2018 is an important year for China's anti monopoly law enforcement.Firstly,2018 marks the tenth anniversary of the implementation of the Anti monopoly Law.Secondly,2018 has undergone significant changes in the anti monopoly law enforcement agencies,from the previous pattern where the National Development and Reform Commission,the Ministry of Commerce,and the State Administration of Industry and Commerce were responsible for anti monopoly law enforcement,to the unified responsibility of the State Administration of Market Supervision for anti monopoly law enforcement.Therefore,relevant business concentration There is a unified regulatory body for the review of monopoly agreements and abuse of market dominance.As of November 2018,the reform of the antimonopoly law enforcement agencies at the level of the General Administration of Market Supervision has been completed.The establishment of the General Administration of Market Supervision is expected to further promote the integration and allocation of resources,which is conducive to further unification and strengthening of antimonopoly law enforcement.

1、Reform of antitrust institutions

In March 2018,according to the institutional reform plan of the State Council,the situation in which the National Development and Reform Commission,the Ministry of Commerce,and the State Administration of Industry and Commerce shared the power of anti monopoly law enforcement was changed to a situation where the State Administration of Market Supervision was responsible for the unified anti monopoly law enforcement work.The State Administration of Market Supervision has 27 departments,and the Anti monopoly Bureau of the State Administration of Market Supervision is specifically responsible for anti monopoly law enforcement.The Anti monopoly Bureau of the State Administration of Market Supervision has 10 departments,three of which are responsible for the concentration review of business operators,and the other three are responsible for the investigation of monopoly agreements,abuse of market dominance,and administrative monopolies.The remaining departments are mainly responsible for some administrative matters,such as supervision and law enforcement,international cooperation,and rulemaking.The specific handling personnel of the Anti monopoly Bureau of the State Administration of Market Supervision are mainly from former anti monopoly law enforcement personnel from the National Development and Reform Commission,the Ministry of Commerce,and the State Administration of Industry and Commerce.

2、Concentration of operators

(1)Brief description

In 2018,the State Administration of Market Supervision received 513 applications for concentration of business operators,and 468 cases were concluded.The vast majority of them were approved through summary procedures,and a total of 4 cases were subject to conditional approval.As a result,99%of the application cases were unconditionally approved.Compared to the record number of 7 conditional approval cases set in 2017,the establishment of the State Administration of Market Supervision in 2018 did not have a direct impact on the number of concentration intervention cases,We will wait and see the law enforcement of concentration of operators in 2019.

With the establishment of the State Administration of Market Supervision,the efficiency of concentration review has further improved,with over 95%of cases tried through summary procedures being approved in the first stage,and the review cycle in the first stage has been further reduced compared to the previous year.However,for cases tried through ordinary procedures,especially those with potential conditional approval,the trial cycle is still relatively long.In 2018,the trial cycle of the four cases with conditional approval exceeded the statutory 180 days.In order to obtain final approval,the declarants of these four cases have undergone the process of withdrawing the case and then re filing,with some cases even exceeding a year's trial cycle,For example,Bayer's acquisition of Monsanto's equity.Therefore,we believe that the State Administration of Market Regulation,on the one hand,further improves the efficiency of the trial of summary procedure cases,and on the other hand,it focuses its main time and manpower on the review of conditional cases that may have limiting or eliminating concentration effects.In 2018,the State Administration of Market Supervision and the Ministry of Commerce announced a total of four cases with conditional approval.The following is a brief analysis of the four cases.

(2)Transactions subject to conditional approval

Bayer/Monsanto case

On March 13,2018,the Ministry of Commerce approved Bayer's acquisition of Monsanto.The relief measures attached to this case include both behavioral and structural relief.The structural relief involves overlapping businesses of both parties,including Bayer's non selective herbicide business,vegetable planting business,corn,soybean,cotton,and rapeseed traits business.The Ministry of Commerce believes that after the completion of the transaction,Bayer will increase the market control power of the above businesses,which may have the effect of eliminating and limiting competition.Therefore,it is required to divest Bayer of the above related businesses.The business involving behavioral relief is commercial digital agricultural products,which require the centralized entity's commercial digital agricultural products to comply with FRAND obligations within five years of entering the Chinese market.

