Competition Currents | December 2020 | China & Japan
On Nov. 11, 2020, the Anti-Monopoly Bureau of the State Administration of Market Regulation (SAMR) released the draft Anti-Monopoly Guide for the Internet Platform Economy Sector (Platform Guide) for public comment.
Under the Platform Guide, practices such as demanding that business partners only enter into transactions with one platform operator or engaging in price discrimination based on a customer’s shopping history or user profile could potentially be made illegal. The Platform Guide represents the first time that the SAMR has attempted to address competitive practices specifically pertaining to internet companies under the PRC Anti-Monopoly Law. The public comment period ended Nov. 30, 2020.
Additional highlights of the Platform Guide include the following:
To address perceived difficulties in applying traditional market definitions to the internet industry, the Platform Guide provides that under certain circumstances, anti-competitive conduct can be directly inferred without defining the relevant product and geographic markets.
As background, the VIE structure is frequently used to facilitate foreign financing of Chinese businesses in industries where foreign equity is legally prohibited or restricted under the Chinese foreign investment regime. The VIE structure is widely used in the Chinese internet industry. The Platform Guide expressly contemplates that internet companies organized under the VIE structure also fall within the scope of merger control review, assuming relevant thresholds are met.
The Platform Guide provides additional insight on how the SAMR views anticompetitive conduct such as refusal to deal, selling below cost, tie-in sales, or imposing other anticompetitive conditions in the internet space. Additionally, the Platform Guide recognizes that internet companies may reach monopoly agreements using algorithms and other technical methods.
While the Platform Guide has yet to be finalized, the document indicates that the SAMR could enhance antitrust enforcement in the internet sector.
A. Japanese convenience store companies submit action plan to Ministry of Economy, Trade and Industry (METI).
On Oct. 29, 2020, METI revealed that Japanese major convenience store companies and the Japan Franchise Association – which includes major convenience store companies – had submitted their action plan regarding the report of the survey conducted by Japan Fair Trade Commission (JFTC).
This JFTC report regarding transactions between convenience store companies and its member stores (including their franchisees) was revealed on Sept. 2. According to the report, some of the member stores said that they were misled by convenience store headquarters’ failure to provide them with accurate information (such as number of visitors, labor costs, waste loss, inventory loss, etc.) before signing the franchise agreement. Member stores also said that they were forced by the headquarters to purchase a certain volume, and the headquarters were refusing to negotiate regarding shortened opening hours.
B. JFTC issues administrative orders in the maglev train bid rigging.
Nikkei Shimbun reports that JFTC issued administrative orders and surcharge payment orders to general contractors in connection with the maglev train bid-rigging case. In that case, four Japanese major general contractors are accused of having rigged bids to settle price and winners of the bids for maglev train construction worth over USD 85 billion. All of the contractors were prosecuted for criminal charges, and two of the contractors already have been sentenced and ordered to pay approximately USD 2 million in fines. In October JFTC issued (i) administrative orders to all of the four contractors to prevent future similar bid rigging and (ii) surcharge payment orders to two contractors of approximately USD 30 million and USD 11 million, respectfully. The surcharge payments appear to be reduced for leniency.
Edoardo Gambaro, Yuji Ogiwara, Stephen M. Pepper, Gillian Sproul, Hans Urlus, Dawn (Dan) Zhang, Filip Drgas, Simon Harms, Marta Kownacka, Shuhei Mikiya, Pietro Missanelli, Jose Abel Rivera-Pedroza, Ippei Suzuki and Rebecca Tracy Rotem contributed to this piece.