Eric J Jiang^[1]
Jingtian & Gongcheng, Beijing
ejj@prospectlaw.co.uk

Yunpeng Zhang^[2]
Jingtian & Gongcheng, Beijing

Introduction

Competition law deals with merger reviews, prohibition of cartels/trusts and prohibition of abuses of dominant positions. In the People’s Republic of China (the PRC or ‘China’), competition law is typically called anti-monopoly law since the primary legislation that governs this subject matter is the Anti-Monopoly Act of the PRC (the AMA^[3]). The AMA was adopted by the National People’s Congress on 30 August 2007 and took effect on 1 August 2008. Since the adoption of the AMA, more than six regulations and eight guidelines have been issued to provide clarity and additional guidance on the interpretation, implementation and enforcement of the AMA. Such regulations and guidelines include the Interim Regulations on the Prohibition of Abuse of Dominant Market Positions, the Interim Regulations on the Prohibition of Monopoly Agreements, the Anti-Monopoly Guidelines for the Platform Economic Sector, the Anti-Monopoly Guidelines for the Active Pharmaceutical Ingredients Sector and the State Council Provisions on the Criteria for Filing of Merger Review.

On 24 June 2022, about 14 years into its enforcement, the Standing Committee of the National People’s Congress adopted a major change to the AMA, effective on 1 August 2022 (the ‘2022 Amendment’). On 27 June 2022, the State Administration of Market Regulation (the SAMR) published six draft regulations for public comment. They are the revised State Council Provisions on the Criteria for Filing of Merger Review, the revised Regulations on Merger Review, the revised Regulations on the Prohibition of Monopoly Agreements, the revised Regulations on the Prohibition of Abuse of Dominant Market Positions, the revised Regulations on Prohibition of Abuse of Intellectual Property for Excluding or Restraining Competition and the revised Regulations on the Prohibition of Abuse of Administrative Power for Excluding or Restraining Competition.

This article briefly reviews the major changes that are being made by the recent amendments to the AMA and the proposed regulations. It also reviews the latest developments in enforcing the AMA and their impacts. It is intended to provide some insight into China’s initiative to build a stronger competition law and to alert business operators, both within and external to Chine, to develop stronger compliance mechanisms.

What changes have been introduced to the AMA by the 2022 Amendment?

Despite the progress that has been made by the AMA, the AMA and its enforcement provisions have faced some criticism including:

• Lack of clarity in the provisions: the AMA is a relatively new law and some of its provisions are still open to interpretation, which can make it difficult for businesses to understand their obligations and to ensure compliance.
• Difficulty in applying the AMA to new business models: the rapid development of new business models, such as e-commerce and digital platforms, has posed new challenges for the enforcement of the AMA as these models may not fit neatly within the existing provisions of the law.
• Lack of consistency in enforcement: despite the reforms to unify anti-monopoly enforcement in China, there is still some variation in the enforcement practices of different agencies and localities, which can lead to inconsistencies in the application of the AMA.
• Weaknesses in the private enforcement system: while the AMA has strengthened the rights of private parties to seek remedies for anti-monopoly violations through the courts, there are still some weaknesses in the private enforcement system, including limited damages and heavy costs for starting the proceedings.
• Limited efficiency and effectiveness in cross-border enforcement: the Chinese anti-monopoly authorities have increased their focus on international cases but there is still limited cooperation with extraterritorial regulators and limited interaction with external practices, which can limit the efficiency and effectiveness of cross-border anti-monopoly enforcement.

The AMA has now been amended to address some of the above problems, aiming at playing a more important role in ensuring fair competition in the market.

Confirmation of a unified enforcement agency

Many commentators have referenced the 2002 Amendment technical changes but the first important change made by the 2022 Amendment is actually the confirmation of unified enforcement by one government agency (under the leadership of the Chinese Communist Party) (see articles 13 and 4).

