Anti-Monopoly Law of the People's Republic of China

Order of the President [2007] No. 68

August 30, 2007

The Anti-Monopoly Law of the People's Republic of China was adopted at the 29th session of the Standing Committee of the Tenth National People's Congress on August 30, 2007, which is hereby promulgated and goes into effect as of August 1, 2008.
President of the People's Republic of China: Hu Jintao

Annex: Anti-Monopoly Law of the People's Republic of China

(Adopted at the 29th session of the Standing Committee of the Tenth National People's Congress on August 30, 2007)

Contents
Chapter I General Provisions
Chapter II Monopoly Agreements
Chapter III Abuse of Dominant Market Position
Chapter IV Concentration of Undertakings
Chapter V Abuse of Administrative Power to Eliminate or Restrict Competition
Chapter VI Investigation into Suspected Monopolistic Practices
Chapter VII Legal Liability
Chapter VIII Supplementary Provisions

Chapter I General Provisions

Article 1 This Law is enacted for the purposes of preventing and restraining monopolistic practices, protecting fair market competition, improving economic efficiency, safeguarding the interests of consumers and the public, and promoting the healthy development of the socialist market economy.

Article 2 This Law is applicable to monopolistic practices as part of economic activities occurring within the People's Republic of China. This Law is also applicable to monopolistic practices outside of the People's Republic of China which have the effect of eliminating or restricting Chinese market competition.


Article 3 For the purposes of this Law, "monopolistic practices" include:
1. The conclusion of monopoly agreements between operators;
2. The abuse of dominant market position by operators; and
3. Concentration of undertakings which has or may have the effect of eliminating or restricting market competition.


Article 4 The state is to formulate and implement rules for market competition which are compatible with the socialist market economy, improve macro-control, and establish a market system which is unified, open, competitive, and ordered.

Article 5 Operators may, through fair competition or voluntary union, be concentrated lawfully in order to expand their operational scale and improve their market competitiveness.

Article 6 The operators which have dominant market positions shall not abuse their dominant positions to eliminate or restrict competition.

Article 7 The state protects the lawful business activities of the operators from industries of vital economic or national security importance in which the state-owed sector of the economy holds the position of control or industries which implement monopolization legally, and regulates and controls the business activities of such operators as well as the prices of their commodities and/or services pursuant to law to safeguard the interests of consumers and promote technological advance.
The operators referred to in the preceding paragraph shall conduct business operations lawfully and in good faith, carry out strict self-regulation, and accept the supervision of the general public. They shall not use their position of control or their monopolization status to harm consumer interests.

Article 8 Administrative organ and other organizations authorized by laws or regulations to administrate public affairs shall not abuse their administrative power to eliminate or restrict competition.


Article 9 The State Council establishes the Anti-Monopoly Commission to take charge of organizing, coordinating, and directing anti-monopoly activities and to fulfill the following duties:
1. Researching and drafting policies relevant to competition;
2. Organizing examination and assessment of the market's overall situation with regard to competition and publicizing relevant reports;
3. Formulating and releasing anti-monopoly guidelines;
4. Coordinating anti-monopoly administrative law enforcement; and
5. Other duties prescribed by the State Council.
The State Council shall determine the composition of and procedural rules for the Anti-Monopoly Commission.


Article 10 The authorities designated by the State Council to undertake anti-monopoly law enforcement (hereinafter the "anti-monopoly law enforcement authorities under the State Council ") are responsible for anti-monopoly law enforcement in accordance with this Law.
The anti-monopoly enforcement authorities under the State Council may, as required by their work, empower the corresponding authorities within the provincial, regional, and municipal people's governments to take charge of the work relating to anti-monopoly law enforcement in accordance with this Law.


Article 11 Industry associations shall strengthen industry self-regulation, guide the operators of their industry to engage in lawful competition and uphold the order of market competition.

Article 12 For the purposes of this Law, "operators" refer to the natural persons, legal persons or other organizations which produce or sell commodities or provide services.
For the purposes of this Law, "relevant market" refers to commodity coverage and territorial scope in which operators compete to provide a particular commodity or service (hereinafter referred to generally as a "commodity") during a specific period of time.