2.Yishilu/Luxottica case

On July 25,2018,the State Administration of Market Supervision approved the merger of Essilo/Luxottica.In this case,due to the limited overlapping business between the two parties,the form of competition presented in this transaction is more of a mixed concentration,and the transaction has been unconditionally approved in both the EU and the United States.The State Administration of Market Supervision approved the transaction through behavioral remedies.The main competitive concern generated by this transaction is that after the transaction is completed,the centralized entity may use its market control power in the wholesale and optical lens and sunglasses market,and optical lens frame market to bundle or tie up,which may have the effect of eliminating and restricting competition.Therefore,in the relief measures,the State Administration of Market Supervision requires that entities should not engage in tying sales of eyewear products after the transaction,and prohibit the imposition of exclusive conditions on Chinese eyewear stores.It also requires them to comply with FRAND obligations in the supply of eyewear products and trademark authorization processes.

3.Linde/Plax case

On September 30,2019,the State Administration of Market Supervision approved the Linde/Plax merger.In this transaction,there is a significant overlap between the two parties in the industrial gas field,which is a typical horizontal concentration case.The State Administration of Market Supervision approved the transaction through behavioral remedies supplemented by structural remedies.The divestiture part of this transaction mainly involves the helium business with overlapping businesses between the two parties,while in the fields of inert rare gas mixtures,fluorinated rare gas mixtures,and hydrogen chloride rare gas mixtures,it is required to continue to provide timely and stable supply to Chinese customers at reasonable prices and quantities.

4.United Technologies/Rockwell Collins Case

On November 23,2018,the State Administration of Market Supervision approved the acquisition of Rockwell Collins shares by United Technologies.In this case,there is a high degree of overlap between the two parties in the field of aviation components,while in other business areas,there may be bundling and tying behaviors that are characteristic of mixed concentration.The State Administration of Market Supervision also approved this transaction through a combination of behavioral and structural remedies.

(3)Cases of concentration of business operators not declared according to law

In 2018,the State Administration of Market Supervision imposed penalties on 14 cases of failing to file a concentration declaration in accordance with the law.Compared to the seven cases of investigation that were not filed in accordance with the law in 2017,the number of preemptive cases in 2018 increased significantly.Penalties for cases not declared in accordance with the law in 2018 include both foreign-funded enterprises,private enterprises,and state-owned enterprises.Therefore,with the strengthening of law enforcement in concentration of business operators,the failure of mergers and acquisitions involving state-owned enterprises to perform their antitrust reporting business in accordance with the law may also result in investigations and fines by the State Administration of Market Supervision.

3、Behavioral law enforcement

In 2018,the State Administration of Market Supervision filed 32 cases of suspected monopoly agreements and abuse of market dominance.During the integration process of anti monopoly law enforcement agencies in 2018,the National Development and Reform Commission and the State Administration for Industry and Commerce continued to implement anti monopoly law enforcement.The following is a brief description of some characteristics of cases involving monopoly agreements and abuse of market dominance announced by the State Administration of Market Supervision in 2018.

(1)Penalty Benchmark Calculation Issues

On July 27,2018,the State Administration of Market Supervision announced the decision of the National Development and Reform Commission on administrative penalties against two natural gas companies.The case involved the issue of vertical price monopoly agreements(RPM).The punishment measures taken by the National Development and Reform Commission against these two natural gas companies did not involve the collection of illegal income.The specific penalty calculation basis is the CNG natural gas sales revenue involved by the company in 2016,Based on this,the specific penalty amount is calculated according to a certain proportion.Similarly,on July 25,2018,the State Administration of Market Supervision announced another case involving a monopoly agreement.In this case,with the authorization of the former State Administration for Industry and Commerce,the Guangxi Autonomous Region Administration for Industry and Commerce investigated and punished the monopoly agreement reached between three Qinzhou fireworks and firecrackers companies and made a punishment decision.In this case,three fireworks and firecrackers wholesale enterprises in Qinzhou City reached a monopoly agreement to horizontally divide the sales market.In the punishment decision,it also did not involve the confiscation of illegal income,and the specific penalty amount was calculated based on the 2014 fireworks and firecrackers sales volume as a certain proportion.Therefore,the common characteristic of these two cases is that the penalty decision does not include confiscation of illegal income,and the sales volume of a specific product is used as the calculation basis for the penalty.