The AMA used to be enforced by several government agencies, including:

• the State Administration for Industry and Commerce (SAIC): SAIC was the primary enforcement agency for the AMA, responsible for investigating and penalising anti-monopoly violations in the market;
• the State Intellectual Property Office (SIPO): SIPO was responsible for investigating and penalising anti-monopoly violations in the field of intellectual property, such as the abuse of patent monopolies and the imposition of unreasonable licensing terms;
• the National Development and Reform Commission (NDRC): NDRC was responsible for investigating and penalising anti-monopoly violations in the field of pricing, such as price-fixing and resale price maintenance; and
• the Ministry of Commerce (MOFCOM): MOFCOM was responsible for merger reviews.

In 2018, following a government agency reshuffling plan, the State Administration for Market Regulation (SAMR) was set up to replace SAIC and to perform more functions in ‘market regulation’. After this reform, SAMR has become the primary anti-monopoly enforcement agency in China, responsible for merger reviews and investigating and penalising anti-monopoly violations in all areas, including market competition, intellectual property and pricing. By November 2021, a reorganised State Anti-Monopoly Bureau (formerly part of MOFCOM) was officially announced under the leadership of SAMR. Nevertheless, it is only until this 2022 Amendment, that Article 10 of the old AMA was revised to confirm SAMR’s (and its future successor’s) role in unifying the enforcement of the AMA.

This unification of enforcement in China is considered instrumental in improving the consistency and coherence of anti-monopoly enforcement and increasing the deterrent effect of the AMA. There is now a single agency responsible for enforcing the law which makes it easier for businesses to understand and comply with the provisions. Although, it is arguable that SAMR, remaining as the company registration house, may not be the proper agency to enforce competition law.

Increase of costs for non-compliance

Before the 2022 Amendment, the AMA followed international practices and allowed enforcement authorities to impose civil penalties from one to ten per cent of the (global) turnover of the non-complying company for serious violations in cases involving monopoly agreements or abuse of dominant market positions. It did not impose a similar civil penalty for failure to comply with a merger review. It also did not impose criminal penalties for any violation.

The amended AMA has now enabled the enforcement authorities to impose civil penalties at any amount up to ten per cent of the (global) turnover of the non-complying company for failure to comply with a merger review. Even failure to report a merger that actually does not produce excluding or restraining impacts on competition could incur a fine of up to RMB¥5m. In very serious cases, the above said maximum fines may be multiplied by two to five. The amended AMA further imposes various fines on a range of violations, even for a procedural failure and in some cases, levies fines on individuals responsible for the violations. Most importantly, the amended AMA has now introduced criminal penalties for any violation that may constitute a crime although the AMA does not outline specific details (Article 67).

With such an increase in costs for non-compliance, businesses operating in or with China have to think many times before they enter into a conscious violation. The importance of such new penalty clauses cannot be overstated.

However, such clauses, especially the two to five multiplying clause, when combined with the ten per cent global turnover clause, may be criticised for being too draconian, for example, a business may be fined up to 50 per cent of its global turnover. These draconian clauses could beget unintentional effects such as abuse of power and corruption. To prevent such unintended effects, very detailed follow-up regulations and stringent due process need to be established immediately.

Introduction of certain critical competition law concepts

Following international practice, China’s own experience in enforcing the AMA since 2008 and some existing Chinese regulations and guidelines, the amended AMA has now formally introduced a few critical competition law concepts. Among them are ‘hub and spoke cartel’ and ‘safe harbor’.

A hub and spoke cartel is a complex structure of cartel (‘monopoly agreements’ in the AMA) which could involve both horizontal and vertical agreements. Typically, it involves indirect exchange of information between two or more competing business operators for supply or sale (the ‘spokes’), through one business operating at a different level of the production or distribution chain (the ‘hub’). In such a structure, the hub facilitates or coordinates the anti-competitive activities between the spokes, typically without any direct exchange of information between the spokes. The agreements reached or practices used are no less harmful than any other horizontal or vertical agreements. In practice, Chinese trade or industrial associations and large upstream business operators may play the hub for such hub and spoke cartels.

