'Inspiring innovation' is added into legislative purposes. The 'safe harbor' rule applies to monopoly agreement. Harsher sanctions are in place for violations. These are some of the changes in the newly-revised anti-monopoly law recently passed by China's top legislature. Revised for the first time since its debut in 2008 and set to enter into force on August 1, 2022, the law strives to clarify some rules, uphold fair competition order and provide a fair, transparent and predictable environment for business operators.

The old structure with eight chapters remains intact while the number of articles grows from 57 to 70. There are many marked changes to the articles as well.

'Inspiring innovation' added into a legislative purpose

Upholding fair competition order in the market while inspiring innovation. While adding 'The state bolsters the fundamental position of competition policy' to Article 1 of the law in an effort to stress protection of competition, 'inspiring innovation' is added into legislative purposes.

"IP protection and protection of competition share a common objective in boosting development. Protection of free competition and proper use of IP are not mutually exclusive. If a right holder, however, abuses IP to exclude and restrict competition, the anti-monopoly law may come into play. This reflects the balanced philosophy of the law in protecting IP, inspiring innovation while having no qualms about curbing improper use of IP," says Ning Lizhi, Dean of IP and Competition Law Institute, Wuhan University.

Anti-monopoly law is closely connected with relevant IP laws, which is attested in either the outgoing version or the incoming one. The measures to curb monopolistic acts and the sanctions to punish those acts - both under the anti-monopoly law – can be applied to monopolistic acts of abusing IP to exclude and restrict competition.

Violations pay bigger price

Some notable changes are made the legal liability chapter of the law with the cap of monetary fines for monopolistic acts significantly lifted and civil public interest litigation added which allows procuratorates in cities with subordinate districts to file such litigation at people's courts.

"Legal liability is an important part of any specialized law. Only legal liabilities identified may pose restraint and deterrent to violations by certain subjects," says Feng Xiaoqing, Professor, School of Civil, Commercial and Economic Laws, China University of Political Science and Law. He believes the new anti-monopoly law has brought in harsher sanctions against violations.

"Generally speaking, this revision means significantly to curbing those acts damaging the legitimate rights and interests of other business operators and consumers as well promoting fair, free competition and healthy development of socialist market economy," Feng adds.

'Safe harbor' rule settles down

The new law provides 'If a business operator can prove its relevant market share is under the standard prescribed by the State Council anti-monopoly enforcement agency while complying with other conditions prescribed by the State Council anti-monopoly enforcement agency, it shall not be enjoined.' During the revision of the law, the introduction and gradual refinement of the above 'safe harbor' rule also sparked attention.

"The installation of the 'safe harbor' rule in vertical monopoly provisions carries multiple values," Ning mentions the installation can liberate the enforcement agency from entangling in discovering every possible liability, significant or not, drastically save enforcement resources and free the agency from unnecessary, over-complex, expensive analysis of the illegality of vertical monopoly agreements while improving the transparency of anti-monopoly enforcement of the state and giving clear instructions for compliance-seeking business operators. In addition, the 'safe harbor' rule embodies the state's encouragement and care to the development of SMEs and policy considerations such as industry transformation and upgrade, optimization of climate for doing business. Of course, whether in the future the 'safe harbor' rule will achieve what it is supposed to relies on the formulation of implanting rules and experience gathering from enforcement practice.

In a bid to implement the revised anti-monopoly law, the Chinese State Administration for Market Regulation is currently drafting the Regulation on Enjoining Acts of Abuse of IP to Exclude and Restrict Competition and inviting comments from the public.