On December 14, the State Administration for Market Regulation of China (SAMR) published the administrative decisions on Alibaba, China Literature and Hive Box, which had completed economic concentrations with no approval of the supervisory authority: all three companies were fined 500,000 RMB (≈76,500 USD) each for undeclared M&A transaction. The responsible officers of the SAMR Antimonopoly Bureau agreed to provide their commentary on the matter.
Q: Recently, the SAMR published the draft of the Antitrust Guidelines for Platform Economy to solicit public opinions, which attracted much attention and caused heated debate. What was your main concern in investigation of these three cases?
A: In the past few years the development of online economy has been rapid, we see new models and types of operation appear every day. It obviously helps to improve the quality of national economy and to satisfy people’s demand of better life, but on the other hand, rises market concentration ratio: market resources flow towards tech giants, and we receive more and more reports on platform monopoly. The development of online economy poses a certain threat to fair competition.
According to the Antimonopoly Law of China (the AML) and the Provisions of the State Council on the Standard for Declaration of Concentration of Business Operators, when a concentration reaches the specified thresholds, business operators should lodge a declaration in advance with the responsible authorities, otherwise such concentration may not be implemented. Undeclared cases are often then reported to the Antimonopoly Bureau, so that we could initiate investigation, and three mentioned cases are just another example of unwilling to respect the law.
By making our administrative decision public, we hope to prove that the Antimonopoly Law applies to any company, no matter with national or foreign capital, state or private, big or small, everyone should be treated equally. Although the industry of platform economy has its own features, it still falls under the AML. Only if all companies respect competition laws and protect market competition, it will be possible to guarantee healthy economic development.
The investigation of unfiled concentrations has always been a focal point of competition law enforcement. Since the beginning of 2020, we have already published our decisions on 11 cases of undeclared mergers and acquisitions, and there is still a lot of work to be done.
Q: Could you describe the circumstances of these three cases?
A: We fined all three companies for unfiled concentration. In five years Alibaba Investment, which is a subsidiary of Alibaba Group, has gradually purchased over 73,79% of Intime Retail’s shares. China Literature Limited (online book platform), with Tencent as its largest shareholder, acquired New Classics Media Limited. And 100% of China Post Smart Delivery Company were sold to Hive Box (express locker system operator).
The illegal nature of these acquisitions is quite clear: three companies obtained the right to control the target ones, and their turnover exceeded the declaration threshold. However, after thorough assessment we came to a conclusion that neither of transactions had limited or restricted competition on the market. Considering all details, we imposed a 500,000 RMB fine on each purchaser.
Q: Comparing to their scale of business, five hundred thousand yuan do not seem a lot. Is such fine capable of deterring?
A: According to the AML, those who neglected their obligation to declare concentration may either be requested to reestablish the state they were in before the concentration, or receive a fine up to 500 thousand yuan. As our specialists had detected no impact on competition, there was no need to request the reestablishment. But the companies of interest are large, they invest and acquire a lot, they even have their own teams of professional lawyers, and still chose not to declare. So we decided to impose a maximum penalty.
500,000 yuan is not a lot indeed. But it is a signal that we are enforcing antitrust control of the platform economy, it dispels all illusions that one may get away from law enforcement and, of course, it deters. By doing so, we encourage entities to declare, as required by law, and thus prevent them from anticompetitive practices or eliminating their potential competitors.
We acknowledge that other jurisdictions do impose larger penalties and the deterring effect of ours is quite limited. We will take that into account during the revision of the Antimonopoly Law, which is still ongoing.
Q: What is your advice to digital companies in respect of antimonopoly compliance?
A: To remember that the Antimonopoly Law is still applicable to online industries, no matter how much they differ from the traditional ones. It is crucially important not to perform any actions that are prohibited by the AML, to file your upcoming concentrations in advance, to build a system of corporate self-control in terms of antitrust compliance, and to cooperate with regulation authorities during their antimonopoly investigations. The protection of healthy market environment and the improvement of business conditions is our common responsibility.