Last year saw the first amendments to the Anti-Monopoly Law (AML) since its promulgation 14 years ago, implemented on 1 August. Most notably, chapter 5 was wholly dedicated to “abuse of administrative authority to eliminate or restrict competition”.
Compared with the original version, the chapter adds greater detail to relevant provisions and strengthens regulation of administrative monopolies.
On this basis, the State Administration for Market Regulation (SAMR) published the Regulations for Curbing the Abuse of Administrative Authority to Eliminate or Restrict Competition in March 2023, which were implemented on 15 April.
IDENTIFYING VIOLATIONS
Partner
Jingtian & Gongcheng
Pursuant to the AML and above-mentioned regulations, administrative monopolies may be categorised under the following scenarios:
Restrict transactions or do so in a disguised manner. Article 39 of the AML prohibits the abuse of administrative authority to restrict an entity or individual from operating, purchasing or using goods provided by a designated business operator, or doing so in a disguised manner. Article 4 of the regulations provides additional details.
Impede other operators from entering the market or impose unfair treatment through administrative actions. The added article 40 of the AML regulates administrative actions of either concerned parties that eliminate or restrict competition. This prohibits abuse of administrative authority to impede other business operators from entering the market, or imposing unfair treatment by way of entering into co-operation agreements or memoranda of understanding. Article 5 of the regulations reiterates this but does not add any further detail.
Impede free flow of goods. Article 41 of the AML prohibits the abuse of administrative authority to impede free flow of goods between regions. Article 6 of the regulations provides further details.
Restrict bidding or other activities. Article 42 of the AML prohibits the abuse of administrative authority to exclude or restrict business operators from participating in bidding, tendering or other business activities by such means as setting discriminatory qualification requirements or evaluation criteria, and failing to release information in accordance with the law. Article 7 of the regulations provides further details.
Unequal treatment or discrimination against non-local operators. Article 43 of the AML prohibits the abuse of administrative authority to exclude, restrict or compel investment or establishment of branches in a region by non-local business operators, or do so in a disguised manner by treatment unequal to that accorded to local operators. Article 8 of the regulations provides further detail.
Compel others to engage in monopolistic conduct. Article 44 of the AML prohibits the abuse of administrative authority to compel a business operator to engage in monopolistic acts, or to do so in a disguised manner. Article 9 of the regulations reiterates this.
It is worth noting that the above-mentioned classifications are mainly based on behaviour and characteristics. From the perspective of the nature and type, administrative monopolies may take the form of concrete or abstract acts.
Regarding the latter, article 45 of the AML expressly prohibits the abuse of administrative authority to formulate regulations aiming to eliminate or restrict competition. Article 10 of the regulations lists forms of such “regulations”, which specifically include measures, decisions, announcements, notices, opinions, meeting minutes and correspondence.
REMEDIES AND RESPONSE
Counsel
Jingtian & Gongcheng
Pursuant to the AML, the regulations, and other relevant laws and regulations, the main legal remedies for administrative monopolies include:
1. Reporting. Pursuant to article 46 of the AML and article 12 of the regulations, any entity or individual has the right to report alleged abuses of administrative authority to eliminate or restrict competition to the anti-monopoly enforcement agency.
When encountering an act of administrative monopoly, it is advisable to report in writing, providing relevant facts and evidence pursuant to article 13 of the regulations. With respect to such real-name reports, the anti-monopoly enforcement agency is required to conduct necessary investigations and, if so requested in writing, inform the whistleblower afterwards on the outcome.
A report may be made for either a concrete administrative act or an abstract one. For the latter, article 29 of the regulations expressly requires the relevant entity to conduct a fair competition review.
Where a policy formulating authority is suspected of failing to conduct a fair competition review, or issuing policy measures in violation of review criteria, article 25 of the Rules for the Implementation of the Fair Competition Review System, implemented on 29 June 2021, provides that any entity or individual may reflect its opinion to such authority, or report to the higher-level authority or market regulator at a comparable or higher level.
In the event such a report is made in writing and provides a basis for facts, the authority should promptly deal with the issue. If a suspected violation of the AML is identified, the anti-monopoly enforcement agency will conduct an investigation.
2. Administrative review/lawsuit. A report may be made by any individual or entity, but administrative review or lawsuit of an administrative monopolistic act must be initiated by someone with a material interest in the act, and the review applicant/plaintiff is required to provide evidence.
In an administrative review or lawsuit, the burden of proof on the illegality of the disputed administrative act falls on the respondent/defendant. This means the accused authority must adduce evidence to substantiate that the administrative act it carried out was lawful. Failing which, the act would be held unlawful.
If the plaintiff also demands compensation, indemnification or makes other pecuniary claims, evidence supporting the facts of the injury should be provided – along with the measure of damages and calculation basis – as well as the causal relationship between the injury and the relevant administrative act. This is not unlike allocation of the burden of proof for damages in a civil case.
However, if the plaintiff is unable to provide evidence due to a reason attributable to the defendant, the defendant then bears the burden of proof in respect of the circumstances surrounding the injury.
Additionally, although an administrative review/lawsuit cannot be instituted solely of an abstract administrative act – pursuant to article 53 of the Administrative Procedure Law – plaintiffs have the right in an administrative action instituted in respect of a concrete administrative act to request that the court additionally reviews the regulatory document on which the act was based excluding laws, administrative statutes, rules and regulations.
Ryan Fang is a partner and Simon Shi is a counsel at Jingtian & Gongcheng
34/F, Tower 3, China Central Place
77 Jianguo Road, Beijing 100025, China
Tel: +86 10 5809 1165
Fax: +86 10 5809 1100
