NDRC issues rules against price fixing

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NDRC issues rules against price fixing, 国家发改委颁布反价格垄断细则

On 29 December, the National Development and Reform Commission (NDRC) promulgated the Anti-price Fixing Provisions (substantive provisions) and the Anti-price Fixing Law Enforcement Administrative Procedures Provisions (procedural provisions).

Both sets of provisions came into effect on 1 February 2011.

The substantive provisions

Acts defined as price fixing by the substantive provisions include: (1) where business operators reach a price-fixing agreement; (2) where business operators with a dominant market position use pricing to eliminate or restrict competition; and (3) where executive organs and organizations authorized by laws or regulations to administer public affairs abuse administrative power in terms of price to eliminate or restrict competition.

Price-fixing agreements

The substantive provisions prohibit competing operators reaching the following eight kinds of agreements that “fix or change prices”: (1) agreements fixing or changing the price levels of goods or services; (2) agreements fixing or changing price ranges; (3) agreements fixing or changing the commissions, discounts or other charges that influence prices; (4) agreements to use an agreed price as the basis for transactions with third parties; (5) agreements to adopt a standard formula with which to calculate prices; (6) agreements not to change prices without the consent of other business operators who are parties to the agreement; (7) agreements fixing or changing prices in a disguised way; and (8) other price-fixing agreements determined by the State Council department in charge of prices.

The substantive provisions also stipulate that business operators may not reach agreements with their trading counterparts to fix the price of goods for resale to third parties or to set the minimum price at which goods may be resold to third parties. They also prohibit industry associations from issuing rules, decisions or notices to eliminate or restrict price competition, and from organizing business operators to reach or implement price-fixing agreements.

Abuse of dominant market position

Further to the six kinds of behaviour by which business operators abuse their dominant market position specified by section 17 of the PRC Anti-monopoly Law, the substantive provisions specify the corresponding price-fixing behaviour that should be prohibited: (1) the sale of goods at unfairly high prices or purchase of goods at unfairly low prices; (2) the sale of goods below cost price without a proper reason; (3) the refusal in a disguised way to carry out a transaction with a trading counterpart without a proper reason, by setting the sales price too high or the purchase price too low; (4) by way of price discounts and other means, and without a proper reason, limiting trading partners to dealing only with oneself or with one’s designated business operators; (5) imposing unreasonable charges on top of a price during a transaction; (6) engaging in price discrimination without a proper reason with regard to people in transactions whose conditions are similar.

The substantive provisions list factors that need to be considered in determining what are “unfairly high” and “unfairly low” prices, and the circumstances covered by the “proper reasons” in points (2), (3) and (4) above. They also lay down six types of factor which need to be considered when determining whether a business operator has a dominant market position.

Abuse of executive power

Executive organs and organizations authorized by laws or regulations to administer public affairs may not engage in the following kinds of price-fixing behaviour: (1) abuse of executive power to set discriminatory charges, set discriminatory charging standards or impose discriminatory prices on goods from other areas in order to impede the free movement of goods; (2) forcing business operators to engage in various types of price fixing prohibited by the substantive provisions; and (3) enacting provisions whose content eliminates or restricts price competition.

The procedural provisions

The procedural provisions indicate that the State Council department in charge of prices, and the price departments of the provinces, autonomous regions and municipalities authorized by it, are the bodies responsible for enforcing the anti-price fixing measures. The procedural provisions lay down in detail administrative law-enforcement procedures such as reporting price fixing, investigative measures, dealing with infringements according to the law, diminution or exemption of liability and the suspension and resumption of investigations.

With regard to price fixing by executive organs and organizations authorized by laws or regulations to administer public affairs, the government price departments have the right to make recommendations to their higher organs about ways that such behaviour should be dealt with according to the law. These include (1) stopping such bodies from forcing business operators to engage in price fixing; (2) repealing provisions whose contents eliminate or restrict price competition; (3) punishing those persons directly in charge and others directly responsible in accordance with the law; and (4) other recommendations on how to correct the abuse of executive power.

Business Law Digest is compiled with the assistance of Haiwen & Partners. The authors can be emailed at baochen@haiwen-law.com. Readers should not act on this information without seeking professional legal advice.