1. Competition review before promulgation of rules
Ministries, departments and agencies at all levels of government, as well as organisations tasked with the administration of public affairs, are required to conduct a competition review before introducing rules, regulations, policies or other administrative measures(together, Rules) that affect or would affect the economic activities of market participants, to ensure that the proposed Rules do not have the effect of eliminating or restricting competition. While the idea of competition review was first raised by the State Council back in 2016,1 its formal introduction under the AML further highlights the important role fair competition will play in China’s market economy.
2. Competition issues in platform/digital economy
From a legislative standpoint, the amended AML formally extends the competition regulatory regime to the platform economy. A new article 9 outlines the general principle2 that businesses must not engage in anti-competitive activities by, for example, taking advantage of data and algorithms, technological capabilities, capital strength3 or platform rules. The amended AML also specifically prohibits businesses from abusing market dominance by using data and algorithms, technology, platform rules, etc. These new provisions reflect and codify the increasingly stringent competition enforcement policies and practices in this sector.
3. Substantially increased penalties for violation
The amended AML substantially increases penalties for violation of the AML. Specifically:
(a) Entering into and implementing anti-competitive agreements4
- In addition to the confiscation of any illegal gain, businesses that enter into and implement anti-competitive agreements will be subject to a fine ranging from 1 per cent to 10 per cent of sales revenue in the last financial year. If there was no sales revenue in the last financial year, a fine of up to RMB 5 million will be imposed. If the anti-competitive agreement has not yet been implemented, a fine of up to RMB 3 million5 may be imposed.
- The legal representative and/or ‘principally responsible person’ of the business, as well as any other ‘person who is directly responsible’ for the business entering into the anti-competitive agreement, may be fined up to RMB 1 million.6 The precise scope of persons who might be liable and elements of such personal liability under this new provision are subject to further interpretation by the competition enforcement agency.
- Any business that arranges for other businesses to enter into an anti-competitive agreement or that provides substantive assistance to other businesses in concluding an anti-competitive agreement will face the same legal liabilities as those applicable to the parties to the agreement.