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Overview on Guidelines on Undertakings’ Commitments in Antitrust Cases

23 December 2020

In early August 2020, the Anti-Monopoly Bureau (“AMB”) of the State Administration for Market Regulation (“SAMR”), in the form of a book (“Book”) titled “A Collection of Antitrust Regulations and Guidelines in 2019”, published the Guidelines on Undertakings’ Commitments in Antitrust Cases, together with three other guidelines, i.e. the Antitrust Guidelines for the Automobile Industry, the Guidelines for the Application of Leniency Program in Horizontal Monopoly Agreement Cases, and the Antitrust Guidelines on the Abuse of Intellectual Property Rights (collectively, the “Four Guidelines”). According to the explanations stated in the Book, the Four Guidelines were approved by the Anti-Monopoly Commission under the State Council and took effect on 4 January 2019, however, in fact they were only disclosed to the public in August 2020.

Before the Guidelines on Undertakings’ Commitments in Antitrust Cases (“Commitment Guideline”) took effect, the National Development and Reform Commission (one of the former competition authorities) published the Guidelines for the Undertakings’ Commitments in Anti-Monopoly Cases (Draft for Comment) (“Draft Guideline”) for public comments on 2 February 2016. According to the explanations stated in the Book, the Office of the Anti-Monopoly Commission made further amendments to the Draft Guideline according to expert opinions and comments of the public.

Below is an overview on the key aspects of the Commitment Guideline.

1. Scope of the Commitment Program

According to the Commitment Program stated in the PRC Anti-Monopoly Law (“AML”), in the process of investigating a suspected monopolistic conduct, the PRC competition authorities may suspend the investigation if the concerned undertaking commits to take specific measures to eliminate the impact of such conduct within the time limit approved by the PRC competition authorities. In addition, after the concerned undertaking has implemented its commitments within the time limit, the PRC competition authorities may terminate the investigation.

a) Same as the Interim Provisions on the Prohibition of Monopoly Agreements, the Commitment Guideline further states that the PRC competition authorities shall not accept any commitment made by an undertaking which is party to a  horizontal monopoly agreement (“Hardcore Horizontal Monopoly Agreement”) containing clauses on (i) price fixing, (ii) output volume restrictions and/or sales volume restrictions, or (iii) division of sales market and/or raw materials purchasing market. In other words, the Commitment Program shall not be applicable to these three types of Hardcore Horizontal Monopoly Agreements.

b) According to the Commitment Guideline, as to other monopolistic conducts expressly prohibited by the AML, including but without limitation (i) horizontal monopoly agreements containing such restrictive clauses as new technology restrictions and collective boycott; (ii) vertical monopoly agreements containing clauses of resale price maintenance and/or minimum price fixing; and (iii) abuse of dominance, if the requirements stated in the Commitment Guideline are met, the Commitment Program can be applicable to these types of monopolistic conducts. Please see Item 3 below for more details.

2. Time of Submission or Withdrawal of the Application for the Commitment Program

a) Submission of the Application for the Commitment Program

An undertaking is “encouraged” to submit an application for the Commitment Program at any time after the PRC competition authorities have adopted any of the investigation measures according to the AML. However, such application shall be made before the Advance Notice of Administrative Penalty is issued by the PRC competition authorities.

b) Withdrawal of the Application for the Commitment Program

Before the PRC competition authorities issue the decision on the suspension of an investigation, an undertaking may withdraw its application for the Commitment Program. If so, the PRC competition authorities shall stop reviewing the commitments submitted by such undertaking. In addition, the PRC competition authorities shall resume the investigation on the suspected monopolistic conduct. Further, they shall no longer accept an application for the Commitment Program by such undertaking in this case.

