Amendments to the Antimonopoly Law: Raising the Stakes for Antitrust Compliance in China
In August 2007, China’s National People’s Congress (NPC) adopted China’s first comprehensive competition law, the Antimonopoly Law (AML).1 Fifteen years later, on June 24, 2022, the NPC voted to amend the AML for the first time.2 In the interim, China has emerged as a pivotal jurisdiction in global competition enforcement. Enormous penalties for anticompetitive conduct have been imposed on both domestic and foreign firms, and global mergers have been stalled, blocked, and saddled with sweeping remedies. When the “Amended AML” takes effect on August 1, 2022, companies active in China will face new antitrust enforcement dynamics and uncertainties.3 These include: dramatically increased corporate penalties; individual fines; investigations of mergers not subject to mandatory notification requirements; tolling of pending merger review deadlines; and damages claims brought directly by local regulators.
Legislative Context
The AML prohibits restraints of competition among multiple firms as “monopoly agreements,” prohibits “abuse of dominance” by firms with substantial market power, establishes a suspensive premerger review system, and features additional measures for addressing “administrative monopoly” (the anticompetitive misuse of government powers). The State Antimonopoly Administration (SAA), a vice-ministerial level body within the State Administration of Market Regulation (SAMR), enforces the AML.4 Parties injured by violations may sue for damages. The statutory text, implementing measures, and published enforcement decisions of the AML regime reflect many practices prevailing among foreign competition regulators, while preserving the flexibility (and opacity) to advance other goals of the Chinese government in particular cases.
Over a decade of robust AML enforcement has also exposed weaknesses and ambiguities in the original legislation. In January 2020, SAMR released for public comment a package of proposed amendments.5 In October 2021, the NPC Standing Committee issued an updated package that retained many of the SAMR proposals, retreated from other SAMR proposals, and introduced new revisions.6 The Amended AML builds on these prior proposals and introduces new provisions.
Key Revisions
General Policy Statements
The Amended AML updates the broad statements of legislative intent and policy priorities from the original 2007 text. The official purposes of the AML now include “encouraging innovation.”7 Several new passages align AML enforcement with the overall policy agenda of the current leadership, and articulate broad aspirations for more effective enforcement.8
Continued Focus on Digital Markets
The Amended AML contains new language prioritizing AML enforcement involving online industries, broadly declaring that “business operators shall not use data and algorithms, technology, capital advantages, and platform rules to engage in monopolistic behavior prohibited by this law.”9 This confirms the senior leadership’s endorsement of SAMR’s campaign targeting monopoly agreements, abuse of dominance, and anticompetitive mergers in China’s digital markets since 2020.10
Codification of Unified Enforcement Structure
Jurisdiction to enforce the AML was originally divided among three distinct agencies designated to serve as “antimonopoly enforcement authorities of the State Council.”11 In 2018, AML enforcement powers were consolidated in the newly formed SAMR through a broad restructuring of the bureaucracy. The Amended AML codifies this unified enforcement structure, providing that “the anti-monopoly law enforcement agency of the State Council is responsible for the unified anti-monopoly law enforcement work.”12
Penalties
For many multinational companies active in China (as well as many domestic Chinese firms), the most immediate impact of the Amended AML is a drastic increase of the potential administrative penalties for violations.
Monopoly Agreement Penalties
The basic penalty range for implementing monopoly agreements remains unchanged at 1% to 10% of the preceding year’s sales revenues.13 However, the maximum fine increases from RMB500,000 to RMB3 million in scenarios (a) where a business operator agrees to a monopoly agreement without actually implementing the agreed restrictions or (b) where a trade association organizes a monopoly agreement.14 The Amended AML further allows a fine of up to RMB 5 million for participants in monopoly agreements with no annual sales revenues (a scenario not addressed by the original text).15
Merger Penalties
More drastic penalty increases apply to procedural violations of the merger review rules by “failure to file” (i.e., consummating a concentration subject to mandatory notification under the AML without submitting the requisite notification) or “gun jumping” (commencing the implementation of a notified transaction before receiving requisite clearance). Originally, the maximum fine for “implementing a concentration in violation of [the AML]” was just RMB 500,000. While unreported transactions risked post-closing review and retroactive remedies to cure any anticompetitive effects (including the risk of unwinding a consummated transaction), this relatively low penalty was often criticized as insufficient to deter transaction parties from bypassing the AML merger review. Under the Amended AML, the maximum penalty for implementing a concentration increases to RMB 5million even if the concentration is determined not to cause the elimination or restriction of competition.16 If the concentration is deemed anticompetitive, the maximum penalty is 10% of the business operator’s annual revenues (the same as the maximum fine for substantive cartel or abuse of dominance offenses).
