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Antitrust Magazine

Volume 38, Issue 1 | Fall 2023

Antitrust and Economic Analysis of Key Sectors under the New Anti-Monopoly Law

Janet Yung Yung Hui, Wei Huang, and Vanessa Yanhua Zhang


  • China’s merger control regime is enhanced with several new procedural rules under the new Anti-monopoly Law. Mergers in the sectors with strategic significance such as semiconductor industry and platform economy are expected to be closely scrutinized in China.
  • Antitrust enforcement rules are updated along with the implementation of the new Anti-Monopoly Law in China. Pharmaceuticals and digital platforms remain enforcement priorities, with more rigorous investigations in sectors closely related to people’s livelihoods and social well-being.
  • The developments in antitrust judicial interpretations and practice demonstrate the efforts of Chinese courts in antitrust litigations. Chinese courts are also cautious in balancing protection of innovation and competitive effects in IPR related cases.
  • China’s antitrust authorities and courts are increasingly applying economic analysis in mergers, investigations, and litigations, particularly in cases involving platforms and pharmaceuticals. This trend is expected to continue with the rise of the digital economy.
Antitrust and Economic Analysis of Key Sectors under the New Anti-Monopoly Law
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For more than a decade, China has witnessed rapid economic and social development in the face of changing global economic dynamics. In order to adapt to these circumstances, China has revised its anti-monopoly law and issued a number of anti-monopoly guidelines in key areas, including the platform economy, the pharmaceutical industry, and the semiconductor industry. The new legislation also refines legal procedures regarding merger review, antitrust investigation, and private litigations to assist law enforcement by the antitrust authorities. Antitrust agencies are increasingly capable of handling complex cases as they progress to adopt more economic analysis tools, and are increasingly issuing guidelines to aid practitioners, including for specific industry sectors.

This article addresses three aspects of the amendments to the Anti-monopoly Law (AML Amendments): merger reviews, antitrust investigations, and antitrust litigation. Milestone cases will be analyzed in detail with the intention of probing into the changes and implications brought by new antitrust laws and regulations. Finally, we review economic analyses applied in both new antitrust cases and recent merger reviews.

Mergers: Legislative Progress

Recent years have witnessed significant improvements in China’s merger control regime. The AML Amendments came into effect on August 1, 2022, marking the first substantial revision since August 2008. The AML Amendments include, inter alia, the “stop the clock mechanism,” a new local review system, the State Administration for Market Regulation’s (SAMR’s) power to intervene in concentrations where the notification thresholds are not met, and the improvement of the classification and grading review system for concentrations of undertakings. Subsequently, on March 24, 2023, the SAMR issued, among others, the Provisions on the Review of Concentration of Undertakings (effective since April 15, 2023), which further clarify and complement the procedural rules of the merger control regime in China.

Inclusion of the Stop the Clock Mechanism and the Local Pilot Review System

The AML Amendments for the first time introduced the stop the clock mechanism in Article 32 and formulated the local pilot review system. The stop the clock mechanism is envisaged to address issues where the SAMR does not have sufficient time to finalize the review of complex cases with competition concerns. Currently, the SAMR normally would require the parties to pull and re-file the transactions in these circumstances. Yet, based on our survey, the authority has been very cautious in applying the new mechanism in practice. As of this paper, based on publicly available sources, the stop the clock mechanism has only been used in a few high-profile cases, e.g., Asiana Airlines/Korean Air Lines, Tower Semiconductor/Intel, and MaxLinear/Silicon Motion. As for the local pilot review system, from its inception (August 1, 2022) to the end of 2022, the SAMR had delegated 135 cases to local Administrations for Market Regulation (local AMRs), accounting for 32.7 percent of all the filings for the same period. After nearly a year of implementation, the review period of local AMRs is largely in pace with that of the SAMR, i.e., the average review period of local AMRs is almost the same as that of the SAMR.

Further Clarification of the Rules for the SAMR’s Intervention into Transactions Below the Filing Thresholds

Legislation has now empowered the SAMR to initiate investigations on transactions below the turnover thresholds. According to Article 26 of the AML Amendments, for transactions under the filing thresholds, but with facts and evidence showing the transaction has or may have the effect of eliminating or restricting competition with anti-­competitive effects, the SAMR can initially require the undertakings concerned to proactively notify the transactions; if the undertakings fail to do so, the SAMR shall then launch an investigation.

The Guidelines of the Anti-monopoly Commission of the State Council for Anti-monopoly in the Field of Platform Economy (Platform Economy Guidelines), effective in 2021, also expressed concern regarding the killer acquisition in the platform economy, i.e., where the emerging target’s turnover may be low in consideration of its free or low-­margin business model, but the relevant market may be highly concentrated with limited incumbents.

Merger Review Practice: Pattern and Trend

The enforcement of merger review is under ongoing improvement and strengthening during recent years, especially since 2021.

  • The number of merger filings received and completed annually shows a significant growth since 2021. Specifically, in 2019 and 2020 respectively, the SAMR received 503 and 520 cases and completed 465 and 473 cases; in 2021, the SAMR received 824 cases (with a growth rate of 58.5 percent) and completed 727 cases (with a growth rate of 53.7 percent); in 2022, antitrust agencies in China (including both the SAMR and local AMRs) received 867 cases and completed the review of 794 cases–which is the highest number of transactions reviewed ever since 2008.
  • Complex cases (i.e., conditionally approved cases) continue to be subject to strict scrutiny. The average review periods for 2019, 2020, and 2021 were about 400 (approx. 393) days, 300 (approx. 291) days, and 350 (approx. 352) days, respectively. While in 2022, the average review period was more than 400 (approx. 434) days, the longest in recent years.

