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Delayed Leniency Applications: The Unfortunate But Predictable Outcome of the Flexible Leniency Policies Under the Chinese Antimonopoly Law

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Abstract

Leniency has become important for the enforcement of competition law against illegal cartels. When the Chinese Anti-Monopoly Law was drafted, the possibility to give lenient treatment to an infringer coming forward with information on the illegal cartel was inscribed in Article 46. In their elaboration of this general leniency provision, NDRC and SAIC created two leniency policies, one of price related and one for non-price related cartels. These leniency policies empowered the enforcement agencies to take decisions almost as they like.

Flexible leniency policies, as experience in the United States and the European Union has shown, do not always lead to a favourable outcome in terms of detecting cartels independent from investigations from enforcement agencies. The European experience suggests that a flexible leniency policy will still trigger leniency applications, but that they will always follow the investigations by another enforcement agency. The Japanese experience has taught that this outcome may even not be achieved by a clear and transparent leniency policy. Despite that outcome, the Japanese experience shows that the leniency applications will follow almost directly the foreign investigations. Combining these experiences, the chapter suggests that the Chinese leniency policies will be used. However, due to the uncertainty, the leniency applications will be delayed until it is almost certain that the firm will be punished.

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Notes

  1. 1.

    See Beaton-Wells and Tran (2015) and Beaton-Wells (2014).

  2. 2.

    See Griffin (2003).

  3. 3.

    See for an overview of countries with a leniency policy ICN (2009), pp. 17–20.

  4. 4.

    Anti-Monopoly Law of the People’s Republic of China, adopted at the 29th Meeting of the Standing Committee of the National (30 August 2007). For a text in Chinese and English, see Harris et al. (2011), pp. 373–394.

  5. 5.

    See Harris et al. (2011), p. 273.

  6. 6.

    See Harris et al. (2011), p. 277.

  7. 7.

    NDRC (2010b). For a text in Chinese and English, see Harris et al. (2011), pp. 461–469.

  8. 8.

    SAIC (2010). For a text in English, see Linklaters (2010).

  9. 9.

    See Xue and Yang (2013), p. 86.

  10. 10.

    See Xue and Yang (2013), p. 86 and Yang (2013), p. 377.

  11. 11.

    See Department of Justice (1978).

  12. 12.

    See Kobayashi (2001), pp. 728–731. The leniency policy for individuals was revised in 1994. See Department of Justice (1994).

  13. 13.

    See Department of Justice (1993).

  14. 14.

    See European Commission (1996).

  15. 15.

    See European Commission (2002).

  16. 16.

    See European Commission (2006).

  17. 17.

    See Article 7-2 AML.

  18. 18.

    See Article 7-2 (13) AML; See for a summary discussing the changes, JFTC (2009).

  19. 19.

    For a detailed description, see Stephan and Nikpay (2014), pp. 16–19.

  20. 20.

    Stephan and Nikpay (2014), p. 19.

  21. 21.

    See Department of Justice (1993), par. A and B.

  22. 22.

    See European Commission (2006), par. 8.

  23. 23.

    See Van Uytsel (2008), pp. F31–F36.

  24. 24.

    See European Commission (2006), section II and III; Article 7-2 (10), (11), and (12) AML.

  25. 25.

    See European Commission (2006), par. 24.

  26. 26.

    See Article 7-2 (11); JFTC (2005).

  27. 27.

    See Article 7-2(11) (iii) of the AML.

  28. 28.

    See Department of Justice (1993), par. A (2), (3), (4), (5), (6) and par. B (2), (3), (4), (5), (6), (7), European Commission (2006) par. 12, 13, and 24; Article 7-2 (10) (ii), (11), (12), (16), (17) AML, and JFTC (2005), Section 8.

  29. 29.

    See Stephan and Nikpay (2014), pp. 16–19.

  30. 30.

    See generally, Kobayashi (2001), pp. 728–731 and Van Uytsel (2014), p. 197.

  31. 31.

    See Leslie (2011), p. 175.

  32. 32.

    See Van Uytsel (2008), pp. F31–F36.

  33. 33.

    See European Commission (1996), par. B.

  34. 34.

    See Van Uytsel (2008), pp. F31–F36.

  35. 35.

    European Commission (1996), par. B (b) (emphasis added).

  36. 36.

    European Commission (1996), par. D (2) (emphasis added).

  37. 37.

    European Commission (2002), par. 8 (emphasis added). A similar formulation is to be found in the 1993 Leniency Policy. The United States has also some provisions in its leniency policy that allow the Antitrust Division some flexibility in the appreciation of the information and evidence submitted. The 1993 Leniency Policy allows applicants to report the illegal cartel even if the Antitrust Division has information on the cartel. The condition is, however, that the information in the hands of the Antitrust Division is likely not to result in a sustainable conviction. This element gives the same flexibility to the Antitrust Division as the Commission. Information needs to be assessed.