In the Decision on Administrative Penalties in the Tianjin Port Shore Yard Monopoly Case announced by the State Administration of Market Supervision on December 10,2018,when imposing fines,the Tianjin Development and Reform Commission calculated the total sales of the investigated enterprise in the previous year,rather than the sales of the products or services involved in the previous year.Therefore,the calculation basis was expanded,and the scope of the fines was correspondingly increased.On December 24th,2018,the State Administration of Market Supervision announced the administrative penalty decision on the monopoly case of glacial acetic acid raw material drugs under its own investigation.The specific penalty measures in the decision include no illegal income,and the penalty amount is calculated based on the total sales volume of the investigated enterprise in the previous year.In the recently released administrative penalty decision on the monopoly case of chlorpheniramine raw materials investigated by the State Administration of Market Supervision,the specific administrative penalty measures also include no illegal income,and the penalty amount is calculated based on the total sales volume of the investigated enterprise in the previous year.

Through analyzing two recent monopoly cases investigated by the State Administration of Market Supervision,we find that,on the one hand,confiscation of illegal income has become one of the specific administrative penalties.In previous monopoly cases investigated by the National Development and Reform Commission and the State Administration of Administration,it is relatively prudent to apply the penalty measure of confiscation of illegal income,because in actual cases,it is often difficult to accurately calculate the specific illegal income,Especially in investigation cases involving price monopoly agreements.The occurrence of confiscation of illegal income in two recent important monopoly investigation cases indicates that the State Administration of Market Supervision is more skilled and confident in applying the penalty measure of confiscation of illegal income.This is also the area that the investigated enterprises need to pay attention to.Confiscation of illegal income may appear more frequently in punishment decisions in the future.

On the other hand,in the two monopoly cases investigated by the State Administration of Market Supervision,the calculation of the penalty base is based on the total sales volume of the investigated enterprise in the previous year,rather than the product/service involved or the geographical market involved.If the State Administration of Market Supervision's practice becomes a certain normalization of antitrust law enforcement in the future,the penalty intensity for the investigated enterprise will greatly increase,This is where the investigated enterprises and antitrust compliance need special attention.

See:http://www.cicn.com.cn/2019-01/09/cms114231article.shtml

(2)The"single economy"issue

The issue of"parent company responsibility"originates from the European Union competition law,which has led to the concept of a single economic entity.If the parent company and its subsidiaries constitute a single economy,there is no competitive relationship between them,and the agreements between the parent company and its subsidiaries that constitute a single economy are only internal actions rather than arrangements between independent enterprises.Therefore,there is no possibility that agreements and arrangements between the parent company and its subsidiaries may constitute a monopoly agreement.

On July 9,2018,the State Administration of Market Supervision made an administrative penalty decision on the behavior of two tally companies in Shenzhen that reached and implemented a monopoly agreement.In this case,the two tally companies are Shenzhen Zhongli and Shenzhen Zhonglian,while China Merchants Logistics holds 50%of the equity interests of Shenzhen Zhongli and Shenzhen Zhonglian,respectively.Therefore,the two companies jointly own the same major shareholder,China Merchants Logistics.According to the State Administration of Market Supervision,although Shenzhen Zhongli and Shenzhen Zhonglian have 50%equity held by the same operator,namely China Merchants Logistics,However,"From the perspective of actual business management,Shenzhen Zhongli and Shenzhen Zhonglian can independently carry out production and operation.When the new tally company entered the western port area of Shenzhen Port in August 2016,Shenzhen Zhongli and Shenzhen Zhonglian stopped relevant communication and coordination activities,and launched normal market competition.Therefore,Shenzhen Zhongli and Shenzhen Zhonglian belong to operators with competitive relationships.".The State Administration of Market Supervision has therefore determined that the agreement signed between Shenzhen Zhongli and Shenzhen Zhonglian to implement market share division constitutes a horizontal monopoly agreement.In other words,in this case,the State Administration of Market Supervision does not recognize the formation of a single economy between Shenzhen Zhongli,Shenzhen Zhonglian and their parent company,China Merchants Logistics.The core consideration of the State Administration of Market Supervision in determining whether a subsidiary forms part of a single economy is whether the subsidiary has the ability to conduct business independently.

Therefore,the inspiration from this case is that when the parent company holds 50%of the equity of a subsidiary,the relationship between the parent company and the subsidiary company is not necessarily considered to constitute a single economy,thereby exempting the possibility of constituting a monopoly agreement.

4、Anti monopoly litigation

In 2018,in the field of abuse of market dominance and fixed resale prices(RPMs),the court heard and announced some influential cases,which provided very useful reference value for enterprises to understand and master the specific application of abuse of market dominance and fixed resale prices under the Anti monopoly Law in antitrust compliance.The following is an analysis of two relevant typical cases for readers'reference.