Overview of Key Conditionally Approved Cases, Particularly in the Semiconductor Sector

In recent years, the semiconductor industry has been navigating serious supply shortages, increased costs of components, and the pandemic’s disruption of supply chains. Supply shortages have led to cuts in automobile production and higher prices for consumer and healthcare electronics. However, even in the period of economic downturn, China, as the largest semiconductor market, has seen no lowering of antitrust scrutiny for mergers in this sector.

In 2022, the SAMR cleared five transactions with remedies, including three that were related to the semiconductor industry. For example, both parties of the Advanced Micro Devices (AMD)/Xilinx transaction, i.e., AMD and Xilinx, are US companies. There was neither a horizontal overlap nor a vertical relationship between the parties. Rather, there is an adjacent market relationship between the programmable gate arrays (FPGA) of Xilinx and the central processing units (CPUs) and graphics processing units (GPUs) of AMD. In the review decision, the SAMR expressed their concern that the parties might use Xilinx’s strong market power in FPGA (market shares of 50-55 percent) to reduce the interoperability between its FPGAs and competitors’ CPUs and GPU accelerators by refusing to supply, so that to eliminate or restrict market competition. The SAMR decided to impose several behavioral remedies to address these concerns. Another example is the II-VI/Coherent transaction, where the SAMR concluded that the merged entity had the capability to implement input foreclosure, discriminatory treatment, and refusal to supply in the vertical markets. The SAMR approved the transaction with conditions such as the continuation of existing supply and purchase contracts post-merger and the supply of products under the FRAND principles.

These cases reflect China’s continuously cautious, fairly creative and aggressive enforcement attitude towards semiconductor deals. Separate and apart from this, we must also keep in mind that the United States-China trade war since July 2018 may further increase the uncertainty of merger review of high-profile cases involving U.S. companies.

The SAMR’s Intervention in Transactions Below the Filing Thresholds, Particularly in Platform Economy and Active Pharmaceutical Ingredients

Although the SAMR has been bestowed the power to investigate transactions below the filing thresholds since 2008, there has been little information about how this power has been exercised in practice. According to the limited information, it seems that the SAMR has been paying most attention to such transactions involving active pharmaceutical ingredients (APIs) and the platform economy.

In terms of the API industry, for example, the SAMR launched an investigation against the Hunan Erkang Pharmaceutical/Henan Jiushi Pharmaceutical transaction. Despite not meeting the filing thresholds, the deal was eventually abandoned by the parties amid antitrust authorities’ concerns that the deal might eliminate or restrict competition. It was reported that Henan Jiushi Pharmaceutical had market dominance in the market for API of chlorpheniramine in China, whilst Hunan Erkang Pharmaceutical served as the sales distributor of paracetamol for an Indian company, Supriya Lifescience Ltd. The theory was that the parties could have obtained the most share of the production and imports of the API of chlorpheniramine in China should the merger be completed.


One should assume that there will be continued close scrutiny on sectors of strategic significance, especially the semiconductor industry and the platform economy. As evidenced above, most of the conditionally approved cases have involved the semiconductor industry. China is the largest semiconductor market across the globe, and thus it is of vital importance from both antitrust and industrial perspectives to ensure the security supply of components for the development of China’s semiconductor industry. In addition, the Platform Economy Guidelines explicitly state that the platform economy should not be exempted from merger review and confirm antitrust agencies’ power to investigate so-called killer acquisitions. Therefore, it would be reasonable to expect that the SAMR will keep a close eye on any platform transactions involving nascent competition threats.

More broadly, for high-profile transactions generally, it should be remembered that geopolitical reach and international tension may also have a negative impact on the merger review to some extent. For example, against the background of the United States-China trade war, the supply chain disruption risk (especially in the semiconductor industry) can be intensified, resulting in greater uncertainty and unpredictability of the merger review timeline for complex and/or high-profile semiconductor transactions. Competition authorities in China may also have different appetites for high-profile transactions and not always negative. Taking the Microsoft/Activision deal as an example, announced in January 2022, this deal faced great difficulties in obtaining approval in several major jurisdictions. Specifically, the U.S. FTC initiated a lawsuit attempting to block the transaction in December 2022 and asked for a preliminary injunction of the deal in June 2023, and the UK CMA blocked the deal in April 2023. While also expressing concern, the European Commission conditionally approved the case. On the contrary, this deal was unconditionally approved by the SAMR in China in May 2023. Yet, the SAMR found that the merger would have little impact on the domestic market, given that Activision does not have a distributor in China and the market share of Microsoft’s Xbox consoles in China is negligible. This signifies that the antitrust agency in China has its own review perspective, rather than merely following the approach in other major jurisdictions. Hence, for cross-border transactions, it is advisable for transaction parties to assess the competition risks in the major jurisdictions separately.

