Contributed By AnJie Law Firm
Article 13 of the Anti-Monopoly Law (“AML”) stipulates that undertakings that have competitive relationships are prohibited from reaching the following agreements:
Article 13 is considered the statutory basis for challenging cartel behaviour in China. Although not specifically provided for in the AML, bid-rigging is also a form of cartel recognisable by the AML, and was identified as price-fixing and splitting the sales market by the NDRC in the roll-on roll-off shipping cartel case in 2015.
The above legal basis is supplemented by and elaborated upon in the following regulations:
It should be noted that, in the last 12 months as of April 2019, with the process of integration of China’s antitrust enforcement agencies, the new authority – the State Administration for Market Regulation (“SAMR”) – is pushing forward to revise the AML and antitrust regulations, including the aforementioned three Provisions.
On 1 January 2019, the SAMR released a draft of Provisions on Prohibiting Monopoly Agreements (“Draft”) to gauge public comments. This Draft will take the place of the old SAIC Provisions on Prohibiting Monopoly Agreements and NDRC Provisions on Anti-Price Monopoly (hereinafter together referred to as “Old Provisions”) to regulate cartel activity.
As observed from the Draft, most articles mainly come from the Old Provisions. However, notable innovations are provided, such as “safe harbour”.
Although there has been no progress so far, it is anticipated that SAMR will finalise the Draft before the end of 2019, according to its Legislative Work Plan 2019.
On 21 March 2018, China officially initiated the consolidation of its antitrust enforcement functions that were previously administered by three agencies into one single authority – the SAMR, which was founded based on the original SAIC.
On 9 August 2018, the finalised three-pronged plan for consolidating SAMR was finally released. Eight days later, the new leadership of the Anti-monopoly Bureau was announced. At this stage, the reform at central government level was almost settled.
The consolidation of the provincial and lower branches of SAMR was also accomplished in the first quarter of 2019.
The new agency undertakes the original three agencies’ responsibilities, as follows:
On 21 December 2018, SAMR released two new regulations: the Interim Provisions on the Procedures for Administrative Punishments for Market Supervision, and the Interim Measures for Hearings on Administrative Penalties of Market Supervision. The substantive rules about liabilities, penalties or awards remain unchanged.
In practice currently, cartel violations are not punishable under criminal law. Like the EU, China adopts an administrative-oriented enforcement approach, and administrative sanctions that can be applied to cartel violations include cessation of the violation, confiscation of illicit gains, and fines. In antitrust civil litigation procedures, the court may also order civil liabilities, including behavioural injunctions and compensation for damages.
The Supreme People's Court issued the Provisions on Certain Issues Relating to the Application of Law in Hearing Cases Involving Civil Disputes Arising out of Monopolistic Acts in 2015, Article 2 of which provides that: “A court shall accept a civil lawsuit directly filed by a plaintiff, or filed by a plaintiff after the decision affirming the relevant act as constituting a monopolistic act by the anti-monopoly law enforcement agency concerned has become legally effective, as long as such lawsuit satisfies other case acceptance conditions prescribed by law.” Therefore, cartel behaviour can be challenged in courts as either standalone or follow-up actions.
There is no literal definition of “cartel conduct” in the AML. The prohibition of cartel conduct is by statute and can be found in Article 13 of the AML. See also 1.1 Statutory Bases for Challenging Cartel Behaviour/Effects.
Joint actions between competitors that do not amount to cartel or other prohibited monopoly agreements do not amount to violations of law. For instance, co-operation between competitors is allowed to the extent that it does not amount to a violation of Article 13 of the AML.
In addition to provisions in the AML, the SAIC Provisions on Prohibiting Monopoly Agreements and the NDRC Provisions on Anti-Price Monopoly interpret the conduct of monopoly agreements (including cartel conduct) to a further degree.
The NDRC Provisions on Anti-Price Monopoly have similar provisions to those above to further define what kind of conduct amounts to a monopoly agreement under the Chinese Antitrust legal framework. In particular, Article 7 of the NDRC Provisions on Anti-Price Monopoly makes clear the meaning of fixing or changing commodity prices.
According to the NDRC Provisions on Anti-Price Monopoly, the following agreements with competitors would be regarded as monopoly agreements:
With regard to the conduct of restricting the quantity of a commodity, which is prohibited in Article 13 of the AML, Article 4 of the SAIC Provisions on Prohibiting Monopoly Agreements stipulates that undertakings are prohibited from concluding the following monopoly agreements with competitors in order to limit the production quantity or sales quantity of commodities:
In respect of the conduct of splitting the market, as previously referred to, Article 5 of the SAIC Provisions on Prohibiting Monopoly Agreements further explains that undertakings are prohibited from concluding the following monopoly agreements with competitors to divide the sales market or the raw material procurement market:
With regard to the exemptions of certain industries, according to Article 56 of the AML, provisions in the AML do not apply to the association or co-operation of agricultural producers or rural economic organisations in their business activities of production, processing, sale transportation, and storage of farm products, etc.
