In context

China clarifies conditions for monopoly agreement exemptions

June 16, 2016
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In context

The Chinese competition regulator NDRC has issued a set of draft guidelines to specify the general conditions and procedures for exemption from the prohibitions on monopoly agreements. The consultation period ended on 1 June 2016. The draft guidelines on monopoly agreement exemptions follow a number of other draft guidelines issued in recent months by NDRC and China’s two other competition authorities, MOFCOM and SAIC. The various guidelines elaborate on and interpret a number of provisions in China’s anti-monopoly legislation. Once implemented, the guidelines will contribute to a more consistent and predictable application of competition law in China.

Under China’s Anti-Monopoly Law, certain agreements are exempted from the general prohibition on monopoly agreements if specific conditions are met. Examples are agreements which improve product quality or encourage R&D. Currently, parties have to make their own assessment on whether an exemption applies to their agreement. But the draft guidelines now provide for the possibility to apply for formal exemptions through two procedures. The first procedure is available before an agreement is signed, and the second after investigations by the competition authority have started (but before the investigations are completed).

 

When considering an exemption request, the authority will take into account such factors as the parties’ market share, barriers to entry, and the parties’ financial and technical capabilities. In addition, the parties will have to prove that the agreement will benefit consumers (for example, improvement of quality or a price decrease). The authority will consult with third parties on the exemption request. If the request is awarded, the decision will be published. Parties may apply for confidential treatment of any business secrets prior to any publication.

 

In certain limited circumstances, companies may, before an agreement is concluded, consult with a competition authority on whether an exemption will apply. The limited circumstances include an agreement with cross-border effects where the parties plan to seek an exemption in other jurisdictions and a request from a nationwide industrial association. The authority will provide its advice within 60 working days. The advice does not preclude competition authorities from later alleging that the agreement violates competition laws.

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