Establishing A Fair Competition Examination System in the Building of the Market System

• Document Number：No. 34 [2016] of the State Council
• Area of Law： Industrial and Commercial Management
• Level of Authority： Regulatory Documents of the State Council
• Date issued：06-01-2016
• Effective Date：06-01-2016
• Status： Effective
• Issuing Authority： State Council

Opinions of the State Council on Establishing A Fair Competition Examination System in the Building of the Market System
(No. 34 [2016] of the State Council)
The people's governments of all provinces, autonomous regions, and municipalities directly under the Central Government; and all ministries and commissions of the State Council and all institutions directly under the State Council:
Fair competition is the basic principle of market economy and an important basis for the efficient operation of the market mechanism. With the continuous deepening of the reform of the economic system, a unified national market has been basically formed and a fair competition environment has been gradually created. However, we also see that, local protection, regional blockade, trade barriers, enterprise monopoly, illegally granting preferential polices, impairing the interests of market players, and other phenomena against the aim of building a unified national market and fair competition still exist. For the purposes of standardizing relevant acts of the government, preventing the issuance of policies and measures eliminating or restricting competition, and gradually reviewing and repealing the provisions and practices that hinder the unified national market and fair competition, the following opinions on establishing a fair competition examination system in the building of the market system are offered as follows.
I. Fully Understanding the Significance and Urgency of Establishing A Fair Competition Examination System
First, it is the objective need of further promoting the economic system reform. The core of economic reform is making the market play a decisive role in the allocation of resources and making the government play a better role. The unified and open market system with orderly competition is the basis for the market to play a decisive role in the allocation of resources. Establishing a fair competition examination system and preventing the government's excessive and inappropriate intervention in the market helps to guarantee that the resources are allocated for achieving the maximum benefits and the best efficiency according to the market rules, market prices, and market competition.
Second, it is the strong guarantee for comprehensively promoting rule of law. Rule of law shall be comprehensively promoted and the government shall be required to fully and appropriately perform the functions according to the law. The Anti-Monopoly Law of the People's Republic of China explicitly prohibits administrative organs to abuse their administrative power, and eliminate and restrict market competition. Establishing a fair competition examination system and improving the examination system for the legality of administrative organs' internal decision-making helps to ensure that government acts are consistent with the relevant laws and regulations and ensure law-based administration of government.
Third, it is the inevitable choice for realizing innovation-driven development. Currently, China has ushered in a new normal of economic development rate, therefore we shall rely on innovation-driven to promote the sustainable and sound economic development. Enterprise is the subject of innovation and fair competition is a significant driving force for innovation. Establishing a fair competition examination system and vigorously eliminating the constraint of various systems that affect fair competition and hinder innovation helps to create a market environment of fair competition for business startup by the public and mass innovation.
Fourth, it is an effective measure for releasing the vitality of the market players. China is witnessing a crucial period of power transition for economic development. Vigorously developing new momentum, and transforming and upgrading traditional kinetic energy require sufficient stimulation of market players' vitality. Establishing a fair competition examination system, reducing the institutional transaction costs, and overcoming the distort of market prices and behaviors, help to mobilize various market players' enthusiasm and creativity, and cultivate and foster new economic development momentum.
II. Specifying the General Requirements and Basic Principles for Establishing A Fair Competition Examination System
To establish a fair competition examination system, you shall, according to the requirements for accelerating the construction of a unified and open market system with orderly competition, ensure that relevant government behaviors comply with the requirements for fair competition and relevant law and regulations, maintain fair competition order, guarantee that various market players equally use the production factors, fairly participate in market competition, and equally receive legal protection, stimulate the vitality of the market, improve the efficiency of resources allocation, promote business startup by the public and mass innovation, and promote the realization of innovation-driven development and the sustainable and sound development of economy.
The market shall be respected and priority shall be given to competition. The market economy rules shall be respected, the relationship between the government and the market shall be dealt with, joint efforts shall be focused on the transformation of government functions, micro-economic interventions shall be minimized, fair competition of market players shall be promoted and protected, and the decisive role of the market for allocation of resources shall be guaranteed to be fully maximized.
