SAMR now is seeking public comments for the revisions until July 3.
China’s top competition regulator has proposed incorporating revenue benchmarks and market share thresholds into the safe-harbor rules.
Yesterday, the State Administration for Market Regulation, or SAMR, released planned revisions to the safe-harbor provision within its regulations on prohibiting monopoly agreements.
China introduced the safe-harbor regime into the 2022 Antimonopoly Law, which said a vertical agreement shall not be prohibited if the involved operator can demonstrate that its market share in the relevant market is below the standard prescribed by the antitrust agency and that it satisfies the “other conditions” stipulated by that agency.
In 2023, SAMR revised the supporting regulations to conform to the 2022 amended Antimonopoly Law, but omitted detailed proposals such as the 15 percent market share cap that had been included in the 2022 public consultation draft for the safe harbor rules.
This time, for resale price maintenance agreements, SAMR has proposed more stringent benchmarks: both the operator and its trading counterpart must have a market share below 5 percent in the relevant market, and their relevant revenues must each be less than 100 million yuan ($13.9 million).
For other types of vertical agreements, such as those involving non-price restrictions, SAMR appears more lenient, setting the threshold at 15 percent market share and 300 million yuan in revenues.
These differentiated criteria reflect an effort to calibrate enforcement based on the potential competition harm associated with different types of vertical agreements, SAMR said.
It noted that considerable debate earlier regarding the statute’s scope and standards led to the current Article 17 of the regulations retaining only a set of guiding principles, which allows for flexibility.
After extensive research and numerous discussions with legal authorities, scholars and industry participants, a broad consensus has now emerged on the design of China’s "safe harbor" regime, according to the agency.
The proposed revisions are expected to advance the investigation of vertical monopoly agreement cases and provide business with clearer compliance guidance.
Legal practitioners point out that the dual benchmarks and tightened thresholds indicate that regulators may be adopting a somewhat conservative approach to the rules.
The draft introduces exceptions to the safe harbor regime, excluding agreements with proven anti-competitive effects and allowing for tailored rules in specific sectors or for certain agreement types. It also places the evidentiary burden on business operators.
Companies must provide detailed information on the agreement’s formation and execution, ownership structures, and market activity. They are also required to submit annual market share and revenue data with supporting calculations. If regulators determine the criteria are met, they may decline to initiate or discontinue an investigation.
Source: MLex
