Antitrust Alert: Chinese Antitrust Authority Publishes New Procedural Rules for Non-merger Investigations

On June 5, 2009, the PRC State Administration of Industry and Commerce ("SAIC") published two new sets of procedural rules to implement the Chinese Anti-Monopoly Law ("AML").  One set of rules deals with procedures for the investigation and handling of cases involving monopoly agreements and abuses of dominant market position.  The other specifies procedures for investigation and handling of administrative monopolies.  Both take effect on July 1, 2009. 

Although it has been ten months since the AML came into effect on August 1, 2008, SAIC has not taken any formal or public actions under the AML, despite rumors that it already has received more than 1,000 complaints of anticompetitive conduct.  Promulgation of these new procedural rules may herald the start of AML enforcement by SAIC.

In addition to the procedural rules, in April 2009 SAIC also has published for public comments two sets of draft substantive rules – one regarding monopoly agreements and another regarding abuses of dominant market position.  This alert briefly summarizes the first set of these new rules, the SAIC Procedural Rules for Investigating and Handling Cases Relating to Monopoly Agreements and Abuse of Dominance Cases (the "SAIC Procedural Rules"), and their implications for future enforcement.


According to the new SAIC Procedural Rules, the national-level SAIC is responsible for investigating and handling cases with nationwide impact, along with other cases in which it may want to exercise discretionary jurisdiction.  Provincial Administrations of Industry and Commerce ("Provincial AICs," the  comparable provincial-level departments under SAIC’s supervisory authority) may be authorized to investigate and handle alleged monopolistic conduct occurring solely or principally in their administrative regions.   

Compared to the blanket authorization given to Provincial AICs in earlier drafts of the Procedural Rules, SAIC appears to have moved closer towards centralizing its authority:  the new rules provide for delegation to Provincial AICs only on a case-by-case basis.  The Rules also specify that, before Provincial AICs may make final decisions regarding suspensions or terminations of investigations or the imposing of administrative penalties, they first must report such decisions to SAIC.

These provisions appear to give SAIC the power to supervise AML enforcement by Provincial AICs to ensure nationwide consistency.  Certain ex-officio authority remains with local AICs to conduct investigations, and local AICs may also be called upon to support provincial or national level investigations.  It remains to be seen to what extent SAIC actually will be able to exercise such supervisory authority in practice, given its currently limited staff resources and the high anticipated volume of AML-related complaints.

Initiation of Formal Investigation

Under the SAIC Procedural Rules, a complaint of a suspected AML violation must be made in writing.  The complainant must include basic information about itself and the suspected violator, relevant facts about the suspected AML violations, and relevant evidence.  The complainant must state whether the same facts already have been reported to other administrative authorities or filed in the PRC courts.  The Rules further require that the submitted evidence must identify and be signed by the persons providing such evidence.  Together, these requirements may, at least in some circumstances, constitute a considerable disincentive to reporting or providing evidence for AML violations.

Only SAIC and Provincial AICs have the authority to accept such complaints and reporting materials.  Lower-level AICs (e.g.,at local levels) that receive such reporting materials must transfer those materials to the appropriate Provincial AIC within five days.  The Provincial AICs will examine and verify the reports and submit to SAIC their findings and opinions on whether to initiate a formal investigation.  The decision about whether formally to initiate an investigation resides with SAIC and is entirely within its discretion, subject to delegation of authority to Provincial AICs on a case-by-case basis.

The Rules do not specify the evidentiary burden to be met before SAIC initiates an investigation.  Nor do they require SAIC (or its provincial or local branches) to notify complainants about the results of their complaints, including whether or not a formal investigation is opened.

Investigation Methods

The SAIC Procedural Rules provide a wide range of methods for SAIC or the Provincial AICs to investigate suspected anticompetitive conduct.  These methods include:

  1. Entering the place of business of the business operators being investigated or other relevant places to conduct investigation; 
  2. Requesting relevant information from the business operators being investigated, interested parties, or any other relevant entities or persons;
  3. Inspecting and copying relevant documents and materials such as certificates, agreements, accounting, business letters, and electronic data;
  4. Sealing and detaining relevant evidence; and
  5. Enquiring about the bank accounts of business operators.