Chapter II Monopoly Agreements

Article 13 The following monopoly agreements are prohibited from being made between operators which are in competition:
1. Those on fixing or changing the prices of a commodity;
2. Those on limiting the production or sales volume of a commodity;
3. Those on dividing a sales market or material purchase market;
4. Those on restricting the purchase of new technology or new equipment or preventing the development thereof; and
5. Those on boycotting trading; and
6. Other monopoly agreements as determined by the State Council anti-monopoly law enforcement authorities.
For the purposes of this Law, "monopoly agreements" refer to protocols, decisions, or other coordinated behavior for eliminating or restricting competition.


Article 14 The following monopoly agreements shall not be made between operators and their trading counterparts:
1. Those on fixing the price for resale of a commodity to a third party;
2. Those on restricting the minimum price for resale of a commodity to a third party; and
3. Other monopoly agreements as determined by the State Council anti-monopoly enforcement authorities.


Article 15 Article 13 or 14 hereof is not applicable if operators can prove that the agreements are concluded for:
1. Advancing technology, or researching and developing new products;
2. Improving product quality, lowering cost, increasing efficiency, unifying specifications and standards, or implementing a division of labor based on specialization;
3. Improving the operation efficiency and competitiveness of small- and medium-sized operators;
4. Realizing public interests such as energy conservation, environmental protection, and rescue and relief efforts;
5. Alleviating problems related to a serious drop in sales or obvious overproduction during an economic downturn;
6. Protecting legitimate interests during foreign trade or foreign economic cooperation; or
7. Other circumstances specified by laws or the State Council.
Where Article 13 or 14 does not apply as a result that agreements that fall under any of the circumstances of Items 1 to 5 of the preceding paragraph, the operators shall also prove that the agreements do not seriously restrict the competition in relevant market and enable consumers to share the benefits therefrom.


Article 16 Industry associations shall not make arrangements for operators within their respective industries to engage in the monopolistic practices prohibited by this Chapter.


Chapter III Abuse of Dominant Market Position

Article 17 An operator who holds a dominant market position is prohibited from engaging in the following practices of abuse of the said position:
1. Selling commodities at unfairly high prices or buying commodities at unfairly low prices;
2. Selling commodities at a price lower than cost without justified reasons;
3. Refusing to trade with relevant trading counterparts without justified reasons;
4. Restricting trading counterparts to the trading only with the said operator or its designated operator without justified reasons;
5. Conducing tie-in sales without justified reasons, or adding other unreasonable conditions to the trading;
6. Discriminating against trading counterparts of the same qualifications with regard to transaction price, etc., without justified reasons; and
7. Other practices determined by the anti-monopoly law enforcement authorities as abuse of dominant market position.
For the purposes of this Law, "dominant market position" refers to a market position where an operator can control the prices or volume of commodities or other trades in a relevant market, or can obstruct or affect other operators' capability to enter into a relevant market.


Article 18 The dominant market position of an operator shall be determined based on the following factors:
1. The operator's market share in a relevant market, as well as the competition situation of the relevant market;
2. The ability of the operator to control the sales market or material purchase market;
3. The financial and technical ability of the operator;
4. The degree of reliance of other operators on the operator in terms of trading;
5. The degree of difficulty for market entry by other operators; and
6. Other factors relevant to the determination of a dominant market position of the operator.


Article 19 It may be assumed that one or more operators have a dominant market position if:
1. An operator has 50% or higher market share in a relevant market;
2. Two operators have 66% or higher market share in a relevant market; or
3. Three operators have 75% or higher market share in a relevant market.
If one of the operators under the circumstances of Item 2 or 3 of the preceding paragraph has a market share of less than 10%, the operator shall not be assumed to have a dominant market position.
Where there is evidence showing that an operator which has been assumed to hold a dominant market position does not hold such a position, the operator shall not be determined to hold a dominant market position.


Chapter IV Concentration of Undertakings

Article 20 Concentration of undertakings refers to one of the following circumstances:
1. Operators merge;
2. One operator obtains controlling rights in another operator by means of equity or asset purchase; and
3. One operator, by means of contract, etc., obtains controlling rights in another operator or can exercise decisive influence on another operator.


Article 21 When concentration of undertakings reaches certain standards for report as specified by the State Council, relevant operators shall report the same to the State Council anti-monopoly law enforcement authorities in advance. In the absence of such report, no concentration may be made.