Lastly, transaction parties need to consider these antitrust complexities at the outset of deal planning, especially for complex and/or high-profile transactions. For example, it may be more unpredictable to estimate the review timeline for complex and/or high-profile transactions with strategic significance (e.g., semiconductors), due to the more uncertainty caused by geopolitical tension between the United States and China and the application of the stop the clock mechanism. Therefore, parties need to carefully envisage the transaction timetable to avoid any economic loss incurred due to the delay caused by the merger review.

Antitrust Investigations: Recent Developments in the Legislation for Antitrust Investigations

To date, the SAMR has released five AML implementing rules since the law came into effect, among which are the latest Provisions on Prohibiting the Abuses of Intellectual Property Rights to Exclude or Restrict Competition (Provisions on Abuses of IPR) effective from August 1, 2023. The Provisions on Abuses of IPR introduce a new article to regulate excessive pricing practices in the intellectual property rights (IPR) sector and retain the focus on the abuse of injunctive relief in the latest draft. This demonstrates the SAMR’s efforts to strike a balance between ensuring reasonable returns for IPR holders and preventing exploitative IPR practices. This also heightens antitrust risks for Standard-­Essential Patent (SEP) holders, particularly when seeking protection against infringement through either authorities or courts.

In addition to implementing AML regulations, antitrust guidelines also play a vital role in guiding the agencies’ enforcement approaches and emphasizing enforcement priorities. Currently, the Anti-Monopoly Commission under the State Council has issued four industry-specific guidelines, successively. These guidelines provide guidance for enforcement activities in the auto sector, the platform economy, the API sector, and the IPR field. These guidelines offer detailed explanations of the typical forms of monopolistic conduct in those industries, as well as potential justifications or efficiencies based on industry characteristics. Additionally, the SAMR published its draft Antitrust Guidelines for the Standard Essential Patents (Draft SEP Guidelines), for which public comments closed in July 2023. The Draft SEP Guidelines extensively address SEP-related antitrust issues, particularly abusive practices such as excessive pricing, tying, imposing unreasonable trading conditions, and abuse of injunction actions.

Antitrust Investigation Cases

From 2020 to 2022, the SAMR launched 20, 30, and 18 investigations on monopolistic agreements, respectively. Among them, the number of concluded cases was 16, 11, and 16, and the total penalties and confiscation amounted to RMB 104 million, 1,673 million, and 569 million for the three years. Medicines and construction materials attracted the most enforcement attention in the past three years.

As for investigations on abuse of market dominance, the SAMR concluded 13 cases in 2022, imposing penalties and confiscation of RMB 166 million. In 2021, the SAMR concluded 11 cases of abusing market dominance with penalties and confiscation totaling RMB 21,847 million. In 2020, the SAMR concluded ten cases of abusing market dominance with penalties and confiscation totaling RMB 341 million. Public sectors (e.g., water/gas supply), medicines, and Internet platform industries faced the most stringency from the SAMR in these three years. In this section, we review some of the key cases.

The SAMR’s Investigation on Alibaba’s Abuse of Dominance

On April 10, 2021, the SAMR imposed an administrative penalty on Alibaba, an Internet hyper-scaler of China, for its abuse of dominance in China’s online retail platform service market through implementing the “either-or” provision. The SAMR ordered Alibaba to cease its illegal behavior and imposed a fine of RMB 18,228 million (four percent of its China sales in 2019), which so far remains the highest fine in China’s antitrust enforcement arena.

According to the penalty decision released, the SAMR investigated Alibaba’s behavior in the market for online retail platform services in China. The relevant market was defined through analysis of both demand-side substitutability and supply-side substitutability. It is worth mentioning that the SAMR considered the online retail platform service market as a two-sided market serving two groups, i.e., online retail merchants and consumers. The market is characterized by an indirect network effect where demands for the service by merchants and consumers are closely related. Therefore, the SAMR conducted a demand-side substitutability analysis from the perspectives of both retail merchants and consumers.

Another highlight of the Alibaba case is that the SAMR for the first time found the either-or conduct to constitute the exclusive dealing as prohibited by the AML. The challenged conduct included a) prohibiting merchants on the platform from starting a business on Alibaba’s rival platforms; b) prohibiting merchants on the platform from participating in promotional activities on Alibaba’s rival platforms; and c) adopting various rewarding and punitive measures to ensure the implementation of the exclusivity requirement.

The SAMR’s Investigation on Yangtze River Pharma’s Retail Price Maintenance

On April 15, 2021, the SAMR imposed on Yangtze River Pharma, a pharmaceutical company in China, a fine of RMB 764 million (three percent of its sales in 2018) for engaging in resale price maintenance (RPM) when distributing medicines within China.

The SAMR found that Yangtze River Pharma reached and implemented monopoly agreements on fixing and restricting resale prices with its counterparties (including its first- and second-tier distributors, chain pharmacies, and other retail pharmacies). Specifically, Yangtze River Pharma reached the agreements by entering into agreements containing RPM clauses with its counterparties, as well as issuing written and verbal notifications requiring its counterparties to adjust resale prices accordingly. Yangtze River Pharma had further implemented these RPM agreements by establishing a price control system, a monitoring system, and a penalty system for counterparties who failed to comply with the pricing policy.