The limitation period for public enforcement actions against cartel conduct is two years. Article 29 of the Administrative Penalty Law of the People’s Republic of China (“APL”) provides that, if an illegal act is not discovered within two years, an administrative penalty shall no longer be imposed, except as otherwise prescribed by the law. Since penalties such as the confiscation of illegal gains and fines imposed by antitrust agencies are classified as administrative penalties, and there is no specific rule governing the statute of limitation under the AML, the principles prescribed by Article 29 of the APL apply to cartel conduct as well.
In principle, the two-year limitation in antitrust public enforcement cases will be calculated from the date on which the cartel conduct is committed. If the cartel conduct is of continual or continuous nature, the two-year limitation will be counted from the date the cartel conduct is terminated. It should be noted that NDRC views the illegal conduct as being continuous if the outcome or effects resulting from the illegal conduct are lasting.
Since 1 October 2017, the limitation period for private civil litigation is three years, with the limitation of action being calculated from the date on which the right-holder becomes aware or should be aware of the tort of his or her rights and who is the obligor. The court does not protect these rights if it has been over 20 years since the occurrence of the cause of action; however, under special circumstances, the court may decide to extend the limitation of action according to the application by the right-holder.
Furthermore, according to Article 16 of the Interpretation on Several Issues Relating to Laws Applicable for Trial of Civil Dispute Cases Arising from Monopolies (“Supreme Court’s Interpretation on Monopolistic Dispute Cases”), the limitation period for requesting compensation for damages caused by monopolistic acts is to start from the date on which a plaintiff becomes aware or should have become aware of the infringements on their rights and interests.
If the cartel conduct is of a continual or continuous nature and has been continuing for more than two years when the plaintiff files the lawsuit, and the defendant files a defence on the ground of limitation of action, compensation for damages shall be calculated from two years before the date on which the plaintiff files the lawsuit.
According to Article 195 of the General Rules of the Civil Law of the People’s Republic of China, the statute of limitation for private litigation shall be discontinued and limitation of action shall be calculated anew from the date of the discontinuance or termination of the following relevant procedures:
Theoretically, China’s antitrust regime has adopted the doctrine of extra-territorial effect. Article 2 of the AML provides that the Law is applicable not only to monopolistic conduct in economic activities within the territory of the People’s Republic of China (“PRC”), but also to monopolistic conduct outside the territory of the PRC, provided that such conduct has the effect of eliminating or restricting competition in the domestic market of the PRC.
There is no specific provision in China’s antitrust legal framework that addresses the issue of the principle of comity. In practice, the situation where a case was or is being investigated in other jurisdictions does not necessarily mean that the case will not face public antitrust enforcement actions in China. In practice, China’s antitrust enforcement agencies sometimes initiate follow-up investigations, such as in the LCD case, the capacitor case and the auto parts case.
Nevertheless, the fact that there are no provisions on the legal principle of comity does not mean that the NDRC and the SAIC do not consider comity in the process of enforcement against cartels. It is believed that the principle of comity may affect the decision-making and the discretion of Chinese antitrust enforcement agencies in specific cases, although it is difficult to clarify at this time to what extent and in which cases the NDRC and the SAIC (now SAMR) may choose to apply this principle.
The AML and relevant regulations do not provide a specific initial investigatory procedure for cartel enforcement. In practice, however, the agency will conduct a preliminary inspection to verify the suspected cartels before any official investigation begins. The agency may either carry out this preliminary inspection themselves or delegate the task to a relevant industry association and/or economic expert. In the event of a report/whistle-blow, the agency will usually review the documents and the information provided by the reporter at first. Experience shows that, in general, the agency will only formally initiate an investigation where there is adequate evidence to suggest that a cartel exists.
According to Article 39 of the AML, the Chinese antitrust enforcement agency has the right to carry out dawn raids or surprise visits, and this right is largely relied on when investigating cartels for obtaining evidence, such as in the Mercedes Benz case in 2014, the Medtronic case in 2016, and the ongoing DRAM case against Micron, Samsung Electronics and SK Hynix, among others. During a dawn raid, the investigated party and its employees are required to co-operate with the Chinese antitrust enforcement agency in their investigation. The agency may also interview employees, review and duplicate documents, seize and detain evidence, etc. Normally, PRC-qualified lawyers with proper documentation can accompany the investigated party and its employees on site during the investigation.
The AML and relevant regulations give the Chinese antitrust enforcement agency the administrative power to inspect the business premises, access computers, copy work e-mails, seize contract and financial documents, check the bank account of the investigated company, and even detain original items such as work computers, notebooks, original business contracts, etc, if they consider it is necessary. The investigated party and its employees shall co-operate during the investigation. Although the AML and relevant regulations do not explicitly provide any restrictions on dawn raids, it is understood that personal premises (such as private households) would not fall into the scope of the investigation in practice.
Article 39 of the AML stipulates that, when conducting investigations into suspected monopolistic conduct, the enforcement authority can take the following measures under the AML:
In order to take these measures, a written report shall be submitted for approval to the principal leading person of the authority for enforcement of the AML.
