First Application of China’s Antimonopoly Law to Governmental Actions

Three years after the entry into force of the Antimonopoly Law (AML), governmental conduct has for the first time successfully been challenged on competition law grounds. On 22 August, the State Administration for Industry and Commerce (SAIC) reported on the first abuse of administrative power case, which was handled by the Guangdong provincial administration for industry and commerce (Guangdong AIC) earlier this year.

In the case at hand, the city of Heyuan had issued a series of administrative measures to improve transport safety. As part of these measures, automobile GPS operators were required to upload their GPS data onto a monitoring platform operated by a designated local GPS operator. The Guangdong AIC determined that these measures effectively forced the other GPS operators to accept and pay for the monitoring services that they could either provide themselves or access for free elsewhere, thereby placing them at a competitive disadvantage. Acting under the AML, the Guangdong AIC made a recommendation that the measures be rectified. Shortly thereafter, the provincial government ordered their withdrawal.

The prohibition against abuses of administrative power constitutes the fourth pillar of the Chinese competition law regime. Article 8 of the AML prohibits administrative authorities and organisations from abusing their administrative power to eliminate or restrict competition. The regime aims to promote competition and market integration and bears some resemblance with the EU internal market rules. It is of particular relevance in the Chinese context where State involvement in the economy and administrative restrictions are still prevalent.

While the Guangdong GPS case proved successful, tackling anticompetitive conduct by administrative authorities under the AML is likely to remain challenging for the Chinese competition authorities. Indeed, Article 51 of the AML only authorises them to make non-binding recommendations to the relevant higher administrative authority, which in turn has the sole discretion to order rectification. Effective enforcement to a large extent depends on the goodwill of the higher administrative authority. This first successful AML enforcement case against an administrative authority is nevertheless an encouraging sign that governmental action may not be shielded from competition law scrutiny both in law and in practice.