In November 2014, widespread press reports in China announced that Chinese competition authorities would imminently commence investigations into foreign manufacturers of medical devices for suspected anti-competitive behavior, in particular in connection with after-sales services. The reports suggested that the investigations would reflect complaints over the high maintenance costs of foreign medical devices. These press reports followed a series of news reports relating to competition concerns in the pharmaceutical and healthcare sectors:
- In October, it was reported that more than a dozen medical-device companies were under investigation for anti-competitive pricing. Press reports indicated that the focus of the investigation was on vertical restrictions such as resale price maintenance.
- In November, the Ministry of Commerce (“MOFCOM”) held a two-day closed-door seminar in Beijing which was attended by more than 30 provincial-level commerce regulators, as well as industry associations including the China Association for Medical Devices Industry. Participants are understood to have engaged in in-depth discussions on competition issues.
- In November, press reports speculated that Zhang Handong, a previous deputy chief with a medical reform background, would be appointed as the new director general of the Anti-Monopoly Bureau of the National Development and Reform Commission (“NDRC”). If confirmed, this appointment is expected to increase NDRC’s focus on the pharmaceutical and healthcare sectors.
For a more comprehensive analysis of these developments, please contact us. Please also refer to our previous client alert below on recent probes conducted by Chinese competition authorities in the pharmaceutical and healthcare sectors in 2014. China’s Antimonopoly Law Ramping Up: Pharmaceuticals and Healthcare under the Spotlight The NDRC has also launched a new platform on its website making it easier for whistleblowers to report violations of competition law. What this means for you In 2013, there were widespread press reports about potential investigations in the automotive sector. In 2014, NDRC publicly announced investigations in the automotive sector which resulted in a large number of automotive manufacturers receiving high fines. Press reports focusing on the pharmaceutical sector may be indicative of a similar enforcement priority in this sector in 2015. We recommend that pharmaceutical and healthcare companies doing business in China remain vigilant and ensure that they continue to review and update their competition compliance efforts, including conducting a review of their distribution networks and aftersales services. By Stephen Crosswell, David Fleming and Eva Crook-Santner (Baker & McKenzie Hong Kong)