According to Article 52 of the AML, if the investigated business operators refuse to provide related materials and information, or fraudulent materials or information, and conceal, destroy or remove evidence, or refuse/obstruct the inspection and investigation by the antitrust enforcement agency in other ways, the antitrust enforcement agency shall order them to make rectification and impose a fine of less than CNY20,000 on individuals, and/or a fine of less than CNY200,000 on entities; in serious circumstances, the authority may impose a fine of CNY20,000-100,000 on individuals, and/or a fine of CNY200,000-1 million on entities. Where a crime is committed, the relevant business operators shall assume criminal liabilities.
According to Article 39 of the AML, the antitrust enforcement agency can make inquiries of the undertakings under investigation, the interested parties, or other departments or individuals involved, and request them to provide explanations. Before the inquiries, the investigator must submit a written report for approval to the leading person of the antitrust enforcement agency.
Article 40 of the AML provides that “for [the] antitrust enforcement agency to conduct [an] investigation into suspected monopolistic conducts, there shall be at least two law-enforcement officers, who shall produce their law enforcement papers. The law-enforcement officers shall make written records when conducting [the] inquiry and investigation, which shall be signed by the persons after being inquired or investigated.”
Under the AML, refusal to co-operate or hindering an investigation can lead to fines or even criminal sanctions.
There are no clear rules on whether corporate officers or employees have a right to counsel. In practice, the antitrust enforcement agency will allow PRC lawyers to accompany the officers/employees during the investigation. The company counsel can take on this role in the interview and may sometimes be interviewed by the enforcement officer as well. In practice, since the interviewees have an obligation to co-operate, the counsel’s main role during the on-site interview is to help the interviewee to understand the enforcement officers’ questions, and to advise the interviewees on relevant laws and regulations.
As mentioned above, according to Article 52 of the AML, the antitrust enforcement agency shall impose a fine of less than CNY20,000 on individuals, and a fine of CNY20,000-100,000 in the case of serious circumstances. In August 2018, in the first case in China where an individual was fined for refusal to co-operate with SAMR during the antitrust investigation, SAMR imposed fines of CNY12,000 and CNY8,000 on the Legal Representative and the General Manager of Guangzhou Qingfeng Toyota, respectively. In this regard, while there is no statutory requirement, it is expected that, in practice, individuals would be willing to obtain separate counsel in order to avoid any legal risks during the investigation.
In practice, defence counsel can participate in the investigation, communicate with the antitrust enforcement agency regarding their concerns, assist the company/individual that is under investigation to prepare reports to explain the behaviour concerned, defend clients, and so forth.
The Chinese antitrust enforcement agency can normally obtain documentary evidence or testimony via the following channels:
According to Article 39 of the AML, the law enforcement officers must submit a written report for approval to the leading person of the antitrust enforcement agency in order to investigate and to obtain documentary evidence or testimony. According to Article 40 of the AML, there shall be at least two law enforcement officers present, who shall produce their law enforcement papers. After the interview, the law enforcement officers must ask the interviewee to review the records of the testimony and sign for verification.
In addition, subject to Article 26 and Article 27 of the Interim Provisions on the Procedures for Administrative Punishments for Market Supervision and Administration (promulgated on 21 December 2018 and effective on 1 April 2019), investigators are entitled to interview the parties and other relevant entities and individuals respectively. Transcripts shall be made for inquiries, and inquiry transcripts shall be handed over to the inquired person for verification; the inquiry transcripts shall be read to those who have difficulty in reading. Where there is any error or omission in the transcript, correction or supplement shall be allowed. The altered part shall be affixed with the signature or seal of the interviewed person, or shall be confirmed by other means. Upon verification, the interviewed person shall affix signatures or seals to the transcripts page by page or conduct confirmation by other means. Please see 3 Procedural Framework for Cartel Enforcement – When Enforcement Activity Proceeds for more details of the procedure.
According to Article 39 of the AML and Article 20 of the Interim Provisions on the Procedures for Administrative Punishments for Market Supervision and Administration (promulgated on 21 December 2018 and effective on 1 April 2019), the antitrust enforcement agency can also obtain e-mails and digital data during the investigation, after the enforcement officers receive approval from the leading person of the agency. For example, in the PVC case, the NDRC used “WeChat” conversation records as evidence. In the Microsoft case, it was reported that the SAIC took the working computers of Microsoft employees away in order to obtain the electronic data.
When the antitrust enforcement agency requires the company or individual being investigated to provide documents or other evidence, the company or individual is obliged to co-operate, according to Article 42 of the AML, as long as they have access to such documents or other evidence, even if it is located in another jurisdiction or in the cloud. In practice, for information that needs to be sent into the jurisdiction, the antitrust enforcement agency will sometimes set a deadline for the company or individual being investigated to provide such information.
There is no law or regulation regarding attorney-client privilege in China. Even though Article 38 of the Lawyer Law requires attorneys to keep their clients’ trade secrets confidential, in practice the antitrust enforcement agency does not have a strong recognition of the attorney-client privilege in their investigation activities.
