On the 17 March 2018, China’s 13th National People’s Congress (“NPC”) passed the Plan on Reforming the Institutions of the State Council (the “Reforming Plan”). Among other things, the NPC approved the merger of China's three anti-trust forces into one newly established authority, the State Administration for Market Supervision (“SAMS”). Once the Reform Plan is implemented it will have a profound impact on the creation of China’s anti-trust legislation and on its enforcement.
Currently, China's anti-trust matters are regulated by three different authorities: the National Development and Reform Commission (“NDRC”) who are responsible for price-related violations; the State Administration of Industry and Commerce (“SAIC”) who are responsible for non-price related violations; and the Ministry of Commerce who are responsible for merger control filings. The Anti-Monopoly Committee of the State Council oversees and co-ordinates the three authorities. Despite its achievements, it is no secret that the current power sharing structure causes inconsistency and inefficiency in the creation and enforcement of anti-trust legislation. For example, on the enforcement side, the NDRC and the SAIC have a conflict of jurisdiction when handling cases with both price and non-price related elements. This means the authorities may adopt different enforcement standards. Whilst on the legislative side, the Anti-Monopoly Committee of the State Council, in 2015, instructed all three anti-trust authorities to separately draft a guideline covering their own jurisdiction on anti-trust and IP interface issues. This approach has caused integration problems at a later stage. After almost three years the guideline is yet to be finalised.
The Reforming Plan, once fully implemented, would streamline the current anti-trust enforcement system by merging the anti-trust powers into one. It is expected to: resolve the ambiguity in the rules and guidelines, formulate a more robust and professional workforce, and eventually improve the efficiency, predictability and transparency of anti-trust enforcement and legislation in China. On the 10th anniversary of the implementation of the China Anti-trust Law, this reform sends out a positive signal of a better anti-trust regime. The reform also demonstrates the determination of the Chinese government for anti-trust enforcement. This bodes for stricter enforcement of anti-trust going forward and companies may thus be required to adopt higher compliance standards. In addition, the on-going merger control reviews and anti-trust investigations could be delayed during the period of reforms.
Although it remains to be seen how the anti-trust power will be merged, who will lead the unified force, and how the existing guidelines adopted by the three authorities will be consolidated, it is clear that the Chinese government is moving quickly to implement the Reforming Plan. On 21 March, SAMS was officially established. Thus, the first step has already been taken. CMS will keep a close eye on the process and provide timely updates on the transitional period.