According to the penalty decision, Yangtze River Pharma argued that its RPM practices should be exempted from the AML for two reasons. First, Yangtze River Pharma contended that its purpose was to facilitate the successful launch of new medicines and give consumers more choices. Having such a purpose, the conduct at issue should be regarded as an improvement of technology and development of new products, and thus be exempted from the AML. Second, Yangtze River Pharma argued that the purpose of its conduct was to prevent distributors and pharmacies from competing at low prices, thereby encouraging distributors and retail pharmacies to strengthen investments in the distribution chain and ensure the quality of drug products, rendering the conduct at issue eligible for exemption from the AML. However, both contentions were rejected by the SAMR on factual grounds (i.e., the RPM was irrelevant to the new product) and that ensuring product quality and safety is a basic regulatory requirement of the pharmaceutical sector regardless of commercial considerations.

The SAMR’s Investigation on CNKI’s Abuse of Market Dominance

On December 26, 2022, the SAMR imposed an administrative penalty of RMB 87.6 million, which constitutes five percent of the faulty player’s 2021 domestic sales revenue on CNKI, an academic database platform in China. CNKI allegedly abused its dominance in the market of Chinese academic literature network database service in China through implementing a) unfairly excessive pricing, and b) exclusive dealing since 2014. Aside from the five percent fine, the SAMR also ordered CNKI to cease its exclusive contracting.

Regarding the relevant market definition, similar to the previous Alibaba case introduced above, the SAMR again took into consideration the multi-sided nature of the platform. The SAMR considered CNKI as competing in a multi-sided market comprised of database users (on one side) and academic resource providers (such as Chinese academic journal publishing institutions, colleges and universities, research institutes, public libraries, and individual users on the other).

Regarding CNKI’s behavior of imposing unfairly excessive pricing, the SAMR took the “historical price-cost comparison” test (i.e., to examine whether the price has been increased beyond the normal range when the costs are essentially stable) and the “competitor-price comparison” test (i.e., whether the price has been increased significantly more than that of competitors in the same industry), concluding that CNKI had continued to drive up the price of database service through unfair means. While regarding exclusive dealing, CNKI was recognized to have inhibited both publishers and universities from authorizing the use of relevant data to other competitive platforms. It also employed punishment measures including discriminatory royalty fees to ensure the implementation of such arrangements.


The above recent updates in antitrust enforcement rules, coupled with increased stringency in investigations on sectors closely connected to people’s livelihood and social well-being, indicate a continued enhancement of antitrust regulation in China. Industries such as pharmaceuticals, digital platforms, and APIs are expected to remain enforcement priorities.

Looking ahead, we anticipate a more dynamic landscape in the investigation of monopoly agreements in China. One reason for this is the AML Amendments, which now grant companies under RPM investigation the opportunity to defend their practices by proving the absence of anticompetitive effects. This shift will result in future RPM investigations placing greater emphasis on competition effect analysis, facilitating the development of a more comprehensive analytical approach for assessing RPM conducts. Further, the new AML introduces an article specifically targeting hub-and-spoke agreements in order to close all of the regulatory gaps between vertical and horizontal monopoly agreements. Meanwhile, it also raises pertinent questions regarding the definition of the role of hubs in such agreements and how to evaluate their involvement, which await further clarification through future enforcement actions.

In terms of abuse of market dominance, there has been a growing number of antitrust investigations in recent years, especially in public sectors and the platform economy. We expect enforcement priorities to continue focusing on sectors such as APIs and others with significant public impact. In addition, the SAMR will likely continue to investigate cases that garner wide attention, as indicated by the Alibaba case, the CNKI case, and a few APIs that caused supply shortages of critical drugs.

Considering some unique features of the AML in China—specifically, its regulation on excessive pricing conducts—Chinese antitrust agencies are poised to play an increasingly important role in shaping the landscape of SEP licensing. This is evident through the recent release of the Provisions on Abuses of IPRs and the Draft SEP Guidelines. SEP holders and other IPR holders must remain informed on the latest developments, anticipate how their practices will be evaluated under the AML, and proactively devise effective plans to address potential claims.


Private antitrust litigation in China plays a crucial role in enforcing the AML and is widely acknowledged as a crucial aspect of the “double-track” enforcement system for the AML. In recent years, the Supreme People’s Court (SPC) and other lower courts in China have made extensive efforts to shape antitrust litigation in the country. They have clarified numerous high-­profile and contentious issues through draft updates on judicial interpretations and landmark antitrust judgments. These developments are expected to have substantial impacts on future antitrust practices in China.

Recent Developments on the Draft Antitrust Judicial Interpretation in China

In parallel with the SAMR, the SPC has also been engaging in efforts to reflect the recent AML Amendments and to respond to new circumstances in the evolving and complex antitrust landscape in China. (We note here that for most practitioners in other countries, it is unusual for a court to issue rules and guidance absent a litigated decision.)

For instance, in November 2022, the SPC released a draft of Provisions of the Supreme People’s Court of the People’s Republic of China on Several Issues concerning the Application of Law in the Trial of Monopoly-related Civil Dispute Cases (the Draft). Compared to its predecessor, this Draft is much more comprehensive and detailed, with the number of articles increasing almost threefold from 16 to 52. Among others, the SPC makes several bold attempts to introduce new concepts such as “competing undertakings,” “single economic units” and “as-efficient competitors,” specifies new forms of monopolistic conduct such as the “pay-for-delay” agreement, and offers more detailed explanations and guidance on the analytic approaches in assessing the alleged monopolistic practices, especially on excessive pricing and abusive practices in industries with special features (e.g. platform economy and IPR field). All of the above, if implemented, are expected to have profound implications for the antitrust judicial practices in China.