Article 22 Where one of the following is the case relevant to a consolidation of undertakings, declaration to the anti-monopoly law enforcement authorities is not required:
1. One of the parties to a consolidation holds assets or shares that grant at least 50% voting rights in each of the other operators; or
2. For in each of the parties to a consolidation, assets or shares that grant 50% voting rights in said operators are held by the same operator which is not party to the consolidation;


Article 23 Operators declaring consolidation shall submit the following documents and materials to the anti-monopoly law enforcement authorities under the State Council:
1. A declaration form;
2. An explanation of the effect of the consolidation on market competition;
3. The consolidation agreement;
4. The financial and accounting statements of the operators that are party to consolidation for the preceding fiscal year, audited by an accounting firm; and
5. Other documents and materials prescribed by the anti-monopoly law enforcement authorities.
The declaration form shall indicate the name, domicile, and operational scope of each party to the consolidation as well as the expected date of consolidation and any other items required by the anti-monopoly law enforcement authorities.


Article 24 If the documents and materials provided by operators are incomplete, the missing items shall be submitted within a time limit prescribed by the anti-monopoly law enforcement authorities under the State Council; in the case where the operator(s) fail to provide the missing documentation before the date, it shall be deemed a failure to declare.

Article 25 Within 30 days of the receipt of documents and materials that fit the stipulations of Article 23 herein, the anti-monopoly law enforcement authorities under the State Council shall carry out a preliminary investigation of the operator consolidation, deciding whether or not to conduct further investigation and informing the operator(s) in writing. The consolidation may not take place prior to a decision from the anti-monopoly law enforcement authorities.
If the anti-monopoly law enforcement authorities under the State Council make the decision not to conduct further investigations or fail to release a decision prior to the deadline, the operator(s) may carry out consolidation.


Article 26 In the case where the anti-monopoly law enforcement authorities under the State Council decide to conduct further investigation, the investigation shall be completed and a decision on whether or not to prohibit the consolidation shall be made within 90 days from the date of the original decision. The operator shall be informed in writing and, in the case that the consolidation is prohibited, the grounds for said decision shall be provided. The consolidation may not take place prior to a decision from the anti-monopoly law enforcement authorities.
If any of the following is the case, the anti-monopoly law enforcement authorities under the State Council may extend the investigation period by no more than 60 days after informing the operator in writing:
1. The operator consents to an extension of the inspection period;
2. There are inaccuracies in documents provided by the operator which require further verification; or
3. A major change has taken place within regard to the operator in the time since initial declaration.
If the anti-monopoly law enforcement authorities under the State Council fail to release a decision prior to the deadline, the operator(s) may carry out consolidation.


Article 27 The following factors shall be considered when investigating operator consolidations:
1. The relevant market share of operators party to the consolidation as well as their ability to control the market;
2. The degree of consolidation in relevant markets;
3. The effect of the consolidation on market entry and technological advance;
4. The effect of the consolidation on consumers and other operators;
5. The effect of the consolidation on national economic development; and
6. Other factors that the anti-monopoly law enforcement authorities under the State Council regard as worth consideration.


Article 28 Where operator consolidation has the effect of restricting or eliminating competition, the anti-monopoly law enforcement authorities under the State Council shall prohibit said consolidation. However, if the operator is able to demonstrate that the positive effect on competition is greater than the negative effect, or that it is in the general public interest, then the anti-monopoly law enforcement authorities under the State Council shall not prohibit the consolidation.


Article 29 In the case where an operator consolidation is not prohibited, the anti-monopoly law enforcement authorities under the State Council may decide to place restrictive conditions on the consolidation which will diminish its negative effects on market competition.


Article 30 Anti-monopoly law enforcement authorities under the State Council shall promptly make public any decision to prohibit operator consolidation or to place restrictive conditions on such a consolidation.


Article 31 Where a foreign investor participates in the concentration of undertakings by merging and acquiring a domestic enterprise or by any other means, which involves national security, the matter shall be subject to review on national security as is required by the relevant State regulations, in addition to the review on the concentration of undertakings in accordance with the provisions of this Law.


Chapter V Abuse of Administrative Power to Eliminate or Restrict Competition

Article 32 Administrative authorities and other organizations authorized by laws or regulations to administrate public affairs shall not misuse their authority to force, openly or disguisedly, individuals or entities to sell, purchase, or use the products of operators designed by said authorities.


