Questions and Answers

People's Republic of China

PRINCIPAL LAWS

1. Firstly, what are the principal laws which are aimed at the protection of competition in your country?

Interim Provisions for the promotion and Protection of Competition in Socialist Economy, issue by the State Council in 1980, is the earliest piece of legislature concerning competition in China. The Law of PRC for Countering Unfair Competition (hereinafter referred to as LCUC) is the major law which is aimed at the protection of competition. In addition, there are some other laws and regulations containing a few provisions concerning the protection of competition, such as the Foreign Trade Law of PRC, Pric e Law of PRC and the Regulation of PRC concerning Anti-dumping and Countervailing. Presently, China is in the process of drafting Anti-Monopoly Law.

PRINCIPAL AGENCIES

2. Now, we are interested in the principal agencies involved in the enforcement and administration of your competition laws. What are the respective roles of the principal agencies involved in enforcement of the law?

2A. Head of State

2B. Government/relevant ministers

2C. Courts

Ans: All levels of People's Courts

2D. Competition agencies

Please specify their names and role.

Name of the principal agencies involved in the enforcement or administration of your competition law State Administration of Industry and Commerce (SAIC), Ministry of Foreign Trade and Economic Cooperation (MOFTEC) State Economic and Trade Commission (SETC) State Development and Planning Commission (SDPC)

Roles of the agency

SAIC is responsible for countering unfair competition practices specified in the LCUC. MOFTEC and SETC are responsible for anti-dumping investigation and issuing the order of anti-dumping duty. SDPC is responsible for the investigation and correction of the improper pricing in terms of anti-competition by the entrepreneurs.

2E. Do the competition agencies have any other administrative, decision making or negotiating roles?

Ans: Yes. SAIC is also responsible for the industry and commerce registration. MOFTEC is in charge of foreign trade, foreign direct investment and international economic cooperation. SETC is responsible for the restructure of State-owned entrepreneurs , technology innovation and domestic commerce. SDCP is mainly responsible for macro planning of national economy based on the study and research.

THE SUBSTANTIVE PROHIBITIONS IN YOUR COMPETITION LAWS General prohibitions

3. Most competition statutes have general prohibitions against anti-competitive behavior (e.g. "Combinations in restraint of trade", "agreements to substantially lessen competition". Are there any general prohibitions in your competition law? And what are they?

Ans: Yes. According to Interim Provisions for the Promotion and Protection of Competition in the Socialist Economy Section 3, all are forbidden to be engaged in monopoly or exclusive dealing, except the departments and units who are authorized to have the specialized operation power upon certain kinds of commodities.

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Horizontal Agreements

4. Horizontal agreements are agreements between firms directly in competition with one another.

4. A. Price fixing [agreements between competitors to raise or fix prices] Does your law have special provisions relating to price fixing?

Ans: Yes.

Please specify the law and the provision of that law. The Price Law Article 14(1):It is forbidden to fix price through collusion among firms to injury the lawful rights and interests of other businesses and consumers.

What is the nature of the provision?

Ans: The practice is prohibited in all cases.

If covered by a general prohibition how does that prohibition treat the practice?

Ans: According to Article 40 of the Price Law, where the entrepreneurs are involved in improper pricing, the price authorities shall order to make corrections, confiscate the undue profit and simultaneously impose a fine of five times of the undue profit.

4B. Bid rigging [agreements on which firm will make the low bid for contracts, and what that bid will be] Does your law have special provisions relating to bid rigging?

Ans: Yes.

Please specify the law and the provision of that law. Tenders shall not submit tenders in collusion with one another to force the tender price up or down. A tender shall not collaborate with the party inviting tenders to exclude competitors from fair competition. (Article 15, LCUC)

What is the nature of the provision?

Ans: The practice is prohibited in all cases.

If covered by a general prohibition how does that prohibition treat the practice?

Ans: Such bids shall be null and void. The relevant authorities shall, according to circumstances, impose on the entrepreneurs a fine within the range from RMB 10,000 Yuan to RMB 20,000 Yuan.

4C. Market sharing [agreements to allocate specific customers or sales territories to particular firms and not to compete over the territory or customers of other firms] Does your law have special provisions relating to market sharing?

Ans: No.

4D. Output limitation [agreements not to supply more than a specified quantity of goods or services] Does your law have special provisions relating to output limitation?

Ans: No

4E. Collective boycotts [agreements between competitors not to deal with firms that supply other firms in their market] Does your law have special provisions relating to collective boycotts?