Recent Developments in Antitrust Litigation Cases in China

An Overview of the Recent Developments in the Antitrust Litigation Landscape in China

With the growing awareness of antitrust law, Chinese courts have witnessed a surge in antitrust cases. For instance, the SPC alone accepted 79 antitrust civil appeal cases and 26 antitrust administrative appeal cases from 2019 to 2022.

Meanwhile, with a strong emphasis on antitrust regulations and the steady accumulation of comprehensive expertise, Chinese courts have demonstrated their adeptness in handling complex antitrust cases and issuing rulings that have significant impacts nationally and globally. For instance, the SPC has developed a comprehensive analytical framework for addressing excessive pricing issues of patented drugs, under which the SPC fully considers the unique characteristics of innovative products and seeks to strike the right balance between preserving incentives for innovation and the necessity for antitrust intervention. Additionally, the SPC has successfully resolved a variety of other antitrust lawsuits related to intellectual property rights, involving issues such as exclusive licensing of copyrights owned by sports unions, patent settlement agreements between competitors, and pay-for-delay agreements.

Moreover, the SPC has improved its alignment and coordination with the antitrust enforcement agencies. For instance, the SPC established that the plaintiffs in a follow-on antitrust damage claim are not required to prove the illegality of alleged monopolistic conduct if such conduct has been fined in a valid antitrust decision. And the SPC affirmed that it is reasonable for antitrust regulators to calculate antitrust fines based on the total sales of the company concerned, instead of the sales of the products in question.

A Closer Look at Three Recent Landmark Antitrust Litigation Cases

While the SPC issued many noteworthy antitrust judgments in recent years, we chose the following three landmark cases as they exemplify the intricate intersections between patent rights and abuses of dominant position, pay-for-delay agreements, and abuses of dominance in the platform economy. These cases are anticipated to have substantial implications for sectors such as high tech, pharmaceuticals, and the platform economy.

Yangtze River Pharma v. HIPI Pharma

On May 25, 2023, the SPC finally delivered its long-awaited judgment in the Yangtze River Pharma v. HIPI Pharma case. In this extensive 175-page ruling, the SPC reversed the lower court’s decision which required HIPI Pharma (HIPI) to pay Yangtze River Pharma civil damages totaling around RMB 70 million and rejected all claims put forth by Yangtze River Pharma.

Among the various findings, we find the following standing out as particularly noteworthy.

First, the SPC carefully recognized and analyzed the special features of input products in its analysis for market definition and market dominance. Specifically, the SPC acknowledged that the demand for inputs is derived from the demand for the final product. Therefore, input suppliers not only face direct competition from other competing input suppliers but also face indirect competition from the downstream market competition of the final product. Whether these indirect competition constraints should be considered in the relevant market definition, or the determination of market dominance depends on the specific circumstances of each case. If the indirect competitive constraint from the downstream markets is significant enough, then it should be considered in the definition of the relevant market. Otherwise, it can be considered in the determination of market dominance.

Second, the SPC set clear boundaries for antitrust intervention on prices and highlighted the high risk of misjudgment when intervening in prices from the antitrust perspective. The SPC explicitly held that “if the practice of high pricing does not have a clear effect of excluding or restricting competition, neither does it clearly harm consumer welfare, then it is not appropriate to simply identify it as an abuse of dominant market position,” and “the determination and regulation of unfairly high pricing conduct shall be especially prudent.”

To mitigate the risk of misjudgment, the SPC has established a “three-step” analytical approach for excessive pricing issues:

  • In the first step, the SPC examines the competitive landscape and innovation risk in the relevant market. The SPC emphasizes that the more competitive the market is and the higher the level of innovation risk is, the more caution shall be exercised in regulating high prices.
  • In the second step, the SPC suggests utilizing various economic tools to analyze whether the price is excessive or not. In this step, after a holistic assessment of different economic tools proposed by the parties, the SPC held the internal rate of return (IRR) is a proper economic tool for assessing the price in this case and further concluded the price charged by the defendant is not excessive as compared to reasonable IRR range for similar products. (Please see “Economic Analysis Applied in Mergers, Investigations, and Litigations” for a detailed introduction and analysis of how the SPC applied economic methods in this case.)
  • In the final step, the SPC assesses the impact on market competition and consumer welfare to verify the initial conclusion reached in step 2. The SPC highlights the potential “price-squeezing” effects on the as-efficient competitor when the dominant player is vertically integrated. After reviewing all the evidence, the SPC concludes that there is insufficient evidence to suggest anti-competitive effects or harm to consumer welfare in this case.

Last, but certainly, not least, the SPC also provided much-needed clarifications on rules regarding tying and the imposition of unreasonable trading conditions. For example, when examining the alleged tying practices, the SPC supported the IPR defense raised by the defendant and held that if tying is a natural outcome of exercising lawful IPRs, it should not be condemned under antitrust laws. Additionally, the SPC outlined that both the presence of “mandatory” conditions and the occurrence of “undue harm to trading counterparties or the receipt of undue benefits by dominant players” are crucial elements in determining whether the imposition of unreasonable trading conditions has taken place in China.

