According to the Notice, SAMR will continue its online merger filing mechanism, which was originally introduced on February 5.  Specifically,

• SAMR continues its suspension of the relevant on-site reception work, and notifying parties should submit filing materials and supplementary materials/responses to SAMR RFIs in electronic form;

• those who are not equipped to handle work online should mail the materials to the Anti-monopoly Bureau of SAMR; 

• in general, onsite meetings will be cancelled or postponed during this period, and on an as-needed basis, meetings shall be organized in the form of video conference or conference call.[5] 

Based on our experience and observation, SAMR appears to have indeed been able to optimize its merger review work under this new mechanism.  According to its official interpretations, in the first quarter of 2020, SAMR received 111 merger filings, docketed 113 filings, and cleared 111 filings (including three conditional clearances – Danaher/GE Biopharma, Infineon/Cypress Semiconductor and NVIDIA/Mellanox), with a year-on-year growth rate of 4.7%, 6.6% and 0.9% respectively; the average review period was shortened by 26.9% (8 days shorter than that of last year); a failure-to-notify case was also sanctioned and published during this period.[6]

On the other hand, certain other antitrust authorities have stated that the merger review process might be pro-longed or even suspended for non-exigent cases,[7]which will impact transactions that are subject to multi-jurisdiction review.  To manage the process, for transactions that are yet to be filed, the parties should set an appropriate long-stop date or extend it as necessary by taking into account the relevant local situations; for merger filings pending clearance, it is important to communicate to the authorities the hard deadlines and urgent need for timely clearance, if applicable.

In the Notice, SAMR indicates that it has established a “green channel" to expedite merger review in the following areas:

• sectors closely related to pandemic prevention/control and people’s basic livelihood, such as pharmaceutical manufacturing, medical instrument and equipment manufacturing, food production, transportation, wholesale and retail;

• sectors severely impacted by the pandemic, such as catering, accommodation, and tourism; and

• transactions to facilitate work resumption.

Parties to a transaction covered in the above prioritized list are advised to specify the request and basis for a fast-track review in their merger filings and communications to SAMR.  On the other hand, parties to transactions beyond the above scope may need to assess the potential delay of review process due to SAMR’s limited staffing and restricted communication channels during the pandemic.

Recognizing the need for coordinated efforts to combat COVID-19 and facilitate work resumption, SAMR indicates that it will, in accordance with the Anti-monopoly Law (“AML"), lawfully exempt cooperative agreements that are conducive to technological progress, efficiency enhancement, public interests and consumer welfare, such as agreements for the following purposes:

• technological improvement, or R&D of a new product in the fields of drugs and vaccines, testing technology, medical devices, and protective equipment, etc.;

• unification of product specification, standards or implementation of specialization to improve quality, reduce cost and enhance efficiency of materials for pandemic prevention and control;

• public welfare such as disaster relief or assistance to the indigent; or

• enhancing operating efficiency of small or medium-sized undertakings or strengthening their competitiveness.

The above exempted agreements are still within the purview of the exemptions granted under Article 15 of the AML[8],rather than a change of the exemption criteria prescribed by the AML.  This means that anti-competitive conducts will not receive a free pass under the pretext of mitigating COVID-19 impact.  Therefore, as a guiding principle, businesses should be aware that all prohibitions relating to monopoly agreements under the AML and its implementation rules still apply.

With respect to the justification for the exemption, as provided by Article 15 of the AML, companies should also demonstrate that the agreement concluded will not seriously restrict competition in the relevant market, and will enable consumers to share in the benefits so derived.  SAMR’s Interim Rules on Prohibition Against Monopoly Agreements provide specific factors to be considered in determining an exemption, including the specific form and effect, the causality, the necessity, etc.[9]The Draft Amendment to the AML unveiled by SAMR on January 2 also provides more nuanced criteria for the exemptions, as previously laid out in the Interim Rules on Prohibition Against Monopoly Agreements.[10]

In addition, absent any further guidance from SAMR, it is still unclear as to how those exemptions in response to COVID-19 would operate in practice; for example, whether the exemption will be granted on a case-by-case basis, whether the businesses concerned should make a prior application with SAMR before concluding such agreements (though SAMR seems to be indicating such application requirement in providing its contact information to the public, as noted in detail below in Section 7), and how businesses should deal with such agreements that have already been concluded.  Given the strict prohibition of cartels by the AML, companies should be prudent when contemplating the conclusion of any cooperative agreements with competitors.  For collaborations that will likely meet any of the above criteria for exemption, companies are recommended to identify and document the legitimate purposes under the AML and limit such cooperation to the extent reasonable and necessary to realize such purposes, and where necessary, consult with antitrust counsels.