  38. 38.

    European Commission (2002), par. 21 (emphasis added).

  39. 39.

    See European Commission (2006), par. 8 in combination with 9 and 24 in combination with 25.

  40. 40.

    See Joshua (2007), p. 519 and Ceres et al. (2006), p. 4 (indicating that a good cartel story has to be given and that the Antitrust Division then guides the applicant to fill the gaps in the story). See also supra note 37 and the explanation on assessment of information.

  41. 41.

    For a detailed description, see Van Uytsel (2015a), pp. 78–80 n. 85, 96, 98, and 100.

  42. 42.

    See Kobayashi (2001), pp. 729; on the contentious nature of these concepts, see Beaton-Wells (2013), pp. 184–186.

  43. 43.

    See European Commission (1996), par. B (e).

  44. 44.

    See European Commission (2002) and European Commission (2006).

  45. 45.

    See European Commission (2006), par. 13.

  46. 46.

    See Article 7-2(17) (iii) AML.

  47. 47.

    See Kobayashi (2001), p. 729.

  48. 48.

    Kobayashi (2001), p. 729.

  49. 49.

    See European Commission (2006), par. 12 (a).

  50. 50.

    See Van Uytsel (2015b), pp. 89–90 and Van Uytsel (2012), pp. 19–20.

  51. 51.

    See Van Uytsel (2008), pp. F31–F36.

  52. 52.

    See Article 46 CAML.

  53. 53.

    See Article 52 CAML.

  54. 54.

    See Article 49 CAML.

  55. 55.

    See Article 13 (1), (2), and (3) CAML.

  56. 56.

    See Article 13 (4) CAML.

  57. 57.

    See Article 14 (1) and (2) CAML.

  58. 58.

    See Article 13 (6) CAML and 14 (3) CAML.

  59. 59.

    See Foster (2015), pp. 98–103 and Harris et al. (2011), p. 291. See infra Sect. 4.3 (indicating that leniency is not always extended to the confiscation).

  60. 60.

    NDRC (2010b).

  61. 61.

    SAIC (2010).

  62. 62.

    See NDRC (2010b), Article 14.

  63. 63.

    See NDRC (2010b), Article 14.

  64. 64.

    See NDRC (2010b), Article 14.

  65. 65.

    See NDRC (2010b), Article 14.

  66. 66.

    This chapter uses the wording material evidence. This is the translation found in the official translation of the law given by the Ministry of Commerce, see MOFCOM (2008). The majority of the literature refers to important evidence. For the purposes of this chapter, the two concepts are interchangeable and have the same meaning.

  67. 67.

    See NDRC (2010b), Article 14.

  68. 68.

    See NDRC (2010b), Article 14.

  69. 69.

    See Harris et al. (2011), p. 292.

  70. 70.

    See Oded (2013), p. 156.

  71. 71.

    See SAIC (2010), Article 11.

  72. 72.

    See SAIC (2010), Article 12.

  73. 73.

    Harris et al. (2011), p. 293 and Xue and Yang (2013), p. 88.

  74. 74.

    See SAIC (2010), Article 12.

  75. 75.

    See Harris et al. (2011), p. 293.

  76. 76.

    See SAIC (2010), Article 11.

  77. 77.

    See SAIC (2010), Articles 11–13.

  78. 78.

    See SAIC (2010), Article 11.

  79. 79.

    See SAIC (2010).

  80. 80.

    See SAIC (2009), Article 20.

  81. 81.

    See Harris et al. (2011), p. 293 and Xue and Yang (2013), p. 88.

  82. 82.

    See SAIC (2010), Article 10.

  83. 83.

    See SAIC (2010), Article 11.

  84. 84.

    See MLex Staff (2014), p. 2 (indicating that international lawyers are cautious to advice on applying for leniency in China).

  85. 85.

    See Harris et al. (2011), p. 293 and Xue and Yang (2013), p. 88. But see Oded (2013), p. 157 (urging for caution as no official statement has been made by SAIC).

  86. 86.

    SAIC’s silence on all these aspects does open different possibilities for the implementation of the leniency policy. By not explicitly excluding a standard that is less severe than in the EU Leniency Notice, SAIC could substantially lessen the requirements for the leniency applicants. Unless there is evidence in that direction, the opposite may be true as well and SAIC may be following the rules set out in Europe. In the latter case, SAIC itself must not have sufficient information or the provided evidence must allow for a targeted investigation. In terms of finding an agreement, SAIC may decide that the information must be unknown. Further, if the European approach is followed, the information required for initiating an investigation would be less demanding than if they were finding an agreement.

