB 500,000, the Anti-Monopoly Law Amendment provides for fines of less than three million or five million which may be imposed, and for certain violations, a fine of more than one percent but less than ten percent of the previous year’s sales may be imposed.
2) Addition of Personal Liability
The Amendment adds the provision that individuals may be liable for monopolistic conduct. For illegal monopoly agreements, if the company’s legal representative, the principal person in charge and directly responsible personnel are personally responsible for such agreements, a fine of up to one million RMB may be imposed; if it constitutes a crime, they can even be held criminally responsible.
3) Introduction of Punitive Penalties
The Amendment introduces a punitive penalty mechanism for the first time. For monopolistic conduct with particularly serious circumstances, causing bad effects and consequences, the anti-monopoly enforcement authority can impose a fine of more than two times but less than five times the original fine amount, significantly increasing the punishment.
2. New Regulatory Mechanisms
1) Public Interest Litigation
Considering the past experiences of law enforcement in the field of anti-trust and drawing on the handling mechanism of public interest litigation in other fields, the Amendment has introduced public interest litigation into the field of anti-monopoly. According to the Anti-Monopoly Law Amendment, if an operator implements monopolistic conduct and infringes on the public interest of society, the procurator can file a civil public interest litigation to the court.
2) Credit Record
The Amendment incorporates the operator’s compliance with the Anti-Monopoly Law and regulations into the credit evaluation system. If an operator is subject to administrative penalties for monopolistic conduct, it will be included in the credit records and publicized.
3) Regulation on Digital & Platform Economy
In view of the vigorous development of the digital economy and the platform economy in recent years, many new modes of monopolistic conduct have emerged. The Anti-Monopoly Law Amendment clearly stipulates that operators shall not abuse data and algorithms, technology, capital advantages and platform rules to exclude or restrict competition.
Impacts on Companies and Compliance Points
1. Impacts on Companies
The Anti-Monopoly Law Amendment is not only a summary of the experience of anti-monopoly enforcement practice in the past ten years or so, but also points out the direction to cope with future economic development and regulate monopolistic practices. We expect the following impacts on companies:
1) Company and relevant personnel face increased penalties. In view of the fact that the Anti-Monopoly Law Amendment has not only significantly increased the penalties for monopolistic conduct, but also set penalty provisions for individuals for the first time, future anti-monopoly enforcement practices will increase the penalties for monopolistic conduct and even pursue criminal liability.
2) Company and relevant personnel face more compliance requirements. The Anti-Monopoly Law Amendment introduces new mechanisms and rules, and the anti-trust enforcement agencies have issued a series of related anti-trust regulations, which further refine the requirements and details in the field of anti-trust enforcement. For companies, these regulations have also increased their compliance requirements as well as for relevant personnel involved in alleged anti-trust activities, which must be addressed throughout daily operations.
3) Anti-monopoly enforcement activities becoming more frequent. The Anti-Monopoly Law Amendment will provide the basis for more frequent anti-monopoly enforcement activities by the anti-monopoly enforcement authority in the future.
4) More industries and monopolistic conduct will be included in the regulation. With the accumulation of enforcement experience and the strengthening of enforcement, we expect that future anti-monopoly enforcement will cover industries and fields that have not been included before, and anti-monopoly regulatory issues under the new economic model will be gradually incorporated into the regulatory framework.
2. Compliance Points
In combination with the aforementioned impact of the Anti-Monopoly Law Amendment on companies, in order to help companies mitigate the risks and responses in compliance matters in the future, we hereby provide the corresponding compliance points for consideration based on our experience in assisting our clients to deal with anti-monopoly enforcement:
1) Raise awareness of anti-trust compliance. Given that the Anti-Monopoly Law Amendment strengthens the penalties for monopolistic conduct and establishes the mechanism of individual liability, in order to reduce the compliance risks of companies and executives, we suggest that companies pay attention to compliance matters involving anti-monopoly and strengthen anti-monopoly training to improve employees’ awareness of compliance in daily operations. At the same time, the legal representative, the principal person in charge of such related work and directly responsible personnel should pay more attention to anti-trust compliance work during their daily activities in order to avoid taking personal responsibility for monopolistic conduct.
2) Establish an anti-trust compliance mechanism. Since companies are involved in a large number of anti-trust compliance requirements in their daily operations; and the anti-monopoly enforcement authorities have tended to focus on the documents and information generated by companies during their daily operations in the past, including emails, letters, notices and other transaction information, to collect evidential materials involving anti-trust conduct. We suggest that companies should establish an anti-trust compliance mechanism, evaluate and pay attention to the anti-trust compliance of documents and information involved in daily operations, and focus on the anti-trust requirements in important areas in order to avoid any violation of anti-trust regulations.
3) Focus on anti-trust enforcement practice. Due to the substantial revision of the relevant content, the anti-trust enforcement authority has also issued relevant detailed provisions, but many specific requirements, compliance details and other issues are yet to be clarified through enforcement practice. Therefore, we suggest that companies should pay close attention to anti-monopoly enforcement practices to ensure timely clarification of the relevant regulatory requirements.
4) Consult professionals in a timely fashion. Given that the Amendment imposes higher compliance requirements on companies and that anti-monopoly enforcement may focus on more areas in the future, we recommend that companies consult professionals to ensure that the relevant compliance risks are reduced or resolved prior to being identified as anti-monopoly violations.
D’Andrea & Partners Legal Counsel and PHC Advisory Tax & Accounting (companies of DP Group) offer full-scale legal compliance, tax advisory support and consultancy to address any concerns related to the evolving legal framework of anti-trust in China. For more information or for any questions, please feel free to contact us at info@dpgroup.biz.
