China Consolidates its Antitrust Enforcement Agencies into a Single Super Regulator

China’s National People’s Congress has approved a government institutional reform plan proposed by the State Council which will (among other things) merge the country’s three existing Anti-Monopoly Law (AML) enforcement agencies:

• The Anti-Monopoly and Anti-Unfair Competition Bureau of the State Administration of Industry and Commerce (SAIC), responsible for non-price-related conduct;
• The Price Supervision and Anti-Monopoly Bureau of the National Development and Reform Commission (NDRC) responsible for price-related conduct; and
• The Anti-Monopoly Bureau of the Ministry of Commerce (MOFCOM) in charge of reviewing mergers.

The new body, the State Administration of Market Regulation (SAMR), is just beginning operations and will be charged with overseeing a consistent, coordinated, and comprehensive enforcement covering the three traditional pillars of antitrust: merger control, anti-competitive agreements, and abuse of dominance.^[1]

Timing

While SAMR was officially established on March 21, 2018, the internal structure and staffing of the organization, and the transfer to it of its various operational functions, is still a work in progress.  The names of the Director and Deputy Directors were published on April 4, 2018.  Mr. Zhang Mao, formerly Director at the SAIC, has been appointed Director of SAMR (at the ministerial level).  It is not yet clear who will head the antitrust department within the SAMR (at the bureau level).  None of the newly appointed Deputy Directors of the SAMR have extensive antitrust enforcement experience.

It appears SAMR intends to submit a plan for its internal organizational structure and staffing to the State Council by May 31, 2018.  The State Council is then set to approve the organizational structure by June 20, 2018, with a view to the transition being completed by the end of September 2018. 

Implications

It can be expected that the merger of the competition law functions of MOFCOM, the NDRC, and SAIC will result in considerable operational efficiencies (not least learning efficiencies on the part of staff) and, presumably, a more consistent approach to the application of the AML irrespective of the conduct investigated.  As in many other jurisdictions, decisions on the application of the competition law will come from a single authoritative source, potentially affording companies a clearer understanding of regulatory priorities, which might in turn inform their compliance efforts.

As to its enforcement agenda, SAMR recently announced it had instructed its provincial branches to focus investigations on the anti-competitive practices of public utility companies: in particular with respect to water, electricity, transport, tobacco, and salt. Companies active in healthcare, education, finance, and funeral services may also see increased scrutiny, as the SAMR has identified these sectors as an additional enforcement focus.  

While the establishment of SAMR is moving forward with remarkable swiftness, there are a number of important questions that remain unanswered at this time: 

• Will SAMR follow all existing guidance and subordinate regulations and measures of MOFCOM, SAIC, and NDRC? Presumably yes, but new texts and procedures will likely also be adopted. 
• Will the centralisation of competition functions into one super regulator mean a more economics-based approach than has been the case previously or will a more streamlined structure allow for the possibility of more industrial policy considerations coming into play?  One would hope the former is the case.
• How will the establishment of SAMR affect current cases and investigations?  Will there be delays?  Perhaps.  On the merger front at least, SAMR is off to a flying start having already issued clearance decisions (e.g. DTT/JAC Capital Management, Qualcomm - JV; Happigo Home Shopping/EE-Media and Mango Film).

[1] In addition to its antitrust responsibilities, SAMR merges the SAIC, the General Administration for Quality Supervision, Inspection, and Quarantine, the China Food and Drug Administration, and takes over responsibilities previously held by the Certification and Accreditation Administration and the Standardization Administration of China.  It will also oversee the State Intellectual Property Office.

This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Philip Monaghan, an O’Melveny partner admitted to practice law in Hong Kong, England & Wales, and Ireland, Charles Paillard, an O’Melveny associate admitted to practice law in France, and Lining Shan, a senior legal consultant in O'Melveny's Beijing office, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.

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