Antitrust & Competition

By Susan Ning, Kate Peng and Ying Zhu King & Wood Mallesons’ Commercial & Regulatory Group

Ountitledn peng_kateDecember 8th 2015, the State Administration for Industry and Commerce (SAIC) publicized on its website Guangdong Administration for Industry and Commerce (AIC)’s decision in relation to the boycott investigation into Guangzhou Panyu Animation Association (GAGA). This is the very first investigation that focuses on a boycott agreement. In previous investigations where boycotts were identified, there were always other anti-competitive agreements involved and boycott agreements were not identified as the target violations that were subject to fines.

Here we introduce the GAGA investigation and some previous boycott-related investigations. We then present a short guide to practices that may constitute boycott agreements identified by the authorities.
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By Susan Ning, Kate Peng and Lingbo Wei King & Wood Mallesons’ Antitrust Group

NING, Susan (Xuanfeng)彭荷月After more than a year’s investigation into Qualcomm, the NDRC made an announcement of its investigation decision through press release on 10 February 2015.[1] About 20 days later, the NDRC published the full-text of the decision on its official website on 2 March 2015. The decision provided a comprehensive analysis on the definition of the relevant markets, Qualcomm’s dominant position and abusive conducts that are deemed violating the Chinese Anti-Monopoly Law (“AML”), which sent a warning to patent-heavy companies to review their business practices in China.

We hereby set out the points below to provide insight into the facts and factors that the NDRC considered in its decision making process.
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By Susan Ning, Kate Peng and Lingbo Wei  King & Wood Mallesons’ Antitrust Group

NING, Susan (Xuanfeng)彭荷月On 10 February 2015, the NDRC announced its decision in relation to the abuse of dominance investigation into Qualcomm. Following the announcement, the NDRC held a press conference and revealed more details about the case.

According to Mr. Xu Kunlin, the Director General of the Anti-monopoly Bureau of the NDRC, two US companies filed a complaint to the NDRC about Qualcomm’s alleged abuse of dominance in 2009. In November 2013, the NDRC initiated an investigation into Qualcomm and conducted a dawn raid at Qualcomm’s Beijing and Shanghai offices in the same month. It is reported that during the proceedings, Qualcomm delegates had made 28 visits to the NDRC. Mr. Xu personally attended 8 of those visits. Finally, yesterday the NDRC announced its decision, imposing a fine of RMB 6.088 billion (approximately USD 975 million).  The fine is the largest in China’s corporate history, outnumbering all fines imposed by the NDRC in 2014 (RMB 1.8 billion in total) by more than double.  In addition to the fine, Qualcomm has made commitments to the NDRC to take several rectification measures.

According to press releases, Mr. Xu indicated that the full text of the decision will be published in the coming days.


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On 1 November 2014, the People’s Congress of China approved proposed amendments to China’s Administrative Procedure Law (“APL”) respect of private actions against government agencies for abuses of administrative powers.

Although the AML includes an entire chapter addressing abuses of administrative powers, the provisions are considered to be somewhat lacking in bite. The antitrust enforcement authorities are only authorized to provide advice to the body responsible for a government agency which is alleged to have abused its administrative powers. The antitrust authorities are unable to take any action against, or impose any penalties on, the agency themselves. In addition, to date there have been very few private enforcement actions against government agencies as the existing legislation makes it difficult for individuals and entities to bring such actions.

The reforms, which are explained in this article, are intended to rectify the status quo and will take effect from 1 May 2015.
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On 4 November 2014, the State Administrative for Industry and Commerce (“SAIC”) published a decision in which it found that the Pizhou branch of the Xuzhou City Tobacco Corporation (the “Pizhou Tobacco Branch”) had abused its dominant position in the tobacco wholesale distribution market by treating customers of equal standing in a discriminatory manner.  The SAIC found that the Pizhou Tobacco Branch had violated Article 17 of the PRC Anti-Monopoly Law (the “AML”), which prohibits business operators in a dominant market position from engaging in abusive conduct that eliminates or restricts competition, and it imposed a fine of RMB 1.7 million.

We set out in this article some points that are of particular relevance to undertakings subject to the jurisdiction of the AML in evaluating the legal risks of conduct which may constitute an abuse of a dominant market position.
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By Susan Ning, Kate Peng, Sarah Eder and Gao Sibo

 Introduction 

A major concern for undertakings which are involved in international cartel cases is the possibility of receiving overlapping punishments for their cartel conduct by competition authorities in different jurisdictions.