As the first case of its kind involving patented drugs, this case fully demonstrated the SPC’s approach of meticulously striking a balance between the protection of IPR and the promotion of market competition, which offered clear guidance for antitrust disputes that involve IPRs or innovation risks. This would undoubtedly be welcomed by high-tech companies and IPR holders.

AstraZeneca AB v. Aosaikang Pharma

This was initially a patent infringement case rather than an antitrust case. However, when reviewing the request to withdraw the appeal, the SPC observed that the patent settlement agreement involved in this case appeared to be a pay-for-delay agreement and that there was no need to challenge the disputed patent’s validity. Considering the public interests involved in antitrust issues, the SPC decided to conduct a preliminary antitrust review of the settlement agreement to assess whether it excluded or restricted competition.

In its review, the SPC emphasized that the effects of such agreements on competition can be evaluated by comparing the actual situation, where the agreement is signed and performed, with the hypothetical situation in which no such agreement exists. And, in this case, the SPC deemed that the key factor to consider in this process was the likelihood of the party succeeding in its invalidation challenge against the disputed patent, as this would impact the assessment of whether the agreement unduly prolonged the exclusivity of the patent rights and significantly delayed or hindered the entry of generic drug applicants into the market.

While pay-for-delay agreements have been a hot topic in the United States for many years, they did not receive much attention from Chinese courts or agencies until the end of 2021, when this case came into the spotlight. As a first of its kind, the case underlined the potential antitrust risks associated with reaching settlement agreements on patent matters in China, and no doubt further highlighted the importance for companies to seek antitrust counsels’ assistance when reviewing such agreements.

HUANG Wende v. Didi

This case is the most recent antitrust judgment from the SPC regarding the abuse claims in the platform economy. Didi is a prominent ride-hailing service provider in China, and in 2019, it was sued by a passenger for the alleged abuses of its dominant position in the mainland China ride-hailing market.

The most noteworthy aspect of the case is the SPC’s definition of the relevant product market for ride-hailing services. While the passenger argued for a separate market for ride-hailing services, Didi advocated a market that includes both traditional taxis and ride-hailing services. After a careful review of the evidence, the SPC agreed with Didi and defined the relevant product market as the taxi transportation service market and declared the following findings:

  • Traditional taxis and ride-hailing services are closely substitutable in terms of their functions and intended uses, as they both cater to the personalized “point to point” transportation needs of passengers and operate based on the passengers’ willingness.
  • Although traditional taxis used to be mainly hailed on the street while ride-hailing services are primarily hailed online, this distinction is becoming less important as online hailing of traditional taxi services is becoming more prevalent.
  • There were no significant differences in terms of quality or pricing between traditional taxis and ride-­hailing services.
  • Furthermore, there were no substantial differences in the difficulties passengers faced in obtaining these two types of services.

The SPC further found the relevant geographical market to the local city, i.e., Zhengzhou (a Chinese city), and defined the relevant market as the taxi transportation service market in Zhengzhou city. In such a relevant market, the SPC concluded that Didi faced strong competitive constraints and there was insufficient evidence to establish its dominance. Consequently, all claims made by the passenger were dismissed by the SPC.

Insights from the Recent Developments on Antitrust Litigations in China

From recent developments in antitrust judicial interpretations and practices, we can see that the SPC and other specialized courts in China have a growing influence in shaping antitrust enforcement in China. These courts now generally prefer an effects-based approach when assessing alleged monopolistic conduct. Importantly, however, they also provide defendants with ample opportunities to present and substantiate the rationale and efficiency behind their business practices. This, in turn, also underscores the value of involving economic experts in antitrust litigation cases in China.

We also observed that the SPC engaged in serious efforts to alleviate the burden of proof on plaintiffs and address the current low success rate for antitrust plaintiffs. And, in relieving plaintiffs of the need to prove alleged monopolistic conduct in follow-on damage claims and anti-competitive effects in RPM cases, we see this as a signal of the SPC’s willingness perhaps to do this in other areas. Consequently, we anticipate that plaintiffs may be even more motivated to bring antitrust cases before the courts, leading to a potential increase in the number of antitrust lawsuits in China.

By contrast, we also observed that the SPC and other courts in China tend to be more cautious when it comes to IPR-related abusive conduct and seem to put great emphasis on the importance of preserving innovation incentives and avoiding chilling effects. This approach is generally well received by high-tech companies and those holding significant IPRs. As a result, it is likely to encourage IPR holders and other innovators to vigorously defend their antitrust cases in China, considering not only the competitive effects but also the potential impacts on innovation.

Economic Analysis Applied in Mergers, Investigations, and Litigations:

China’s antitrust authorities and courts have adopted multiple economic analysis tools in mergers, investigations, and litigations. In this section, we will look into the economic analysis in some specific cases, discuss the tools that the agencies and courts have used, and try to display the tendency of economic analysis in antitrust cases in China.

Economic Analysis in Merger Reviews. The Herfindahl-­Hirschman Index (HHI), diversion ratio, and the Gross Upward Pricing Pressure Index (GUPPI) are all widely used in merger filings of horizontal cases. The HHI can serve as an indicator to analyze the relevant market concentration changes before and after the transaction. The diversion ratio may be utilized to measure the degree of close competition between the parties, and the GUPPI is used to measure the possibility of price increases by the post-transaction entity.

