Jurisdiction - China
Reports and Analysis
China – Competition Regulators Attack: New Fines, Conditional Merger Decisions, and a Broadband Dominance Investigation.

29 November, 2011



China’s regulators have sent a clear warning that they are now vigorously enforcing China’s competition laws. New regulatory reforms implemented in recent months include new fines imposed, an investigation into broadband internet services, national security review procedures, and a raft of new merger control decisions, including the first formal decision confirming that creation of joint ventures in China may be subject to scrutiny under the Anti-Monopoly Law.


‚ÄčIn this review, we discuss a range of significant developments that have taken place over the last 6 months, including new investigations by the National Development and Reform Commission (NDRC), new merger decisions by the Ministry of Commerce (MOFCOM), international competition partnerships and regulations recently published by the Ministry of Industry and Information Technology (MIIT). Specifically, recent competition developments in China covered by this review include the following:


  • NDRC’s imposition of severe penalties on parties’ attempts to control the blood pressure drug market and abuse of dominance investigation into China Unicom and China Telecom;


  • MOFCOM’s conditional approvals of the joint venture between General Electric (GE) and state-owned Shenhua Group, and Uralkali’s acquisition of Silvinit;


  • MOFCOM’s approval of Alpha Private Equity Fund’s acquisition of Salvio conditioned upon a required divestiture;


  • MOFCOM’s Provisional Rules on Evaluating the Competition Effects of Concentrations of Undertakings, 2011 Draft Rules regarding An Undertaking’s Failure to File Notification, and updated national security review provisions;


  • a landmark abuse of administrative power case by the State Administration of Industry and Commerce (SAIC);


  • MIIT’s Opinions on Regulating Activities of Basic Telecommunications Carriers on Campuses Business; and


  • international cooperation initiatives.


1. Severe penalties imposed by NDRC for anti-monopoly conduct


On November 14 2011, the NDRC fined suppliers Shandong Weifang Shuntong Pharmaceuticals Co. Ltd. (Shuntong) and Weifang Huaxin Pharmaceuticals & Trading Co. Ltd. (Huaxin) RMB 6.87 million and RMB 152,600, respectively, for engaging in monopoly pricing over reserpine tablets (a kind of high blood pressure medicine). Shuntong and Huaxin’s illegal gains will also be confiscated. This marks the first time NDRC (at a national level) has sought to impose hefty fines in respect of anti-competitive conduct.




According to NDRC’s price supervision and anti-monopoly department, pursuant to an agency agreement dated 6 June 2011, Shuntong and Huaxin became exclusive sales agents in China for the only two manufacturers of pro-methazine hydrochloride, the raw material used to make compound reserpine tablets. Under the agency agreements, the manufacturers were prohibited from selling the raw material to other parties without Shuntong's and Huaxin’s consent. Having cornered the supply of pro-methazine hydrochloride, Shuntong and Huaxin imposed a mark-up per bottle exceeding close to 700 percent, which in turn forced reserpine tablet manufacturers to pass on the cost to consumers at RMB 5-6 per bottle up from RMB 1.3 per bottle. Given that 8 to 9 billion pills are taken annually in China, the NDRC found the suppliers’ behaviour monopolistic, inflicting great harm on China’s healthcare reform and intention to provide drugs at affordable prices.


Observation and implications


As the first case where large fines have been imposed, the NDRC is sending a clear message that it aims to crackdown on price related market abuses. The case also marks a further development in the PRC's Anti-Monopoly law (AML) in that the regulatory authorities are prepared to use tougher measures in targeting anti-competitive practices. Accordingly, firms with exclusive agency agreements for the supply of products or services should be mindful of pricing strategies adopted and, if in doubt, seek to review and audit existing contractual arrangements.