Obstruction Penalties
The maximum fine for companies for obstructing AML investigations increases from RMB200,000 (or RMB1 million in "serious cases”) to 1% of annual sales revenues (or RMB5 million in the absence of sales revenues).17 For individuals, the maximum fine for obstruction increases from RMB20,000 (or RMB 100,000 in “serious cases”) to RMB500,000.18
Penalties in Egregious Cases
Beyond increasing these general penalty ranges, the Amended AML empowers SAMR to levey penalties of two to five times the general maximum “where the circumstances of the violation of this Law are extremely severe, the impact is extremely bad and led to especially serious consequences.”19 Consequently, the maximum fine for monopoly agreements, abuse of dominance, or implementing an anticompetitive concentration without clearance increases to 50% of annual revenues, while the maximum corporate fine for obstruction of AML investigations increases to 5% of annual revenues.20
Individual Liability for Monopoly Agreements
The Amended AML introduces individual liability for violating the rules against monopoly agreements. “If the legal representative, main responsible person and directly responsible personnel of the operator are personally responsible for reaching a monopoly agreement, a fine of not more than RMB 1 million may be imposed.”21 Significantly, individual liability is not confined to hard-core cartel agreements such as price-fixing, bid-rigging, or market allocation; it technically applies to all monopoly agreement offenses.
Remediation as a Mitigating Factor
The Amended AML expands the list of non-exhaustive factors to be considering in calculating penalties from “the nature, extent, and duration of the violations” to include “the elimination of the consequences of the illegal conduct, etc.”22 This revision confirms the authorities’ discretion to consider voluntary remediation and restitution as mitigating factors, as well as other potentially relevant factors.
Monopoly Agreement Rules
General Definition of Monopoly Agreement
The Amended AML preserves the definition of a “monopoly agreement” as an “agreement, decision, or concerted action that eliminates or restricts competition,” but moves it from the detailed rules against horizontal monopoly agreements into a freestanding article.23 This revision avoids confusion in applying the same definition to both horizontal and vertical restraints.
Hub & Spoke Cartels
The Amended AML introduces new language providing that “business operators shall not organize other business operators to reach a monopoly agreement or provide substantial assistance for other business operators to reach a monopoly agreement.”24 This revision targets hub and spoke cartels through which collusion amongst horizontal competitors is facilitated by a firm at a different level of trade, such as a common distributor or supplier.
Affirmative Defence for Resale Price Maintenance (RPM)
The Amended AML codifies the judicially-created burden-shifting framework for defending specific resale-price maintenance practices on grounds that they do not actually harm competition. New language stipulates that a vertical monopoly agreement to fix or set minimum resale prices “shall not be prohibited if the business operator can prove that it does not have the effect of eliminating or restricting competition.”25 This revision addresses a long-standing controversy about the standards of liability for resale price maintenance. While the original AML text prohibited vertical “monopoly agreements” to fix resale prices or set minimum resale prices, the general definition of an unlawful “monopoly agreement” was limited to agreements that “restrict or eliminate competition.” Administrative rulings and judicial opinions diverged in treating RPM as unlawful per se, in requiring complainants to prove anticompetitive effects, or requiring respondents to prove the absence of anticompetitive effects. In 2018, the Supreme People’s Court (SPC) determined in Yutai v. Hainan Price Bureau that RPM may be presumed to violate the AML without evidence of actual anticompetitive effects, with the respondent bearing the burden of establishing any asserted exemption from prohibition.26 The Amended AML codifies this framework, placing the burden on the respondent to prove that the alleged RPM did not eliminate or restrict competition.
Safe Harbours for Vertical Restraints
The Amended AML authorises SAMR to establish “safe harbours” for vertical restraints. It provides that “business operators who can prove that their market share in the relevant market is lower than the standards set by the anti-monopoly law enforcement agency of the State Council and meet other conditions set by the anti-monopoly law enforcement agency of the State Council shall not be prohibited.”27 This revision paves the way for SAMR to craft new measures permitting, for example, distribution schemes where the suppliers and resellers lack sufficient market shares to pose credible risks of foreclosure.
