Navigating the Globe: Cartel Enforcement Around the World

Transcription

1 Navigating the Globe: Cartel Enforcement Around the World Chapter 7: China Presented by the Cartel and Criminal Practice Committee and the International Committee November 15, 2012

2 Presenters Chris Casamassima, WilmerHale LLP, Los Angeles, (moderator) Richean Li, University of International Business and Economics, Beijing Lester Ross, WilmerHale LLP, Beijing John Yong Ren, T&D Associates, Beijing 2

3 Discussion Outline Anti-Monopoly Law Overview Cartel Law Cartel Enforcement Investigatory Process Leniency International Cooperation Recent Developments Private Litigation and Government Enforcement 3

4 Anti-Monopoly Law ( AML ) First Comprehensive Chinese Competition Law Went into effect on August 1, s Anti-unfair Competition Law and 1997 s Price Law were limited precursors Establishes a Merger Control Regime Similar to EU model Ministry of Commerce ( MOFCOM ) responsible for merger control 4

5 AML Enforcement Responsibility for Monopoly Conduct State Administration for Industry and Commerce ( SAIC ): Responsible for nonprice-related monopoly conduct National Development and Reform Commission ( NDRC ): Responsible for oversight of pricerelated monopoly agreements, abuse of dominance and administrative monopolies 5

6 AML A cartel is classified as a monopoly agreement, which puts primary responsibility for anti-cartel enforcement with the NDRC The AML allows individuals and entities to bring actions against those allegedly involved in a monopoly agreement 6

7 Cartel Law Monopoly Agreements Article 13 prohibits agreements, decisions, or other concerted actions which eliminate or restrict competition Such agreements include horizontal price fixing; concerted output restrictions; market division; restricting the purchase of new technology, new facilities, or the development of new technology; and group boycotts Article 14 prohibits vertical agreements that fix resale prices or restrict minimum resale prices 7

8 Cartel Law Monopoly Agreements But Article 15 provides exemptions to Articles 13 and 14 for certain types of agreements between undertakings if the undertaking can prove that the agreement: a. can enable consumers to share the interests from the agreement, and b. will not severely restrict competition in the relevant market 8

9 Cartel Law Monopoly Agreements This two-prong requirement under Article 15 pertains to agreements that Improve technology, research, or develop products Increase quality or efficiency, or reduce cost Enhance operational efficiency and increase competitiveness of small-medium businesses Achieve public interests such as conserving energy, protecting the environment, and disaster relief Mitigate serious decreases in sales volume or excessive production during economic recessions 9

10 Cartel Law Monopoly Agreements But Article 15 also exempts certain agreements without requiring proof of harm to competition or a benefit to consumer welfare: Agreements that safeguard justifiable interests in foreign trade or economic cooperation Agreements that are otherwise lawful under circumstances as stipulated by other laws and the State Council 10

11 Cartel Law Penalties Article 46 of the AML provides that the antimonopoly authorities shall confiscate the illegal gains and impose a fine of 1% to 10% of the sales revenue in the previous year not expressly limited to China-wide turnover only or if the agreement has not been implemented, a fine of less than RMB 500,000 [approximately $85,000] shall be imposed 11

12 Cartel Enforcement Investigative Process Investigative measures include Inspecting office of target Questioning target Inspecting, copying target documents Reviewing target s bank accounts On finding of monopoly agreements, agency must issue an order to stop implementation 12

13 Cartel Enforcement Leniency Broadly worded and does not provide calculable penalty decreases Where any business operator voluntarily reports the conditions on reaching the monopoly agreement and provides important evidence [] to the anti-monopoly authority, it may [] impose[] a mitigated punishment or exemption from punishment as the case may be 13

14 Cartel Enforcement Leniency NDRC/SAIC recently issued final rules regarding leniency applications NDRC may grant immunity to first company to self-report and provide important evidence about anticompetitive agreement and may reduce penalty for subsequent applications (at least 50% for second and up to 50% mitigation for others who self report may be available) SAIC has similar powers, and may grant leniency/recue penalties for companies that report after investigation has started or companies that voluntarily cease participation 14

15 Cartel Enforcement International Cooperation MOFCOM, NDRC, and SAIC have signed a MOUs with enforcement agencies, including the US FTC/DOJ, the UK OFT and the Korean FTC Coordination meetings among the agencies have begun 15

16 Cartel Enforcement International Cooperation September 24-25, 2012 Meetings in Washington DC among senior officials at the DOJ FTC, MOFCOM, NDRC, and SAIC 16