2. China Telecom and China Unicom abuse of dominance investigation


On 9 November 2011, the NDRC confirmed its abuse of dominance investigation of state-owned telecom giants, China Telecom and China Unicom. The investigation was launched amidst complaints from competitors (including many other state-owned entities) of suspended connections to local loop infrastructure if access was purchased via a third party. The two main operators will be found to have breached the AML if they are determined to have abused their dominant positions by charging competitors unfairly high prices and acting discriminatorily by providing different treatment to parties of equal standing.




In determining whether there has been an abuse of dominance, the NDRC will be required to first identify the relevant market and determine China Telecom's and China Unicom’s dominance within such market. As both operators control approximately two-thirds of China’s broadband business, it would appear that the NDRC is likely able to establish that both parties are dominant in a relevant market (although the courts in China have already shown that clear statistical evidence of dominance will be required). However, it remains to be seen whether the high access fees imposed on other competitors will constitute an abuse of a dominance since the level of charges do not breach current legislative price-caps (MIIT Settlement Measures). Alternatively, the NDRC will need to seek evidence to establish that the Chinese telecom giants have applied different pricing to counterparties of equal standing.


If found liable for an abuse of dominance, the NDRC may require China Telecom and China Unicom to discontinue the described anti-competitive activities and may also seize illegal income and impose a penalty of between 1-10% of each operators’ annual revenue. Last year, China Telecom and China Unicom’s annual revenues totalled RMB 219.4 billion and RMB 171.3 billion respectively, with their broadband businesses accounting for approximately RMB 50 billion and RMB 30 billion of their respective turnover. NDRC officials have mentioned fines in reference to the turnover of the broadband businesses only, but that could still result in substantial fines.




The NDRC’s abuse of dominance probe is significant as it is the first investigation of Chinese state owned enterprises (SOEs) under the AML. Up until this point there had been some scepticism surrounding how and whether the AML would be applied to SOEs. By its actions, the NDRC has seemingly taken the opportunity to make a clear statement that large national enterprises are not exempt from the AML.


3. GE and Shenhua Joint Venture


On 10 November 2011, MOFCOM conditionally cleared the establishment of a joint venture between General Electric (China) Limited (GE China) and China Shenhua Coal to Liquid and Chemical Co., Ltd. (Shenhua) to license coal-water slurry gasification technology to industrial and power projects in China (GE-Shenhua JV). This case is particularly significant because of the involvement of a SOE for the first time and the application of merger control review to joint ventures.




Shenhua is a subsidiary of Shenhua Group Corporation Limited (Shenhua Group), a Chinese state-owned mining and energy company that produces and supplies coal, electricity and heat, as well as rail and port transportation services.


On 16 May 2011, MOFCOM accepted GE China and Shenhua’s concentration filing for review and determined on 15 June 2011 that it would implement a second phase review, the duration of such review was further extended on 13 September 2011.


In its review, MOFCOM determined that the relevant market concerning the GE-Shenhua JV was the coal-water slurry gasification technology licensing market, which constituted a separate product market.  In assessing competition in such relevant market, MOFCOM analysed GE-Shenhua JV’s potential market share, market concentration levels and barriers to entry and concluded the likelihood of the parties restricting competition "could not be excluded". MOFCOM determined that the GE-Shenhua JV could potentially exclude or restrict competition.


To address its concerns, MOFCOM approved the establishment of the GE-Shenhua JV on condition that Shenhua and Shenhua Group not compel coal-water slurry gasification technology licensees to use the GE-Shenhua JV’s technology by limiting raw coal supplies, condition such supply on the licensing of GE-Shenhua JV’s technology or raise the cost of the supply of coal for licensees that choose to employ other technologies.


Observations and implications


MOFCOM’s decision formally acknowledges that the establishment of joint ventures are notifiable transactions under the AML. The decision also provides guidance into the way in which MOFCOM will assess such joint ventures in the future. However, it remains unclear whether MOFCOM will adopt the approach of the European Commission and draw a clear distinction between full-function joint ventures that are independent of their parent companies and operate on a standalone basis, and other joint ventures (which may not be notifiable).