According to Article 42 of the AML, a company or individual must co-operate with the antitrust enforcement agency during the investigation, and shall not refuse to provide the information required by the agency, nor hinder the investigation. Therefore, there are limited privileges recognised under the Chinese legal system. Article 38 of the Law of the People's Republic of China on Lawyers stipulates that “a lawyer shall keep confidential the secrets of the State and commercial secrets that he comes to know during his legal practice and shall not divulge the private affairs of the parties concerned. He or she shall keep confidential the information and situations that come to his/her knowledge during practising activities and that the clients or others do not want to divulge, unless the information and situations are about the facts that the clients or other persons prepare to commit or are currently committing crimes that endanger national security or public safety, or seriously jeopardise the personal safety of others.”
If a firm or an individual resists initial requests for information, they may be punished by the antitrust enforcement agency in accordance with Article 52 of the AML. Therefore, initial requests for information are not commonly resisted by individuals or firms, although they are allowed to communicate with the antitrust enforcement agency regarding the initial requests and check whether it is possible for them to not provide information that is irrelevant or that they are unable to provide.
Article 52 of the AML stipulates that “If business operators refuse to co-operate with the enforcement agency’s requests, the enforcement agency shall order them to make rectification, impose a fine of less than CNY20,000 on individuals, and a fine of less than CNY200,000 on entities; and where the circumstances are serious, the enforcement agency may impose a fine of CNY20,000 or up to CNY100,000 on an individual, and a fine of CNY200,000 or up to CNY1 million on an entity; where a crime is constituted, the relevant business operators shall be subject to criminal liabilities.”
In accordance with Article 41 of the AML, “The antitrust enforcement agencies and their staff shall have the obligation to keep confidential the business secrets, which they obtain when enforcing the law.” Targets of enforcement actions and third parties can obtain such protection subject to this provision.
The defence counsel can raise legal and factual arguments to persuade the enforcement agency while presenting in the interview. The defence counsel can also communicate with the Chinese antitrust enforcement agency or assist the interviewee to reply to the antitrust enforcement agency’s requests for information before the agency issues the final administrative decision.
Article 46 of the AML provides general rules on the leniency programme. The draft Leniency Guidelines, published in February 2016, have not yet entered into force but do provide relevant procedures for leniency, including procedures for application, marker system, acceptance and determination. However, these Guidelines shall only apply to cases of horizontal monopoly agreements. Although the draft Leniency Guidelines are currently soliciting comments, it is expected that the specific regulations of the leniency programme will come into force in the coming days.
The draft Leniency Guidelines authorise the reporter to apply for leniency orally or in writing. By contrast with EU eLeniency, which was launched on 19 March 2019, whistle-blowers cannot report the evidence online in China.
Full exemption could be obtained by the investigated company if it (i) is the first whistle-blower; (ii) reports the suspected horizontal agreement and provides essential evidence; and (iii) voluntarily co-operates during the whole investigation. In this regard, the first whistle-blower could be exempt from all or no less than 80% of the penalty. If the first whistle-blower forces or organises other undertakings to conclude and/or implement horizontal agreements, in general it would not be completely exempted from the penalty at all. For the second reporter providing key evidence, 30%-50% of the penalty may be exempted. For others providing key evidence, exemptions of no more than 30% of the penalty may be granted by the antitrust authority. Confiscation of the fine would also be granted, along with the penalty exemption.
According to the draft Leniency Guidelines, the “marker” system is also applied for the leniency programme in China. The reporter could submit an initial report to lock the ranking position of exemption if they can supplement all the requested materials within 30 days (or 60 days for special conditions).
The investigating authority may seek information directly from company employees. Under Article 39 of the AML, this includes “making inquiries of ... the individuals involved and requesting them to provide relevant explanations.” In order to conduct investigations into suspected monopolistic conduct under this article, “a written report shall be submitted for approval to the principal leading person of the authority for enforcement of the AML.”
Based on Article 26 and Article 27 of the Interim Provisions on the Procedures for Administrative Punishments for Market Supervision and Administration (promulgated on 21 December 2018 and effective on 1 April 2019), case-handling personnel may interview the parties and other relevant entities and individuals. Transcripts shall be made and handed over to the interviewee for verification; transcripts shall be read to those who have difficulty in reading. Where there is any error or omission in the transcript, correction or supplement shall be allowed to be made. The altered part shall be affixed with the signature or seal of the interviewed person, or shall be confirmed by other means. Upon verification, the interviewee shall affix signatures or seals to the transcripts page by page or conduct confirmation by other means. Case-handling personnel shall affix signatures to the transcripts, and may request the parties and other relevant entities and individuals to provide supporting materials or other materials relevant to the acts suspected of violating laws within a certain time limit; the providers of such materials shall affix signatures or seals to the relevant materials.
Based on Article 39 of the AML, the investigating authority can seek documentary information directly from the target company or others, such as competitors, trade partners, industry associations, etc, either during a dawn raid or by issuing Requests for Information (“RFIs”) to the target company or others.