Ans: No.

4F. Trade association activities [agreements between members of a trade association] Does your law have special provisions relating to trade association activities?

Ans: No.

4G. Other horizontal agreements Does your law have special provisions relating to other horizontal agreements which we have not mentioned above?

Ans: No.

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Monopolization and Dominant Firm Behavior

5. Monopolization and dominant firm provisions are aimed at individual firms with market power. Such firms may be able to use their market power to restrict the competitive process or to charge excessive prices.

5A. General provisions Does your law have general provisions prohibiting monopolization or dominant firm behavior?

Ans: No.

5B. Excessive prices Are there any provisions prohibiting dominant firms from charging excessive prices?

Ans: No.

5C. Presumptions of dominant position Are there any provisions defining a dominant position, or creating a presumption that firms with a particular market share or size are in a dominant position?

Ans: No.

5D. Predatory pricing [selling at below cost for the purpose of driving out competitors] Are there any specific provisions relating to predatory pricing?

Ans: Yes.

Please specify the law and the provisions of that law. LCUC Article 11: A business hall not sell his goods at a price below the cost so as to exclude his competitors. In any of the following cases, such sales do not constitute unfair competition: (1) selling fresh goods; (2) disposing of goods the effective period of which is about to expire or other overstocked goods ; (3) seasonal lowing of prices; (4) selling goods at lowed price for paying off debts, changing the line of production or closing the business. In addition, The Price Law Article 14(2): Businesses are forbidden to sell goods at a price below the cost for the purpose of excluding competitors or monopolizing the market.

The nature of the provisions: All the sales below the cost, other than those provided as exceptions mentioned above are prohibited.

5E. Refusals to deal Are there any specific provisions relating to "refusals to deal" by dominant firms?

Ans: No.

5F. Discriminatory behavior [selling to some customers, particularly associated companies, on different terms to others] Are there any specific provisions relating to discriminatory behavior by dominant firms?

Ans: Yes.

Please specify the law and the provisions of that law. The Price Law Article 14(5):A business is forbidden to sell goods or provide services to the buyers in the same transaction conditions at discriminatory prices.

What type of behavior is this provision aimed at and what is the nature of the provision? This provision is aimed at discriminatory behavior and such behavior is prohibited in all cases.

5G. Exclusive dealing [requiring a retailer or distributor not to sell products competing with the supplier's products] Are there any specific provisions relating to exclusive dealing by dominant firms?

Ans: No.

5H. Tie-ins [requiring purchasers of one product to purchase other products from the same supplier] Are there any specific provisions relating to tie-ins by dominant firms?

Ans: Yes.

Please specify the law and the provisions of that law. Article 12 of LCUC: When selling goods, the entrepreneur shall not make a tie-in against the wish of the buyer or attach other unreasonable conditions.

What type of behavior is this provision aimed at and what is the nature of the provision? This provision is aimed at tie-ins and such behavior is subject to review by the SAIC authorities and may be prohibited by administrative actions if unreasonable.

5I. Third line forcing [requiring purchasers of one product to purchase other products from named suppliers] Are there any specific provisions relating to third line forcing by dominant firms?

Ans: Yes.

Please specify the law and the provisions of that law. Public utility enterprises or other entrepreneurs legally having monopolistic status shall not force customers to buy goods from the entrepreneurs designated by them so as to exclude other entrepreneurs from competing fairly.

What type of behavior is this provision aimed at and what is the nature of the provision? This provision is aimed at the unreasonable force by dominant firms to buy goods from the designated suppliers. such behavior is subject to review by the SAIC authorities and may be prohibited by administrative actions if unreasonable.

5J. Territorial restrictions [specifying that the retailer or distributor may not resell outside of a defined territory] Are there any specific provisions relating to territorial restrictions by dominant firms?

Ans: No such provisions.

5K. Customer restrictions [specifying that the retailer or distributor may only deal with specified customers] Are there any specific provisions relating to customer restrictions by dominant firms?

Ans: No.

5L. Other specific provisions Are there any other specific provisions relating to monopolization or dominant firm behavior in your law?

Ans: No.

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Vertical Restraints

6. Vertical restraints are restrictions imposed by supplying firms upon distributors or retailers on matters such as the price at which the good may be sold, what other products the distributor must or must not sell, or the territory in which the good may be sold.

6A. Resale price maintenance [specification of minimum price at which the product may be resold to customers] Does your law have special provisions relating to resale price maintenance?

