New Trend in China’s RPM Policies in the Aftermath of Amended Anti-Monopoly Law

Abstract

Before the Amended Anti-Monopoly Law (“Amended AML”) was implemented in 2022, the divergence on resale price maintenance (“RPM”) between the AML public enforcement agencies and the courts had been noticeable and attracted heated debates. The AML administrative agencies responsible for public enforcement against RPM in China firmly adopt the principle of “prohibition + exemption” by imposing the burden of proof on the enterprises who are alleged to engage in RPM acts: enterprises have to apply for exemption once the agencies prove and prohibit the RPM acts. AML agencies do not need to prove the “restricting or excluding competition” effect under this approach. On the contrary, the courts had required the plaintiff in private enforcement cases to prove the “restricting or excluding competition” effects in addition to the RPM acts. In the Amended AML, such disagreement between public and private enforcement was formally addressed by explicitly adding the precondition of “restricting or excluding competition” and allocating such burden of proof to enterprises/defendants. Prior to the Amended AML, such a new trend was already seen in the landmark Supreme Court Yutai case, where the courts’ standards for determining the illegality of RPM started to move towards the approach of the AML public enforcement agencies. The new Supreme Court Judicial Interpretations on AML for comments issued in 2022 further confirmed the new trend and clarified that enterprises/ defendants shall prove that there is no “effect of excluding or restricting competition” in RPM cases. Nonetheless, how such a reformed RPM policy will be applied in practice remains blurred. The Old AML was applied in all the RPM cases after the Amended AML took effect. It is unclear how to apply the “exemption” rule and in particular “safe harbor” rule once an RPM act is identified and presumed to be anti-competitive. No case has ever touched such issues. EU’s overall RPM practice on RPM appears similar to China’s RPM policy with differences on safe harbor and exemption. It is useful to take reference to EU policy and practice along the reform road with China’s post-pandemic economy conditions taken into consideration. This paper first introduces the previous RPM policy and the new trend in China and then takes the reference to EU policies on RPM. This paper finally concludes that the elements of competitive effects, the new safe harbor rule, and the exemption rule should be further clarified in the coming implementation regulations and judicial interpretations to avoid antitrust law Type I errors, i.e., over-regulation.