(1)Abuse of market dominance

In the field of abusing market dominance,on August 23,2018,the Shenzhen Intermediate People's Court released a first instance civil judgment on a very influential monopoly dispute between a microsource company and Tencent Technology and Tencent Computer.In this case,the plaintiff's WeChat source code company believed that the defendant Tencent Technology Company and Tencent Computer Company abused their dominant position in the instant messaging software and service market and blocked 26 WeChat official account such as its data wizard,which damaged market competition and infringed on the plaintiff's legitimate rights and interests.

In the trial of this case,the Shenzhen Intermediate Court considered that there were three controversial focuses.

Dispute focus 1:Whether the defendant has a dominant market position.The Shenzhen Intermediate People's Court believes that in the definition of relevant commodity markets,"WeChat official account service"and"instant messaging service"have important differences in product characteristics and uses.WeChat instant messaging service,microblog and social networking sites belong to a large category of social software services,"As long as the services launched on the WeChat platform,regardless of their specific services,are all advocated to rely on mobile internet instant messaging services,and the relevant market is directly defined as the mobile internet instant messaging software and service market,which obviously cannot objectively reflect the essence and current situation of competition in the internet segment.".The court then analyzed and explained how to define the relevant commodity market in this case,and concluded that the relevant commodity market in this case should be the online promotion and promotion service market on Internet platforms,rather than the instant messaging and social software and service market defined by the plaintiff.Therefore,the plaintiff's definition of the relevant commodity market was inaccurate.As for the relevant regional market,the court agreed with the plaintiff's view that it should be defined as the Chinese Mainland market.

After completing the definition of the relevant market,the court then determined whether the defendant had a dominant market position in the relevant market of the case.The court held that the number of WeChat users is not equal to having a natural monopoly attribute,and the total number of users within the platform is not necessarily related to the market power available to individuals within the platform.Therefore,the court held that the plaintiff's view that the total number of WeChat personal users is a natural attribute of the defendant's monopoly dominance cannot be established.In addition,according to Article 8 of the Provisions of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trial of Civil Disputes Caused by Monopoly,the plaintiff should bear the burden of proof for the defendant's dominant position in the relevant market and its abuse of market dominance.In this case,the court held that,The plaintiff did not provide sufficient evidence to prove that the defendant has a dominant position in the online promotion service market in Chinese Mainland,which is the relevant market of the case.

The second focus of controversy is whether the defendant's labeling behavior constitutes an abuse of market dominance.The court held that the defendant's labeling behavior did not constitute a refusal to trade,nor did it constitute an act of differential treatment for trading counterparties with the same conditions.The court held that a refusal to trade under the Anti monopoly Law requires:(1)the defendant has a dominant market position;(2)The defendant's refusal to trade was not justified;(3)The defendant's refusal to trade has the motivation or effect of excluding or restricting competition.The plaintiff first failed to provide evidence to prove that the defendant has a dominant market position.In addition,the act of labeling does not have the motivation or effect of excluding or restricting competition,but rather is conducive to protecting the interests of WeChat users.

Dispute focus 3:Whether the defendant's labeling behavior is justified.The court held that the operation and publishing content on the plaintiff's 26 official account violated the defendant's Operation Specifications,Service Agreement and other provisions,which has endangered the normal use environment and legitimate rights and interests of WeChat users.Therefore,there are legitimate reasons for the defendant's act of sealing the number.On the one hand,it has a clear contractual basis,and on the other hand,it helps to maintain the public order of the WeChat public platform and protect the legitimate rights and interests of WeChat users.

Case inspiration:This case mainly provides the following enlightenment.First,unlike traditional fields,in the ever-changing and surging Internet field,it has a highly dynamic characteristic.Therefore,its related market definition issues need to be particularly careful and meticulous,and the results of different relevant market definition methods may vary greatly.Through this case,we understand that when defining the relevant market of the Internet industry,the court tends to expand the relevant commodity market from the perspective of demand substitution,which makes it difficult to determine that a certain Internet platform has a dominant market position.In addition,when determining the existence of abuse of market dominance,it is necessary not only to demonstrate the existence of market dominance,but also to provide evidence to prove that the abuse has been committed and has the effect of eliminating or restricting competition.The plaintiff must bear the burden of proof for this,otherwise it will bear the result of losing the lawsuit.

