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Antitrust Regulatory Talks in China: A Step towards More Flexible Enforcement

Susan Ning, Zhifeng Chai, Ruohan Zhang, Xueying Song, and Rui Gao

Antitrust Regulatory Talks in China: A Step towards More Flexible Enforcement
wang mengmeng via Getty Images


During a press conference held on 13 April 2023, Gan Lin, the former Deputy Chief of China’s State Administration for Market Regulation (SAMR), emphasized that apart from administrative penalties, SAMR may undertake “softer” enforcement measures such as regulatory talks and guidance. Although the concept of “regulatory talk”(“约谈”in Chinese)was first explicitly introduced in the amended PRC Anti-Monopoly Law of 2022 (AML 2022) and its supplementary provisions released on April 15, 2023, we understand regulatory talks have already occurred in previous antitrust enforcement.

In this article, we will present an overview of the mechanism of antitrust regulatory talks in China and share some key insights to navigate this new process.

I. “Regulatory talk” in the AML 2022 and Previous Enforcement Practices

What is the law?

Article 55 of the AML 2022 expressly states that: “Where a business operator, an administrative agency, or an organization empowered by laws or regulations to administrate public affairs is suspected of violating the AML 2022, the antitrust enforcement authority may arrange an antitrust regulatory talk with its legal representative or person in charge, and require it to propose corrective and improvement measures.”

Previous Enforcement Practices

Based on past enforcement, there are several instances where regulatory talks have already taken place:

1. Joint regulatory talks

Antitrust enforcement authorities, together with other government departments, conducted joint regulatory talks with major companies in certain industries such as iron ore, steel, copper, aluminum, and ride-hailing, etc. During these regulatory talks, authorities imposed requirements on these companies, including but not limited to requiring these companies to refrain from implementing monopolistic agreements.

2. Antitrust regulatory talks with specific business operator(s)

Antitrust enforcement authorities conducted regulatory talks with specific companies concerning their non-compliant competition practices and guided them towards compliance.

3. Antitrust regulatory talks in investigation cases

In a limited number of investigations that resulted in administrative penalties or case suspension, antitrust regulatory talks were also held to assess corrective/remedial measures.

4. Antitrust regulatory talks with administrative agencies

Antitrust regulatory talks were also used by antitrust enforcement authorities to remind relevant administrative agencies of their suspected administrative monopoly behaviors. These administrative agencies proactively took rectification measures after the regulatory talk.

II. Who can Initiate an Antitrust Regulatory talk?

Antitrust enforcement authorities are authorized to initiate regulatory talks under Article 55 of the AML 2022.

However, with the growing awareness of antitrust compliance among business operators, many businesses are inclined to proactively seek clearer guidance on ambiguous issues, such as the legality of certain non-price vertical restrictions. Therefore, this raises a further query: can business operators proactively apply for regulatory talks to seek advice and/or guidance on antitrust compliance issues that remain a grey area? Based on currently available guidance, there does not appear to be an opportunity for businesses to initiate regulatory talks to seek such advice or guidance on antitrust compliance. Further guidance from the antitrust authority will be required to determine whether they are open to using antitrust regulatory talks in this manner.

III. Post-Talk Remedial Measures

1. Determination of Remedial Measures

Both the Provisions on Prohibiting Monopoly Agreements and the Provisions on Prohibiting Abuse of Dominant Market Positions mention that antitrust enforcement authorities can request business operators to take remedial measures during the regulatory talk to mitigate or eliminate potential adverse effects of their behavior. It can be reasonably inferred that determining the specific remedial measures may require back-and-forth communications between the business operators and the antitrust authorities, somewhat akin to the process of imposing remedies during the merger filing review process. If the remedial measures are insufficient to mitigate any potential adverse effects of the business operators’ behavior, the antitrust enforcement authorities may require the business operators to propose additional measures within a reasonable timeframe.

2. Supervision of Remedial Measures

Neither AML 2022 nor its supplementary provisions explicitly indicate how the implementation of remedial measures will be supervised. Given the antitrust enforcement authorities’ heavy workload with limited manpower, we believe that the supervision of remedial measures will mainly consist of periodic compliance reports submitted by business operators, and supervision by third-party trustees.

3. Consequences of Not Proposing or Not Implementing Remedial Measures

The AML 2022 and its supplementary provisions do not delineate penalties for business operators that do not propose remedial measures or implement the remedial measures proposed during regulatory talks. The absence of specific penalties, however, does not imply that the antitrust enforcement authorities will not take further actions. If the business operators’ actions are deemed potentially non-compliant with the AML 2022, formal investigations may be initiated and business operators will be required to cooperate and cannot refuse or obstruct the investigation.

Final Remarks

As of the date of writing, antitrust enforcement authorities have already started to conduct antitrust regulatory talks with business operators in accordance with the AML 2022 and its supplementary provisions. For example, on July 31st, SAMR met with four hog breeders over their no-poaching agreement and asked them to implement corrective measures, undo the harmful consequences of the conduct, and carry out antitrust compliance self-audit. On the same day, the four companies issued a joint statement saying they have not enforced the arrangement at issue and would revoke it. They also agreed to implement corrective measures as requested.

The introduction of more flexible enforcement measures is a welcomed development, giving business operators new opportunities to rectify their practices before suddenly facing severe legal consequences such as hefty fines. However, further guidance will be helpful as the process for antitrust regulatory talks develops further and antitrust enforcement authorities introduce other “softer” enforcement measures.