4. Alpha Private Equity Fund’s acquisition of a Salvio subject to conditions




On 31 October 2011, MOFCOM approved Alpha Private Equity Fund’s (Alpha) acquisition of Salvio, a textile manufacturer. The key issue considered was whether the proposed concentration would have a negative impact on competition in the relevant market, which it narrowly defined as the “auto-winder electronic yarn cleaner market”.


Under the proposed concentration, Alpha was to acquire Salvio and gain control over its wholly-owned subsidiary Loepfe Brothers Ltd (Loepfe). Loepfe was one of only two participants in the relevant market with a 47.7% market share. Interestingly, Alpha’s ultimate holding company (Alpha V) at the time of the application held a 27.9% shareholding in Wusite Technology Co., Ltd (“Wusite”), Loepfe’s direct and only other competitor.


MOFCOM considered the likelihood of whether the two competitors would coordinate their business operations due to their common ties to Alpha V post concentration. Following an analysis of the relevant market (in particular, the fact that there were only two participants and there existed considerable barriers to market entry for new participants due to significant capital and R&D barriers) and Wusite’s shareholding and corporate governance structure, MOFCOM determined that the effect on Wusite’s business operation “could not be excluded”.


Ultimately, MOFCOM granted approval of the concentration subject to the condition that Alpha V dispose of its interest in Wusite within 6 months (and report the details of such disposal to MOFCOM).  MOFCOM also required the appointment of an independent supervisor to oversee the disposal and prohibited Alpha V from intervening in the business operations of Wusite prior to such disposal taking place.


Observations and implications


The most notable aspect of the decision is that Alpha V’s shareholding in Wusite was quite clearly a minority interest and it was clear that Alpha V could not exert direct control over the company. MOFCOM’s decision highlights the importance of assessing potential competition concerns in relation to a proposed transaction in advance, as MOFCOM is continuing to impose divestiture obligations on merger parties.


5. Uralkali’s acquisition of Silvinit subject to conditions


On 2 June 2011, MOFCOM announced its decision to clear Uralkali’s acquisition of Silvinit. This decision marked MOFCOM’s 7th conditional approval out of the 242 merger filings it has received since the AML took effect in August 2008.


Background and merger review process


On 10 December 2011, Uralkali – a leading global producer of potash fertiliser – offered to purchase its rival, Silvinit, a producer of mineral fertilisers and salts. Both are Russian companies, each with a leading position in the global production market. It is anticipated that the transaction will create a company worth US$24 billion and the world’s second-largest potash producer by volume.


Prior to obtaining MOFCOM’s conditional approval, antitrust clearance for the transaction was obtained in Brazil, Poland, Ukraine and Russia.


In China, Uralkali’s merger filing was accepted by MOFCOM on 14 March 2011 for preliminary review. On 12 April, MOFCOM decided to implement a second phase review and conditional clearance was announced on 2 June 2011.


MOFCOM’s competition concerns and conditions of clearance


The Uralkali-Silvinit transaction concerned a relevant market of potassium chloride as determined by MOFCOM. The ability to produce potassium chloride depends on access to natural potassium resources, which only a limited number of countries and business operators have.


The merged entity will be the world’s second-largest potash supplier with an individual global market share exceeding one-third, and a combined market share with the world’s largest potash supplier exceeding 70% of global supply. More than half of China’s total import of potassium chloride comes from the two parties involved in the proposed merger and their associated companies.


In addition to the above reports on the two enterprises’ market shares, MOFCOM also found that barriers to entry were highly restrictive due to the necessary access to resources and investments of time and financial resources.


As a result of these findings, MOFCOM believed that the proposed merger of Uralkali and Silvinit would increase the degree of concentration of the potassium chloride market and enhance the parties’ dominance. MOFCOM believed this would have an adverse impact on the global potassium chloride trading environment, would lead to potential coordinated conduct among potash suppliers, and, in particular, could have the effect of eliminating and restricting competition in China’s border trade market of potassium chloride.