The overall situation shall be based on and overall consideration shall be given. Joint efforts shall be made to break regional blockade and industry monopoly, remove market barriers, and promote the free flow of goods and factors across the country. Overall consideration shall be given to the needs of protecting national interests and economic security, promoting coordinated regional development, maintaining a stable and sound economy, and other multiple targets, and the implementation of the system shall be steadily promoted.
Planning shall be made in a scientific manner and shall be implemented step by step. Establishing a fair competition examination system is a long-term, systematic, and complex project. National conditions shall be respected, proceeding from the reality shall be insisted on, and operable plans shall be researched and developed; criticism and creation shall be united, while regulating the incremental policies, these policies shall be handled in a classified manner and shall not be retroactive, and the existing policies that hinder the unified national market and fair competition shall be gradually reviewed and repealed; and by looking forward to the long-term future, overall plans shall be effectively developed and be promoted and improved in practice by stages and by steps.
Examination shall be conducted according to the law and supervision shall be strengthened. The connection between the existing legal system and the administrative system shall be strengthened, and the authority and effectiveness of fair competition examination shall be enhanced. A fair competition examination and guarantee system shall be established and improved, self-examination and external supervision shall be combined, social supervision and law enforcement supervision shall be strengthened, and acts of abusing administrative power to eliminate or restrict competition shall be corrected in a timely manner.
III. Establishing A Fair Competition Examination System in A Scientific Manner
1. Objects of examination. Administrative organs and organizations authorized by laws and regulations to have the functions of managing public affairs (hereinafter collectively referred to as “policymaking organs”) shall conduct fair competition examination in the developing of market access, industrial development, investment attraction, tendering and bidding, government procurement, business conduct code, qualification standards, and other regulations, normative documents, and other policies and measures involving the economic activities of market players.
For the administrative regulations and other policies and measures, and local regulations developed by the State Council, the drafting departments shall conduct fair competition examination during the drafting process. Where self-examination is not conducted, they shall not be submitted for deliberation.
2. Way of examination. During the process of developing policies, policymaking organs shall strictly conduct self-examination of the examination standards. Policies examined to have no effects of eliminating or restricting competition may be implemented; and policies that have effects of eliminating or restricting competition shall not be issued or shall be issued after they are adjusted to comply with the relevant requirements. Policies that are not subject to fair competition examination shall not be issued. Opinions of interested parties or opinions of the public shall be consulted for the development of policies and measures and fair competition examination. Relevant policies and measures shall be disclosed to the public according to the requirements of the Regulation of the People's Republic of China on the Disclosure of Government Information after they are issued.
3. Examination standards. Examination shall be conducted according to the following standards from the respect of maintaining a unified national market and fair competition:
(1) Standards for market access and exit.
(a) Unreasonable and discriminatory access and exit conditions shall not be set up.
(b) The list of franchises shall be announced and franchise rights shall not be granted to operators that are not subject to fair competition.
(c) The management, purchase and use of goods and services provided by specific operators shall not be restricted.
(d) Approval or pre-recordation procedures without legal basis shall not be set up.
(e) The approval procedures shall not be set up for industries, fields, and business, among others, other than those as listed in the negative list of market access.
(2) The standards for the free flow of goods and factors.
(a) Discriminatory pricing or discriminatory subsidy policies shall not be implemented for goods or services of other places or imported.
(b) Goods or services of other places or imported shall not be restricted from entering the local market or hinder the outbound transportation of local commodities or output of services.
(c) Operators of other places shall not be eliminated or restricted from participating in local tendering or bidding activities.
(d) Operators of other places shall not be eliminated or restricted from or be forced to making investment or setting up branches in local areas.
(e) Operators of other places that make investment or set up branches in local areas shall not be treated in a discriminatory manner, and their lawful rights and interests shall not be impaired.
(3) The standards for the impact on the production and management costs.
(a) Preferential policies shall not be granted illegally to specific operators.
(b) Arrangement for fiscal expenditures generally shall not be connected with the tax or non-tax revenue paid by enterprises.
(c) Social insurance expenditures to be paid by specific operators shall not be exempted.
(d) Operators shall not be required to provide or detain all kinds of margin beyond the scope as prescribed by law.
(4) The standards for the impact on the production and management acts.
(a) Operators shall not be forced to have monopolistic behaviors as prescribed in the Anti-Monopoly Law of the People's Republic of China.
(b) Sensitive information on production and management shall not be illegally disclosed or shall not be required to be disclosed by operators, to provide convenient conditions for operators' monopoly behaviors.