Based on Article 26 and Article 27 of the Interim Provisions on the Procedures for Administrative Punishments for Market Supervision and Administration, case-handling personnel may interview the parties and other relevant entities and individuals. Transcripts shall be made and handed over to the interviewee for verification; the transcripts shall be read to those who have difficulty in reading. Where there is any error or omission in the transcript, correction or supplement shall be allowed to be made. The altered part shall be affixed with the signature or seal of the interviewee, or shall be confirmed by other means. Upon verification, the interviewee shall affix signatures or seals to the transcripts page by page, or conduct confirmation by other means. Case-handling personnel shall affix signatures to the transcripts, and may request the parties and other relevant entities and individuals to provide supporting materials or other materials that are relevant to the acts suspected of violating laws within a certain time limit; the materials providers shall affix signatures or seals to the relevant materials.
If the entities are located outside China, the antitrust enforcement agency will usually seek information from their Chinese affiliates. If the entities have no Chinese affiliates, the enforcement agency may seek information directly from the entities located outside the jurisdiction through issuing RFIs.
Documentary evidence, audio-visual materials and other evidence in foreign languages shall be annexed with correct Chinese translations provided by institutions with translation qualifications or other translators, and be affixed with the seals of the translation institutions or signatures of the translators.
Prior to the consolidation of the three antitrust enforcement agencies in March 2018, the enforcement power was split into three parts and performed respectively by MOFCOM, NDRC and the former SAIC. See also 1.2 Public Enforcement Agencies and Scope of Liabilities, Penalties and Awards.
In 2018, the newly established SAMR completed the unification and reorganisation of the three previously separate government agencies regarding AML enforcement and became the sole antitrust and competition authority in China. Notably, the integration of antitrust enforcement agencies has resulted in a better allocation of administrative enforcement resources.
In July 2011, the NDRC, the SAIC and the MOFCOM signed a Memorandum of Understanding (MOU) with the Federal Trade Commission and the US Department of Justice, laying out the framework for long-term co-operation between the antitrust agencies from both sides.
In September 2012, the NDRC and the SAIC signed an MOU with the Directorate-General for Competition of the European Commission, to enhance co-operation and co-ordination on antitrust matters between China and the EU.
The NDRC has also entered into MOUs with the (former) Office of Fair Trading of the UK, the Korea Fair Trade Commission, the Japan Fair Trade Commission and Brazil's Administrative Council for Economic Defense. Separately, the SAIC has signed MOUs with the antitrust agencies of the UK, Korea, Russia, Australia, Brazil, Kazakhstan and Chile.
Currently, most of the co-operation focuses on general matters, such as communicating on competition policies and jointly organising competition-related conferences or forums. With some MOUs, such as those with the US and the EU, the agencies have agreed to exchange information and co-ordinate their enforcement activities directly.
China also participates actively in international competition co-operation activities held by multinational organisations such as UNCTAD, the WTO and the OECD. Unofficially, the officials of China antitrust agencies may exchange their views with officials of other antitrust agencies in academic conferences.
The co-operation between China’s antitrust enforcement agencies and foreign antitrust authorities remains on a general level, with a focus on macro antitrust policies rather than specific cases.
At present, no criminal liability can be imposed on cartel violations under the rules of the AML in China.
Article 50 of the AML provides that where the monopolistic conduct of an undertaking has caused losses to another person, that undertaking shall bear civil liabilities according to law. Article 2 of the Provisions of the Supreme People’s Court on Several Issues Concerning the Application of Law in Hearing Civil Cases Caused by Monopolistic Conducts further clarifies that the people's court shall accept a civil lawsuit filed directly by a plaintiff, or a civil lawsuit filed after a decision of the anti-monopoly law enforcement authority affirming the existence of monopolistic conduct comes into force, if the lawsuit satisfies other conditions for lawsuit acceptance as prescribed by law.
Based on Article 3 of the Provisions of the Supreme People’s Court on Several Issues Concerning the Application of Law in Hearing Civil Cases Caused by Monopolistic Conducts, the first instance of civil dispute cases on monopoly is in the jurisdiction of the Intermediate People’s Courts of provincial capital cities, autonomous region capital cities, municipalities directly under the Central Government and municipalities with independent planning status, and Intermediate People’s Courts designated by the Supreme People’s Court. With approval of the Supreme People’s Court, Primary People’s Courts may have jurisdiction over the first instance of civil dispute cases on monopoly. Based on the provision of the Decision of the Standing Committee of the National People's Congress on Several Issues Concerning the Proceedings of Patent Cases and Other Intellectual Property Cases (effective as of 1 January 2019), where a party is not satisfied with a first-instance judgment or ruling rendered for an IP-related civil case involving professional technologies, including a patent for invention, utility model patent, new variety of plants, layout design of integrated circuit, know-how, computer software and monopoly, and lodges an appeal, the Supreme People's Court shall accept and try the appeal.
The plaintiff shall submit the complaint to the court. The complaint shall include basic information about the plaintiff and the defendants, the plaintiff’s claims and the facts and grounds on which the claims are based, the evidence and source of the evidence, and the name and address of the witness.