To address the identified competition concerns, MOFCOM held several rounds of negotiations with the parties before a proposed remedy plan was accepted on 20 May 2011. The remedy plan concerns the China market, and requires the merged entity to:


  • continually abide by the established process and procedures relating to the sale of potassium chloride to China, i.e. via direct trade or channelled by rail or sea in a reliable and diligent manner;


  • continually ensure China’s demands for potassium chloride (in terms of volume and range of products), including potassium chloride with 60% and 62% potassium oxide;


  • continually respect traditional negotiation procedures and take account of the historical and current trading situation on pricing with respect to Chinese customers; and


  • report to MOFCOM of its compliance with the above obligations on a semi-annual basis (or at the request of MOFCOM). An appointed supervisor will monitor the merged entity’s implementation of the restrictive conditions and upon failure to meet the same, MOFCOM has the power to penalise the merged entity for non-compliance.




MOFCOM’s decision highlights how Chinese national interests may be taken into account in framing conditions to a merger affecting the China market. The broad wording of the conditions leaves MOFCOM a considerable degree of discretion in determining whether the conditions have been fulfilled and whether it will be continuously involved in the potassium chloride supply market. Firms with a dominant market position who are conducting mergers should be prepared for potential remedy packages imposed by MOFCOM should any competition concerns be identified.


6. Provisional Rules for Assessing Competitive Effects of Concentrations of Undertakings


On 29 August 2011, MOFCOM promulgated the Provisional Rules for Assessing Competitive Effects of Concentrations of Undertakings (Provisional Rules), which took effect on 5 September 2011.


The Provisional Rules supplement Articles 27, 28 and 29 of the AML and provide a more comprehensive framework for the assessment of the anti-competitive effects of a concentration of undertakings (Concentration). Generally speaking, a Concentration occurs as a result of the merger of two or more previously independent undertakings or by the acquisition of the direct or indirect control of one or more undertakings by persons already controlling one or more existing undertakings.




The Provisional Rules reiterate that MOFCOM is responsible for anti-monopoly reviews of Concentrations (Article 2) and has the authority to prohibit the same if it believes that the Concentration would exclude or restrict competition (Article 13). However, MOFCOM may permit an otherwise anti-competitive Concentration to proceed if the parties to a Concentration demonstrate that the transaction’s pro-competitive impacts outweigh any anti-competitive effects, or that the transaction is in the interest of the public. In deciding to permit a Concentration MOFCOM may impose restrictive conditions to reduce anti-competitive effects (Article 13).


Review factors


Generally speaking, MOFCOM will assess potential anti-competitive effects by considering whether the Concentration gives rise to or strengthens power and/or the motivation to exclude or restrict competition and the likelihood of such exclusion or restriction of competition occurring.


Where the relevant undertakings are not direct competitors in a market, MOFCOM will consider the effect on upstream and/or downstream markets or adjacent markets (Article 4).


MOFCOM will consider Concentration proposals on a case-by-case basis taking into account the following (Article 4):


  • market shares in the relevant market(s) and the market control power of the respective undertakings – determined by analysing the respective market shares of the undertakings, the competition status of the relevant market, the substitutability of the products or services of the Concentration, the production capacity of the Concentration as compared with the non-concentrated undertakings, the control power of the Concentration on the sales and/or the raw material procurement market, the ability of purchasers to switch to other suppliers, the financial strength and technological condition of the Concentration and the purchasing power of downstream customers;


  • the level of market concentration in a relevant market – measured by reference to the Herfindahl-Hirschman Index (HHI) and the Concentration Ratio Index (CRI) (Article 6);


  • the proposed Concentration’s impact on market entry and technological advancement, consumers and other undertakings and national economic development – with consideration given to any off-setting anti-competitive effects that may be derived from positive contributions to technical advancement (Article 8 ) and improvements to economic efficiency post Concentration (Article 9). In addition, taking into account public interest, economic efficiency, whether the undertakings are facing bankruptcy absent the Concentration and relevant buy-side factors off-setting anti-competitive effects (Article 11); and


  • other affecting factors required to be taken into account – such as potential impact on public interest, potential impact on economic efficiency and if the involved undertakings are facing bankruptcy.