Hub and spoke cartels are now expressly prohibited by the AMA. Prior to the 2022 Amendment, trade or industrial associations had been prohibited from organising their members for anti-competitive conducts. The amended AMA, while maintaining this prohibition, further prohibits any business operator from organising other business operators to reach monopoly agreements or provide material support to other business operators in reaching monopoly agreements (Article 19).

As the costs for non-compliance with the AMA increase substantially, compliance with the AMA has increasingly become a substantial burden for businesses. As such, clear guidelines for compliance and further, ‘safe harbors’ have been in demand. The AMA now has responded to this demand.

A ‘safe harbor’ provision exempts certain types of conduct from being examined for potential anti-monopoly violations. These provisions are designed to balance the goal of promoting competition with the need to allow for reasonable and pro-competitive business practices.

Article 18 of the amended AMA now provides a ‘safe harbor’ for business operators in terms of vertical agreements if they can demonstrate that they do not meet the prescribed market share threshold and do meet other prescribed conditions. However, no ‘safe harbors’ have been provided to horizontal agreements in the AMA.

Notwithstanding the foregoing, under the AMA, the following types of conduct are generally considered to be exempt from the prohibition against anti-monopoly practices:

• certain vertical agreements between a manufacturer and a distributor, such as exclusive distribution agreements;
• exercises of intellectual property rights, such as patents, trademarks and copyrights;
• joint ventures between companies for the purpose of research and development, production or distribution of goods and services; and
• technology licensing agreements between companies, provided that the licensing terms are reasonable and do not restrict competition.

It is important to note that the safe harbor provisions under the AMA are subject to certain limitations and restrictions and that businesses must comply with these provisions in order to take advantage of the safe harbors. Businesses should also be aware that the safe harbor provisions may be subject to change over time, and that the enforcement authorities may interpret the provisions differently in distinct cases.

Amendments in other aspects

The 2022 Amendment has also made other important changes to the AMA. Among others, it sets up a ‘Fair Competition Review’ procedure for any administrative authority or public entity to go through before they could adopt rules, regulations or provisions involving the ‘economic activities of market operators’ (Article 5). It specifically prohibits business operators from engaging in any anti-competitive conduct ‘by making use of data and algorithm, technology, capital advantage, platform rules, etc’ (Article 9). It allows the enforcement authority to stay the review process without including the time for the statutory review period for a merger review in certain cases (Article 32). It prohibits government agencies from abusing administrative power to exclude or restrain competition through signing cooperation agreements and memoranda of understanding (Article 40). It also allows the public prosecutors (‘people’s procuratorates’ in Chinese law) to sue business operators if their anti-competitive activities harm the public interest (Article 60).

What changes have been proposed by the follow-up regulations?

As discussed above, following the adoption of the 2022 Amendment to the AMA, SAMR released six draft regulations for public comments. A news release on SAMR’s official website on 27 September 2022 which was available to the public for comment for one month, received 299 comments on the revised Regulations on the Prohibition of Monopoly Agreements, the revised Regulations on the Prohibition of Abuse of Dominant Market Positions and the revised Regulations on Prohibition of Abuse of Intellectual Property for Excluding or Restraining Competition. It is believed that SAMR will soon have all such revised regulations issued or adopted by the State Council, with or without changes.

The changes proposed by such revised regulations are quite extensive and intended to clarify many provisions of the AMA. The below is only a summary of some of the proposed changes.

Raising of the threshold for merger review

The current threshold for mandatory merger reviews has proved to be too low. According to the current State Council Provisions on the Criteria for Filing of Merger Review, if, for the last financial year, at least two of the merger participants each have a turnover exceeding RMB¥400m in China, and the total of the global turnovers of all merger participants exceeds RMB¥10bn or the total of the Chinese turnovers of all merger participants exceeds RMB¥2bn, filing for a merger review shall be mandatory. It is reported that MOFCOM and SAMR received a total of 4,165 filings for a merger review from 1 August 2008 to 31 December 2021, with three mergers disallowed and 52 mergers approved with conditions. An important point to note here is that the filings for merger reviews, according to some reports, are rapidly increasing in recent years, with 824 filings in 2021.

