On 18 September 2020, China’s State Administration for Market Regulation (SAMR) published the final version of the Anti-Monopoly Compliance Guidelines for Business Operators (Antitrust Compliance Guidelines). The guidelines provide a framework for how business operators should establish an antitrust compliance system and manage antitrust compliance risks in China. The Antitrust Guidelines are not mandatory but are indicative of the key aspects SAMR would expect to see in a good compliance programme.
That same day, SAMR issued draft antitrust compliance guidelines for Chinese companies’ overseas business operations (Draft Overseas Compliance Guidelines), seeking public comments. The Draft Overseas Compliance Guidelines are intended to persuade Chinese companies with overseas operations to ensure compliance with overseas antitrust/competition laws.
What is new
The Antitrust Compliance Guidelines urge business operators doing business in China to build a robust antitrust compliance program based on their respective business coverage, scope and industry areas. Key requirements are:
- Leadership commitment – have senior management fully commit to antitrust compliance
- Adequate resources – establish an antitrust compliance department and/or in-house lawyer(s)/compliance officer(s) to be in charge of antitrust compliance
- Risk assessment and management – conduct internal self-assessment to identify antitrust law risk and consider appropriate mitigating measures (e.g., considerations for reporting to SAMR and applying for leniency, etc.)
- Implementation and monitoring – make sure that the antitrust compliance programme is well implemented and monitored (i.e., by establishing an internal reward and punishment system, having smooth internal channels for whistleblowers, building up an effective compliance culture, having sufficient resources and capacity for compliance system, providing antitrust compliance training etc.)
The Antitrust Compliance Guidelines are silent on how such compliance efforts may be credited, and SAMR has not expressly rewarded compliance efforts to date. There would appear to be scope for the authority to consider an effective compliance programme as a mitigating factor in the calculation of fines, in line with the growing number of competition authorities worldwide. Such an approach would be a welcome development, further incentivising businesses to appropriately invest in antitrust compliance and to prioritise the prevention of violations.
- With SAMR back to normal operations, it is now a good time for companies active in China to reconsider their antitrust compliance programmes, with reference to the framework provided by the Antitrust Compliance Guidelines.
- Given the proliferation of competition laws and enforcement globally, companies with cross-border operations (including Chinese companies) should assess their global and regional compliance efforts.
- Since compliance issues tend to be interconnected, cutting across disciplines, many businesses are increasingly looking to develop robust multidimensional and connected compliance risk management and monitoring tools that drive a more holistic approach to reducing risk in the organisation’s operations. Our publication “Connected Compliance: The Business Case for Compliance Integration,” is available here.
The Antitrust Compliance Guidelines are relatively detailed and contain 30 articles. They are not mandatory, but helpfully provide a framework guiding business operators in China on what SAMR considers an antitrust compliance program should look like and how such compliance should work in practice.
In September 2019, SAMR published a draft of the guidelines for public comment.
After that consultation, eight sets of local antitrust compliance guidelines were issued by SAMR’s local branches in Shanghai Municipality, Zhejiang Province, Helongjiang Province, Jilin Province, Hebei Province, Shandong Province, Henan Province, and Jiangxi Province. Some of these guidelines were issued during the COVID-19 pandemic, showcasing the importance the Chinese antitrust regulators place on antitrust compliance advocacy. These local guidelines are intended to remind local business operators of the importance of antitrust compliance as well as the risk of antitrust violations.
The release of the Antitrust Compliance Guidelines by SAMR has once again signaled the importance SAMR places on antitrust compliance. The guidelines highlight the key risk areas from the PRC Anti-monopoly Law (“AML”) perspective:
- horizontal monopoly agreements such as price fixing, market allocation, output restriction, joint boycotts etc.
- resale price maintenance
- abuse of dominance
- merger filing obligations for M&A transactions
Companies are encouraged to have a dedicated antitrust compliance department or antitrust compliance officer(s) to be in charge of overall antitrust compliance management. In particular, the department or officer is recommended to undertake the following tasks:
- study domestic and global antitrust laws and enforcement to provide clear antitrust compliance guidance for employees
- lay down internal compliance management rules indicating explicit compliance requirements and implementation measures to be integrated into business lines and operations
- organise and conduct internal antitrust compliance audits or “healthchecks” to identify risk and monitor implementation of mitigating/corrective measures
- organize and conduct tailored antitrust trainings for business teams
- compile an antitrust compliance report and coordinate relevant departments to ensure that antitrust compliance records are integrated into employees’ performance/KPI reviews
- coordinate with internal and external resources to respond to antitrust investigations and to properly and effectively implement mitigating/corrective measures.
The guidelines emphasise that companies and their leadership/senior management should provide adequate resources and support for setting up and implementing their antitrust compliance programmes.
The Antitrust Compliance Guidelines will not replace the regional antitrust compliance guidelines released by local branches of SAMR. The local guidelines focus on raising awareness and reminding local business operators of the conduct prohibited by the AML and/or likely to elevate the risk of enforcement. The Antitrust Compliance Guidelines, however, provide specific guidance to business operators on how to implement a robust antitrust compliance programme. Companies with cross-border operations will want to consider whether different factors should shape their compliance programmes overseas or whether the programme being rolled out in China is adaptable to the global risk factors the organisation faces. Consideration might also be given to how antitrust compliance fits in with other compliance risks facing the business. Increasingly, businesses are looking to develop robust multidimensional and connected compliance risk management and monitoring tools that drive a more holistic approach to reducing risk in the organisation’s operations. For more details, we recommend reference to our publication “Connected Compliance: The Business Case for Compliance Integration,” available here.
1 For the full Chinese version of the Antitrust Compliance Guidelines, please see http://gkml.samr.gov.cn/nsjg/fldj/202009/t20200918_321796.html
3 See our global heat map of credit for antitrust compliance programmes at http://whem.bakerworld.com/gpi/AntitrustCompetition/sp/KM/_layouts/15/WopiFrame2.aspx?sourcedoc=/gpi/AntitrustCompetition/sp/KM/Documents/Compliance%20Credit%20Available.PPTX&action=default.
4 See our previous client alert Chinese antitrust authority urged companies to boost antitrust compliance management