The Provisional Rules likely reflect MOFCOM’s accumulated experience in dealing with past reported transactions. Firms who are or will be involved in merger filing are now afforded further guidance on preparing their submissions, establishing that their proposed transactions do not have a negative competitive impact in the relevant market and obtaining merger clearance more swiftly. However, there remains little clarity regarding the nature of the restrictive conditions that MOFCOM may impose to reduce anti-competitive impacts of Concentrations.


7. Draft Rules on Failing to File


In June 2011, MOFCOM released the Draft Interim Measures for Investigating and Disposing of Concentration of Undertakings Failing to File Notification in Accordance with the Law (2011 Draft Rules on Failing to File), setting out the process for investigating Concentrations that meet the merger notification thresholds but which have not been notified to MOFCOM for clearance. This draft follows publication of earlier drafts in January and March of 2009.


The 2011 Draft Rules on Failing to File simplify original provisions and highlight the investigation process and associated penalties for parties who fail to notify MOFCOM.


Investigation Process







The above diagram depicts the process for informant-initiated investigations, the identity of whom MOFCOM is required to keep confidential.


Upon receipt of relevant information, MOFCOM must first verify proffered evidence (Stage 1 in diagram) before providing written notice to the investigated undertaking and requiring submission of documentation within 15 days (Stage 2 in diagram). Following this, MOFCOM will have 60 days to investigate into matters and determine whether a breach has occurred and issue a notice (Stage 3 in diagram).  The investigated undertaking will then have 30 days to submit documentation in accordance with Measures for Review of Concentration of Undertakings and for any Concentration that has not been completed, parties will be required to suspend implementation of the same (Stage 4 of diagram). Thereafter, MOFCOM will conduct its usual merger review and determine whether penalties or further action in terms of remedies need to be imposed.


It should be noted that MOFCOM may also initiate an investigation on its own. Under such circumstance, the process simply commences at stage 1 with MOFCOM collating the relevant information itself.


Procedural Aspects of the Investigation


  • The 2011 Draft Rules on Failing to File also highlight procedural requirements during the investigation, including:


  • MOFCOM may endorse measures as stipulated in the AML to any extent necessary (eg to enter premises, to seize or impound relevant evidence, or to check bank accounts), and request opinions from the relevant authorities.


  • A minimum of two MOFCOM officers are required to conduct the investigation and must record their inquisitions.


  • During the investigation, the investigated undertakings have a right to state their opinions and MOFCOM shall verify the facts, arguments and evidence raised by these parties.


  • All involved parties must give their full cooperation to MOFCOM. They are prohibited from actions that will hinder MOFCOM’s investigation.




If an investigated undertaking objects to MOFCOM’s determination, it may apply for administrative review. If the investigated undertaking is further dissatisfied with the decision resulting from administrative review, it may commence administrative action.




The Draft Rules on Failing to File detail the severity of penalties to which non-compliant parties would be exposed and may effectively encourage firms to notify MOFCOM of any proposed transactions caught by the AML. Once these rules have been finalised it is likely that MOFCOM will be more proactive in investigating mergers where the parties have not notified MOFCOM.


8. National Security Review Provisions


In March 2011, MOFCOM issued the Interim Provisions on Issues Relating to Implementing the Security Review System for Foreign Investors’ Merger with and Acquisition of Domestic Enterprises (Interim Provisions), which required foreign investors to obtain prior approval before acquiring control of domestic Chinese companies in certain sensitive sectors. These Interim Provisions remained valid for six months until 31 August 2011. On 26 August 2011, MOFCOM issued the Provisions on the Security Review System for Foreign Investors’ Merger with and Acquisition of Domestic Enterprises (National Security Provisions), which took effect on 1 September 2011, superseding the Interim Provisions.