As such, the raising of the threshold has been proposed as follows:

• filing for merger review shall be mandatory if, for the last financial year, at least two of the merger participants each have a turnover exceeding RMB¥800m in China; and
• the total of the global turnovers of all merger participants exceeds RMB¥12bn or the total of the Chinese turnovers of all merger participants exceeds RMB¥4bn.

Of course, this does not mean that there will be no other cases where filing for a merger review is mandatory. In fact, according to the amended AMA, SAMR even has the authority to initiate investigation against any merger that it suspects is excluding or restraining competition.

Attempt to define ‘safe harbor’

As discussed above, the amended AMA uses the concept of ‘market share’ in specifying a safe harbor for vertical agreements. The revised Regulations on the Prohibition of Monopoly Agreements therefore attempts to define such market share and describe the safe harbor.

At the time of writing, if a business operator proves that the business operator has, (and when combined with the counterparty(ies) to the agreement at issue still has) a market share of less than 15 per cent in the relevant market, the agreement will not be considered a monopoly agreement and will not be prohibited. Of course, the business operator still has to prove that there is no contrary evidence showing exclusion or restraining of competition by such agreement.

Introduction of the concept of ‘potential competitor’

The aforesaid draft on monopoly agreements also introduces the concept of ‘potential competitor’ into Chinese competition law, for the purpose of identifying horizontal agreements.

A potential competitor is not a current competitor in the market for the product or service but is a business operator which ‘has a plan and the feasibility to enter the relevant market within a period of time’.

The introduction of this concept from international practice could produce a significant impact on the identification of horizontal agreements and will expand the scope of Chinese competition law.

Expansion of the relevant market to cover ‘innovation market’

In the revised draft Regulations on Prohibition of Abuse of Intellectual Property for Excluding or Restraining Competition, ‘relevant market’ is considered to include ‘relevant technology market’ which is further considered to include ‘relevant innovation market’.

‘Innovation market’ refers to the research and development market. This is a clear recognition that competition not only exists in product sales, but also in product research and development.

This is also a clear expansion of the application of competition law. The guidelines for IP-related anti-monopoly enforcement is expected to be updated accordingly and include further details on how to enforce the anti-monopoly law in the ‘innovation market’.

Outlawing of the licence-back clause?

The aforesaid draft Regulations on Prohibition of Abuse of Intellectual Property for Excluding or Restraining Competition also contain provisions on multiple IP-related competition law issues, such as licensing clauses, essential patents and essential facilities. It is especially worth noting its provisions on the licence-back clause.

A licence-back clause is very typical of an IP licence agreement and requires the licensee to licence back to the licensor improvements to the intellectual property and/or other rights generated from practicing the licensed intellectual property.

A licence-back clause, if on a non-exclusive basis, may be permitted under Chinese competition law. If a licence-back clause is made on this exclusive or sole basis, however, it would be treated as having unreasonable licensing conditions and considered anti-competitive under this draft Regulation.

Trends in making a stronger competition law

The AMA aims to promote fair competition, prevent monopolistic practices and protect the interests of consumers in the Chinese market. As Chinese state-owned companies, Chinese privately owned companies and international companies are competing against each other in the Chinese market, the AMA has been instrumental in striking or tipping the balance of competition in particular industrial sectors. For all these reasons, the AMA has become a ‘hot topic’, and there is a clear trend in pushing for stronger competition law in China. This trend can be detected from the following developments:

• Expansion of the scope of the AMA: the scope of the AMA, as discussed above, has been expanding, with new provisions added to address specific issues such as the definition of relevant markets, the interpretation of dominant market positions, the deemed unfair trading conditions and abuse of administrative power to restrict competition.
• Emphasis on innovation and economic efficiency: in recent years, the Chinese government has placed greater emphasis on the role of competition in promoting innovation and economic efficiency and has taken steps to encourage companies to engage in pro-competitive conduct and to create a fair and level playing field for all participants.
• Clarification of rules, regulations and guidelines: following a major revision in 2022, the AMA and its implementing rules, regulations and guidelines have provided improved clarity and consistency and have become more effective and efficient in providing guidance to businesses on how to comply with the competition law.
• Increased enforcement: in recent years, the enforcement of the AMA in China has become more rigorous, with a growing number of investigations and penalties imposed on companies that violate the law. According to SAMR’s annual reports, the number of cases investigated and the fines imposed have increased significantly in recent years. For example, in 2020, SAMR investigated a total of 638 cases and imposed fines totalling over RMB¥12bn (about USD$1.7bn). SAMR has also taken a number of high-profile enforcement actions against foreign companies, including fines against Qualcomm and Daimler, and these cases have attracted international attention. SAMR’s investigations on certain domestic hi-tech giants have also attracted intense attention from the Chinese public. The fines imposed in these cases have been among the largest ever imposed for anti-monopoly violations in China.
• Increased transparency: the Chinese anti-monopoly authorities have also increased the transparency of their enforcement activities, publishing more information on their investigations and penalties and providing more guidance on the application of the AMA. Indeed, SAMR now publishes its enforcement reports annually and seeks public comments before making new rules and regulations.
• Strengthened private enforcement: the AMA expressly set forth the rights of private parties to seek remedies through the courts for anti-monopoly violations. In support, the Supreme People’s Court has issued special interpretations and advice to guide private parties to seek such remedies. This has encouraged more private parties to bring anti-monopoly cases to court and has increased the deterrent effect of the AMA. Further, the newly amended AMA allows public prosecutors to sue anti-monopoly violations in the public interest and this would lend further support to private enforcement since many anti-monopoly violations also tend to harm the public interest.
• Greater international cooperation: China has been actively seeking to increase cooperation with other countries and international organisations in the enforcement of competition law. This has included the establishment of mutual assistance mechanisms and the sharing of best practices. This has also been achieved through a series of bilateral and multilateral agreements signed between China and other countries, as well as through increased participation in international organisations such as the International Competition Network. Although the Covid-19 pandemic has interrupted such international cooperation, such collaboration is expected to resume shortly.

In sum, Chinese competition law is evolving and is aimed at promoting fair competition, protecting the interests of consumers and supporting innovation and economic growth. Companies operating in China should be aware of these developments and should take steps to ensure that their conduct complies with Chinese competition law.

Additional observations for corporate compliance

In light of the above, companies operating in or with China should establish an internal mechanism for compliance with Chinese competition law. In implementing such corporate compliance programmes, the following aspects, inter alia, should be especially noted. These aspects tend to make Chinese competition law different from the US antitrust law and EU competition law.

The AMA may interact with the Counter Unfair Competition Act

Although the AMA was initially adopted in 2007, it is wrong to assume that Chinese competition law dated back only to 2007. In fact, the Counter Unfair Competition Act (CUCA), adopted in 1993, already contained several competition law provisions. It not only prohibited price-fixing, tying sales and certain other anti-competitive practices, it also prohibited abuse of something like dominant market position.

With the AMA adopted in 2007, conflicts between the enforcement of the AMA and the enforcement of the CUCA arose. Fortunately, the enforcement authority for both laws is SAMR (with SAIC as its predecessor) in terms of investigating and punishing anti-competitive acts. However, in recent years, SAMR has taken steps to clarify the relationship between the AMA and the CUCA and to ensure that they are enforced consistently and in a complementary manner. For example, SAMR has issued guidelines on how to apply the AMA and the CUCA in specific situations.

The most recent efforts of the Chinese legislature to clarify the relationship between the AMA and the CUCA are the proposed amendments to the CUCA following the revisions to the AMA. Although both the AMA and the CUCA serve similar goals in promoting fair competition and protecting the interests of consumers, the AMA is now positioned as the primary competition law in China and the CUCL is expected to address only specific types of conduct that are not covered by the AMA. It appears that the two laws would not overlap but a new provision in the CUCA is worth special attention for corporate compliance.

