# Presentation: 234224

## 2006 U.S./China Legal Exchange:Abuse of Dominant Position Under Draft AML of the PRC

**Abbott B. Lipsky, Jr.**
**Global Antitrust and Competition Practice**
**Washington, D.C.**

## Antitrust Limitations on Single-Firm Conduct:A Persistent and Pervasive Conundrum

- A Complex and Lengthy History Yet Unresolved
- Questions Going to the Heart of Any System of Competition Rules – Purposes, Methods, Role in Stimulating Economic Progress
- A History of Special Challenges to the Institutions and Procedures of Competition Law
- A Subject of Current Active Debate in the US and the EU
- EU Staff Discussion Paper on Exclusionary Abuses
- US DOJ/FTC Hearings on Single-Firm Conduct

## Single-Firm Conduct under the Draft AML 

- Definition – Article 3
- 	“Monopolistic conduct” is defined in this Law as the following activities:
- 	 . . .
- 	(ii) abuse of dominant market positions by undertakings
- 	 . . .
- Central Prohibition – Chapter III
- 	Article 12 – “Undertakings are prohibited from abuse of dominant market positions to eliminate or restrict competition.”

## Single-Firm Conduct under the Draft AML of PRC

- Defining “Dominance”
- Article 12
- 	“Dominant Market Position” in this Law refers to a controlling market position held by one undertaking or several undertakings as a whole which is capable of controlling the price or quantity of products or other trading conditions in the relevant market or restricting or affecting other undertakings in entering into the relevant market.
- Article 13
- 	“Undertakings that have any of the following conditions, can be  concluded to hold a dominant market position:
- (i)		the market share of one undertaking in relevant market accounts 	for more than 1/2;
- (ii)		the joint market share of two undertakings as a whole in relevant 	market accounts for more than 2/3;
- (iii)	the joint market share of three undertakings as a whole in relevant 	market accounts for more than 3/4.”

## Single-Firm Conduct under the Draft AML of PRC

- Abuse of dominant market position by undertakings includes:
-  (i)	[Monopoly Price] selling products at unfair high or buying products at 	unfair low prices;
-  (ii)	[Predatory Price] without valid reasons, selling products at prices below 	cost ;
-  (iii)	[Refusing Trade] without valid reasons, refusing to trade with trading 	partners;
- (iv)	[Mandatory Trade, Exclusive Trade] compelling  trading partners to 	trade with undertakings, or without valid reasons, restricting trading 	partners to only trade with the undertaking or the undertakings 	designated by the undertaking;
- (v)	[Tying and Imposing Other Unreasonable Trading Conditions ] contrary 	to the will of the trading partners, tying products or imposing other 	unreasonable trading conditions during the deals;
- (vi)	[Differentiated Treatment] without valid reasons, applying differentiated 	treatment in regards to transaction conditions such as trading prices to 	equivalent trading partners;
- (vii)	other abuses of dominant market position determined by the Anti-	Monopoly Law Enforcement Authority.

## Other Provisions of Interest

- 	Article 53 –   Applications to the Abuse of Intellectual Property Right
- Where the undertakings utilize the intellectual property rights pursuant to the stipulations in laws and administrative regulations relating to intellectual property, this Law is not applicable.
- However, this Law is applicable to the conducts by the undertakings eliminating or restricting competition by the abuse of the rights stipulated by the Intellectual Property Right Laws or administrative regulations.

## Other Potentially Significant Provisions

- Purposes – Article 1
- 	Protecting market competition, preventing and prohibiting monopolistic conduct, promoting efficiency of economic operation, safeguarding the legitimate rights and interests of undertakings, consumers and public interests, and ensuring the healthy development of the socialist market economy
- Scope – Article 2
- 	As for monopolistic conduct prohibited by this Law, this Law does not apply where other laws or administrative regulations provide provisions. Chapter V on Abuse of Administrative Powers

## Other Potentially Significant Provisions

-  Article 45 [Penalty for Abuse]
- 	[Orders to cease], “confiscate the illegal gains and impose fines more than 1% and less than 10% of the total turnover in the preceding year.”
- Article 48 [Obligations to Compensate the Injury]
- 	Where the undertakings implement Monopolistic Conducts and cause loss to others, the undertakings shall be responsible for the civil liabilities in accordance with the laws; if constitutes crime, they shall be imposed criminal liability in accordance with the laws.

## Comments and Points to Observe

- Role of “Collective Dominance”
- How statutory purposes will be employed in case selection, investigation and decision
- Non-exclusive list of abuses
- Significance of government involvement
- Relationship to exercise of intellectual property rights
- Methods and institutions of investigation and analysis
- Availability of appeal and review

## Concluding Remarks

- Global economic impact of PRC domestic and international economic policy
- Profound impact of PRC entry into competition-law enforcement
- Open and international process characteristic of AML consideration

## 2006 U.S./China Legal Exchange:Abuse of Dominant Position Under Draft AML of the PRC

**Abbott B. Lipsky, Jr.**
**Global Antitrust and Competition Practice**
**Washington, D.C.**