China’s Fair Competition Review Regulations come into effect on 1 August 2024
Published 1 July 2024
Yu Du
The new Fair Competition Review Regulations (Regulations) issued by the State Council on 6 June 2024 will come into effect on 1 August 2024, marking a significant step towards promoting fair market competition, optimizing the business environment, and establishing a unified national market in China.
These Regulations are formulated in accordance with the PRC Anti-Monopoly Law, as an upgrade to the Detailed Rules for the Implementation of the Fair Competition Review System issued in 2021.
In 2016, the Opinions of the State Council on Establishing a Fair Competition Review System in the Market System officially established China’s fair competition review system. In 2022, the Anti-Monopoly Law formally incorporated the Fair Competition Review System, effectively placing it on par with the anti-monopoly system.
The primary objective of the new Regulations is to standardize fair competition review processes, ensuring that administrative bodies and organizations authorized by laws and regulations to manage public affairs comply with fair competition principles when drafting policies and measures.
The main provisions of the Regulations are summarized as follows:
[Review Standards]
The Regulations outline the standards for fair competition reviews. Key prohibitions include:
1) Restrictions or disguised restrictions on market entry and exit, such as illegal approval procedures, granting exclusive rights, and unreasonable or discriminatory entry and exit conditions.2) Restrictions on the free flow of goods and factors, including barriers to entry for non-local or imported goods and discriminatory fees or subsidies.3) Policies that influence production and operation costs without legal or administrative basis or State Council approval, such as selective tax incentives and preferential treatment in obtaining resources.4) Measures that affect production and business activities, including mandatory monopolistic behaviors and unlawful government pricing interventions.
The Regulations also allow for exceptions under specific circumstances, such as maintaining national security, promoting technological advancement, and protecting public interests, provided there are no less restrictive alternatives and a reasonable implementation or termination period is defined.
[Review Mechanism]
The Regulations describe the mechanisms for conducting fair competition reviews. Drafting units are responsible for reviewing proposed policies at the drafting stage. For policies to be issued by multiple departments or local governments, the lead drafting unit and local market supervision departments will coordinate the review. The Regulations encourage regions to explore cross-regional and cross-departmental review mechanisms. Stakeholder and public opinions must be considered during the review process, and the review conclusions should be based on the prescribed standards.
[Supervision and Safeguards]
Regarding the supervision and enforcement of fair competition reviews, the State Administration for Market Regulation (SAMR) is responsible for guiding and overseeing the implementation of the review system. Mechanisms for random inspections, handling complaints, and conducting audits are to be established. The results of these inspections can be made public. Any unit or individual can report violations of the regulations, and the SAMR is required to address such reports promptly.
Comment
The implementation of the Regulations represents a significant development for businesses operating in China. These Regulations aim to create a more transparent and predictable business environment by ensuring that all market participants operate under fair competition rules. For foreign businesses, this means greater confidence in the Chinese market, as the Regulations mandate a level playing field by preventing discriminatory practices and ensuring equal access to market opportunities. The inclusion of strict supervision and enforcement mechanisms further underscores China’s commitment to fostering a competitive market environment.
Despite the government’s repeated legislative emphasis on fair competition, local protectionism, regional blockades, industry barriers, and corporate monopolies remain prevalent in practice across China. We hope to see the Regulations implemented in a meaningful way.
These Regulations are formulated in accordance with the PRC Anti-Monopoly Law, as an upgrade to the Detailed Rules for the Implementation of the Fair Competition Review System issued in 2021.
In 2016, the Opinions of the State Council on Establishing a Fair Competition Review System in the Market System officially established China’s fair competition review system. In 2022, the Anti-Monopoly Law formally incorporated the Fair Competition Review System, effectively placing it on par with the anti-monopoly system.
The primary objective of the new Regulations is to standardize fair competition review processes, ensuring that administrative bodies and organizations authorized by laws and regulations to manage public affairs comply with fair competition principles when drafting policies and measures.
The main provisions of the Regulations are summarized as follows:
[Review Standards]
The Regulations outline the standards for fair competition reviews. Key prohibitions include:
1) Restrictions or disguised restrictions on market entry and exit, such as illegal approval procedures, granting exclusive rights, and unreasonable or discriminatory entry and exit conditions.2) Restrictions on the free flow of goods and factors, including barriers to entry for non-local or imported goods and discriminatory fees or subsidies.3) Policies that influence production and operation costs without legal or administrative basis or State Council approval, such as selective tax incentives and preferential treatment in obtaining resources.4) Measures that affect production and business activities, including mandatory monopolistic behaviors and unlawful government pricing interventions.
The Regulations also allow for exceptions under specific circumstances, such as maintaining national security, promoting technological advancement, and protecting public interests, provided there are no less restrictive alternatives and a reasonable implementation or termination period is defined.
[Review Mechanism]
The Regulations describe the mechanisms for conducting fair competition reviews. Drafting units are responsible for reviewing proposed policies at the drafting stage. For policies to be issued by multiple departments or local governments, the lead drafting unit and local market supervision departments will coordinate the review. The Regulations encourage regions to explore cross-regional and cross-departmental review mechanisms. Stakeholder and public opinions must be considered during the review process, and the review conclusions should be based on the prescribed standards.
[Supervision and Safeguards]
Regarding the supervision and enforcement of fair competition reviews, the State Administration for Market Regulation (SAMR) is responsible for guiding and overseeing the implementation of the review system. Mechanisms for random inspections, handling complaints, and conducting audits are to be established. The results of these inspections can be made public. Any unit or individual can report violations of the regulations, and the SAMR is required to address such reports promptly.
Comment
The implementation of the Regulations represents a significant development for businesses operating in China. These Regulations aim to create a more transparent and predictable business environment by ensuring that all market participants operate under fair competition rules. For foreign businesses, this means greater confidence in the Chinese market, as the Regulations mandate a level playing field by preventing discriminatory practices and ensuring equal access to market opportunities. The inclusion of strict supervision and enforcement mechanisms further underscores China’s commitment to fostering a competitive market environment.
Despite the government’s repeated legislative emphasis on fair competition, local protectionism, regional blockades, industry barriers, and corporate monopolies remain prevalent in practice across China. We hope to see the Regulations implemented in a meaningful way.