Abuse of Dominance in Digital Markets
The Amended AML does not materially change the rules against abuse of dominance. The qualitative standards for gauging dominance and quantitative market-share thresholds for presuming dominance remain unchanged; the non-exhaustive list of illustrative abuses—including the catch all for “other acts of abuse of dominant market positions”—remains intact. However, the Amended AML does include new language underscoring the prohibition of abusive practices by dominant firms in digital markets. “A business operator with a dominant market position shall not use data, algorithms, technologies, platform rules, etc. to engage in the abuse of a dominant market position as prescribed in the preceding paragraph.”28 While this insertion does not actually expand the scope of prohibited abuses, it reinforces the central government’s continued focus on antitrust enforcement in online sectors.
Merger Review
Investigation of “Below Threshold” Transactions
The Amended AML retains the AML’s overall merger control scheme. Any transaction that meets the qualitative definition of reportable concentration (such as mergers, acquisitions, and certain joint ventures) and satisfies the quantitative thresholds for notification (based on annual global revenues and revenues from China of the transaction parties at the group-level) must be reported to SAMR, and parties must suspend implementation until SAMR clears or conditionally approves the transaction.
However, the Amended AML now enables SAMR to investigate potentially anticompetitive concentrations that do not otherwise trigger mandatory reporting obligations. “Where the concentration of business operators does not meet the reporting standards prescribed by the State Council, but there is evidence that the concentration of business operators has or may have the effect of eliminating or restricting competition, the anti-monopoly law enforcement agency of the State Council may require the business operators to notify.”29 This new power might be invoked to investigate concentrations involving leading players in small markets (such as narrow geographic markets for services) or to probe acquisitions of nascent competitors in national and global markets (such the so called “killer acquisitions” by large technology companies of emerging rivals). The Amended AML does not explicitly limit the time period within which such investigations may be initiated.
Suspension of Pending Merger Reviews
The Amended AML allows the tolling of merger review periods under certain circumstances. New language permits the “suspension” of the “calculation of the review period” if: the parties’ “failure to submit documents and materials in accordance with the regulations makes impossible to conduct the review work”; if “new situations and new facts that have a significant impact on the review of the concentration of business operators occur and the review work cannot be done without verification”; or “restrictive conditions” need “further evaluation” and the parties request a suspension of the deadlines.30
Competition authorities in many other jurisdictions may similarly suspend applicable review periods in certain circumstances. In China, however, this procedural change might have significant ramifications, particularly for transactions are controversial (whether due to substantive antitrust risks, collateral industrial policy or trade policy concerns, or both).
The Amended AML retains the basic review timeline of the original law. The formal review commences on the date that SAMR receives notification materials satisfying the requirements prescribed by the AML, and may last up to 180 calendar days. It includes: a preliminary review period of up to 30 days (“Phase 1”); a full review period of up to 90 days (Phase 2); and an extended review period of up to 60 days (Phase 3) if the submitted materials are inaccurate or incomplete, material changes in circumstances have occurred, or the parties agree to the extension.31 Like the original text, the Amended AML neither provides a mechanism for transaction parties to compel SAMR to accept a notification and initiate the formal review period, nor requires SAMR to make substantive findings of anticompetitive risks in extending reviews between phases. Under this existing framework, controversial transactions routinely face protracted pre-initiation reviews before “starting the clock,” and frequently resort to withdrawing and refiling the notification to “start over” with a fresh 180-day cycle. The Amended AML allows SAMR broad discretion to toll the deadlines on pending reviews, which may be particularly relevant to controversial tr where objections from Chinese stakeholders arise after the initiation of the formal review.