Furthermore, China is not alone in highlighting such lawful exemptions during the pandemic period.  For example, on March 24, the Federal Trade Commission (FTC) and the Department of Justice (DOJ) of the U.S. issued a Joint Antitrust Statement Regarding COVID-19, generally permitting R&D collaboration, sharing of technical know-how, development of suggested practice parameters, joint purchasing arrangement, and private lobbying addressed to the use of federal emergency authority.[11]Other countries, such as the U.K., Australia, Norway, are also granting temporary exemptions to allow cooperation in specific sectors such as airlines, supermarkets, etc.[12]Therefore, for contemplated agreements covering wider jurisdictions or related to the relevant sectors, companies are also advised to conduct a jurisdiction-specific antitrust compliance review.

The Notice calls for accelerated investigations and aggravated sanctions by local provincial-level enforcement authorities against antitrust violations that hinder the prevention and control of the pandemic, the work resumption, and consumer interests.  Monopoly agreements (both cartel and vertical restraints) and abuses of market dominance in the following sectors will be subject to heightened enforcement effort:

• products and relevant raw and auxiliary materials for pandemic prevention and control, such as facemasks, drugs, medical devices, and sanitizing supplies;

• public utilities such as supply of water, electricity and gas; and

• other sectors and fields closely related to people’s livelihood.

Before this Notice, there have already been an array of enforcement actions against price gouging activities in connection with the COVID-19 crisis under the PRC Pricing Law.[13] In addition, local authorities （such as Zhejiang Administration for Market Regulation） have launched a special antitrust enforcement initiative to crack down on antitrust violations which impede COVID-19 combat and work resumption.[14]Companies engaging in sensitive conducts should be mindful of the antitrust risks.  In addition, SAMR encourages the lodging of complaints regarding any suspected antitrust violations and established a direct communication channel (as noted below in Section 7) to facilitate such complaints, and suspected violations might be subject to heightened scrutiny, with potential complaints by aggrieved and other interested parties.

As neither the regulators nor the businesses have fully resumed work, antitrust authorities may be less likely to carry out dawn raids in a short run.  However, regular investigative work could still be carried out electronically and via teleconferences and conference calls.  Future dawn raids after the pandemic are also possible.

In addition to the regular publication of sanction decisions on its website, SAMR warns that typical (but not all) antitrust cases that impede pandemic control and work resumption will be timely reported publicly, causing reputational damages to investigated companies.

Fair competition review is the mechanism for scrutinizing anti-competitive government policy measures and curbing local protectionism, market entry barriers, coerced transactions, etc.  The Draft Amendment to the AML released by SAMR, if adopted, will provide an express legal basis for fair competition review.[15]

Pursuant to the Notice, SAMR will strengthen its support for policy measures that are conducive to the prevention and control of COVID-19 and the work resumption, and will provide guidance to policymakers in connection with fair competition reviews. SAMR also emphasizes that review of policies relating to supply of preventative materials supplies and support to severely affected industries and regions should be streamlined.  For policies which aid public welfare effort and which do not seriously restrict or eliminate competition, clear timelines should be set for the implementation of such policies.

SAMR indicates that it will strengthen guidance on antitrust compliance of businesses and support them to establish and improve their anti-monopoly compliance management.  Provincial-level antitrust regulators are also required to actively guide companies in their antitrust compliance.  This echoes the intensive legislative initiatives of SAMR and local authorities with respect to antitrust compliance guidance - on November 28, 2019, SAMR released its national exposure draft of the Antitrust Compliance Guidelines for Undertakings; on July 9, 2019, the Zhejiang Enterprise Competition Compliance Guide was published; on December 26, 2019, the Shanghai Administration for Market Regulation published the Shanghai Anti-Monopoly Compliance Guide for Business Operators for enterprises in Shanghai[16].

In response to the work resumption needs, the Heilongjiang Administration for Market Regulation published an antitrust compliance on March 7, highlighting “four reminders" with respect to monopoly agreements, abusive conducts, merger filings and abuse of administrative powers to exclude or restrict competition[17]；on March 31, the Jiangxi Administration for Market Regulation issued an “eight-point" antitrust compliance guidance[18];on April 1, the Jilin Administration for Market Regulation published a “five-point" antitrust compliance guidance[19].On April 14, the Shandong Administration for Market Regulation published the Shandong Anti-monopoly Compliance Guide for Undertakings and the Shandong Anti-monopoly Compliance Guide for Industry Associations[20], and held a press conference on the local antitrust enforcement support for combatting the pandemic and work resumption[21].  The Jiangsu Administration for Market Regulation also issued its antitrust enforcement guide on April 17.[22]

Trade associations are also recommended to strengthen industry self-discipline, provide competition compliance guidance to maintain a level playing field.  Many trade associations have joined efforts in combatting the pandemic and work resumption.[23]

To fully support combatting the pandemic and work resumption, SAMR indicates that businesses and individuals can make antitrust enquiries, apply for antitrust exemptions and lodge complaints via various channels such as phone call, email, fax, post mail, website messaging, and the relevant contact details of these channels are published.Unprecedently, SAMR also undertakes to proactively respond within 2 business days.  It is unclear whether the same practice will be applicable for non-pandemic-related enquiries and complaints, and whether such initiative will remain post pandemic.