  87. 87.

    Harris et al. (2011), p. 292 and Xue and Yang (2013), p. 88.

  88. 88.

    See, e.g., Zhang and Zhang (2012), p. 66 (focusing on the coordination costs), Hao (2013), pp. 15–34 (giving a general overview), Wang (2014), and Emch (2014).

  89. 89.

    See Wang and Su (2012), pp. 68–6 and Van den Bergh and Faure (2011), pp. 57–58.

  90. 90.

    See Van den Bergh and Faure (2011), p. 58 and Huang and Zhang (2011), p. 51.

  91. 91.

    See Zhang and Zhang (2013), pp. 123–126.

  92. 92.

    See NDRC (2010a), Article 3. For an English version, see Harris et al. (2011), pp. 450–460.

  93. 93.

    SAIC (2010), Article 4.

  94. 94.

    See Emch (2014), p. 233. See also Eichner (2012), p. 612 and Zhang and Zhang (2012), p. 66.

  95. 95.

    See Lin and Qiao (2015), p. 135.

  96. 96.

    Atiyah and Summers (1978), p. 71; See also Summers (1992), pp. 245–246 and Wolff (2011), pp. 551 and 566.

  97. 97.

    Wollf (2011), p. 551.

  98. 98.

    Wollf (2011), p. 552.

  99. 99.

    See Wollf (2011), pp. 553–561 (summarizing the discussion and provided a wealth on sources).

  100. 100.

    ICN (2009).

  101. 101.

    See Kobayashi (2001), pp. 729–730.

  102. 102.

    See Stephan (2005), pp. 8–9.

  103. 103.

    See Stephan (2005), p. 9.

  104. 104.

    See Stephan (2005), pp. 9–14.

  105. 105.

    Van Uytsel (2015b), pp. 89–90.

  106. 106.

    Leslie (2011), p. 175 (emphasis added, footnotes omitted).

  107. 107.

    See Kobayashi (2001), p. 731.

  108. 108.

    See Leslie (2011), p. 175; See also Griffin (2003).

  109. 109.

    Stephan (2005), p. 21.

  110. 110.

    See Stephan (2005), p. 20.

  111. 111.

    See Beaton-Wells (2013), pp. 184–186.

  112. 112.

    See Stephan (2005), p. 20.

  113. 113.

    See Stephan (2005), p. 20.

  114. 114.

    Van Uytsel (2015b), pp. 93–99.

  115. 115.

    USCBC (2015), pp. 18–33 (giving an overview of all decisions by NDRC and SAIC until May 2015).

  116. 116.

    Hong (2015).

  117. 117.

    See Xue and Yang (2013), p. 92. See also Editorial Board (2012).

  118. 118.

    See Xue and Yang (2013), p. 93 (the Price Law was applied because the investigation started before the CAML came into effect).

  119. 119.

    See Chen (2013), pp. 2–3.

  120. 120.

    The firms involved were the Korean firms Samsung and LG on the one hand, and the Taiwanese firms AU Optronics, Chunghwa Picture Tubes, Chimei InnoLux and HannStar on the other hand.

  121. 121.

    See Xue and Yang (2013), p. 93. See also Orrick (2013).

  122. 122.

    See Zhong Lun Law Firm (2013), p. 3 Annex 1.

  123. 123.

    See Xu (2015) (discussing the milk powder case) and USCBC (2015), p. 23 (giving an overview on the eyeglasses case).

  124. 124.

    Recently, NDRC has taken decision on vertical price fixing in relation to FAW-Audi and Mercedes-Benz. However, these decisions seem not to be based upon a leniency application.

  125. 125.

    The firms active in the vertical milk powder price cartel are: Biostine, Mead Johnson, Dumex, Abotts Lab, FrieslandCampina, Wyeth, Fonterra, Beignmate and Meiji.

  126. 126.

    The firms active in the vertical eyeglass cartel are: Essilor International SA of France, Germany’s Car Zeiss AG, the Japanese firms Hoya Corp. and Nikon Corp.; and Bausch + Lomb owned by Canada’s Valeant Pharmaceuticals International Inc and the Chinese firm Shanghai Weicon Optics Co.

  127. 127.

    See Staff Reporter (2014).

  128. 128.

    See Modrall and Hu (2014), p. 3.

  129. 129.

    Modrall and Hu (2014), p. 4.

  130. 130.

    See Modrall and Hu (2014), p. 2.

  131. 131.

    See MLex Staff (2014).

  132. 132.

    See Modrall and Hu (2014), pp. 2–3.

  133. 133.

    See Modrall and Hu (2014), p. 3.

  134. 134.

    See Gibson Dunn (2014), pp. 1–2.

  135. 135.

    Cf. MLex Staff (2014).