Article 13 of the CUCA, as proposed, prohibits business operators having ‘comparative advantageous positions’ by imposing unreasonable restrictions or attaching unreasonable conditions, such as exclusive dealing, restriction on transaction parties or transaction terms, tying sales, unreasonably restricting sales price, purchasing party, sales territory, sales time or promotional activity and non-equal treatment to users on digital platforms. ‘Comparative advantageous position’ is defined as including the relative advantage that a business operator has over its competitors in terms of technology, capital, number of users, industrial influence, reliance by other business operators or other factors.

The difference between the comparatively advantageous position and the dominant market position appears to lie in the degree of the advantage that the business operator has over its competitors. For example, a company that has a lower cost structure than its competitors may use this comparatively advantageous position to engage in anti-competitive practices, such as price-fixing, in order to maintain or increase its market share and profits. On the other hand, a company that holds a dominant position in the market and uses its market power to engage in anti-competitive practices, such as excessive pricing or discriminatory practices, would be considered as having engaged in an abuse of the dominant market position.

As such, a company that is not a party to any monopolistic agreement or is short of holding a ‘dominant market position’ under the AMA may still be investigated for anti-competitive practices. The company may be caught by the CUCA for having a comparatively advantageous position.

Therefore, companies operating in or with China should be aware of the provisions of both the AMA and the CUCA and should take steps to ensure that their conduct complies with both laws.

Participation in the fair competition review process

On 14 June 2016, the State Council issued an Opinion on Establishing a Fair Competition Review Mechanism in the Construction of the Market System and started to require that all administrative authorities and organisations with public functions go through a Fair Competition Review process before they adopt regulations, orders or other provisions involving the ‘economic activities of market operators’. This Opinion actually lists a series of questions for the proposing authorities to check before their proposed regulations, orders, etc may be formally issued. The AMA, as amended, require this fair competition review (Article 5).

The purpose of the review is to identify any provisions in the proposed regulations, orders, etc that may create barriers to entry, restrict competition or harm the interests of consumers. The review may involve assessing the potential impact of the proposed regulations, orders, etc on market competition, analysing relevant market data and soliciting feedback from stakeholders, such as business operators and consumer groups. If the review identifies any provisions that may harm competition, the administrative authority may make changes to the proposed regulations, orders, etc or provide conditions to mitigate the potential negative impact on competition.

The Fair Competition Review mechanism is an important part of China’s broader efforts to promote fair competition and prevent anti-competitive behaviour, especially ‘administrative monopoly’. By requiring administrative authorities to conduct a review before passing regulations, orders, etc that may affect competition, the mechanism helps ensure that new regulations, orders, etc are consistent with the principles of fair competition and do not unduly restrict the ability of businesses to compete in the market.

As such, companies operating in or with China should pay close attention to any new regulation or order (‘abstract administrative act’ in Chinese administrative law) that is being proposed by any local or central administrative authority or public function entity and take advantage of the Fair Competition Review mechanism. Participation in this process may be conducive to preventing overregulation that could produce an unfair impact on market competition. Also, as noted below, the Chinese courts lack authority to strike down ‘abstract administrative acts’ that are inconsistent with the PRC Constitution or the laws. It is important to participate in the fair competition review process before an ‘abstract administrative act’ is made since it might be the best chance for companies to seek solutions to a problematic decision.

Private enforcement and judicial review

By the amended AMA (Article 60) and the Administrative Proceeding Act (which is actually a legislated judicial review act), both private enforcement and judicial review are available. Judicial review allows private parties to sue the regulatory authorities for the overturning of their competition law decisions and seek damages. Private enforcement allows private parties, harmed by monopolistic practices, to seek remedies through the courts. Private enforcement of the AMA typically involves individuals or companies bringing lawsuits against other companies or administrative authorities (if involved in ‘administrative monopoly’) for violations of the AMA or its regulations.

