China Antitrust Enforcement: A Look Back at 2023 and What to Expect in 2024

On June 18, 2024, the State Administration for Market Regulation (SAMR), which includes the State Antimonopoly Bureau, released the Annual Report on Antimonopoly Law Enforcement in China (2023) (the “Report”). This article provides information on the antimonopoly law enforcement activities and legislative changes that took place in China in 2023, as well as a forecast of what we can expect in the coming year based on the Report and changes observed in the first half of 2024.

I. China Antitrust Enforcement: 2023 Review

1. Monopoly agreements

• In 2023, law enforcement agencies concluded a total of 16 cases involving monopoly agreements, imposing fines and confiscations totaling RMB 294 million.
• The cases concerned different types of antitrust conduct, with horizontal price fixing (seven cases) and the combination of price fixing and market allocation (four cases) being the most prevalent.
• Trade associations were frequently involved (six cases), while the construction materials sector recorded four cases, indicating a concentration in these areas.
• Remaining enforcement actions covered multiple sectors, including liquefied petroleum gas, insurance and pharmaceuticals, reflecting the broad scope of regulation.

These cases reflect SAMR’s ongoing commitment to combating cartels, particularly those organised by trade associations, and to protecting consumer welfare and market competition in key industries.

Data sources: Statistics are from the Annual Reports on Antitrust Enforcement in China (2019 to 2023).

2. Abuse of dominant market position

• In 2023, 11 cases of abuse of dominant market position were recorded, resulting in fines and confiscations totaling RMB 1.869 billion.
• The greatest focus was on the pharmaceutical sector and public services such as water and gas supply, where five and four cases were recorded respectively.
• Various forms of abuse were punished, including charging unfairly high prices and imposing unreasonable trading conditions or restrictions on trade, tying and differential treatment.

These cases are evidence of SAMR’s ongoing efforts to curb abuses by dominant market participants, particularly in the pharmaceutical and utility sectors where market competition is relatively weak and the public interest is at risk.

Data sources: Statistics are from the Annual Reports on Antitrust Enforcement in China (2019 to 2023).

3. Merger Control

• A significant number of merger cases were considered (797 in total), with the vast majority receiving unconditional clearance.
• The average review period decreased slightly to 25.7 days.
• Most cases were straightforward and were resolved within the first stage of review.
• The cases concerned both domestic and foreign companies, with domestic mergers and acquisitions being more active.
• The manufacturing sector (including chemicals, automotive, computers, electronic equipment and pharmaceuticals) was particularly active in terms of mergers and acquisitions, followed by other sectors such as wholesale and retail trade, transport, production and supply of water, electricity, gas and heat, finance, real estate and IT services.
• The transactions included horizontal, vertical and hybrid concentrations. Specifically, there were 417 horizontal concentrations (53%) involving competitors from the same sector, 311 vertical concentrations (40%) involving upstream and downstream companies, and 191 hybrid concentrations (24%) with no horizontal or vertical relationship.
• The dominant transaction mode was capital acquisitions, accounting for 56% of the total, followed by the establishment of joint ventures, which accounted for 34%.

These cases demonstrate that SAMR streamlines the merger review process, lowers the barrier to entry, reduces transaction costs and increases the efficiency of enforcement, while addressing the potential antitrust implications of certain transactions in key sectors.

Data sources: Statistics are from the Annual Reports on Antitrust Enforcement in China (2019 to 2023).

II. Legislative developments in 2023

In 2023, China made the following significant progress in improving its legal system and antitrust laws:

• Changes have been made to Resolutions of the State Council on the thresholds for the declaration of concentration of enterprisesthe aim of which is to facilitate market entry, reduce transaction costs and support investments, mergers and acquisitions.
• Five antitrust laws have been amended, covering a range of prohibitions from monopoly agreements to the abuse of intellectual property rights. The five laws are:
  1. this Provisions prohibiting the conclusion of monopolistic agreements;
  2. this Provisions prohibiting the abuse of a dominant market position;
  3. this Provisions prohibiting the abuse of administrative powers to exclude or restrict competition;
  4. this Provisions prohibiting the abuse of intellectual property rights to exclude or restrict competition; and
  5. this Rules on the review of business concentrations.
• This Antitrust Guide for Trade Associations New guidelines have been introduced that clarify compliance expectations for industry associations.

III. Looking Towards the Second Half of 2024

In the scope of antitrust enforcement in the first half of 2024 (as of June 30, 2024), law enforcement authorities conducted the following cases:

• Monopoly agreements: Four cases were investigated and resolved, resulting in fines and seizures totaling RMB 7.18 million. Of these cases, three involved industry associations and one involved the construction materials sector.
• Abuse of dominant market position: Two cases of abuse of dominant market position were investigated, leading to fines and seizures amounting to RMB 1.75 million. These cases were observed in the pharmaceutical and water supply sectors.
• No notification:One of the cases involved the failure to notify the establishment of a joint venture between Shanghai Highly (Group) Co. Ltd. and Qingdao Haier Air Conditioner Co. Ltd. SAMR imposed fines of RMB 1.5 million on each of the two parties involved. It is worth noting that this case was the first case of the penalty after the increase in the amount of the fine introduced after the amendment of the Anti-Monopoly Law (AML) in 2022.

Data sources: Statistics are from the Annual Reports on Antitrust Enforcement in China (2019 to 2023).

In terms of the legal system and regulations, the following changes have occurred recently:

• On June 17, 2024, SAMR issued Guidelines for the review of horizontal concentration of undertakings (draft for consultation)which is a signal of action being taken to tighten regulations, regulate the process and increase transparency in merger notification reviews.
• On June 24, 2024, the Supreme Court issued its judgment Interpretation of several issues concerning Application of law in civil proceedings in antitrust disputes (the “Interpretation”). The Interpretation, effective July 1, 2024, provides key guidance for civil antitrust disputes, covering both procedural and substantive aspects.

Looking ahead, it is expected that antitrust enforcement agencies will continue to strengthen their enforcement activities in sectors such as medicine, building materials and public services. Special attention will be paid to the monopolistic practices of industry associations, with a special focus on directing these associations and companies to strengthen their antitrust compliance measures.

In transactions involving corporate concentrations, the proportion of transactions triggering new thresholds is expected to decrease. Moreover, antitrust enforcement agencies will prioritize key sectors and relatively larger transactions.

With the ongoing strengthening of antitrust enforcement and the continuous improvement of institutional regulations in China, enterprises are encouraged to establish proactive antitrust compliance systems tailored to their revenue scale and industry characteristics. Such systems should help regulate the conduct of both enterprises and employees, mitigate legal risks, and promptly engage outside lawyers for assistance when necessary.