(2)Fixed resale price

In the field of fixed resale prices,the Guangdong Provincial High Court announced the second instance judgment on the dispute over the vertical monopoly agreement between Guochang Electric Appliance Store,Shengshi Company,and Heshi Company on July 19,2018.Shengshi Company is a subsidiary of Gree Electric Appliances.In this case,Heshi Company is a wholesaler of Gree air conditioners,Guochang Electric Appliance Store is a downstream distributor,and Shengshi Company serves as a supplier.Since 2011,Shengshi Company has required Guochang Electric Appliance Store to sell Gree air conditioners at the prices specified by Gree Company.In February 2013,Guochang Electric Appliance Store sold Gree air conditioning products at a lower retail price than the minimum retail price set by Shengshi Company.Therefore,Shengshi Company imposed a fine and was refused to refund the"maintenance sincerity deposit"paid by Guochang Electric Appliance Store.Guochang Electric Appliance Store sued the court of first instance on the ground that the fixed resale price constitutes a monopoly agreement.

In this case,the three parties have no dispute over the existence and implementation of fixed resale prices.However,the focus of the dispute is whether the fixed resale price belongs to a monopoly agreement.The Guangdong High Court believes that the formation of a vertical monopoly agreement should have the effect of eliminating and restricting competition as a necessary condition.In addition,the Guangdong High Court believes that the provisions of Article 7 of the"Provisions of the Supreme People's Court on the Trial of Monopoly Disputes"on the allocation of the burden of proof in horizontal agreements do not apply to vertical agreements."In the absence of clear provisions in laws,regulations,and judicial interpretations,the principle of"who claims,who provides evidence"in the civil procedure law should be followed,and whether the plaintiff has the right to exclude the minimum resale price agreement in this case should be restricted.""The burden of proof is borne for limiting the effectiveness of competition."

The court conducted a very detailed analysis of this issue in this case because a vertical monopoly agreement should have the effect of eliminating and restricting competition as a necessary condition.The definition of the relevant market is the basis for analyzing whether there is the effect of eliminating and restricting competition.The court held that the relevant market of this case was the household air conditioning commodity market in Chinese Mainland from 2012 to 2013.The court then interpreted the issue of whether the relevant market competition in this case is sufficient.Through analyzing several aspects such as the competitive pattern of the relevant market,the characteristics of household air conditioning products themselves,and the market access threshold,the court finally concluded that the relevant market involved in this case is a relatively competitive market.

Finally,the court analyzed the purpose and consequences of fixed resale prices.The court held that the purpose of restricting the minimum resale price of Shengshi Company is mainly to optimize the internal management system,strengthen the internal management level,and improve the user experience experience,rather than to obtain high monopoly profits by eliminating and restricting competition.In analyzing the consequences of fixed resale prices,the court held that fixed resale prices could both restrict competition and promote competition.In this case,fixed resale prices are difficult to cause significant harm to consumer interests.In addition,the court held that the implementation of a fixed resale price by an enterprise belongs to the enterprise's independent operation authority,and"as long as it does not reach the level of eliminating and restricting competition,it is not appropriate to hold a negative attitude towards the operator's actions of establishing brand value and preventing low-price competition.".Finally,the court concluded that the fixed minimum resale price behavior implemented by Shengshi Company was not aimed at obtaining high monopoly profits,nor did it have serious consequences of excluding and restricting competition.

Case enlightenment:This case can provide the following enlightenment.First,in civil litigation involving antitrust,domestic courts tend to apply the principle of"reasonable analysis"when determining whether vertical monopolistic behavior constitutes a monopoly agreement,that is,the existence of effects that exclude and restrict competition as a prerequisite for forming a monopoly agreement.Secondly,on the issue of allocation of burden of proof,there may be a difference between horizontal monopoly agreements and vertical monopoly agreements,where the defendant bears the burden of proof that the agreement does not have the effect of excluding or restricting competition,while the plaintiff may bear the burden of proof that the agreement has the effect of excluding or restricting competition.Thirdly,when analyzing whether a vertical agreement has the effect of eliminating or restricting competition,it is necessary to specifically analyze the purpose of the agreement subject's implementation of the agreement,not just the competitive effect.Finally,in this case,the Guangdong High Court held a more tolerant stance on the issue of fixed resale prices.In analyzing this issue,the court not only focused on the one side that restricts competition,but also recognized the other side that may promote competition.The court considered that the issue of fixed resale prices falls within the scope of the commercial jurisdiction of enterprises,and in principle held a non-interference stance,unless it has the effect of eliminating and restricting competition..

(This article is translated by software translator for reference only.)