17 Recent Developments 1. Cases At The Early Stage of AML Cartel Enforcement Rice Noodle Case (early 2010) Imposed fines ranged from RMB30,000 to 100,000 Green Bean Case (early 2010) Imposed fines ranged from RMB500,000 to 1,000,000 Both are horizontal price cartel cases A mixture of Price Law and AML Focus on products that concerned on national economic stability 17

18 Recent Developments 2. Trade Associations Zhejiang Fuyang Paper Making Association case (2010) Imposed a fine of RMB500,000 China Publishers/Bookstore Associations case (2010) Ordered the association revise the rules Both are horizontal cartel cases Rely mainly on AML 18

19 Recent Developments 3. Turning Point Shandong Medicine case (2011) Cartel / dominance abuse Imposed a fine of RMB6,877,000 and confiscated illegal gains of RMB152,600 Relies only on AML The highest fine ever imposed 19

20 Recent Developments 4. China Telecom / China Unicom China Telecom / China Unicom case (2011) The two giant SOEs proposed settlement with NDRC and improved the services on internet access Still in process A dominance abuse (price squeeze) case, NOT cartel case First case involved big SOEs 20

21 Recent Developments 5. Daily Chemical Cartel Case Unannounced Initial Investigation in early 2011 based on the Price Law In the second half of 2011, NDRC further investigated into alleged horizontal cartel case in China daily chemical market concerted pricing behavior was alleged by NDRC based on 1) association annual meeting 2) informed distributors two month in advance 3) interviews by media 21

22 Recent Developments 5. Daily Chemical Cartel Case Unannounced Defense: a concerted pricing cartel could only be found if 1) consistent pricing behavior existed 2) exchange of idea/information 3) meeting of minds NDRC requested companies to seek leniency, but no one responded NDRC issued a formal questionnaire and conducted an on-the-spot investigation 22

23 Recent Developments 6. Daily Chemical Vertical Agreement Case Unannounced In the second half of 2012, NDRC investigated into alleged vertical price maintenance case in China daily chemical market suggested retail price was alleged by NDRC as illegal Resell Price Maintenance (RPM) under the AML NDRC intends to apply per se rule on RPM NDRC was finally influenced and softened the tone Still in process NDRC issued a formal questionnaire and conducted 23 an on-the-spot investigation

24 Recent Developments 7. Unannounced Investigations Into Giant SOEs 2011 Product Oil Case Dawn Raid process conducted Horizontal cartel case 2011 Civil Aviation Case Price information exchange Both are still in process 24

25 Recent Developments 8. An Old Case Refreshed Unannounced A case regarding product X was investigated by DOJ and the EU from Four Taiwan companies and two Korean companies were involved Legal basis: the Price Law or AML? Still in process 25

26 Recent Developments 9. Leniency Case Unannounced NDRC has applied leniency in one case Domestic companies applied for leniency The first company to report the violation received a 100% exemption from fines Two companies who reported secondly at the same time received 50% reductions in fines Case Complete 26

27 Recent Developments 10. Sea Sand Case Newly Announced Sea Sand Alliance unified the sea and mining resources fee and manipulated sea sand price via four coordination meetings A fine of 10% of turnover of previous year Leniency was applied 27

28 Recent Developments Private Civil Litigation Through 2011, 61 AML private actions were filed, mostly for abuse of dominance Dominant undertakings tend to be politically-connected stateowned enterprises, which limits attractiveness of filing suit No judgments for plaintiffs, but some cases settled without trial to judgment, e.g., China Mobile In May 2012 (effective June 1), the Supreme People s Court issued the Rules on the Application of Laws for Adjudicating Civil Disputes Arising from Monopolistic Conduct International civil chambers are the courts of first instance In horizontal monopoly agreement cases, defendants bear the burden of proving that the agreement does not eliminate or restrict competition 28

29 Recent Developments Private Civil Litigation Although plaintiffs have the burden of proving dominance, the Rules also allow the use of public statements as rebuttable proof of dominance, and permit parties to engage expert witnesses The Rules do not specify a method for calculating damages, but permit courts to grant monetary relief if the defendant s monopolistic conduct caused losses by the plaintiff The Rules allow the consolidation of multiple actions regarding the same alleged monopolistic conduct Standing and the complexity of economically-based litigation have limited access to the courts 29