Administrative Monopoly & Fair Competition Review
New Prohibitions on Administrative Monopoly Tactics
Countering “administrative monopoly” remains a key function of SAMR, and the Amended AML expands the legal tools for this task. New language prohibits “administrative departments and other organizations authorized by laws or regulations to perform the function of administering public affairs” from “abusing their administrative power” by “concluding cooperation agreements and memoranda with business operators, to prevent other business operators from entering the relevant market or imposing unequal treatment on other business operators to eliminate and restrict competition.”32 The existing rule against discrimination against non-local companies by local authorities are expanded to prohibit “compelling or compelling in disguised form” “non-local business operators” “to make investments locally.”33 Similarly, the current prohibition of against abuse of administrative power to compel business operators to engage in unlawful monopolistic conduct is extended to cover “disguised” compulsion.34 The existing rule against abusing administrative power to formulate anticompetitive regulations is extended from “administrative departments” to “administrative departments and other organizations authorized by laws or regulations to perform the function of administering public affairs” (thus matching the scope of the other rules against administrative monopoly).35
Power to Investigate Administrative Monopoly
The Amended AML adds teeth to SAMR’s mandate to investigate administrative monopoly, directing that the “unit or individual concerned shall cooperate.”36 Specifically, “where business operators, administrative departments or organizations authorized by laws or regulations to perform the function of administering public affairs are suspected of violating [the AML]” SAMR “may interview their legal representatives or persons in charge, and require them to propose improvement measures.” 37 While the revisions fall short of empowering SAMR to prescribe remediation, the revisions do require other government authorities to engage with SAMR in the process of evaluating anticompetitive regulatory practices and developing remedies.
Fair Competition Review Mechanism
The Amended AML establishes a formal basis for SAMR’s coordination of the “fair competition review mechanism,” an inter-ministerial process for identifying and modifying anticompetitive regulations. It declares that “the state establishes and improves a fair competition review system” and mandates that “administrative departments and organizations authorized by laws and regulations with functions of administering public affairs shall conduct fair competition reviews when formulating regulations involving the economic activities of market entities.”38
Enforcement by Local Procuratorates
The Amended AML retains the original language creating a cause of action for parties injured by AML violations to sue for damages. “Where the monopolistic conduct of a business operator has caused losses to another person, it shall bear civil liabilities according to law.” Moreover, the Amended AML includes new language authorizing local prosecutors to initiate litigation to enforce the AML. It provides: “The people's procuratorate at or above the level of city with subordinate districts may bring a civil public interest litigation to the people's court in accordance with relevant laws where business operators damaged the public interests through monopolistic conduct.” 39 This brief insertion may shift China’s antitrust enforcement program, particularly in straightforward cartel and RPM cases affecting local markets for low-cost consumer goods and services. While SAMR may have institutional incentives to devote resources to high-profile cases involving regional, national, or global markets, municipal procuratorates may be incentivized to seek damages on behalf of local consumers.
Technical Revisions
Further technical revisions are scattered through the Amended AML. Examples include: the extension of the definition of “business operators” to include organizations engaged in manufacturing and commerce even if they lack separate legal personality;40 the admonition of trade associations to promote compliance by their members;41 and the extension of standards for SAMR’s handling of commercial secrets to cover “personal privacy and personal information.”42
Implications for Competition Compliance
The Amended AML raises the risks of broader antitrust scrutiny of commercial practices and transactions and substantially higher penalties. Companies active in China should renew their antitrust risk assessments, localize their global competition compliance program for their specific risk profile and the Chinese regulatory environment, train personnel on relevant policies, and audit actual implementation. The NPC’s revisions to the AML have raised the stakes for antitrust compliance in China for foreign and domestic companies alike.
1 Zhonghua Renmin Gongheguo Fanlongduan Fa (中华人民共和国反垄断法) [Anti-Monopoly Law of the People’s Republic of China] (promulgated by the Standing Comm. Nat’l People’s Cong., Aug. 30, 2007, effective Aug. 1, 2008) [hereinafter AML], gkml.samr.gov.cn/nsjg/fgs/201908/t20190819_306107.html (Ch.).
2 Woguo Fanlongduan Fa Wancheng Xiugai Baohu Gongping Jingzheng (我国反垄断法完成修改保护公平竞争) [The Revision to the AML is completed, protecting fair competition], http://www.npc.gov.cn/npc/c30834/202206/5eff6074181445c2bfa80be4ba65b4d0.shtml (Ch.).
3 Quanguo Renmin Daibiao Dahui Changwu Weiyuanhui Guanyu Xiugai <Zhonghua Renmin Gongheguo Fanlongduan Fa) De Jueding (全国人民代表大会常务委员会关于修改《中华人民共和国反垄断法》的决定) [The Decision of the Standing Committee of the National People’s Congress of Revising the AML] (promulgated by the Standing Comm. Nat’l People’s Cong., June. 24, 2022, effective Aug. 1, 2022) [hereinafter the Amended AML], http://www.npc.gov.cn/npc/c30834/202206/e42c256faf7049449cdfaabf374a3595.shtml (Ch.)