Article 33 Administrative authorities and other organizations authorized by laws or regulations to administrate public affairs shall not misuse their authority to implement any of the following measures which impede the free flow of goods between regions:
1. Establish discriminatory fees, carry out discrimination with regards to the amounts of relevant fees, or fix discriminatory prices for products from other regions;
2. Set different technical requirements or inspection standards for products from other regions, or require that said products undergo re-inspections, re-authentication, or other discriminatory technical procedures in order to restrict the entry of such products into the local market.;
3. Require special administrative approval for non-local products in order to restrict the entry of such products into the local market.;
4. Establish customs barriers or other impediments to entry of non-local products or exit of local products; or
5. Other measures which impede the free flow of goods between regions.


Article 34 Administrative authorities and other organizations authorized by laws or regulations to administrate public affairs shall not misuse their authority to eliminate or restrict non-local operators from participating in local bidding activities by creating discriminatory qualifications and standards for judgment or by unlawfully releasing relevant information.

Article 35 Administrative authorities and other organizations authorized by laws or regulations to administrate public affairs shall not misuse their authority by treating non-local operators unfairly in order to eliminate or restrict them from carrying out local investment or establishing a local branch office.

Article 36 Administrative authorities and other organizations authorized by laws or regulations to administrate public affairs shall not misuse their authority to force operators to engage in monopolistic practices in violation of this Law.


Article 37 Administrative authorities shall not misuse their authority by formulating regulations containing provisions that eliminate or restrict competition.

Chapter VI Investigation into Suspected Monopolistic Practices

Article 38 Anti-monopoly law enforcement authorities shall lawfully investigate practices which are suspected to be monopolistic in nature.
Any individual or entity may report suspected monopolistic practices to the anti-monopoly law enforcement authorities. The authorities shall keep the identity of reporting parties confidential.
When a report is submitted in written form and includes relevant facts and evidence, the anti-monopoly law enforcement authorities shall lawfully carry out necessary investigations.

Article 39 When investigating suspected monopolistic practices, the anti-monopoly law enforcement authorities may take the following measures:
1. Investigating the operator's place of business and other relevant locations;
2. Conducting interrogations of the operator, interested parties, and other relevant entities and individuals, requiring that they provide explanations;
3. Consulting and making copies of certificates, agreements, accounts, correspondence, computer data, and other documents belonging to the operator, interested parties, and other relevant entities and individuals;
4. Seizing or freezing relevant evidence; or
5. Checking the operator's banking account.
Where one of the measures stipulated in the previous paragraph is to be taken, a report must be filed with the person in charge of the anti-monopoly law enforcement authorities, and approval must be granted.


Article 40 When anti-monopoly law enforcement authorities are investigating suspected monopolistic practices, no less than two law enforcement personnel shall be dispatched, and said personnel must present relevant law enforcement credentials.
When law enforcement personnel are carrying out investigations and interrogations, they shall keep notes which are to be signed by the investigated or interrogated party.

Article 41 Anti-monopoly law enforcement authorities and the personnel thereof are duty-bound to maintain the confidentiality of relevant commercial secrets that are learned during the process of investigation.

Article 42 Operators under investigation, interested parties, and other relevant entities or individuals shall cooperate with the anti-monopoly law enforcement authorities as they perform their duties, and shall not refuse or impede the investigation.

Article 43 Operators under investigation and interested parties have the right to voice their views. The anti-monopoly law enforcement authorities shall verify the facts, reasons, and evidence put forward by the operators under investigation or interested parties.

Article 44 After the practices of an operator have been investigated by the anti-monopoly law enforcement authorities and verified to monopolistic, a decision on measures to be taken in response shall be adopted pursuant to law and announced to the public.

Article 45 With regards to the suspected monopolistic practices of an operator under investigation, if the operator agrees to undertake certain specific measures that will lead to the elimination of said practices within a time limit designated by the anti-monopoly law enforcement authorities, then the anti-monopoly law enforcement authorities may decide to suspend the investigation. The decision to suspend the investigation should indicate the substance of what the operator has agreed to do.
In the case where an investigation has been suspended by decision of the anti-monopoly law enforcement authorities, said authorities shall supervise the execution of relevant agreements. If the operator performs its obligations, the anti-monopoly law enforcement authorities may decide to terminate the investigation.
If any of the following is the case, the anti-monopoly law enforcement authorities shall resume a suspended investigation:
1. The operator has failed to perform its obligations;
2. A major change has occurred relevant to the grounds for suspension of the investigation; or
3. The suspension of the investigation was based on incomplete or inaccurate information provided by the operator.