The National Security Provisions reaffirm that foreign investors who are contemplating investing in sensitive sectors in China must obtain national security clearance before proceeding with the transaction. The provisions are basically developed from the Interim Provisions only with some minor additions, including:


  • clarifying that a national security review application is to be made by the relevant foreign investor;


  • clarifying that informal consultation with MOFCOM prior to the submission of a national security review application is not a precondition of the review process and is not legally binding on the parties;


  • specifying the confidentiality obligation of the parties involved in a security review; and


  • most importantly, indicating that MOFCOM will determine whether a merger or acquisition falls within the scope of security reviews based on the substance of the transaction and its actual impact on national security. Foreign investors are prohibited from circumventing the legal obligation by adopting such foreign investment structures as using nominee shareholders or trust entities, adopting multi-layer reinvestments, leasing, loan, contractual control or offshore transactions.


The National Security Provisions signal the formal implementation of national security reviews by MOFCOM in addition to the regular transaction review and merger review when approving foreign investments.


9. Developments of MIIT competition regulations


In addition to the three AML enforcement authorities, MIIT has also been proactively developing new rules to regulate competition in the telecommunications sector.


Following a consultation on draft measures for regulating internet information services in January this year, MIIT released Opinions on Regulating Activities of Basic Telecommunications Carriers on Campuses Business (Opinions) on 30 June 2011.


The Opinions explicitly prohibit activities that exclude or restrict competition among telecommunications carriers on college campuses.  These activities include:


  • entering into exclusive agreements to provide basic telecommunication services in college campuses;


  • instituting promotions that would “smear” competitors;


  • mailing SIM and/or UIM cards together with enrolment notices to freshmen without authorization; and


  • compelling campuses to use designated telecommunications services or equipment.


  • Basic telecommunications carriers are required by the Opinions to respect clients’ rights to know and choose relevant providers and must not, by any means, restrict campuses from choosing telecommunications services offered by competitors.


10. SAIC development on prohibiting abuse of administrative power


The SAIC demonstrated its authority under the AML, when Guangdong Provincial Administration of Industry and Commerce (Guangdong AIC) successfully used its SAIC-delegated authority to remedy the abusive conduct of administrative authorities. Exercising its “recommendation” power under the AML, Guangdong AIC overturned a municipal government decision concerning satellite positioning services that eliminated competition in the industry.


In January 2011, three satellite positioning service providers jointly filed a complaint under the AML with Guangdong AIC, commencing the nation’s first ‘abuse of administrative power’ case. The service providers reported that a local municipal government (unnamed) abused its administrative power in the course of regulating and enforcing the installation of GPS on certain categories of vehicles. The service providers also filed an administrative review request with the provincial Legislative Affairs Office against the municipal government’s administrative act.


Guangdong AIC discovered that the municipal government had restricted competition by naming Xin Shi Kong Navigational Science and Technology Company (Xin Shi Kong GPS) the sole provider for municipal level monitoring and the control platform in January 2010.  Consequently, all other satellite positioning service providers were forced to feed their data and pay a fee to Xin Shi Kong GPS. In May and November 2010, the municipal government enforced the compulsory GPS and connectivity requirements respectively, and vehicles that neither possessed a GPS nor fed data to Xin Shi Kong GPS failed annual inspection.


Guangdong AIC further ascertained that Xin Shi Kong GPS was not the only provider with the ability to monitor and act as the control platform, with 11 satellite positioning service providers operating in 2010. The designation by the municipal government effectively eliminated competition in the market with all other service providers forced to purchase from Xin Shi Kong GPS to comply with local regulations.