Ans: No.

6B. Maximum resale price maintenance [specification of a maximum price at which the product may be resold to customers] Does your law have special provisions relating to maximum resale price maintenance?

Ans: No.

6C. Exclusive dealing Does your law have special provisions relating to exclusive dealing?

Ans: No.

6D. Tie-ins Does your law have special provisions relating to tie-ins?

Ans: Same as 5H.

6E. Third line forcing Does your law have special provisions relating to third-line forcing?

Ans: Same as 5I.

6F. Territorial restrictions Does your law have special provisions relating to territorial restrictions?

Ans: No such provisions..

6G. Customer restrictions Does your law have special provisions relating to customer restrictions?

Ans: No.

6H. Other non-price vertical restraints Does your law have special provisions relating to other non-price vertical restraints which we have not mentioned above?

Ans: No.

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Price Discrimination

7. Price discrimination is a practice whereby a firm charges different customers or classes of customers different prices for the same good for reasons unrelated to costs.

Does your law have any specific provisions relating to price discrimination?

Ans: Yes.

Please specify the law and the provision of that law. Price Law Article 14 (5): Entrepreneurs are forbidden to sell goods or provide services t the buyers in the same transaction conditions at discriminatory prices.

What type of behavior is this provision aimed at and what is the nature of the provision?

Ans: It's aimed at discriminatory pricing and such behavior is prohibited in all cases.

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Mergers and acquisitions

8. Mergers are the joining together of two or more firms into an existing firm or to create a new firm. Similar effect can often be achieved by the acquisition of business units or business assets from another firm or the creation of a joint venture. Competition laws often treat all three activities under the same provision.

8A. Does your law include a prohibition for anti-competitive mergers and acquisitions?

Ans: No such provisions..

8B. Does your law contain any provisions presuming certain mergers to be anti- competitive(for example if they exceed a given market share)?

Ans: No such provisions..

8C. Does your law require firms involved in mergers or acquisitions to notify competition agencies?

Ans: No such provisions.

8D. And what are the time limits for notification?

Ans: No such provisions.

8F. If the law does not require firms to notify the competition agency of mergers, does it allow for voluntary notification?

Ans: No such provisions.

8G. For the competition agency to stop or prevent anti-competitive mergers and acquisitions, which applies?

Ans: No such provisions.

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Deceptive or misleading advertising or representations

9. Does your competition law contain any provisions prohibiting advertising which is deceptive or misleading, or other misleading representations?

Ans: Yes.

Please specify the law and the provision of that law. And What is the provision? LCUC Article 9: Entrepreneurs are forbidden to use advertisement or other means to give false or misleading information on the quality, composition, performance, use, effective term, origin etc. of the products. Advertisement firms are forbidden to act as an agent in designing , producing and releasing false advertisements where they know or should know that the information in the advertisements is false.

Price Law Article 14(4): Ans: Yes. Any Entrepreneur is forbidden to use the false or misleading pricing to inducing the customers other firms to deal with himself.

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Unfair use of bargaining position(Unconscionable conduct)

10. Does your competition law contain any provisions prohibiting firms from making unfair use of their bargaining position?

Ans: No such provisions.

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Coercive behavior

11. Does your competition law contain any provisions aimed at preventing firms from taking action to intimidate competitors or the customers of competitors?

Ans: No such provisions..

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Other substantive prohibitions

12. Does your competition law have provisions for the protection of competition other than those outlined above?

Ans: No.

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EXEMPTIONS FROM THE PROVISIONS OF YOUR COMPETITION LAW

Actions authorized under other types of law

13. If there is a potential conflict between your competition law and other laws, how do you determine which law takes precedence?

Ans: In such cases, we usually refer to the hierarchy of legal norms, at the top of which lies the Constitution, followed by laws passed NPC and its Standing Committee, administrative regulations issued by the State Council, rules adopted by various ministries, committees and commissions and decisions or notices issued by local governments.

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Import Cartels or Agreements Between Importers

14. Does your competition law exempt or partially exempt agreements aimed at controlling the flow of imports into your country?

Ans: No such provisions..

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Export Cartels or Agreements Between Exports

15. Does your competition law exempt or partially exempt agreements between exporters from your country?

Ans: No.

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Specific products or industries

16. Are there any specific products or industries (e.g. agriculture, international shipping) which are exempted or partially exempted from your competition law?

Ans: No such provisions.