30 Recent Developments Private Administrative Litigation No cases Parties reluctant to sue enforcement agencies But parties have opportunities to negotiate with enforcement agencies, especially with MOFCOM re concentrations Intermediate intellectual property chambers are the courts of first instance 30

31 Recent Developments What do these developments tell us about where cartel enforcement under the AML will go from here? Explicit Criminality? More severe penalties? Enhanced transparency in the leniency program? Increased private litigation? 31

32 Biographies

33 Christopher T. Casamassima wilmerhale.com Chris is an experienced cartel practitioner who has represented clients in connection with DOJ Antitrust Division investigations and/or follow-on civil litigation regarding DRAM, Air Cargo and Air Passenger Transportation, Bananas, Food Service Equipment Hardware, Marine Hose, Flat Glass, and other industries. In addition to handling significant litigation matters, Chris regularly counsels clients on antitrust issues and conducts antitrust compliance training programs. He has also authored articles and contributed to ABA, International Bar Association, and California State Bar publications on a variety of antitrust topics. Chris has acted as a submissions referee for the Antitrust Law Journal, and is currently Vice Chair of the ABA Antitrust Law Section, Cartel and Criminal Practice Committee 33

34 Richean Li Mr. Li teaches competition law at the University of International Business and Economics (UIBE). UIBE is one of the most prestigious universities in China for the study of antitrust law, and Mr. Li is one of the university s most prominent professors.

35 Lester Ross Lester Ross is a partner at WilmerHale in Beijing. His practice concentrates on mergers and acquisitions, foreign investment, financial services, project finance, energy and environmental law matters and capital markets lester.ross@wilmerhale.com Practice Mr. Ross has represented foreign companies in the agricultural, automotive, chemicals, energy, environmental, financial, high tech, pharmaceuticals, publishing and service industries in their strategic expansion in China. He also has extensive experience representing foreign banks and corporations in the United States. He has prepared environmental, health and safety audit protocols for multinational companies conducting business in China and advised clients on environmental regulatory matters in China. He has represented clients in trade investigations, dispute resolution and regulatory matters in China. Professional Activities Mr. Ross is a member of the Board of Governors and former general counsel of the American Chamber of Commerce People's Republic of China and former chair of the Board of Advisors of the International Montessori School of Beijing. Fluent in Mandarin, Mr. Ross has been a visiting scholar at the Chinese Research Academy of Environmental Sciences in Beijing and studied Chinese at Taiwan National University. He has conducted field work in China under the sponsorship of the Committee on Scholarly Communication with China of the National Academy of Sciences. 35

36 Lester Ross (cont.) Education -JD, cum laude, Harvard Law School, PhD, Political Science, 1980, University of Michigan, MA, University of Michigan, AB, Brooklyn College, City University of New York, 1970 Bar Admissions Massachusetts New York Languages - Chinese (Mandarin) Honors and Awards Listed as a leader in China for the practice of Corporate/M&A in the 2009 edition of Chambers Global: The World's Leading Lawyers Recognized in Chambers Asia 2008 for the practice of Corporate/M&A: International Law (China) Publications Mr. Ross is the author of Environmental Policy in China (Indiana University Press 1988) and co-author of Environmental Law and Policy in the People's Republic of China (Greenwood Press 1987). He has contributed chapters to Business Law in China (ICC 2009); The Limits of the Rule of Law in China (University of Washington Press 2000), Managing the Chinese Environment (Oxford University Press 2000), China Joins the World: Progress and Prospects (Council on Foreign Relations Press 1999), Taiwan and International Trade and Investment (Oxford University Press 1994), Doing Business in China (Juris Publishing binder), Government Policies and the Misuses of Forest Resources (Cambridge University Press 1988), Policy Implementation in China (University of California Press 1987) and other books on Chinese law and business. He has written articles in such periodicals as The China Quarterly, University of British Columbia Law Review, Antitrust, China Law & Practice, International Financial Law Review, International Trade Law and Regulation, International Tax & Business Lawyer, Intellectual Property & Technology Law Journal, East Asian Executive Reports, Environment and Comparative Political Studies. 36

37 John Yong Ren John Yong Ren is a founder and managing partner of T&D Associates, in Beijing, China. T&D Associates was the first and is the biggest antitrust group in China. T&D has been providing extensive legal services in antitrust to multinationals in diverse industries since T&D is the only Chinese local firm that has ever been involved in Cartel and Abuse cases initiated by Chinese antitrust authorities John has represented multinationals in a total of over 100 antitrust notifications in China.