As civil litigation on cartels belongs to an action instituted for a tort, the plaintiff shall file the action before the court at the place where the tort occurs, or at the place of domicile of the defendants. The court usually arranges a pre-trial evidence exchange, and the plaintiff and the defendants present cross-examination opinions.
For evidence that a party and its agent ad litem are unable to collect for objective reasons (for instance, evidence held by the enforcement agency or third parties), the party may apply in writing to the court for investigation and collection before the expiry of the term for producing evidence.
As cartel cases involving multiple competitors belong to joint tort, civil actions involving cartels are typically brought against multiple parties. Based on Article 52 of the Civil Procedure Law, in a civil action the actions can be consolidated when one or both parties consist of two or more persons whose subject-matter of action is the same or is in the same category, with the consent of the parties.
Based on the above provision, the parties can pursue separate actions if the court decides that the disputes cannot be consolidated or if all the parties do not agree to consolidate.
In antitrust civil litigation concerning cartels, the plaintiff bears the burden to prove that there is a competitive relationship between the defendants, that the defendants conducted a cartel, that the plaintiff suffered losses, and that there is causation between the cartel and the losses suffered by the plaintiff.
The defendants shall bear the burden of proof that such an agreement does not have the effect of excluding and restricting competition.
There are no criminal proceedings regarding monopoly agreements in China.
In civil litigation concerning cartels brought before a Chinese court, the judge acts as the finder of facts and applies the law to the facts.
The AML and other relevant antitrust rules and regulations do not clearly stipulate the extent to which evidence collected using investigative powers may be discoverable in court. However, since private antitrust actions fall within the scope of civil actions, judicial interpretations of the Civil Procedure Law apply in practice.
According to Article 64 of the Civil Procedure Law, a people's court shall investigate and collect evidence that a party and its agent ad litem are unable to collect for objective reasons, or which the people's court deems necessary for trying a case. According to Article 94 of Interpretations of the Supreme People's Court on the Application of the Civil Procedure Law, such evidence includes the following:
For evidence that a party and its agent ad litem are unable to collect for some objective reasons, the party may apply in writing to request the competent people's court to investigate and collect such evidence before the expiry of the term for producing evidence.
In accordance with these provisions, if the antitrust agencies have conducted relevant investigations in a private antitrust lawsuit, the court may request the agencies to provide related documents and information, such as agreements, accounting books, business correspondences, and electronic data.
The courts may take protective measures if national or commercial secrets, or those of an individual, are involved in a private antitrust lawsuit, in accordance with Article 11 of the Supreme People’s Court on Several Issues Concerning the Application of Law in Hearing Civil Cases Caused by Monopolistic Conducts, such as hearing the case in closed sessions, restricting or prohibiting the reproduction of the evidence, presenting the evidence only to the lawyers engaged, or ordering the parties concerned to sign confidentiality agreements.
As the AML and other relevant antitrust rules and regulations do not make specific provision for evidence collected through the leniency programme, the articles referred to above are applicable.
However, the Draft Leniency Guidelines (published in 2016 but yet to enter into force at the time of writing) provide that the materials submitted by the suspected companies for the leniency programme shall not be used in civil litigation, but it is not yet certain whether the official version of the Guidelines will include this rule.
There are no existing laws and regulations in China explicitly stipulating anything that can be drawn from cartel investigations in other jurisdictions for use in Chinese courts. Despite the absence of prescriptive laws in this regard, the use of evidence sourced from overseas is implicitly recognised by Article 11 of the Provisions of the Supreme People’s Court on Evidence in Civil Proceedings, which provides that any evidence submitted by the parties that is sourced from outside China shall be certified.
In antitrust civil litigation concerning cartels, the plaintiff bears the burden of proof that there is a competitive relationship between the defendants, that the defendants conducted a cartel, that the plaintiff suffered losses and that there is a link between the cartel and the losses suffered by the plaintiff.
The defendants shall bear the burden of proof that the agreement does not have the effect of eliminating and restricting competition.
According to Article 12 of the Provisions of the Supreme People’s Court on Several Issues Concerning the Application of Law in Hearing Civil Cases Caused by Monopolistic Conducts, the parties may apply to the people’s court to have one or two specialists with relevant knowledge appear in court to make explanations on speciality issues about the case. Furthermore, the parties may apply to the people’s court to retain specialist institutions or specialists to issue market study or economic analysis on speciality issues about the case. The retention is not limited to economists.
It is also an accepted practice to retain experts in investigations or merger reviews, especially economists.
See 2.12 Attorney-client Privilege and 2.13 Other Relevant Privileges.
According to Article 38 of the AML, any entity or individual may report suspected monopolistic conduct to the anti-monopoly enforcement authority, which shall conduct the necessary investigations for those reports that are in written form and contain relevant facts and evidence.
According to Articles 1 and 2 of the Provisions of the Supreme People’s Court on Several Issues Concerning the Application of Law in Hearing Civil Cases Caused by Monopolistic Conducts, any natural person, legal entities or other organisations that suffer losses through monopolistic conduct may file a civil action directly before the courts, or may bring a civil action before the court after the determination of the anti-monopoly enforcement authority on the identification of monopolistic conducts becomes legally effective.