Having determined that the municipal government’s regulation breached the AML, Guangdong AIC exercised its power under the SAIC implementation rules (namely, the Procedural Rules for Industry and Commerce Administration Authorities on Prohibiting Abuse of Administrative Power to Eliminate or Restrict Competition, effective from 1 February 2011). With guidance from SAIC, Guangdong AIC made a recommendation for remedial actions to rectify the municipal government’s anticompetitive regulation. Subsequently, in June 2011, the Guangdong Provincial Government ruled that the municipal government had indeed breached the AML as well as applicable transportation law and its designation of a sole satellite positioning service provider was overturned.




This decision provides a clear indication that administrative authorities and organisations empowered to administer public affairs may be challenged under the AML. Undertakings that are designated by administrative authorities or organisations to perform certain functions should thoroughly consider if rights granted are legitimate and therefore protected.


Although SAIC does not possess independent enforcement power against abusive conduct by administrative authorities and organisations, the Guangdong AIC case proves that government authorities are able to work together to combat instances of administrative abuse.


11. International Cooperation on competition matters


Competition authorities around the world are pro-actively seeking opportunities to work together to better existing competition enforcement regimes over matters of international significance. Leading the charge in formalising such arrangements are the competition authorities of the European Union and the United States, and the United Kingdom’s Office of Fair Trading (OFT). The memorandums of understanding (MOUs) entered into by these parties (detailed below) may help to establish frameworks for cooperation that will foster greater collaboration on cross-border competition matters.




On 27 July 2011, the Department of Justice and Federal Trade Commission entered into a MOU with all three of China’s AML enforcement agencies (US MOU) for the purpose of fostering cooperation in the enforcement of their competition laws and policies. The US MOU identifies a number of areas for competition law cooperation between the agencies, including notification of developments in policy and enforcement, provision of training programs and workshops, confidential information exchange, commentary on rule-making and sharing of ideas concerning multilateral competition law. In the same spirit as the US-EU Best Practices Agreement, the US MOU also specifically recognises the possibility for cooperation on investigations; a development which could see the type of joint investigation and enforcement carried out by the US with EU authorities.




In January and March of 2011, the OFT entered into MOUs with the NDRC and the SAIC.


The MOU with the NDRC seeks to foster cooperation between the two enforcement agencies and aims to establish a framework on behavioural matters to better harmonise efforts to constrain anticompetitive behaviour. The MOU with the SAIC focuses more on the exchange of information between the two authorities to share best practices, knowledge and expertise and appoint formal liaison departments to ensure continued and effective communication.


With these two MOUs in place, the OFT also expressed hope to sign a further agreement with MOFCOM, extending the reach of formal arrangements between UK and Chinese competition authorities.


The Beijing Consensus


On 21 September 2011, the Beijing Consensus was signed at the BRICS International Competition Conference. “BRICS” refers to the five leading emerging markets, (Brazil, Russia, India, China, and South Africa) and the conference facilitated communication and cooperation amongst these countries’ competition authorities. The Beijing Consensus notes the importance of new developments in global competition laws and acknowledges the commitment from BRICS countries’ competition authorities to reach consensus and adopt effective competition policy.




After a considerable informal grace period, it is clear that China’s competition regulators now feel emboldened to vigorously enforce the AML, and may receive additional support from other international regulators as a result of the new MOUs that are in place.


Firms operating in China should be taking steps to review their existing operations to identify any potential risk areas and implement plans to address the greatest risks. In addition, those looking at new investments or new joint ventures should be prepared for a more interventionist MOFCOM.


Foreign firms can take comfort in indications that the AML may now be enforced against SOEs also. NDRC’s first abuse of dominance probe involving SOEs (and MOFCOM’s conditional approval of the GE-Shenhua JV) reflects a new willingness to apply competition law principles to SOEs.


It is clear that China’s competition regulators are now on the attack, and announcements of further investigations and imposition of fines should be expected. It will also be interesting to monitor China’s application of its new national security review procedures, particularly in relation to any transaction that is viewed as potentially leading to higher prices in China.



For further information, please contact:


Martyn Huckerby, Mallesons Stephen Jaques

[email protected]


Sharon Wong, Mallesons Stephen Jaques

[email protected]



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