In the merger review of the acquisition . . . in 2021 of MTS Systems Corporation’s (MTS’s) Test & Simulation business by Illinois Tool Works Co., Ltd. (ITW), for example, the SAMR applied the quantitative economic indicators above when assessing the anticompetitive effects of the transaction. The SAMR first used the increasing HHI to indicate the significant increase of market concentration due to the transaction, then analyzed the diversion ratio from MTS to ITW to show the close competition relationship between the parties. Besides, the SAMR calculated a GUPPI of 21.7 percent, which was much higher than the ten percent threshold and showed that there was a great possibility that the parties would increase the price unilaterally after the merger.

In the merger review of the acquisition of WABCO Holdings Inc. (WABCO) by ZF Friedrichshafen AG (ZF) in 2020, the SAMR hired independent third-party consulting agencies to conduct the economic analysis of the competition issues. The economic analysis showed that in the short term, even if the post-merger entity loses all the profit in the upstream market due to the implementation of input foreclosure, it can still make up for it by capturing enough profits from the downstream market. The SAMR concluded that the post-merger entity would have both the incentive and the ability to implement input foreclosure. The SAMR conducted a quantitative analysis to prove the conclusion, which showed that the post-merger entity could make profits through input foreclosure if it cuts its supply to the downstream customers by more than 15-20 percent in the Chinese market. However, this cutoff point rose to 25-30 percent for the global market.

Economic Analysis in the Platform Economy

Economic Analysis in the SAMR’s Investigation on CKNI’s Abuse of Market Dominance (2022)

In the investigation of CKNI’s abuse of market dominance, the SAMR made full use of economic analysis tools. The SAMR analyzed the HHI and found that the relevant market was highly concentrated. In its analysis of the excessive pricing behavior of CNKI, the SAMR found that users’ demand for CNKI’s database service was inelastic. This means that even if CNKI increased the price of the database with stable costs, users would still have to accept the price increase and purchase the database service. Since 2014, CNKI has raised its service fee by a large amount, with a CAGR of 10.06 percent, much higher than the four percent CAGR adopted by its competitors. Coupled with the fact that users had weak bargaining power, CNKI was able to earn unfairly large profits through its abusive excessive pricing conduct. CNKI was fined five percent of its annual in 2021 (RMB 87.6 million) by the SAMR.

Critical Loss Analysis in Shanghai AMR’s Investigation on Sherpa’s Either-Or Abusive Conduct (2020).

Sherpa’s is an online food delivery platform, which mainly provides English food delivery service information and delivery services. In June 2019, Shanghai AMR initiated an antitrust investigation on its either-or abusive conduct and issued a penalty decision in December 2020.

In Sherpa’s case, the online food delivery platform is a typical two-sided platform. The platform makes profits by brokering transactions between consumers on one side and restaurant merchants on the other side and charging service fees. There is an indirect network effect between consumers and restaurant merchants. The demand from consumers and restaurant merchants is negatively affected not only by the fees charged to themselves but also by the fees that the platform charges on the other side. If the online food delivery platform increases the fees charged to consumers (i.e., the delivery fees), it will reduce the number of orders and in turn reduce the willingness of restaurant merchants to join the platform. The same applies to the other side.

With respect to the relevant market, Shanghai AMR used a hypothetical monopolist profit model and conducted the critical loss analysis with market transaction data. Shanghai AMR assumed that the hypothetical monopolist controlled all the target products in the market and increased the price by a small amount (generally five percent to ten percent) over a period of time. By comparing the critical loss rate and the actual loss rate when the price of the target product increases, we can determine whether the price increase of the hypothetical monopolist is profitable. If the actual loss rate exceeds the critical loss rate, the price increase is unprofitable, and the target product cannot constitute the relevant market alone. On the contrary, if the actual loss rate is less than the critical loss rate, the price increase is profitable, and the target product can constitute a relevant market.

Shanghai AMR examined two scenarios for the robust critical loss analysis. In the first scenario, the agency only assumed changing delivery fees. It showed that the higher the delivery fee, the lower the order volume. However, consumer demand was less sensitive to the delivery fee compared with the meal charge. Therefore, if the monopolist was willing and capable, a slight increase in the delivery fee was still profitable. Under the second scenario, Shanghai AMR assumed both changing delivery fees and changing commission rates. If the monopolist was capable of raising both the delivery fee and the commission rate by a slight amount, it could earn more gross profit without losing orders.

Based on the above quantitative analysis as well as the qualitative substitution analysis, the SAMR concluded that the market for online food delivery platform services that provide services in English constituted a separate relevant product market.

Economic Analysis in the Pharmaceutical Sector

Economic Analysis in the SAMR’s Investigation of Yangtze River Pharmaceutical Group (2021). In its investigation of Yangtze River Pharma’s alleged RPM behaviors in 2019, the SAMR used economic simulation to assess the anticompetitive effects. SAMR simulated the competitive resale prices of some drugs of Yangtze River Pharma in 2018 and 2019 in Shanghai. The SAMR then compared the simulated results with the actual resale prices and hospital purchase prices during the same period. The SAMR concluded that Yangtze River Pharma’s RPM behavior caused a significant increase in the prices of drugs, which further led to a significant increase in social expenditure costs, such as increased burdens on patients and damages to the legitimate interests of consumers and the public.