In theory, if the plaintiff brings a civil action before a court and meanwhile reports the suspected monopolistic conduct to the anti-monopoly enforcement authority, there may be multiple or simultaneous enforcement proceedings involving the same or related facts.
The investigatory agency can impose sanctions itself. In accordance with Article 46 of the AML, the enforcement agency can instruct the business operator to cease the violation and confiscate the business operator’s illicit gains, and may impose on a company a fine ranging from 1% to 10% of the turnover it achieved in the previous year. If the monopoly agreement has not been implemented, the company may not be fined more than CNY500,000. Where industry associations violate the AML, the fines will amount to no more than CNY500,000; if the circumstances are severe, the business licence of an industry association may be revoked.
China does not have a plea bargain or settlement mechanism under the AML.
If liability or responsibility is established, there are no collateral effects as a matter of law, but the company may not thereafter qualify for participation in governmental bidding processes.
At the same time, in accordance with the Interim Provisions on the Disclosure of the Information on Administrative Punishments concerning Industrial and Commercial Administration, “Information concerning the administrative punishment decisions made by administrations for industry and commerce according to general procedures shall be made public. Information subject to disclosure mainly includes written decisions on administrative punishments and summaries of administrative punishment information.” Therefore, the punishment may have a negative effect on the business operator, especially if it has plans to go public.
Criminal liability is not currently applicable under the Chinese antitrust law framework. At present, under the rules of the AML in China, criminal liability cannot be imposed on the employees of a company that is party to a monopoly agreement.
Because the administrative agencies rather than the courts make the decisions on public enforcement actions in the Chinese antitrust law system, sanctions and penalties in civil proceedings are not currently applicable in this regard, but business operators that carry out monopolistic conduct that causes damage to others bear civil liability separately, according to Article 50 of the AML. Repeated offences may be an aggravating factor in determining fines.
Under the Chinese antitrust law framework, there is no specific legal basis for considering a company’s “effective compliance programme” as a factor when imposing sanctions and penalties. However, an “effective compliance programme” can effectively mitigate risks of violation and may, at the enforcement agencies’ discretion, be considered as a factor in mitigating sanctions and penalties in practice.
In the LCD panel case in 2013, the business operators were requested to pay back money to the consumers. This practice has not been witnessed in other cases so far. In accordance with Article 50 of the AML, “The business operators that carry out the monopolistic conducts and cause damages to others shall bear the civil liability according to law.”
It should be emphasised that the antitrust enforcement agencies rather than the courts make decisions in public enforcement actions in the Chinese antitrust law system.
Companies that are penalised for anti-competitive conduct by public enforcement action may apply to have the agencies’ decisions reviewed. Under Article 27 of the SAIC Procedural Provision on Prohibiting Monopoly Agreements and Article 21 of NDRC Provisions on Anti-Price Monopoly, a company may apply for administrative review or resort to an administrative action before the courts if it is dissatisfied with the decisions made by the agencies.
Although it is not common, there have been other such reviews of decisions issued by the SAIC and NDRC in practice, such as 25 Certified Public Accountants of Shandong v Shandong Administration for Industrial and Commercial, Yutai Co, Ltd. v Hainan Provincial Price Bureau, and Nanjing Concrete Association and Nanjing Jia Hao New Building Materials Co. Ltd. v Jiangsu Provincial Price Bureau.
Any private firms or individuals who have been harmed by cartel behaviour have the right to bring an action in court. Article 50 of the AML provides that, “[w]here the monopolistic conduct of an undertaking has caused losses to another person, it shall bear civil liabilities according to law.”
The Supreme People’s Court further clarifies that, “[w]here a plaintiff directly files a civil lawsuit with the people's court or files a civil lawsuit with the people's court after a decision of the anti-monopoly law enforcement authority affirming the existence of monopolistic conduct comes into force, if the lawsuit satisfies other conditions for lawsuit acceptance as prescribed by law, the people's court shall accept the lawsuit.” See Article 2 of Provisions of the Supreme People's Court on Several Issues concerning the Application of Law in the Trial of Civil Dispute Cases Arising from Monopolistic Conduct.
No special threshold requirements exist for a private action. As mentioned above, any private firms or individuals who have been harmed by cartel behaviour have the right to bring an action, so the substantive standard for bringing an action is that the plaintiff has suffered harm due to a prohibited cartelised conduct.
With respect to how and where to bring such an action, the applicable general rules are set out in the following:
At the end of 2018, the Supreme People’s Court established an Intellectual Property Tribunal (“IP Tribunal”), which is to hear appeals in antitrust and intellectual property cases starting on 1 January 2019. The IP Tribunal is a permanent trial institution affiliated with the Supreme People’s Court, and its judgments, rulings and decisions are deemed to be rendered by the latter.
Summarising the previously existing and newly issued rules, the current procedural framework for bringing private antitrust actions is as follows:
Basic-level courts that were approved by the Supreme People’s Court to hear first-instance cases no longer have jurisdiction over such cases (Article 14 of the IP Tribunal Provisions).
