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Antitrust / Competition

China: Landmark Anti-Monopoly Law reforms signal more modernized antitrust enforcement

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In brief

On 24 June 2022, China’s National Peoples’ Congress approved far reaching amendments to China’s Anti-Monopoly Law[1]  (“AML”) which become effective from 1 August 2022 (“AML Amendments”).

Alongside the AML Amendments, the State Administration for Market Regulation (“SAMR”) has issued for public comment proposed updates to key implementing rules and regulations concerning cartels and vertical restraints, abuse of dominance, merger control and abuse of IP rights.

Of particular relevance to business operations in China and M&A activity, the AML Amendments include stricter penalties for antitrust violations; increased enforcement powers; revised thresholds for merger control; an express prohibition of hub & spoke arrangements; potential exemptions/defenses for certain vertical restraints including resale price maintenance, and continued scrutiny of the platform economy.

Key takeaways

The following are of particular relevance to business operations in China and M&A activity:

  • Stricter penalties for antitrust violations including tougher fines for gun-jumping (RMB 5 million for non-problematic transactions, or up to 10% of total group turnover for transactions with competition concerns), monetary penalties up to RMB 1 million for individuals (senior leadership and employees directly responsible) for antitrust violations, and potential criminal liability of both companies and individuals if conduct constitutes a crime violating the Criminal Law.
  • Increased enforcement powers: formally granting SAMR power to summon companies to urge them to agree to antitrust compliance and mitigating measures outside the antitrust investigation procedure, and introducing public interest litigation initiated by people’s procuratorate against antitrust violations.
  • Revised thresholds for merger control, including: proposed increases in the turnover thresholds, new hybrid thresholds based on turnover and market value, emphasizing SAMR’s power to require deals to be notified where the parties do not meet the jurisdictional thresholds and new powers for SAMR to “stop the clock” in merger reviews.
  • Express prohibition of hub-and-spoke arrangements, codifying prior enforcement practice.
  • Potential exemptions / defences for resale price maintenance (“RPM”) and non-price vertical restraints.
  • Continued scrutiny of the platform economy focused on the use of data, algorithms, technologies, capital advantage, and platform rule setting.

It is the right timing to reinvent antitrust compliance:

  • Identify the business lines with more exposure in in the China market.
  • Spot potential risks and consider if and what mitigating measures might be adopt to avoid the higher penalties/serious legal consequences.
  • Plan your deal timetable subtly.

Read the full alert here.

[1] The full version is available in Chinese at http://www.npc.gov.cn/npc/c30834/202206/e42c256faf7049449cdfaabf374a3595.shtml, and an official press release in English at http://en.npc.gov.cn.cdurl.cn/2022-06/27/c_784677.htm.

Zhi Bao and Laura Liu are the partner and Yu Zhu is an associate of FenXun Partners which is a premier Chinese law firm. FenXun established a Joint Operation Office with Baker McKenzie in China as Baker McKenzie FenXun which was approved by the Shanghai Justice Bureau in 2015.

Baker & McKenzie. Baker & McKenzie FenXun (FTZ) Joint Operation Office is a joint operation between Baker & McKenzie LLP, an Illinois limited liability partnership, and FenXun Partners, a Chinese law firm. The Joint Operation has been approved by the Shanghai Justice Bureau. In accordance with the common terminology used in professional service organisations, reference to a “partner” means a person who is a partner, or equivalent, in such a law firm. This may qualify as “Attorney Advertising” requiring notice in some jurisdictions. Prior results do not guarantee a similar outcome.

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Author

Mr. Bao is a partner of FenXun Partners and he heads the anti-monopoly practice group of FenXun Partners.
Mr. Bao’s practice focuses on foreign direct investment, mergers and acquisitions, private equity and anti-monopoly, all disciplines which he made his own during his over seven years with the Ministry of Commerce (MOFCOM) in Beijing and subsequently at a leading PRC law firm.

Author

Laura Liu is a partner with Fenxun Partners. Her practice focuses on China antitrust legal issues, including merger control filing, antitrust compliance, antitrust investigations and antitrust litigation. Ms. Liu has extensive experience in merger filings, having assisted numerous clients with antitrust filings before the China competition authority, including some of the most significant merger clearance cases to date. Ms. Liu also has very extensive experience advising clients on deal structure and filing strategy to achieve commercial outcomes while avoiding gun-jumping risks. Laura's practice focus on antitrust and competition (advisory and litigation).

Author

Highly acclaimed and Band 1 ranked Leading Antitrust Lawyer Stephen Crosswell is the chair of Baker McKenzie's Asia-Pacific Antitrust & Competition Group, the head of our Greater China Antitrust & Competition team and the immediate past chair of our Asia-Pacific TMT Industry Group. He is one of the leading trial lawyers in Hong Kong, admitted as a Solicitor Advocate, with the right to appear as an advocate at all levels in the Hong Kong Courts, including the Competition Tribunal, the High Court, the Court of Appeal and the Court of Final Appeal.
Clients laud Stephen for his "years of experience working on competition matters." He is described as a "vital resource for clients seeking to navigate the nuances not only of the local competition law regime in Hong Kong but also across other Asian jurisdictions – including China." Stephen is uniquely placed as a specialist competition advocate in Hong Kong. He represented one of the parties to the first enforcement action taken in Hong Kong's Competition Tribunal. His practice covers investigations, dawn raid response, multijurisdictional cartel investigations, leniency, merger clearance, collaboration/joint ventures and antitrust advisory. Stephen’s three decades of experience includes running and advising on some of the largest and most high-profile competition trials, dawn raids, leniency applications, cross-border cartel matters and merger clearance projects in Asia.
Stephen is also one of the leading telecoms, media and technology regulatory lawyers in Asia, with a practice that covers a broad range of regulatory and litigation issues in China, Hong Kong and throughout the Asia Pacific. This includes digital market regulation, AI, interconnection disputes, premium media content disputes, telecommunications licensing, spectrum allocation and auctions, 5G rollout, submarine cables, cable landing stations, satellite disputes, pay and free TV licensing, judicial review proceedings and access claims.

Author

Tom Jenkins is a partner in Baker McKenzie's Brussels' European, Competition Law & Regulatory Practice. Tom has been practicing competition law in London, Brussels and Hong Kong/Asia Pacific for more than 12 years. Chambers notes that, "Tom Jenkins is a special counsel in the firm's Hong Kong office and is experienced in handling both merger filings and antitrust investigations. He is praised by one client for having a great understanding of competition law in Hong Kong and around the world as well as for his quick turnaround time."

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