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.