The relief measures are different for civil litigation and antitrust agency investigations.
The plaintiff in an action can seek the following remedies:
Meanwhile, the antitrust enforcement agencies may force the impugned company to:
There are no provisions for treble damages or punitive damages stipulated by Chinese law for cartel conduct in civil litigation. However, the claimants can seek compensation for losses, reasonable costs and interest.
The most commonly obtained forms of relief are compensation for losses, reasonable costs, and interest incurred by the plaintiff.
Among private actions, collective actions are available in China in the form of representative actions under Articles 53 and 54 of the Civil Procedure Law, which are similar to class actions in the US. Article 53 of the Civil Procedure Law provides that, “[w]here the parties on one side of a joint action are numerous, such parties may recommend a representative or representatives to participate in the action.” Article 54 of the Civil Procedure Law provides that, “[w]here the subject matter of action for each party is of the same kind, the parties on one side of an action are numerous, but the exact number of such parties is uncertain when the action is instituted, the people's court may publish a notice to describe the case and claims and notify right holders to register with the people's court within a certain period of time. The right holders which have registered with the people's court may recommend a representative or representatives to participate in the litigation …”
However, collective actions are not common in antitrust disputes or in other causes of action. This is because the law has not provided clear guidance as to some key issues in representative action, such as the elements of representative action, the type of applicable cases, the division of damages awarded, and the appeals mechanism. Hence, no antitrust collective action has yet been brought in China.
See 3.8 Enforcement Against Multiple Parties for further information.
No antitrust laws or regulations in China explicitly address the issues of indirect purchasers or passing-on defences. In a private suit brought by a milk powder consumer against the milk powder producer and retailer, the Beijing IP Court acknowledged the right of indirect purchasers to recover for damages suffered (case number: (2014) Jing Zhi Min Chu Zi No 146). The court noted that one of the purposes of the AML is to protect consumer welfare. As the ultimate bearers of monopolistic overcharge, consumers would be treated unfairly if they were deprived of the right to seek damages. Moreover, indirect consumer purchasers are not excluded from antitrust plaintiffs under Article 1 of the Antitrust Trial Provisions, which provides that, “[f]or the purposes of these Provisions, ‘civil dispute cases arising from monopolistic conduct’ means civil lawsuits filed with the people's courts by natural persons, legal persons, and other organisations for disputes over losses caused by monopolistic conduct or violations of the Anti-Monopoly Law by contractual provisions, bylaws of industry associations, and so on.”
However, there are no judicial or administrative enforcement cases in China where the passing-on defence has been successfully invoked or acknowledged.
There are no specific regulations on the admissibility of evidence obtained from government investigations or proceedings, nor are there any precedent cases addressing this issue. In addition, it is understood that there are no co-operative arrangements or established conventions between antitrust enforcement agencies and courts in this regard.
Apart from administrative decisions published by the government, such as penalty decisions and commitment decisions that are available to be used as evidence, there are no open sources suggesting a situation where the antitrust enforcement agencies provided evidence for any legal entities in China, including the courts and natural persons with a special occupation, such as lawyers.
According to open sources, there have been relatively few claims regarding cartels in China to date. Whether claims proceed to completed litigation or are dismissed or settled depends on the circumstances of each case.
As for the timeframe, first-instance trials will be subject to a six-month time limit, while second-instance trials are limited to three months. The time limit can be extended subject to due approvals. However, such time limits are not binding on foreign-related proceedings and, in practice, most antitrust actions take much longer.
Reasonable costs incurred by the plaintiff, including attorneys’ fees, may be compensated. The burden is on the plaintiff to prove that it incurred costs for investigating and stopping monopolistic conduct, and that the costs are reasonable.
In China, unsuccessful claimants do not have the obligation to pay defence costs and/or attorneys’ fees incurred by the defendant.
Any plaintiff could appeal if he or she is unsatisfied with the first litigation results. A plaintiff could also petition the Supreme People’s Court for retrial if he or she is unsatisfied with litigation results, according to the Notice of the Supreme People's Court on Issuing Several Opinions on Accepting and Examining the Petitions for Retrial of Civil Cases (“Opinions on Retrial Petitions”). However, the standard for petitioning for retrial of civil cases is strict, with details specified in the Opinions on Retrial Petitions, and few such cases have been accepted by the Supreme People’s Court.
See 5.1 Private Right of Action for further information.
There are no other items of information that are pertinent to an understanding of the process, scope and adjudication of claims in China.
The Guidelines on Price-related Conduct of Trade Associations were issued by the NDRC on 20 July 2017, and are available at http://www.ndrc.gov.cn/zcfb/zcfbgg/201707/W020170725555925290946.pdf.
The Guidelines on Price-related Conduct of Undertakings Dealing with Drugs in Shortage and Active Pharmaceutical Ingredientswere issued by the NDRC on 16 November 2017, and are available at www.ndrc.gov.cn/gzdt/201711/W020171123358187048047.pdf.
The two Guidelines will remain effective until they are repealed or modified by the SAMR.