Various jurisdictions, including China, recognize the concept of double jeopardy and have introduced provisions which attempt to prevent over-punishment in the context of national proceedings.  Although there is no international standard to prevent double jeopardy in the context of antitrust enforcement of the same cartel by different jurisdictions, a number of competition authorities have taken the principle into account when imposing fines in international cartel cases, for example by excluding commerce or turnover attributable to certain sales or applying a reduction to the fine to take account of the fact that another jurisdiction has already imposed fines in respect of certain sales.     

We recognize that double jeopardy is an important consideration for clients which are implicated in international cartels. The Chinese antitrust agencies have not yet expressed how they intend to address the issue.  However, as they become more experienced in dealing with such cases, we hope that they will also become more aware of the issue and will clarify their approach to the issue of double jeopardy. 
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By Susan Ning, Kate Peng and Chai Zhifeng

On August 27, 2013, MOFCOM announced its conditional clearance on MediaTek Inc’s (“MediaTek”) 4 billion USD acquisition of MStar Semiconductor Inc (“MStar“) (the “Transaction“). This is the second “hold-separate” case since this year (the other one is Xstrata/Glencore), and the forth one in China’s merger filing history. 1 MOFCOM appears to be getting more and more confident with the “hold-separate” arrangement as a behavior remedy to address competition concerns.  It is also worth to note that the parties are required to submit detailed operation plan within three months of the decision and the transaction can only be closed after the detailed operation plan is approved by MOFCOM.


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By Susan Ning, Kate Peng, Pulcheria Chung and Karen Ji

China’s Supreme People’s Court (“SPC”) issued its Provisions on Several Issues concerning the Application of Law in the Trial of Civil Dispute Cases Arising from Monopolistic Conduct (“SPC rules”) on May 3, 2012, effective on June 1, 2012.  Article 7 of the SPC rules differentiates between horizontal and vertical monopolistic agreements with regard to the plaintiff’s burden of proof on the element of anti-competitive effect.  Horizontal monopolistic agreements falling within Article 13 of the AM are presumed to have the effect of eliminating or restricting competition, unless the defendants can demonstrate otherwise.  For vertical monopolistic agreements under Article 14 of the AML, no such presumption will be made. 

By implication, the above differentiation would mean that the plaintiff in a vertical monopolistic claim must prove (1) the monopolistic agreement falls within Article 14 of the AML; (2) the agreement has anti-competitive effects; (3) it suffered damages because of the monopolistic conduct.  Whereas the plaintiff in a horizontal monopolistic claim only needs to prove item (1) and (3) abovementioned, and the defendant has the rebuttal burden to prove that the agreement would not eliminate or restrict competition.
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By Susan Ning, Hazel Yin and Yunlong Zhang

The year 2012 marks the fifth year of the enactment and implementation of China’s Anti-Monopoly Law (“AML”).  Over the past year, we have witnessed substantial progress of the merger control regime and antitrust administrative investigations, in particular in the area of cartel investigations.  With the promulgation of judicial interpretation of the Supreme People’s Court, antitrust civil litigations are also picking up.  As the Year of Dragon is coming to an end, we present this article with an overview of how the AML has been implemented in the past year, together with our observations.  

I. Merger Control

The Ministry of Commerce (“MOFCOM”), the authority in charge of merger control review, maintained a similar caseload in 2012 compared to 2011 and has been gradually establishing its international reputation as one of the most important antitrust authorities.  
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By Susan Ning and Kate Peng
 
On Jan 4th, the National Development and Reform Commission (“NDRC“) published that they had imposed fines in a total amount of RMB 353 million (approximately USD 56 million) on 6 LCD panel manufacturers, including Samsung and LG of Korea and ChiMei, AU Optronics, Chunghwa Picture Tubes and HannStar from Taiwan region.  This is China’s first antitrust enforcement action against international cartels.  It also imposes the highest penalties in China’s antitrust enforcement history.

According to the press releases of NDRC on its official website 1, during the period from 2001 to 2006, the 6 LCD manufacturers, which accounted for about 80% of the global LCD panel market, convened 53 meetings in Taiwan and Korea to exchange market information and negotiate the price of LCD panels.  NDRC received complaints on the cartel from major Chinese TV makers in December 2006.  The TV makers also reported non-price related misconducts of the panel manufacturers, including providing an 18-month warranty only and failing to provide high-end products in a timely manner.
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