By Susan Ning, Cheng Liu, and Hazel Yin King & Wood Mallesons’ Commercial & Regulatory Group
On March 23, China’s National Development and Reform Commission (“NDRC”) published the draft Antitrust Guidelines for the Auto Industry (“Draft Guidelines”), and invited public comments by April 12, 2016. NDRC is entrusted by the State Council Antimonopoly Commission to take the lead in drafting these Draft Guidelines. Before this draft on March 23, it had circulated several versions among a smaller group and received comments from major market players, industry associations, consumer associations, academic experts and legal practitioners.
The Draft Guidelines contain six chapters and address issues of fundamental principles (such as market definition), anticompetitive agreements, abuse of dominant market positions, merger control and abuse of administrative power in the automotive industry.
The Draft Guidelines provide detailed guidance on issues specific to the automotive industry, with a focus on the vertical relationship between market players. For example, the Draft Guidelines recognize that sales of automobiles, sales of auto spare parts and after-sale services can be defined as different product markets, and provide certain key factors to be considered in determining whether to further segment the relevant product markets. It then identifies some specific vertical restraints that are likely to have anticompetitive effects, such as restricting the passive sales of dealers. On the other hand, it also proposes certain circumstances where companies may apply for exemptions for their vertical restraints (e.g. resale price maintenance for new energy vehicles during a promotional period). It also discusses in detail the relationship between auto parts suppliers and auto manufacturers and limits the restrictions that auto manufactures can impose on auto parts suppliers.
While the Draft Guidelines are specific to the auto industry, some of its principles may also be relevant to companies in other industries. For example, the Draft Guidelines provide that an after-sales market can be defined based on single brand. This may also apply to other industries where there are apparent “lock-in” effects for consumers after purchasing the original products.
The Draft Guidelines, once effective, are expected to provide clearer antitrust guidance for businesses operating in the auto industry. Companies are recommended to start reviewing their current business models to adapt as necessary to the change in the policy environment. Articles by the KWM team on more detailed analysis and comments on these Draft Guidelines will follow soon.