New Guidelines Clarify Path to Antitrust Compliance

In recent years, antitrust compliance has increasingly become a focus point within the PRC regulatory landscape. More than 30 antitrust compliance guidelines have been issued at both, national and local levels in the PRC. On April 25, 2024, the Anti-monopoly and Anti-unfair Competition Commission of the State Council released the new version of the Antitrust Compliance Guidelines for Undertakings (the "New Guidelines"). They provide more detailed guidance and examples on various aspects such as the establishment of sound antitrust compliance management systems, the benefits of establishing such systems, and key points for preventing antitrust risks, enabling undertakings to have a better understanding of antitrust compliance management.

1. Establishing a sound antitrust compliance management system

The New Guidelines allow undertakings to establish a tailor-made antitrust compliance management system that takes into account the specifics of their industry, the size of the undertaking and other relevant factors.

The New Guidelines also provide detailed guidance on how to build such a system, mainly focusing on three aspects: establishing compliance management organs, controlling compliance risks, and implementing specific compliance measures. With regard to specific compliance measures, the New Guidelines introduce measures such as antitrust compliance reviews, compliance consulting, compliance reporting, compliance training, compliance commitments, compliance incentives and penalties, compliance supervision (internal and external) and compliance management assessment. The New Guidelines also provide concrete case studies of these measures for different types of undertakings. For example, undertakings with substantial equity investment activities may develop a dedicated process for assessing merger control filing obligations in relation to investment and acquisition transactions. Another example is to encourage larger undertakings to establish routine antitrust compliance training mechanisms, with quarterly training and testing sessions tailored to different categories of staff, while smaller undertakings may opt for training through regular employee meetings or workshops.

2. Inclusion of incentives for antitrust compliance

The New Guidelines incorporate an entire chapter on incentives for antitrust compliance, i.e., the antitrust enforcement authorities may take into account the implementation of the antitrust compliance management system of the undertaking involved while investigating and handling violations of competition laws. Articles 33 to 36 of the New Guidelines introduce four circumstances where the incentives can apply: (1) incentives before investigation; (2) incentives for commitments during the investigation; (3) incentives during leniency program; (4) incentives during discretion of ranges of fine.

Incentives before investigation apply to circumstances where an undertaking has ceased the suspected anti-competitive behavior before investigation by antitrust authorities, and where the behavior is minor and has not resulted in harm to competition. In such cases, the competition enforcement authority may consider the implementation of the antitrust compliance management system of the undertaking concerned as a factor in determining whether timely correction has been made, and may decide not to impose administrative penalties.

Incentives for commitments during the investigation apply to circumstances where the undertaking, during the investigation, commits to taking specific measures to eliminate the effects of the suspected anti-competitive behavior. In such cases, the competition enforcement authority may consider the implementation of the antitrust compliance management system as a factor in deciding whether to suspend the investigation, and may also evaluate the antitrust compliance situation when deciding whether to terminate the investigation thereafter.

Incentives during leniency program apply to circumstances where the undertaking voluntarily reports the relevant information on the conclusion of an anti-competitive agreement to the competition enforcement authority and provides significant evidence, i.e. petitions for the application of leniency program. In such cases, the competition enforcement authority may apply greater reductions in penalties based on the undertaking's implementation of the antitrust compliance management system.

Incentives during discretion of ranges of fine apply to circumstances where, before the competition enforcement authority issues administrative penalty decisions, the undertaking proactively establishes or improves its antitrust compliance management system and effectively implements it, thereby playing a significant role in mitigating or eliminating the effects of anti-competitive behavior. In such cases, the authority may reduce the administrative penalties.

The introduction of the above provisions underscores the importance of establishing antitrust compliance management systems for undertakings, encouraging all undertakings to proactively establish and improve their own systems.

3. Highlighting key aspects of antitrust risk prevention

It is also noteworthy that the section of risk prevention of the New Guidelines provides detailed guidance and examples are provided on how to identify and avoid antitrust violations in practice. The New Guidelines provide descriptions and illustrations of all types of anti-competitive behaviors, such as anti-competitive agreements, abuse of market dominance and merger control.

For instance, Article 15 Section (4) of the New Guidelines emphasizes that when participating in industry associations and encountering discussions, undertakings should avoid discussing competitively sensitive information, and it is advisable to clearly express the intention to withdraw from the meeting if necessary and at the same time also keep evidence of such objections. This provision echoes similar recommendations in the Shanghai Anti-monopoly Compliance Guidelines, which also state that when dealing with sensitive topics, undertakings should promptly and explicitly refuse to participate, immediately excuse themselves and maintain proper documentation as evidence of their refusal and withdrawal from such discussions. The inclusion of such provisions in the national-level antitrust compliance guidelines further reinforces the importance and applicability of such active refusal. As this example shows, the New Guidelines are consistent with previously issued local guidance and best practices in the market, which helps to harmonize public understanding.

In summary, with the issuance of the New Guidelines, it is becoming increasingly important for undertakings to have a sound antitrust compliance management system. We highly recommend that companies put such a system in place. For those with existing systems, we suggest reviewing and improving them in line with the New Guidelines.