On 6 August 2020, a new book authored by the State Administration for Market Regulation (SAMR) published a compilation of antitrust rules. It contained the long-awaited Antitrust Guidelines on the Automotive Sector, which provides a substantive set of additional rules that may prompt the original equipment manufacturers (OEMs) to re-evaluate their distribution models in China. Key highlights include:
(1) Resale price maintenance. Consistent with the SAMR’s enforcement practice, the auto guidelines take the view that resale price maintenance (RPM) should be largely prohibited. However, the guidelines set out new grounds for exemptions of RPM, and sketch out an exemption for RPM imposed on distributors, which “only play an intermediary role in the distribution process, i.e., where the pricing has been negotiated between OEMs and specific end customers already, and the distributor’s role is limited to the delivery of vehicles, receipt of payment or invoice issuance.
(2) Territorial/customer restrictions. The auto guidelines distinguish “active” and “passive” sales. Restricting active sales, i.e., a restriction on the distributor from actively targeting customers outside of its allocated territory, will be generally lawful if the OEM does not have market power; however, restricting passive sales will be unlawful. The guidelines also highlight that OEMs should neither restrict cross-selling between distributors nor impose restriction on supplying spare parts to end customers.
These rules are, so far, confined to the auto sector, in line with a broader policy in China to encourage independent auto dealers and increase intra-brand competition in the auto sector.
Business Law Digest is compiled with the assistance of Baker McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker McKenzie by e-mailing Danian Zhang (Shanghai) at email@example.com