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Small business

17. Are there any exemptions or partial exemptions from your competition law for small and medium size businesses?

Ans: No such provisions.

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Rationalization cartels or agreements

18. Rationalization cartels are agreements between firms, and authorized by the government, to close down inefficient plants, reduce capacity and reorganize production in order to increase overall industry efficiency and performance. Does your competition law contain any exemptions or partial exemptions for rationalization cartels?

Ans: No such provisions.

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Depression cartels or agreements

19. Depression cartels are agreements between firms and authorized by the government to reduce production to meet a temporary downturn in the market. Does your competition law contain any exemptions or partial exemptions for depression cartels?

Ans: No such provisions.

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Government agencies

20. Are Government agencies exempted or partially exempted from your competition law?

Ans: No such provision.

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Practices authorized by administering bodies

21. Is there any provision for competition agencies or the relevant ministers exempt specific activities from the competition law?

Ans: No such provisions.

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Intellectual property

22. Does your competition law contain any exemptions for actions relating to the protection of intellectual property rights?

Ans: No such provisions.

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Labour markets

23. Does your competition law exempt or partially exempt labour market activities?

Ans: No such provisions.

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Other exemptions

24. Are there any other exemptions from your competition law other than those outlined above?

Ans: No such provisions.

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INTERNATIONAL APPLICATIONS

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Acts by citizens or organizations outside the country

25. To what extent are the overseas activities of your citizens or organizations covered by your competition law?

Ans: No such provisions.

Acts by foreign citizens or organizations

26. To what extent are the actions of foreign citizens or organizations covered by your competition laws for actions that take place inside your borders?

Ans: No such provisions.

27. To what extent are the actions of foreign citizens or organizations covered by your competition laws for actions that take place outside your borders but affect markets within your borders?

Ans: No such provisions.

28. To what extent are the actions of foreign citizens or organizations covered by your competition laws for actions that take place outside your borders but affect exporters from your country?

Ans: No such provisions.

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ENFORCEMENT, REMEDIES AND PENALTIES

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Mode of operation

29. Different countries have different ways of controlling anti-competitive behavior. Which of the following best describes your approach?

Ans: We tend to take administrative actions to prevent abuses.

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Sanctions

30. In this section we wish to examine the sanctions which are available to the competition agencies and/or courts to deal with contraventions of the law.

30A. What is the maximum fine chargeable for the various offenses against your competition law?

Ans: According to LCUC, the maximum fine is three times of the illegal income or RMB 200,000 yuan.

30B. Are any other criminal penalties, including imprisonment, available for offenses against the competition law?

Ans: Yes. According to LCUC, where behaviors of entrepreneurs in violation of LCUC constitute crimes, the entrepreneurs shall be imposed criminal penalties.

And what are those penalties?

Ans: Those penalties include fine, criminal detention and imprisonment.

30C. Does the competition agency have the power to order restitution or payment of damages to affected parties?

Ans: Yes.

Please specify the law and the provision of that law. LCUC Article 20: Where an entrepreneur, in contravention of LCUC, causes damages to others, he shall bear the responsibility for compensating the damages.

30D. Does the legislation provide for orders to be made by government or other bodies to prevent repeat contraventions?

Ans: Yes.

Please specify the law and the provision of that law. According to LCUC Article 24: Where an entrepreneur uses advertisement or other means to give false, misleading information on its goods, the SAIC authorities shall order him to desist from the illegal act, dispel the bad influence.

What form of orders can be made, any by what body?

Ans: In the above -mentioned cases, the SAIC authorities may make the orders of ceasing illegal acts and dispelling bad influence.

30E. What other penalties or sanctions are available?

Ans: SAIC authorities may confiscate the undue profit of the entrepreneurs in violation of LCUC.

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Private parties

31A. Do private parties have the right to take action against prohibited activities in the absence of action by the enforcement agency?

Ans: Yes.

31B. What damages and remedies are available to private parties?

Ans: Pecuniary compensation and dispelling bad influence are available to private parities.

31C. Can private parties seek orders to prevent contravention?

Ans: Yes. They may seek the orders of ceasing illegal act and dispelling bad influence.

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Foreign complainants

32. Are there any restrictions or special limitations where the complainant is not domestically based?

Ans: No such provisions.

33. Are there any restrictions or special limitations where the complainant is a foreign government?

Ans: No such provisions.

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Other aspects

34. Are there any other aspects of your competition law or enforcement policy which you would like to comment on?

Ans: No.