Draft Guidelines on Cartel Leniency in China

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In February 2016, the National Development and Reform Commission (NDRC)released the Draft Guidelines on Application of Leniency to Horizontal Monopoly Agreements(the “Draft Guidelines”) seeking public comments due February 22, 2016.

The Draft Guidelines aims to provide more guidance to leniency applicants, therefore it includes information on the requirements for leniency applications, further details on disclosure and confidentiality rules so as to make the application process a fairer and more transparent procedure, and introduces a marker system to fix the time sequence of various leniency applicants. Therefore,
the leniency policy can assist the Anti-Monopoly Enforcement Agencies in discovering monopoly agreements, which contributes to saving administrative law enforcement resources, improving efficiency, and safeguarding the interests of consumers.

The Draft Guidelines is one of the set of guidelines the Anti-Monopoly Commission of State Council has authorised the NDRC to prepare in November 2015. Grants of leniency by the three anti-monopoly enforcement agencies (AMEA), which includes the NDRC, the State Administration for Industry and Commerce (AIC), and the Ministry of Commerce, are authorised by under Article 46 (2) of the Anti-Monopoly Law of the People’s Republic of China, which provides where an undertaking has voluntarily reported the relevant facts on entering into a monopoly agreement to the anti-monopoly enforcement agency and provided material evidence, the anti-monopoly enforcement agency may, at its discretion, reduce or waive the penalty for such an undertaking.

Chronological ranking of multiple applicants

To increase maximum efficiency, early applications are encouraged. Therefore, the Draft Guidelines provides different treatment for leniency applications before and after the launch of an investigation. According to Article 1 and 13 of the Draft Guidelines, the law enforcement authorities may grant the application ranking the first full immunity or may reduce the fine by no less than 80%. The AMEA will further determine the chronological order of multiple leniency applications in connection with a monopoly agreement, and may adjust or cancel the ranking if an applicant fails to fulfill any of its obligations under the Draft Guidelines. Under Article 11, when a ranking is adjusted or cancelled, other applicants may be moved up in the queue. At the conclusion of the investigation, the AMEA will, in an investigation report, determine the penalty for each entity involved based on the severity of its wrongful conduct, and provide proposed reductions of, or exemption from, penalties based on each applicant’s ranking. In most cases, no more than three applicants will be given leniency in a single case. However, in complicated and significant cases which involve in numerous undertakings and where each applicant provides different and substantial evidence, more than three may be granted leniency according to Article 12 of the Draft Guidelines.

The amount of leniency and the reductions available is under Article 13 of the Draft Guidelines, which provides for a single monopoly agreement where the number of entities may enjoy the following type of leniency:
3 entities or more – the reduction of penalty received from the leniency program:
a. The first in: 80%-100%;
b. The second in: 30%-50%; and
c. The third and the subsequent entities in: ≤30%
For example, in the Japanese Auto Parts and Bearing Manufacturers case, the NDRC published its final decision to fine 12 Japanese auto parts suppliers a total amount of RMB 1.24 billion for their participation in cartels. Accordingly, it was found the collusion between the competitors had eliminated and restricted competition regarding the pricing of bearings and other auto parts in the Chinese domestic market, and harmed the legitimate rights of downstream manufacturers and the interests of consumers. Taking into account the fact that the parties had constituted a serious violation, the NDRC decided to impose the highest possible fines on all 12 Japanese auto parts suppliers (that is, 10% of a company's turnover in the previous year). However, all 12 companies applied for leniency, and the NDRC granted leniency based on their cooperation during the proceedings. Furthermore, the NDRC granted full immunity to two companies, as they were the first to voluntarily make reports to the NDRC and provide important evidence for each category of products. The other companies were granted a reduction of fine of between 20% and 60%.


According to Article 20 of the Provisions of the AIC on the Procedure for the Investigation and Punishment of Monopoly Agreement Cases and Abuse of Dominant Market Position Cases, entities who take the initiative to report information of monopoly agreement and provide substantial evidence thereof may be exempt from penalty or receive a reduced penalty. But it will not apply to the organiser of a monopoly agreement.

