Expansion of Anti-Monopoly Law enforcement needs monitoring

It is generally held that such intellectual property (IP) as patents, trade secrets, etc., is a type of statutory monopoly granted rights holders by the law, the objective being to promote technical progress. However, if a rights holder abuses its IP to the extent that it hinders fair competition, it will cross the red line of the Anti-Monopoly Law (AML).

Recently, both Qualcomm and IDC were investigated in China in connection with IP-related monopolistic behaviour. From this it can be seen that IP rights holders and practitioners in relevant industries must also pay close attention to the central government’s anti-monopoly direction.

Pursuant to the AML implemented on 1 August 2008, the Ministry of Commerce (MOFCOM), National Development and Reform Commission (NDRC) and State Administration for Industry and Commerce (SAIC) are specifically tasked with AML-related law enforcement work, and may delegate the authority for relevant enforcement work to the corresponding provincial-level government authority.

A series of anti-monopoly cases commencing in 2013 have drawn broad attention inside and outside China due to the high degree of recognition and influence of the institutions and enterprises involved, as well as the unprecedented amounts of the fines imposed.

The NDRC

Although the NDRC’s Price Supervision and Anti-Monopoly Bureau was only set up in 2011, it has been particularly prominent in AML enforcement in recent years.

According to media reports, in January 2013, a number of liquid crystal display producers, including Samsung, were fined RMB144 million (US$23.5 million) by the NDRC for collusion in fixing prices of liquid crystal displays. In February 2013, Maotai and Wuliangye were fined RMB449 million for implementing a price monopoly. In August 2013, the NDRC launched an anti-monopoly investigation against a number of powdered milk enterprises, including Biostime, fining them a total of RMB668.73 million.

In the second half of 2013, The NDRC began an investigation into IDC and Qualcomm, subsequently suspending the investigation against IDC. A final decision on dealing with Qualcomm is likely in the near future. In May 2014, the NDRC found that eyeglass makers including Essilor had restricted distributors’ right to set prices at their own discretion, and fined them a total of RMB19 million.

In August 2014, at the request of the NDRC, the Shanghai Municipal Pricing Bureau rendered a decision to fine Shanghai Gold & Jewellery Trade Association and certain gold shops for price monopolisation, imposing fines totaling RMB10.09 million. In August 2014, the NDRC imposed the stiffest fine so far of RMB1.23 billion on 12 automotive parts manufacturers, including Hitachi, for manipulation of supply prices.

In September 2014, the Shanghai Pricing Bureau and the Hubei Pricing Bureau completed their investigation of Chrysler and Audi, imposing fines totalling RMB310 million. In September 2014, the Hebei provincial government became the first administrative authority involved in an investigation in the six years since the implementation of the AML. Its setting of bridge fares at half price for buses from the province, discriminating against vehicles from outside the province, was found to constitute a monopoly.

Reviewing the NDRC’s law enforcement history, it is not difficult to see that the number of cases, the speed of handling cases and the amount of the fines have all been unprecedented, and cases are also often closely connected to major interests in the development of a certain specific industry.

The ministry

The number of cases heard by MOFCOM is increasing at a steady pace, and the review of business operator concentration cases is becoming routine.

MOFCOM is charged with conducting reviews of monopoly behaviour relating to business operator concentrations (e.g. mergers and acquisitions). As compared to the other two administrative authorities, MOFCOM is responsible for dealing with the largest number of anti-monopoly cases. As at August 2014, MOFCOM had unconditionally approved 849 business operator concentration filing cases, conditionally approved four cases and prohibited two cases.

More influential cases include the one prohibiting Coca-Cola from acquiring Huiyuan, and Microsoft’s acquisition of Nokia, and the conditional approval of Google’s acquisition of Motorola. The foregoing data indicate that MOFCOM reviews are becoming routine, and the percentage of conditional approval and prohibition cases is small.

The SAIC

The SAIC may play a greater role in AML enforcement process in future.

Since the implementation of the AML, the SAIC has opened three cases, and authorised provincial-level administrations for industry and commerce to open 36 cases, a number that seems small in proportion to the scope of its anti-monopoly functions. However, in July 2014, the SAIC published information on its anti-monopoly enforcement raids on several of Microsoft (China)’s offices, foreshadowing that administrations for industry and commerce may play a greater role in AML enforcement field in future.

The courts

Court scrutiny will promote openness and transparency in anti-monopoly law enforcement.

Pursuant to article 53 of the AML, if an interested party is dissatisfied with a decision rendered by an AML enforcement authority, it may institute an administrative action questioning the decision. With the current exception of the decision- making party with control in a business operator concentration being required to first apply for administrative reconsideration, all others may institute a legal action directly in a court.

Notwithstanding the fact that no such legal action has yet arisen, the authors are of the opinion that, as is generally the rule, with the increase in anti-monopoly administrative law enforcement, both the number of administrative cases involving monopoly acts tried by courts in the future and their social impact will increase.

In short, it is the authors’ opinion that the current anti-monopoly regime of the central government is becoming more sound. The recent series of law enforcement actions are not a flash in the pan campaign, and in future AML enforcement will certainly become more regular and normal. For business operators that control core IP and other interested parties, AML enforcement is not remote, and should be an ongoing focus of attention.