More specifically, the SAMR conducted an economic analysis to show that by locking in prices in the retail channel (i.e., in markets with high price sensitivity), Yangtze River Pharma could maintain or even increase the selling price in the hospital channel. From the perspective of the market environment, the general trend was that more and more people held hospital prescriptions but purchased drugs from retail pharmacies. However, the demand for retail pharmacy drugs was more price sensitive than the demand for hospital-sold drugs. Therefore, by locking in prices in the retail channel, Yangtze River Pharma could indirectly push consumers into the hospital channel. Meanwhile, prices in the retail channel were Yangtze River Pharma’s invoice price and thus could be manipulated by Yangtze River Pharma, as opposed to prices in the hospital channel, which were constrained by the winning bid price. Therefore, Yangtze River Pharma was both willing and capable of maintaining or increasing the prices in the retail channel, which in turn inflated the benchmark price in the hospital channel, ultimately achieving the goal of maintaining or increasing the prices in the hospital channel. Yangtze River Pharma was fined three percent of its 2018 income from sales (RMB 0.76 billion).

Economic Analysis in Yangtze River Pharma v. HIPI Pharma (2023)

In the May 2023 judgment of the case Yangtze River Pharma v. HIPI Pharma, the SPC largely adopted the economic analysis of HIPI’s experts and determined that HIPI’s allegedly abusive conduct was justified as legitimate business conduct.

When assessing the market dominance of HIPI in the Desloratadine Citrate Disodium (DCD) API market, the SPC found that HIPI’s market power was constrained by indirect competitive restraints from downstream competition. The stronger the correlation between the demand for intermediate goods and the demand for finished goods, the greater the indirect competitive restraints from the market of finished goods. In this case, the DCD API had no close substitutes and was used in only one finished good. The market demand for the DCD API was derived from the market demand of the downstream drug “Beixue.” Moreover, there was no substantial barrier or cost for Yangtze River Pharma to switch to the production of other competing drugs. Therefore, HIPI’s market dominance was substantially weakened by the downstream indirect constraints.

When analyzing whether HIPI’s selling price of DCD API at RMB 48,000/kg constituted excessive pricing, the SPC largely adopted the IRR calculations of HIPI’s experts. In addition, the SPC indicated that IRR was a more robust choice than the profit analysis, as the comparison of IRR could reflect the return on inputs and profitability. IRR also avoided the problem of inaccuracy when approximating the economic rate of return with the accounting rate of return, because the calculation of IRR was simply finding the proper discounting rate that would discount the total future cash flows to a net present value of zero. As to the detailed calculation of IRR, the SPC also supported HIPI’s proposal to adjust the research and development (R&D) cost by the development success rate, to cover the costs of failed projects with the profitability of successful drugs. HIPI also allocated the R&D cost based on the supply ratio of API between the two downstream drugs “Beixue” and “Puruikang.” After the adjustment, HIPI’s IRR amounted to 24.4 percent. Such a rate was quite common among Chinese innovative drug companies, as the IRR of the latter is generally above 20 percent and may even exceed 40-50 percent.

Besides, considering the significant economic value that the API in question conveys to the finished drug, the DCD API accounted for only four percent of the price of Beixue, much lower than the proportions of APIs in other pharmaceutical preparations. The SPC concluded that the DCD API was not overpriced.


Not only the antitrust authorities in China such as the SAMR and the local market regulatory agencies, but also the courts, are increasingly applying rigorous economic analysis in merger filings, antitrust investigations, and litigations.

  • In the economic analysis of the platform economy, antitrust agencies are taking more consideration of the features of platform enterprises, such as the utilization of indirect network effects when defining the relevant market and determining the abuse of market dominance.
  • Economic tools provide strong support and innovative perspectives for the Chinese judiciary in the pharmaceutical sector. For example, the IRR of a patented drug that considers not only the production cost but also the R&D cost and the success probability of a new drug is deemed as a much more reasonable index to assess the excessive pricing allegation. And the necessity of exclusivity could be justified by patent protection of innovative drugs. It shows the protection of innovation by China’s judicial authorities, affirming that the lawful exercise of intellectual property should be protected and not prohibited by antitrust laws.
  • For merger reviews, the SAMR employs various economic analysis tools and focuses on the assessment of potential input foreclosures and unfairly high pricing which can result in changes in the profits of the merging parties before and after the merger.
  • Looking ahead, with the development of new economic forms such as the digital economy, there will be more complexity in the antitrust analysis. With data supporting theories, and quantitative analysis supporting qualitative analysis, a closer combination of the two will make a stronger statement. This is especially helpful in assisting the agencies and the courts to make more informed decisions. We expect that economic analysis will play an increasingly important role in China’s antitrust system.

Conclusion: Antitrust in China is Dynamic

In China, the methods to tackle merger reviews, antitrust investigations, and antitrust litigations are varied. With the assistance of economic analysis, many innovative interpretations of laws and regulations were made by antitrust agencies and courts. Progress also stems from updated legislation, such as the AML Amendments, and guidelines in the platform economy, API and IPR, etc. We can expect that strong regulation and antitrust enforcement in these key sectors will persist in the foreseeable future. In addition, landmark cases in antitrust litigation can serve as practical guidance and as interpretations of legislation in real business applications. Lastly, the cases also demonstrate the importance of economic tools that are widely and well adopted by antitrust agencies and courts, in order to reach conclusions based on more robust evidence and logic.