• First price enforcement action by the NDRC in 2011-against paper assocation
  • January 11, 2011
  • Law Firm: King Wood - Beijing Office
  • On 4 January 2011, the National Development and Reform Commission (NDRC) fined the Zhejiang Fuyang Paper Making Industry Association (the Association) for facilitating its members in relation to engaging in monopoly acts, in breach of both the Anti-Monopoly Law (AML) and the Price Law (PL)1.

    This is the first enforcement action (in respect of price-related breaches of the Anti-Monopoly Law) by the NDRC in 2011.

    According to the NDRC, at least 5 meetings were held between the Association's members (facilitated by the Association) with the objective of coordinating prices in respect of a product called "Class A white paperboard".  Twenty directors from the Association's member companies attended the meetings organized by the Association.

    The following is a brief description of the 5 meetings:
    • On 2 March 2010, members met to fix prices in relation to Class A white paperboard.  Subsequently, members increased their prices for Class A white paperboard by 10%.
    • On 6 April 2010, members met and agreed that the price of Class A white paperboard should be "stable"for the month of April.  However, if demand for Class A whitepaper board fell in May 2010, then it was agreed that the Association would organize for members to restrict their output.
    • On 28 April 2010, members met and agreed to price Class A white paper board for between 100 to 150 RMB per ton for the period 29 April 2010 to 15 May 2010.
    • On 3 August 2010, members met and agreed to raise the price of the coating for white paperboard to 200RMB per ton.
    • On 31 August 2010, the Association organized for a special meeting where members met and agreed to increase prices for their Class A white paper board to between 200 and 300 RMB per ton from 1 September 2010 onwards.

    The AML prohibits industry associations from facilitating monopoly acts conducted by business operators (see Article 16, AML).  The PL prohibits industry associations from breaching other price laws and regulations (see Article 17, PL); and regulations accompanying the PL prohibits industry associations from facilitating business operators from "coordinating and manipulating market prices"2

    The NDRC found that the Association was in breach of both the AML as well as the PL; and fined the Association a total of 500,000RMB.  This is the maximum fine for industry associations pursuant to both the AML as well as the PL.

    Comments

    The paper association case above is the first price-related enforcement action by the NDRC in 2011 (pursuant to the AML and the PL) and this decision was issued on 4 January 2011.

    We note that on 29 December 2010, the NDRC published regulations in relation to price-related breaches of the AML (the "Regulations on Anti-Price Monopoly") (regulations).  These regulations provide further guidance to price-related breaches of the AML.  Of most relevance to the paper association case, Article 9 of the regulations prohibits trade associations from:
    • Formulating rules, decisions, notices etc that result in eliminating or restricting price competition;
    • Organising business operators to form price monopoly agreements which are prohibited by the regulations; and
    • Undertaking any other conduct which amounts to organizing business operators to form or implement price monopoly agreements.

    Businesses should be aware of the above mentioned provisions and prohibitions which regulate the conduct of trade associations (both in the AML, the PL and in their accompanying regulations).


    1 http://www.ndrc.gov.cn/jggl/zhdt/t20110104&under;389454.htm

    2 See Article 5(3) of the Administrative Penalty Regulations in relation to Illegal Price Activities.