4 References herein to SAMR include both the SAA and its predecessor, the SAMR Antimonopoly Bureau.
5 Zhonghua Renmin Gongheguo Fanlongduan Fa Xiuding Cao’an (Gongkai Zhengqiu Yijian Gao) (《中华人民共和国反垄断法》修订草案 (公开征求意见稿)) [Draft Revisions to the Anti-Monopoly Law of the People’s Republic of China (Draft for Public Comments)] (released by SAMR, Jan. 2, 2020) [hereinafter SAMR Draft AML Revisions], www.samr.gov.cn/hd/zjdc/202001/t20200102_310120.html (Ch.).
6 Quanguo Renmin Daibiao Dahui Changwu Weiyuanhui <Zhonghua Renmin Gongheguo Fanlongduan Fa> Xiuzheng Cao’an Zhengqiu Yijian (《全国人民代表大会常务委员会<中华人民共和国反垄断法>修正草案征求意见》) [Draft Revisions to the AML proposed by the Standing Committee of National People’s Congress soliciting public comment] (published by Nat’l People’s Cong., Oct. 23, 2021), https://i.ifeng.com/c/8AZgsgK24KJ (Ch.)
7 Amended AML, art. 1.
8 Amended AML, arts. 4, 11, 37.
9 Amended AML, art. 9.
10 In February 2021, SAMR released new Antitrust Guidelines for the Platform Economic Industry, tackling issues such as algorithm-based collusion, self-preferencing, and exclusive dealing by platform operators. In December 2020, SAMR initiated an abuse of dominance investigation of China’s leading e-commerce platform for exclusive dealing, culminating in a record 18.2 billion RMB penalty less than five months later. Probes of other prominent Chinese ecommerce firms followed, including a RMB 3.4 billion fine of a leading online food delivery platform. SAMR fined dozens of companies for failure to notify past deals. In a July 2021 decision addressing one internet platform’s failure to notify an acquisition of an online music streaming service, SAMR ordered remedial measures aimed at restoring pre-transaction conditions of competition. Another July 2021 order prohibited the same internet platform from consolidating one online gaming company over which it already held joint control with another gaming company already under its sole control—the first prohibition of a concentration among domestically controlled parties under the AML.
11 AML, art. 10. The Ministry of Commerce (MOFCOM) reviewed merger notifications, while the National Development and Reform Commission (NDRC) and the State Administration of Industry and Commerce (SAIC) investigated monopoly agreements and abuse of dominance.
12 Amended AML, art. 13.
13 Amended AML, art. 56. Although existing implementing measures apply higher base penalties to horizontal monopoly agreements among competitors than to vertical monopoly agreements, both the original AML text and the Amended AML apply the same penalty range to all restraints of competition (whether cartels, competitor collaborations, or vertical restraints).
14 Amended AML, art. 56.
15 Amended AML, art. 56.
16 Amended AML, art. 58.
17 Amended AML, art. 62.
18 Amended AML, art. 62.
19 Amended AML, art. 63.
20 Amended AML, art. 58.
21 Amended AML, art. 56.
22 Amended AML, art. 59.
23 Amended AML, art. 16.
24Amended AML, art. 19.
25 Amended AML, art. 18.
26 Zhonghua Renmin Gongheguo Zuigao Renmin Fayuan XIngzheng Caidingshu (2018) Zuigaofa Xingsheng 4675 Hao (中华人民共和国最高人民法院行政裁定书（2018）最高法行申4675号) [Administrative Ruling of the Supreme People's Court of the People's Republic of China (2018) Zuigaofa Xingsheng No. 4675] (issued by SPC on December 18, 2018), www.concurrences.com/IMG/pdf/hainan_yutai_vs._price_bureau_of_hainan_province_case.pdf?52043/0ef90443a43ab84e8cab7f2077388e0f5c528e55 (Ch.)
27 Amended AML, art. 18.
28 Amended AML, art. 22. The use of “etc.” is a common feature of non-exhaustive lists in Chinese legislation.
29 Amended AML, art. 26.
30 Amended AML, art. 32.
31 Amended AML, arts. 30-31.
32 Amended AML, art. 40.
33 Amended AML, art. 43.
34 Amended AML, art. 44.
35 Amended AML, art. 45.
36 Amended AML, art. 54.
37 Amended AML, art. 55.
38 Amended AML, art. 5.
39 Amended AML, art. 60.
40 Amended AML, art. 15.
41 Amended AML, art. 14.
42 Amended AML, arts. 49, 66.
