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Introduction of Anti-Monopoly Compliance Incentive Mechanism, Encouraging Enterprises to Strengthen Anti-Monopoly Compliance Construction——Interpretation of the "Guidelines for Anti-Monopoly Compliance by Operators"

On September 11, 2020, the State Council Anti-Monopoly Commission issued the "Guidelines for Anti-Monopoly Compliance by Operators" ("Guidelines 2020"), which is the first compliance guide in the field of anti-monopoly implemented nationwide, providing clear guidance and specific requirements for operators to carry out anti-monopoly compliance work, playing an important role in enhancing operators' awareness of fair competition and improving anti-monopoly compliance management level. With the development and growth of Chinese enterprises, higher requirements have been put forward for operating in compliance with laws (including anti-monopoly compliance), so it is necessary to revise the "Guidelines 2020" in a timely manner. Against this background, in November 2023, the State Council Anti-Monopoly and Anti-Unfair Competition Commission ("Dual Commission") initiated the revision of the "Guidelines 2020"; on March 21, 2024, the State Administration for Market Regulation ("SAMR") issued the "Draft of the Guidelines for Anti-Monopoly Compliance by Operators" ("Draft Guidelines"); on April 25, 2024, the Dual Commission issued the "Guidelines for Anti-Monopoly Compliance by Operators" ("Guidelines 2024"), which provided more detailed and clearer suggestions on how operators should establish anti-monopoly compliance management systems. 22 reference examples were listed, providing more comprehensive and specific suggestions for operators.


The "Guidelines 2024" provides more detailed, comprehensive, and practical provisions on anti-monopoly compliance management. The "Guidelines 2024" encourages operators to formulate customized anti-monopoly compliance management systems based on market competition status, industry characteristics, scope of operation, governance structure, business scale, etc. From this perspective, the anti-monopoly compliance of operators should be "tailor-made" rather than uniform. Even for different operators in the same industry, their anti-monopoly risks are not exactly the same due to differences in business scale and operating models. Therefore, each operator should identify and assess its own anti-monopoly "risk points" and customize its anti-monopoly compliance management systems accordingly.


The biggest highlight of the "Guidelines 2024" is the compliance incentive chapter, which specifically stipulates compliance incentives in Article 32 to Article 38 of Chapter 5, proposing to "strengthen compliance incentives," which means that when anti-monopoly enforcement agencies investigate the violations of the Anti-Monopoly Law, they can take the implementation of operators' anti-monopoly compliance management systems into consideration. Chapter 5 sets out four types of anti-monopoly compliance incentives: (1) pre-investigation compliance incentives; (2) compliance incentives in commitment; (3) compliance incentives in leniency s; (4) compliance incentives in the discretion of fines. In addition, Chapter 5 also specifies the procedures for operators to apply for compliance incentives and specific situations where compliance incentives are not granted.


Two requirements shall be met when applying for pre-investigation compliance incentives: the operator has terminated suspected monopoly conduct before the investigation, and the conduct is minor and has not caused competitive harm. Enforcement agencies may take the implementation of operators' anti-monopoly compliance management systems into consideration when determining whether operators have corrected their behavior in a timely manner and may exercise discretion not to impose administrative penalties.


Compliance incentives in commitment can be applied during the anti-monopoly investigation process. The so-called commitment system refers to operators committing to take specific measures within a certain period to eliminate the consequences of suspected monopoly conduct. Anti-monopoly enforcement agencies may suspend or even terminate the investigation procedure t. The implementation of operators' anti-monopoly compliance management systems is an important factor for enforcement agencies to suspend or terminate the investigation procedure.


Leniency usually applies to horizontal monopoly agreements. Leniency refers that when operators voluntarily report monopoly agreements to anti-monopoly enforcement agencies and provide important evidence, penalties may be reduced or exempted. The extent of leniency granted depends on the applicant's rank in the leniency queue and to what extent the leniency conditions have been met. For example, for operators in the first rank, penalties may be exempted or reduced by no less than 80%. Compliance incentives in leniency systems means that anti-monopoly enforcement agencies can apply greater reductions within the leniency reduction scope to operators who have been successfully granted leniency, if the operators can prove that they have established and effectively implemented anti-monopoly compliance which has played an important role in reducing or eliminating the consequences of illegal conduct.


The fourth type is compliance incentives in the discretion of fines, meaning that enforcement agencies may exercise discretion to mitigate or reduce administrative penalties if operators actively establish or improve anti-monopoly compliance management systems and effectively implement them before anti-monopoly enforcement agencies make administrative penalty decisions, and this has played an important role in reducing or eliminating the consequences of illegal conduct.


Operators can apply for one or more compliance incentives based on their actual situations. Enforcement agencies will conduct substantive review on the completeness, authenticity, and effectiveness of operators' implementation of anti-monopoly compliance management systems, including but not limited to whether operators have established and strictly implemented systematic compliance management systems. If operators fail to pass the substantive compliance review, they cannot apply for compliance incentives.


As China’s anti-monopoly enforcement agencies increasingly emphasize the organic combination of rigid law enforcement and flexible supervision, anti-monopoly compliance will become the focus and direction of their work. For enforcement agencies, measures such as compliance guidance and compliance incentives can enhance operators' attention to anti-monopoly compliance work, encourage enterprises to comply with relevant anti-monopoly laws and regulations; for operators, establishing sound anti-monopoly compliance management systems, and strictly abiding by and implementing them in the operation process, enhance the ability of anti-monopoly risk prevention, and promote healthy and sustainable development of enterprises.