Welcome to Scribd. Sign in or start your free trial to enjoy unlimited e-books, audiobooks & documents.Find out more
Standard view
Full view
of .
Look up keyword
Like this
0 of .
Results for:
No results containing your search query
P. 1
China Competition Bulletin_December 2011

China Competition Bulletin_December 2011

Ratings: (0)|Views: 97|Likes:
Published by fnfbangkok

More info:

Published by: fnfbangkok on Dec 24, 2011
Copyright:Attribution Non-commercial


Read on Scribd mobile: iPhone, iPad and Android.
download as PDF, TXT or read online from Scribd
See more
See less





I. Cases
On 2 December 2011, the National Development and Reform Commission (NDRC)confirmed that it had received an application for suspension of its investigation from bothChina Telecom and China Unicom. The NDRC has been investigating China Telecom andChina Unicom for alleged discriminatory pricing of network access fees.China Telecom has also submitted a plan to adjust and rectify its current practices.China Telecom has stated that it plans to expand interconnection capacity, achieveinteroperability with other backbone telecom operators, standardise network access feescharged to Internet service providers and reduce that fee to ‘a proper level’, and reduceend user broadband access charges by around 35% per bandwidth unit within fiveyears. It has been reported that the NDRC has requested that China Telecom submit arevised proposal that is more detailed and specific as its initial plan was considered to betoo vague and difficult to monitor.
 The conduct of the NDRC’s investigation and the level of public discourse it hasgenerated demonstrate that China’s competition authorities are increasing their AMLcapabilities and that a general awareness of competition law is quickly developing.Unfortunately, China Telecom’s proposal appears to fail to adequately address thealleged abusive behaviour and seemingly has instead diverted attention away from thefocus of the NDRC’s investigation. This investigation will be a litmus test on how the AMLwill be applied to state-owned enterprises (SOEs) and their role in China’s regulatoryreform.
(in Chinese)
(in Chinese)
(in Chinese)
(in Chinese)
Background information:
‘Experts Debate China’s Broadband Access Market and Competition Policy in Response to theOngoing Anti-Monopoly Investigation on China Telecom and China Unicom’, China CompetitionBulletin, Edition 15, November 2011, 1.
The China Competition Bulletin summarises the latest developments of competitionand regulatory policy in the People’s Republic of China, covering laws and policies, cases,agency and other relevant news, and selected publications
Professor Allan Fels, AO
Dean, The Australia and New ZealandSchool of GovernmentFormer Chairman, the Australian Competitionand Consumer Commission
a.fels@anzsog.edu.auProfessor Xiaoye Wang
Institute of Law,Chinese Academy of Social SciencesGraduate University of Chinese Academy of SciencesHead of the Competition Law Committee,China Law SocietyDeputy Head of the Economic Law Section,China Law Society
wangxiaoye88@yahoo.com.cnDr Jessica Su
Postdoctoral Fellow, Institute of Law,Chinese Academy of Social SciencesResearch Consultant to Professor Allan Fels
In this edition
 I. Cases 1-4II. News of the Anti-Monopoly Enforcement Agencies and the Courts 4-5III. Selected Publications in English 5IV. Selected Publications in Chinese 5Major Acronyms 6
 A publication of the ChinaCompetition Research CentreEdition 16: December 2011
In this final edition of the China Competition Bulletin for 2011, we report on the progressof the ongoing anti-monopoly investigation of China Telecom and China Unicom and theconditional clearance of the Seagate/Samsung deal by China’s Ministry of Commerce(MOFCOM), which is the most detailed merger decision delivered by MOFCOM since the Anti-Monopoly Law (AML) became effective in August 2008. We also report on the court judgment in
Liu Dahua v Dongfeng Nissan
, a case that highlights the gaps in the AML inaddressing vertical restraints in the Chinese market.
On 7 December 2011, Hsu Fu Chi, a Chinese confectionary company, confirmed that MOFCOM hasunconditionally cleared the acquisition of a 60 percent share of Hsu Fu Chi by Nestlé SA.
(in Chinese)
Background information:
‘Proposed Acquisition of Hsu Fu Chi by Nestle SA’, China Competition Bulletin, Edition 11, July 2011, 3.
On 12 December 2011, MOFCOM published its conditional clearance decision on the acquisitionof the hard disk drive (HDD) business of Samsung Electronics (Samsung) by Seagate Technology(Seagate). MOFCOM is the only competition authority to impose conditions on its clearance of thetransaction. The European Commission and the US Federal Trade Commission (FTC) have recentlyunconditionally approved the transaction.
Review process:
MOFCOM received the parties’ notification of the transaction on 19 May 2011 but considered thatthe notification documents were incomplete. MOFCOM formally accepted the notification on 13June 2011 after it was satisfied with the parties’ supplemental materials. During the preliminary(Phase I) review, MOFCOM concluded that the transaction would have the effect of eliminating orrestricting competition in the HDD market and initiated further (Phase II) review on 11 October 2011with an expiry date of 12 December 2011.
Market definition and competitive assessment:
MOFCOM defined the relevant product market as the HDD market and the relevant geographicmarket as global. It conducted thorough market investigations and undertook competition analysis,examining issues such as market conditions, procurement patterns, capacity utilisation, productinnovation, buyer power, market entry, prior transactions in the HDD market, price changes duringspecific time periods, and the impact of the transaction on consumers and competition in the HDDmarket.MOFCOM concluded that the HDD market is highly concentrated and that the level of concentrationhas increased over the past two decades. There are currently five HDD manufacturers (Seagate,Western Digital, Hitachi Storage, Toshiba, and Samsung), which hold 33%, 29%, 18%, 10%, and10% share in the global HDD market respectively. Similar market shares were said to exist in theHDD market in China. MOFCOM also found that HDD are homogeneous products and that the HDDmarket is highly transparent. The key customers of HDD products are large PC manufacturers and itis easy and not costly to switch suppliers.MOFCOM found that large PC manufacturers use closed bids to procure HDD products andnegotiate bilaterally with multiple HDD manufacturers on a quarterly basis to obtain and maintaincompetitive prices. To ensure a continuous and steady supply, large PC manufacturers allocate theirdemand among two to four HDD manufacturers based on price and other factors. MOFCOM alsoconcluded that it is important to continue current procurement patterns to maintain competition inthe HDD market.Innovation plays a key role in the HDD market and intellectual property rights and know-howare important for HDD manufacturers. Non-IP intellectual assets and economies of scale createbarriers to entry and there has been no new entry in the last ten years. MOFCOM also found thatthe HDD market has a high capacity utilisation rate. When facing a general price increase, large PCmanufacturers have few incentives to exercise their countervailing power because they are able topass on the price increase to end users through raising the prices of PC products. On the otherhand, smaller HDD distributors and fragmented end users have little or no bargaining power tocounter such price increases.Overall, MOFCOM concluded that the transaction would eliminate or restrict competition in the HDDmarket as it would eliminate an important competitor in the HDD market, resulting in adverse effectson Chinese consumers. Given the procurement patterns of large PC manufacturers, the transactionwould make it easier for the remaining HDD manufacturers to secure orders simultaneously andthereby weaken the competitive constraints imposed by the procurement model. The transactionwould also give rise to coordinated effects due to the highly transparent nature of the HDD market.
MOFCOM imposed six conditions on the parties. First, Seagate must take measures (as specified byMOFCOM) to keep Samsung’s brand as an independent competitor. Second, Seagate must fulfill itscommitments to maintain and expand Samsung’s production capacity within six months followingMOFCOM’s clearance decision, and thereafter reasonably determine the production capacity and volumeof Samsung’s products by taking into account the demand and supply conditions of the market. Afterimplementing MOFCOM’s clearance decision for 12 months, Seagate may apply to MOFCOM to release itfrom the first and second obligations, subject to MOFCOM’s approval. Third, after completion of the transaction, Seagate must not significantly change its current business patternor force customers to purchase HDD products exclusively from Seagate or entities controlled by Seagate.Fourth, after completion of the transaction, Seagate must not force TDK (China) Investment Co., Ltd. (TDK)to supply HDD magnetic heads exclusively to Seagate or its controlled entities or restrict the supply of TDK’sHDD magnetic heads to other HDD manufacturers. Fifth, Seagate must, for three years after the clearancedecision, invest a minimum of USD 800 million per year in research and development. Finally, Seagatemust appoint an independent supervisory trustee to supervise its performance of the relevant obligationsand must, within one week after such appointment, provide MOFCOM with a detailed plan regarding theperformance of the relevant obligations.
The announcement of MOFCOM’s decision is available at:http://fldj.mofcom.gov.cn/aarticle/ztxx/201112/20111207874274.html
(in Chinese)
‘MOC conditionally OKs Seagate-Samsung HDD deal’, news report by Xinhua:http://www.chinadaily.com.cn/business/2011-12/13/content_14258032.htm‘China orders remedies in Seagate/Samsung clearance’, news report by Global Competition Review:www.globalcompetitionreview.com
On 15 December 2011, the Changsha Intermediate People’s Court (Changsha Court) dismissed allegationsthat Dongfeng Nissan Passenger Vehicle Company (Dongfeng Nissan) and Hunan Huayuan IndustryCorporation Ltd (Huayuan) had abused their dominant position in relation to the supply of car parts andcar repair services and thus infringed the AML. The case was initially brought before and accepted by theChangsha Yuelu District People’s Court and later transferred to the Changsha Court, which heard the caseon 4 May 2011. The plaintiff, Mr Liu Dahua, is the owner of a car manufactured by Dongfeng Nissan. He claimed thatHuayuan, one of Dongfeng Nissan’s authorised dealers, charged excessively high prices for spare parts andservices and had refused to sell spare parts separate from repair services, the latter due to a policy adoptedby Dongfeng Nissan that prohibited its authorised dealers from selling spare parts without the provision of the related services. Liu alleged that Dongfeng Nissan and Huayuan had engaged in excessive pricing andtying conduct and therefore abused their dominant position by monopolising the supply of spare parts of Nissan passenger cars. The Changsha Court held that Mr Liu had failed to adduce sufficient evidence to establish that DongfengNissan and Huayuan held a dominant position in the relevant market and had abused that position. It alsofound that the defendants’ management of the aftermarket did not necessarily have a restrictive effect oncompetition. Mr Liu has filed an appeal.
In this case, the plaintiff relied on the AML’s prohibition on abuse of dominance to challenge pricing and tyingbehaviour. Such conduct could also have been challenged as vertical restrictions under the AML; howeverthe AML is currently insufficiently equipped to deal with vertical restrictions. The provisions in the AML thatdeal with vertical restrictions are Articles 14 and 15. Article 14 prohibits vertical agreements that fix resaleprices or restrict minimum resale prices and more generally prohibits other types of vertical practices (asdetermined by the anti-monopoly enforcement agencies) and Article 15 exempts vertical agreements thatmeet a set of broad criteria. However, to date no AML implementing regulations have been issued whichprovide further detail of these provisions.

Activity (2)

You've already reviewed this. Edit your review.
1 hundred reads
1 thousand reads

You're Reading a Free Preview

/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->