China Clamps Down On Cartels

China's State Administration for Industry and Commerce is soliciting public opinion on two new regulations which state that industry associations in China will be punished for making monopoly rules.

According to the two regulations which are called Regulations on Forbidding the Making of Monopolization Agreements and Regulations on the Banning of the Abuse of Market Domination Position, industry associations will be fined up to CNY500,000 for making agreements that encourage monopolies and those serious violators will even be demolished.

Regulations on Forbidding the Making of Monopolization Agreements is aimed at preventing business operators from forming monopolies by signing agreements. It states that apart from written and verbal agreements, any implicit agreements should also be banned. The regulations say that business operators who are competitors to each other must not sign five agreements, including agreements on the quantity produced and the quantity sold. In addition, they must not sign four other agreements, including agreements on the limit of trade areas. The regulations say that violators will required to stop their wrong doing and their illegal income will be confiscated — in addition to a fine of up to 10% of their sales revenue. Those who have not started implementing the respective agreements will be fined up to CNY500,000.

Under the regulations, industry associations who are engaged in four kinds of behavior, including releasing industry rules, decisions or notices that limit or exclude competition, or convening their members to form any agreements, resolutions or memorandums that constitute monopolization, or facilitating their making of monopolization agreements, shall be fined up to CNY500,000 and even closed down.

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