Client Note on PRC Anti-Abuse of Dominance Rules (II)
(Updated June 2010)
5.1 Administrative Liability
Article 47 of AML provides that where an undertaking is found to have abused its dominant market position, in addition to imposing an administrative injunction, the competent enforcement agency shall confiscate any illegal income, and impose a fine of not less than 1% but not more than 10% of the turnover of the undertaking in the preceding year. Under Article 22 of the SAIC Procedural Rules, once a conduct of an undertaking is determined by the SAIC to constitute abuse of dominance, the AIC shall make a decision on imposing administrative penalty thereon in accordance with the law. Administrative fine is normally imposed based on the nature, circumstances, extent and duration of the abusive conduct. On the other hand, in the course of investigation of suspected abuse of dominance, an undertaking may enter into a commitment arrangement with the competent enforcement agency and implements such commitment (as further discussed in Section 6 below).
5.2 Civil Liability
In addition to the administrative enforcement action, under Article 50 of the AML, a private party who is injured by the abuse of dominant market position may pursue a civil action against the undertaking concerned. To date, in all the anti-abuse of dominance lawsuits filed in
5.3 Liability Associated with Obstruction of Investigation
5.3.1 If the competent enforcement agency launches an administrative investigation against an undertaking for abuse of dominant market position, the undertaking is prohibited from the following activities:
184.108.40.206 refusing to provide the relevant materials or information, or
220.127.116.11 providing false materials or information, or
18.104.22.168 concealing, destroying or removing evidences, or
22.214.171.124 engaging in any other conduct amounting to refusal or impediment of investigation.
5.3.2 Any breach of the above duties will subject the personnel involved and the undertaking to the following sanctions:
(i) for an individual, a fine of not more than RMB 20,000 Yuan, or where the conduct is egregious, a fine of not less than RMB 20,000 Yuan but not more than RMB 100,000 Yuan;
(ii) for an undertaking, a fine of not more than RMB 200,000 Yuan; where the conduct is egregious, a fine of not less than RMB 200,000 Yuan but not more than RMB 1,000,000 Yuan;
5.3.3 Where such breach constitutes a crime, criminal sanction shall be imposed in accordance with the applicable laws.
6 Suspension/Termination of Investigation through Commitment Arrangement
6.1 If a competent enforcement agency launches an investigation of an undertaking for suspected abusive conduct, in the course of the investigation, such undertaking may submit an application for suspension of the investigation, and commit to take specific measures to eliminate the effect of such conduct within a period approved by the enforcement agency. Based on the application of the subject undertaking and after taking into consideration the nature, duration, consequence, social impact, etc. of the suspected abusive conduct, the enforcement agency may decide to suspend the investigation, and issue a written decision on suspension of investigation. The undertaking shall submit a written report on its performance of the commitments to the enforcement agency within the prescribed period.
6.2 The competent enforcement agency shall monitor the undertaking’s performance of its commitments. If it believes that the undertaking has fulfilled its commitments, it may decide to close the investigation and issue a written closure decision. Such decision shall contain the facts about the suspected illegal conduct which have been carried out by the subject undertaking, specifics of the commitments, specific measures for elimination of the impact thereof, specific steps and timing for fulfilling the commitments, etc.
6.3 In any of the following circumstances, the competent enforcement agency shall reopen its investigation:
failure by the undertaking to fulfil its commitments;
occurrence of material change in the facts on which the decision to suspend the investigation is premised;
decision to suspend the investigation is premised on incomplete, inaccurate or misleading information provided by the undertaking.
7.1 The PRC anti-trust enforcement authorities are growing their regulatory teeth by issuing/proposing a slew of regulations, which cover issues ranging from guidance on “relevant market definition” to procedures for investigating against suspected abuse of dominant market position. The
7.2 Effective compliance risks and litigation risks management require preparation in both substantive and procedural aspects. The starting point is the delineation of a reasonable relevant market, both in terms of product and geographic scope, so that a proper assessment of the competitive conditions can be made. Secondly, for a firm which is may be presumed to have a dominant market position or hold collective dominant market positions together with other firms due to its significant market share, it is worthwhile to identify factors which can demonstrate that it lacks the ability to control the market, such as the existence of thorough competition in the relevant market, relative ease of entry by potential competitors, countervailing buyer power, etc. Thirdly, since except for Monopolistic Pricing, which is per se illegal, other alleged abuses are subject to the “justifiable cause” defense, it is important for a potential target of either administrative investigation or private litigation claim to collect evidence and conduct analysis in support of the “justifiable cause” defense.
Finally, effective training of staff to minimize inadvertent exposure to abuse of dominance claims, as well as the preparation and implementation of a sound “contingency plan” to ensure procedural compliance in case of investigation by the enforcement authorities is also a vital part of the proactive compliance risks management.
Note: Prepared by John Jiang, with assistance from Jenny Zhang and Frank Jiang of Zhong Lun Law Firm, for reference purposes only, and should not be construed as legal advice. For more information, please contact the author at firstname.lastname@example.org.