There have been a number of notable private enforcement cases in recent years that have attracted public attention and had a significant impact on the development of competition law in China. For example, in 2009, a private lawsuit was filed against China Mobile, one of China’s largest telecom operators, for abusing its dominant market position. This case is considered to be the first private enforcement case with a mediated result for damages since the adoption of the AMA. In practice, it is no longer rare for consumers or competitors to sue companies alleging anti-competitive practices.

In addition to private enforcement cases, there have also been a growing number of judicial review cases relating to the AMA and its regulations. These cases typically involve companies challenging administrative decisions made by SAMR or other government agencies (for example, imposing fines or penalties for violations of the AMA). The increase in judicial review cases reflects the growing importance of competition law in China and the need for companies to protect their interests through the legal system.

An additional note to the above is that the AMA now allows public prosecutors to intervene in the enforcement of competition law. Public prosecutors can bring cases against any violators of the AMA whose anti-competitive practices harm the public interest. As many anti-competitive practices could impact on a relevant market or an industrial sector, with consumers’ interests often at stake, public prosecutors, if pursuing activism, could play a very important role in competition law enforcement in the near future. They could also lend important support for individuals or companies who seek private enforcement.

Are you protected by attorney-client privilege?

Attorney-client privilege is a legal concept that protects communication between lawyers and their clients from disclosure to third parties, including government authorities. It is a privilege that may be claimed by an individual or company that is being investigated by the enforcement authority for violation of competition law with the aim of avoiding production of confidential documents or information that may be required. It is often claimed in antitrust or competition law investigations in the US, the EU and many other countries.

Companies operating in or with the Chinese market, however, need to note that Chinese law does not fully recognise a concept of attorney-client privilege, at least not in the same way as it is recognised in common law countries. Under Chinese law, lawyers are required to keep confidential any information obtained from clients in the course of their legal work, except in certain specified circumstances. However, this duty of confidentiality is not absolute and there are situations where lawyers may be required or authorised to disclose information to third parties, including government authorities.

In the context of competition law investigations, it is possible for Chinese investigating authorities to seek information from lawyers and law firms. Lawyers and law firms in China, of course, will not necessarily comply with such requests, where the investigation involves a crime. On the other hand, it is also doubtful that foreign companies can successfully claim privilege and avoid prosecution based on attorney-client privilege that is recognised in the home jurisdiction of their headquarters.

Privilege has, therefore, become an issue that remains unsolved in cross-border competition investigations involving China. It remains to be seen whether China will follow international practices and recognise the attorney-client privilege in competition law investigations.

One thing is for sure, companies cannot rely on their in-house counsel for protection of sensitive discussions, whether the companies are located in or outside China. As far as competition law is concerned, it is always advisable to use external counsel. External counsel may have more relevant expertise, be better equipped to navigate the complexities of Chinese law and be more suitably positioned to protect their clients’ interests. More importantly, external counsel may bring sensitive discussions under the attorney-client privilege and better protect sensitive information from disclosure to competition investigators. Even without the recognition of the attorney-client privilege in China, experienced external counsel are also a more appropriate choice for the protection of sensitive discussions.

Conclusions

The AMA has undergone a series of important developments and amendments in recent years, aimed at strengthening the country’s competition law. One of the new developments of the AMA has been the strengthening of its enforcement regime. In recent years, the government has taken a number of steps to ensure that the AMA is enforced more consistently and effectively. The government has unified the enforcement of the AMA under one agency, SAMR, to ensure that there is a centralised enforcement mechanism in place which has arguably made the AMA more effective and easier for businesses to understand their obligations and for the government to regulate monopolistic practices in the market. Another major development from the AMA has been the improvement of private enforcement. The Chinese government has taken steps to enhance the ability of individuals and businesses to bring private lawsuits against anti-competitive practices. This has led to an increase in private enforcement cases and has helped enhance the overall level of competition in the market. Prior to the outbreak of Covid-19, the Chinese government was working towards increasing international cooperation in the enforcement of competition law. That involved working closely with other countries and international organisations to promote a level playing field for businesses operating in different markets. All these new developments have led to a more robust and effective competition law and have helped promote a fair, open and transparent market, contributing to the overall economic growth and development of the country.

Notes