Chapter VII Legal Liability

Article 46 In the case where an operator violates the provisions of this Law by entering into and implementing a monopoly agreement, the anti-monopoly law enforcement authorities shall order a halt to illegal activities, confiscate illegal earnings, and impose a fine of between of between 1 and 10 percent of the previous year's sales volume; if the monopoly agreement had been entered into but not yet been implemented, an fine no more than CNY500,000 shall be imposed.
Where an operator reports, on its own initiative, a monopoly agreement entered into by said operator to the anti-monopoly law enforcement authorities as well as providing key evidence, the anti-monopoly law enforcement authorities may consider a lighter fine, or forgo a fine altogether.
In the case where an industry association violates the provisions of this Law by making arrangements for the operators within its industry to enter into monopoly agreements, the anti-monopoly law enforcement authorities my impose a fine of no more than CNY500,000; if the case is serious, the administrative authorities in charge of the registration of non-governmental organizations may revoke the registration of said industry association.


Article 47 Where an operator violates the provisions of this Law by abusing their dominant market position, the anti-monopoly law enforcement authorities shall order a halt to the offending behavior, confiscate the illegal earnings, and impose a fine of between of between 1 and 10 percent of the previous year's sales volume.


Article 48 Where an operator violates the provisions of this Law by carrying out an unauthorized consolidation, the anti-monopoly law enforcement authorities under the State Council shall order a halt to the consolidation and take measures such as the disposal of shares or assets, transfer of the business within a time limit that will restore the operator to its pre-consolidation state. A fine of no more than CNY500,000 may also be imposed.


Article 49 With regards to the fines stipulated in Article 46, Article 47, and Article 48 herein, the anti-monopoly law enforcement authorities shall determine the amount of particular fines by taking into account the nature, the degree, and the duration of the violation.


Article 50 Operators shall be held civilly liable for the damage to the interests of others stemming from their monopolistic practices.


Article 51 Where administrative authorities and other organizations authorized by laws or regulations to administrate public affairs abuse their authority to eliminate or restrict competition, an authority at a higher level shall order rectification; the directly responsible people in charge and other directly responsible personnel shall be sanctioned pursuant to law. The anti-monopoly law enforcement authorities may submit opinions on how the situation should be legally handled to said higher level authority.
Where there are other regulations relevant to the case where administrative authorities and other organizations authorized by laws or regulations to administrate public affairs abuse their authority to eliminate or restrict competition, said regulations shall be observed.


Article 52 Where, during a lawful investigation by the anti-monopoly law enforcement authorities, actions are taken that are obstructive to the investigation, including the refusal to provide information or materials, the submission of fraudulent information or materials, or the concealment, destruction, or diverting of relevant evidence, the anti-monopoly law enforcement authorities shall order rectification, and may impose a fine of no more than CNY20,000 on individuals or CNY200,000 on entities; where the case is serious, fines of between CNY20,000 and CNY100,000 may be imposed on individuals, or fines of between CNY200,000 and 1 million may be imposed on entities; where the circumstance constitute a crime, criminal liability shall be investigated and the offenders prosecuted pursuant to law.


Article 53 If an operator does not accept the decision made by the anti-monopoly law enforcement authorities pursuant to Article 28 and 29 herein, it may lawfully apply for administrative review. If the results of the review are still unacceptable, the operator may file an administrative lawsuit.
If an operator does not accept a decision made by the anti-monopoly law enforcement authorities other than those stipulated in the preceding paragraph, it may lawfully apply for administrative review or file an administrative lawsuit.


Article 54 In the case where the anti-monopoly law enforcement authorities abuse their power, are derelict in their duties, show personal bias, or leak commercial secrets learned during the process of law enforcement such that a crime is constituted, they shall be prosecuted for criminal liability; if the actions do not constitute a crime, sanction shall be imposed pursuant to law.

Chapter VIII Supplementary Provisions

Article 55 This Law shall not be applicable to the exercise of intellectual property rights in pursuant to the laws and administrative regulations relevant to intellectual property rights, however if an operator misuses their intellectual property rights in order to eliminate or restrict competition, this Law does apply.


Article 56 This law is not applicable to the association or coordination by agricyltural producers or rural economic organizations in their business activities of production, processing, sales, transportation, or storage of agricultural products.

Article 57 This Law shall go into effect as of August 1, 2008.