  136. 136.

    See MLex Staff (2014).

  137. 137.

    See Hong (2015), pp. 92–104.

  138. 138.

    See Editorial Board (2012); But see Deng and Zhang (2014).

  139. 139.

    See Hong (2015).

  140. 140.

    See, e.g., Hong (2015), Lou (2010), and Zhang (2008) (mainly focusing on the expansion of Article 46 CAML).

  141. 141.

    See Williams (2013), pp. 88–118.

  142. 142.

    See Zhang (2014), pp. 689–697 and Williams (2013), pp. 98–99.

  143. 143.

    See supra Sect. 4.3.

  144. 144.

    See supra Sect. 4.3.

  145. 145.

    See, e.g., Modrall and Hu (2014).

  146. 146.

    SAIC has tried to limit the flexibility by stating that the time of application, the importance of the evidence, the relevance of the information and the cooperation during the investigation are factors to be taken into consideration when the level of reduction has to be determined. However, these guidelines still do not reveal much about the final degree of leniency.

  147. 147.

    The condition of continuous cooperation has also not been incorporated in the text of the leniency policies. Continuous cooperation may be a helpful condition to construe material evidence in a liberal way. If material evidence is being regarded as any kind of evidence that can contribute to the discovery of a cartel and, eventually, the conviction, it may be necessary for the enforcement agency to further rely on the leniency applicants. The enforcement agency can guide the leniency applicant through the process of supplementing its original information with other information relevant for the discovery and conviction of the cartel. Even though continuous cooperation is a condition not explicitly expressed in the rules determining the leniency policies, it would be possible to construct this obligation out of the ‘material evidence’ condition. Material evidence could be regarded as any kind of information that contributes to the discovery and conviction of a cartel. However, information provided to the enforcement agencies could lose their status of important if the leniency applicant refrains from continuous operation with either of the enforcement agencies. In doing so, firms can come forward with a good cartel story and further be guided by the enforcement agency in supplementing that story with more relevant information. Willfully refusing to cooperate could then render the good cartel story unimportant. Other cartel participants that have in the meanwhile applied could than overtake the first position and still be granted immunity. However, this is not an uncertainty in the head of the firm anymore. The firm has control over its efforts to further cooperate.

  148. 148.

    See Beaton-Wells (2013), pp. 184–186.

  149. 149.

    See Eichner (2012), p. 615.

  150. 150.

    See, e.g., Eichner (2012), pp. 614–615.

  151. 151.

    See Wang (2014). See also Emch (2014), pp. 223–229 and 238 (arguing that both NDRC and SAIC have expanded their scope, thus enforcing beyond their respective competences without the other agency taking an initiative to investigate the same case. This suggests that there is a principle of ‘first come, first serve’. The author mentions that this is also the principle advocated by the NDRC and SAIC officials at conferences).

  152. 152.

    In order to remedy this situation, NDRC and SAIC should implement a marker system. A formal procedure could be followed and the rules could be changed to incorporate the marker system. However, with a few practical changes, NDRC and SAIC could achieve a similar result. Each of the enforcement agencies could install a single fax number. The order of application would be determined based upon the receipt of the fax. In order not to trump the order of the incoming faxes, NDRC and SAIC should conceptualize the material evidence conditional in a very liberal way. The submission of information that could reveal a cartel, in short ‘a good cartel story,’ should be sufficient in order to make this operational.

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Acknowledgements

This chapter has benefited from a grant of the Japan Society for the Promotion of Science – Grants-in-Aid for Scientific Research © No. 15K03152, “Anti-Cartel Enforcement: Towards a Holistic Understanding of Leniency Policies.” The authors would also like to thank the participants of the Asian Competition Forum’s 9th annual conference (8 December 2013), where an earlier draft of this paper was presented under the title “Economic integration through Effective Competition Enforcement: Rethinking the Chinese Leniency Program”.

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  1. Faculty of Law, Kyushu University, Fukuoka, Japan

    Steven Van Uytsel

  2. Guanghua Law School, Zhejiang University, Hangzhou, China

    Ying Bi

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Correspondence to Steven Van Uytsel .

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  1. Faculty of Law, Kyushu University, Fukuoka, Fukuoka, Japan

    Mark Fenwick

  2. Faculty of Law, Kyushu University, Fukuoka, Fukuoka, Japan

    Stefan Wrbka

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Van Uytsel, S., Bi, Y. (2016). Delayed Leniency Applications: The Unfortunate But Predictable Outcome of the Flexible Leniency Policies Under the Chinese Antimonopoly Law. In: Fenwick, M., Wrbka, S. (eds) Flexibility in Modern Business Law. Springer, Tokyo. https://doi.org/10.1007/978-4-431-55787-6_6

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