China approves first AMDs to Anti-Monopoly Law effective in August

The Standing Committee of the National People’s Congress (NPCSC), China’s highest organ of state power and legislature, on June 24 passed an amendment resolution approving proposed first amendments to the Anti-Monopoly Law (AML) of China, which will come into force on August 1. These Chinese competition-related rules and provisions began to be developed in 1987 before their official codification and implementation on August 1, 2008.


The State Administration for Market Regulation (SAMR) on January 2, 2020 issued the exposure draft of the amendments to the AML to solicit public comment. Chinese regulators began cracking down late that year on multiple industries, and, in particular, targeted those once free-wheeling “platform economy” companies over behaviours alleged to be monopolistic, subjecting the likes of Alibaba Group and Meituan to fines of billions of dollars. To curb disorderly expansion of capital has thus stood out as the main drive of the first-time amendment of the AML. Down the line, the NPCSC in April 2021 announced the accelerated amendment as part of its 2022 agenda and on October 23, 2021 released the further revised amendments to seek public feedback a second time. As a crowning act, China’s State Anti-Monopoly Bureau on November 18, 2021 was spun off an affiliated function of the SAMR and took shape independently under the State Council.


The AML, the Price Law of 1998, and the Anti-Unfair Competition Law of 1993 function as three main statutes of general application that protect competition on Chinese markets. Chinese competition regulatory agencies and Chinese courts often rely on varied combinations of these statutes, leading to a broad approach to competition law enforcement that goes beyond addressing purely antitrust concerns. The AML prohibits monopolistic conduct roughly classified into three categories: anti-competitive and restrictive agreements between undertakings and abuse of market dominance, mergers and acquisitions (M&A) restricting or eliminating competition, and abuse of administrative power restricting or eliminating competition.


Anti-monopoly law (AML), a legal titular term used by China and Russia, is known as “antitrust law” in the U.S., as both “antitrust law” and “competition law” in the European Union (EU), and in previous years was referred to as “trade practices law” in the U.K. and Australia. During the AML’s legislative drafting in China, the EU and German competition laws were intensely studied and referenced, and the U.S. antitrust legal theory and cases researched and some U.S. antitrust law experts consulted. As such, the doctrines of “per se rule” and the “rule of reason” both inform or influence the creation of the AML.


Under the per se rule, certain categories of agreements, mostly horizontal agreements between competitors, are presumed to violate competition laws, regardless of other factors such as business purpose or competitive benefits. For example, according to the AML, companies will need to file for a regulatory review about their planned mergers or acquisitions if the combined worldwide turnover of all undertakings concerned surpasses 10 billion yuan ($1.5 billion), and the nationwide turnover within China of at least two undertakings concerned surpasses 400 million yuan ($60 million) each; or if the combined nationwide turnover within China of all undertakings concerned surpasses 2 billion yuan ($300 million), and the nationwide turnover within China of at least two undertakings concerned surpasses 400 million yuan ($60 million) each.


To counterbalance the utter emphasis put on creating a level playing field for all entrepreneurs, “to promote innovation” has been guardedly added to the purpose of the AML as illustrated in Article 1 of the amendments. There has existed a classic predicament with the relations between anti-monopoly and innovation since anti-monopolistic practices often retard innovation when they limit how exactly companies compete against each other. It has been fully acknowledged that since their inception, antitrust laws have had the same basic objective: to protect the process of competition for the benefit of consumers, making sure there are strong incentives for businesses to operate efficiently, keep prices down, and keep quality up.


Observers note that Article 11 and part of Article 60 of the amendments are newly introduced to address litigation, domestic and cross-border, arising out of anti-competitive acts in implementation of standard essential patents (SEPs) and other high-valued intellectual assets, which is bound to further trend up with industries and technologies’ standardization intensifying unstoppably worldwide.