However, under Article 10 of the Draft Guidelines, it provides that entities that forces or organizes others to enter into or implement a monopoly agreement or prevents others from ceasing the illegal conduct may be given a lesser penalty. Therefore, the Draft Guidelines provide an incentive to report. Furthermore, this can give rise to a sense of distrust among cartel members, which impedes the monopoly agreement from being conducted.

Introduction of a marker system

Article 9 of the Draft Guidelines introduces a marker system, which means an applicant can make preliminary report on the monopoly agreement first and supplement the report with details within a set time period. The marker system will fix the position among various applicants to whom different fine reduction rates will apply. Under Article 9, it is provided that after submitting a leniency application or preliminary report, the law enforcement authority should record and confirm the application and send written feedback, specifying the time of acceptance and list of materials, to the applicant within 7 workdays. Under Article 7, the deadline to perfect the marker system a period of time generally not exceeding 30 days, which may be extended to 60 days. Therefore, this allows applicants to secure a marker system in a certain period of time, encouraging efficiency and successful reports on monopoly agreements.

Under Article 7 of the Draft Guidelines, the following information shall be included in the preliminary report:
1. confess explicitly that the undertaking has engaged in a monopoly agreement that violated the Anti-Monopoly Law (AML); and
2. illustrate general information regarding entering into and implementing the monopoly agreement, which include the participants, relevant products or services and the time of entering into and implementing the monopoly agreement, etc.

Formal applications

According to Article 6 of the Draft Guidelines, the entity should confess explicitly that it has been engaged in monopoly agreement that violates the AML, and elaborate information regarding entering into and implementing the monopoly agreement. The following information should be included in the formal report:
1. participants of the monopoly agreement and their basic information (name, address, contact information and representatives);
2. communication of the monopoly agreement (time, venue, contents, and participants);
3. products or service, price and quantity in the monopoly agreement;
4. geographic scope and market scale that might be influenced;
5. duration; and
6. explanation about the evidence provided by the entity.

Additionally, the applicant must submit important or material evidence, which includes
1. evidence that is sufficient for taking forward a credible investigation when the AMEA has not obtained any clue or evidence;
2. evidence that is to add significant value for confirming the monopoly agreement, when the investigation has been launched by the AMEA, which includes:
a. evidence that is of high probative value or complement value in proving entering into and implementing the monopoly agreement;
b. evidence that is of complement value in proving the content, time of entering into and implementing the monopoly agreement, relevant products or services, participants, etc.; and
c. other evidence that reinforce the probative value of the monopoly agreement.

Conduct required of applicants

A leniency applicant generally will not be granted leniency unless it:
1. promptly stops the violations (unless the agency requires the entity to continue in order to assist the investigation;
2. reports any leniency applications submitted by the entity to agencies in other jurisdictions;
3. cooperates with the AMEA in a rapid, continuous, comprehensive, and sincere manner;
4. maintains and provides the agency with evidence and information;
5. does not conceal, destroy, or transfer evidence, or provide false materials or information;
6. without the consent of the agency, does not disclose the application; and
7. does not engage in any other conduct that may impede the investigation.


In order to encourage entities to apply for leniency, it is AMEA’s obligation that information provided by applicants should be used only in anti-monopoly administrative cases. Article 16 of the Draft Guidelines provides the reports, documents and other materials, which are submitted during the application, should be archived and reserved by the AMEA and should not be made public without the permission of the applicant, and should not be accessed by any other agency, organization or individual. The afore-mentioned materials shall not be used as evidence in relevant civil litigation, unless otherwise provided by law.


The Draft Guidelines provide a welcome clarity and transparency regarding the procedures and standards to be used by the AMEAs in connection with applications for leniency from fines and other penalties under the AML. Accordingly, it should encourage parties to a monopoly agreement to submit confessions or reports to the AMEAs, which in the long run, will benefit the Chinese market and its consumers.

ABOUT THE AUTHOR: Matthew Murphy and Xia Yu
Matthew Murphy and Xia Yu are with the MMLC Group.

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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.

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