SAIC or investigating Provincial AICs may employ such measures on their own authority without further approvals or court orders.  

When conducting investigations, AICs may request companies being investigated, interested parties or any other relevant entities or natural persons to submit materials in writing within a prescribed time.  Such information can be intrusive, including details about taxes paid, overseas investments, and earnings or dividends from shareholdings.  Although it is difficult to predict the magnitude of SAIC or AIC investigations at this early stage of enforcement, these extensive investigatory powers would appear to indicate that anti-monopoly investigations in China are likely to become as intrusive as those in the United States, Europe or elsewhere. 

Suspension of Investigations Based on Commitments

Both the AML and the SAIC Procedural Rules permit AICs to suspend their investigations upon application by the company being investigated.  Such applications must include: (1) a statement of facts regarding the suspected violation and its potential anticompetitive effects; (2) an explanation of the measures that the company will take to eliminate such effects; and (3) a time schedule for the company to fulfill such commitments and a representation that the company guarantees such fulfillment.  The Rules further stipulate that AICs shall take into consideration the nature of the alleged conduct and its duration, effect and social impact in evaluating such applications.

This mechanism may permit SAIC/AICs to optimize their use of resources and save costs for accused companies.  However, some unpredictability will remain for an investigated company between the time its commitments are fulfilled and when SAIC issues a decision terminating the investigation, as there is no time limit for SAIC to do so.  Nor is it clear whether and to what extent such a company still may be subject to penalties under the AML for its conduct notwithstanding the suspension of any investigation.

Leniency Program

Both the AML and the SAIC Procedural Rules describe a leniency mechanism that appears to be modeled after those in the U.S. and EU.

The more detailed leniency framework set out in the SAIC Procedural Rules permits AICs to exempt or reduce penalties for companies that voluntarily report monopoly agreements (but not abuses of dominant market position) and provide "significant evidence" that plays a "key role" in SAIC/AIC’s decision to initiate an investigation or in a finding of such prohibited monopoly agreements.  However, companies that have been the organizers of monopoly agreements are precluded from leniency.

Additional details about the SAIC leniency program, including the level of reduction of penalties available (depending in part on the sequence of self-reporting and importance of the evidence provided), are expected to be contained in the substantive Rules on the Prohibition of Monopoly Agreements, a draft of which was published for comments in April 2009.

Coordination among Antitrust Authorities

Finally, the SAIC Procedural Rules contain a brief reference to "strengthening information exchange and enforcement cooperation with other antitrust authorities."  Coordination among the multiple anti-monopoly enforcement authorities in China is likely to be a key and widely watched aspect of AML enforcement.  Although enforcement of merger control rules by the Ministry of Commerce ("MOFCOM") is likely to remain relatively independent, there is a significant possibility of overlap or entanglement between the enforcement responsibilities of the National Development and Reform Commission ("NDRC," responsible for price cartels and other price-related AML violations) and SAIC (responsible for other non-merger enforcement including non-price monopoly agreements and abuses of dominant position).  It will be important for those two agencies in particular to have consistent procedural as well as substantive rules for their enforcement activities, especially because many cartels or other allegedly anticompetitive conduct can be expected to fall under the jurisdiction of both agencies at the same time.


SAIC Procedural Rules (Chinese and English Translation)


Lawyer Contacts


For more information, please contact your principal Jones Day representative or either of the lawyers listed below.


Peter J. Wang
Beijing / Shanghai
+86.10.5866.1131 / +86.21.2201.8040 (Shanghai)

Mark Allen Cohen



Yizhe Zhang



H. Stephen Harris, Jr.

Washington, D.C. and Atlanta

1.202. 879.3771



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