New Regulations with a Focus on Competition Issues in Automotive Industry Became Effective

Following the dawn-raids against several automobile OEMs, ten governmental authorities in China including the State Administration for Industry and Commerce (“SAIC”), the Ministry of Transport, the National Development and Reform Commission, the Ministry of Commerce, the General Administration of Quality Supervision, Inspection and Quarantine, etc, promulgated the Guidance on Promoting the Transformation and Updating of Automotive Maintenance Industry to Improve the Service Quality (the “Guidance”) on 3 September 2013 and the SAIC promulgated the Guiding Opinions on Strengthening the Supervision of the Automobile Market(the “Opinions”) on 29 October 2014.

1. The Guidance took effect on 3 September 2014. From a competition law perspective, the key items of the Guidance are the following: (1) According to Article 4.18 of the Guidance, original automotive component manufacturers are encouraged to provide to the aftermarket their original components and independent after-sale components with their own trademarks. In addition, the authorized component distributors and maintenance companies shall be allowed to resell the original components to non-authorized maintenance companies or end users. (2) Article 4.17 of the Guidance stipulates that starting from 1 January 2015, when automobile OEMs (including those companies which import automobiles from abroad and sell them in China) launch the sales of new automobile models, they shall timely disclose the technical information for automotive maintenance in a convenient and non-discriminatory manner as well as under reasonable consideration to the authorized maintenance companies and independent operators (including independent maintenance companies, equipment manufacturers, publishers of maintenance technical information and maintenance technical training institutions, etc). By 31 December 2015, such information disclosure requirements shall be extended to all domestic automobile models that have been included in the Public Announcement of Automobile Manufacturers and Products as well as the domestic and imported automobile models with CCC certification. The above stipulations aim at reducing the control of automobile OEMs on the upstream supply market and the aftermarket 
2. Following the announcement of the Abolishment of Recordal of Automobile General Distributors and Authorized Branded Automobile Dealers on 31 July 2014, the SAIC has newly released the Opinions on 29 October 2014. The Opinions became effective on the same date. The Opinions require the local counterparts of the SAIC to treat the automotive market as an important commodity market, and to devote greater efforts to tackle prominent problems such as (i) monopoly agreements harming competition and the legitimate rights and interests of consumers and other automobile market players; (ii) abuse of dominant market position; (iii) commercial bribery; (iv) illegal incentive sales; (v) false advertising; (vi) selling infringing, fake or inferior commodities (vi) unfair standard contractual clauses, (vii) online trading violations, etc. Although the Opinions only set out the general principles of tackling the above-mentioned issues, they signal that the SAIC will put more efforts to regulate the automotive market.

Compliance with competition law has increasingly become an important topic in China for government authorities, companies and consumers. It is important for companies doing business in China to review their sales policies and development, distribution and purchase agreements to ensure full compliance with Chinese competition law.