3. Requirements of the Application for the Commitment Program

a) The undertaking shall submit its application for the Commitment Program in writing.

b) The contents of the commitments should include, among others, the following:

(1) the suspected monopolistic conduct under investigation and its possible impact;

(2) specific measures (“Committed Measures”) to be adopted by such undertaking in order to eliminate the consequences of the suspected monopolistic conduct. The Committed Measures to be adopted by an undertaking may be in the form of behavioral measures, structural measures or comprehensive measures:

  • Behavioral measures include, among others, (i) adjusting pricing policy, (ii) removing or changing various transaction restrictions, (iii) opening networks, platforms or other infrastructure, and (iv) licensing patents, know-how or other intellectual property rights;
  • Structural measures include, among others, the divestiture of (i) tangible assets, (ii) intangible assets such as intellectual property rights; and (iii) other relevant rights and interests.

(3) explanations on the Committed Measures which will eliminate the consequences of the suspected monopolistic conduct; and

(4) the time limit and approach in order to implement the commitments.

4. Decision on the Suspension of an Investigation

After reviewing the application for the Commitment Program submitted by an undertaking, the PRC competition authorities may issue a decision on the suspension of the investigation.

a) The PRC competition authorities may at their discretion decide the time limit for an undertaking to implement its commitments based on the situation of a specific case.

If the PRC competition authorities decide that the suspected monopolistic conduct has made an impact on (i) many other undertakings; (ii) legitimate rights and interests of consumers; and (iii) public interests, they may seek public comments on the Committed Measures for a period of no less than 30 days.

b) The PRC competition authorities shall consider the following factors, among others, when reviewing the commitments made by an undertaking:

(1) the subjective attitude of such undertaking when it implemented the suspected monopolistic conduct;

(2) the nature, duration, consequences and social influence of such undertaking’s implementation of the suspected monopolistic conduct; and

(3) the Committed Measures and their expected results.

During the period when an undertaking implements its commitments, should any significant changes take place in respect of (i) the operation situation of such undertaking; or (ii) the competition situation on the market, such undertaking may apply to the PRC competition authorities to amend the Committed Measures.

After the PRC competition authorities issued the decision on the suspension of an investigation and before they make their final decision on the investigation (please see Item 5 below for more details), they shall supervise the implementation situation of the commitments made by such undertaking.

5. Final Decision of the PRC Competition Authorities

Upon the expiration of the time limit stated in the decision on the suspension of an investigation, based on the specific situation of a case, the PRC competition authorities shall decide whether to terminate the investigation of a suspected monopolistic conduct or to resume the investigation.

a) If an undertaking has implemented its commitments before expiration of the time limit, the PRC competition authorities shall issue a decision on the termination of the investigation.

In this case, the PRC competition authorities shall make public both the decision on the suspension of the investigation and the decision on the termination of the investigation (collectively, the “Decisions”) on a timely basis.

b) Under one or more of the following circumstances, the PRC competition authorities shall resume the investigation:

(1) The concerned undertaking failed to implement its commitments;

(2) There were material changes to the facts based on which the decision to suspend the investigation was made; or

(3) The PRC competition authorities made the decision to suspend the investigation based on incomplete or inaccurate information submitted by such undertaking.

According to the Commitment Guideline, neither of the Decisions shall be deemed as an affirmation as to whether the conduct has constituted a monopolistic conduct. In addition, neither of the Decisions shall be deemed as relevant evidence as to whether such conduct has constituted a monopolistic conduct.

6. Conclusion

Since the stipulations on the Commitment Program in the AML just set out the principles and lack express and operational guidance for undertakings, the Commitment Guideline will provide a more implementable guidance for undertakings and a more standardized and transparent system for the PRC competition authorities. In other words, on the one hand, it may encourage an undertaking, through its application for the Commitment Program, to take voluntary measures to eliminate the impact of a suspected monopolistic conduct. On the other hand, it may improve law enforcement efficiency and lower law enforcement costs, which will be helpful to protect fair competition on the market, as well as to safeguard the rights and interests of consumers and public interests.

Authors

Aiping Bao
Aiping Bao
Counsel
Shanghai