(c) Government pricing shall not be set beyond the pricing authority.
(d) The price level of goods and services for which market-adjusted prices are implemented shall not be illegally interfered in.
Without legal basis, all localities and departments shall not develop policies or measures that impair the lawful rights and interests of market players or increase their obligations; and they shall not develop policies or measures excluding or restricting competition, in violation of the Anti-Monopoly Law of the People's Republic of China.
4. Exceptional provisions. Policies and measures that fall under the following circumstances may be implemented under the circumstances of complying with the provisions, if they have the effects of excluding and restricting competition:
(1) They protect state economic security and cultural security or involve national defense construction.
(2) They are developed for poverty relief and development, disaster relief and other social security purposes.
(3) They are developed for the conservation of energy resources, the protection of the ecological environment, and the protection of other public interests.
(4) Other circumstances as prescribed by laws and administrative regulations.
Policymaking organs shall explain that relevant policies and measures are indispensable for the realization of the policy objectives and will not seriously eliminate or restrict market competition, and shall specify the implementation period.
The policymaking organs shall assess the implementation effect of the relevant policies and measures year by year. The policies and measures whose implementation period expires or that have not reached the expected effect shall cease to be effective or be adjusted in a timely manner.
IV. Promoting the Orderly Implementation of the Fair Competition Examination System
1. Specifying the working mechanism. From July 2016, all departments of the State Council and all provincial people's governments and their subordinate departments shall conduct fair competition examination during the process of developing relevant policies and measures. The National Development and Reform Commission, the Legal Affairs Office of the State Council, the Ministry of Commerce, and the State Administration for Industry and Commerce shall, in conjunction with relevant departments, establish and improve the working mechanism, direct the implementation of the fair competition examination system, sum up results and experience in a timely manner, promote continuous improvement of the system, and organize and conduct third-party evaluation when conditions are mature. All provincial people's governments shall spare no efforts to research and develop specific work measures and methods, implement the system requirements, gradually promote them in their respective administrative regions from 2017, and direct people's governments at the municipal and county levels and their subordinate departments to carry out fair competition examination.
2. Orderly reviewing inventory. Under the principle of “developers shall be responsible for the review,” people's governments at all levels and their subordinate departments shall, according to the fair competition examination standards, distinguish different circumstances of the existing policies and measures, reliably seize the tempo, and orderly review and repeal all provisions and practice that hinder the unified national market and fair competition. Provisions and practice that are reported relatively intensively by market players, expose problems in a relatively concentrated manner, and have relatively prominent influence shall be repealed as soon as possible; for preferential policies granted to enterprises in contract agreement and other forms and some policies and measures whose immediately repealing will cause significant impact, a transitional period shall be arranged and necessary buffer space shall be left; and preferential policies that have been implemented shall not be retroactive.
3. Regular assessment and improvement. The policies and measures issued after the establishment of a fair competition examination system, people's governments at all levels and their subordinate departments shall, while reviewing the regulations and normative documents on a regular basis, assess the impact of the policies and measures on the unified national market and fair competition. Encouragement shall be given to entrust third parties to carry out assessment. Opinions shall be solicited from the public for the assessment reports and the assessment reports shall be disclosed to the public. Policies and measures assessed to have hindered the unified national market and fair competition shall be repealed or amended and improved.
4. Developing detailed implementation regulations. The National Development and Reform Commission, the Legislative Affairs Office of the State Council, the Ministry of Commerce, and the State Administration for Industry and Commerce shall, in conjunction with relevant departments, spare no efforts to research and draft the detailed regulations on the implementation of fair competition examination, further specify the contents, procedures, and methods of fair competition examination, direct policymaking organs to carry out fair competition examination and review and repealing of relevant policies and measures, and guarantee the orderly implementation of the fair competition examination system. All localities and departments shall, in close combination with the reality, develop plans for the review and repealing of relevant policies and measures, specify the work methods, work steps, and time node, strengthen classification guidance, and ensure that the review and repealing of relevant policies and measures in local areas and of these departments are steadily promoted.
5. Strengthening publicity and guidance. Relevant departments shall effectively intensify publicity and training, strengthen policy interpretation and public opinion guidance, enhance the awareness and understanding of the whole society on the fair competition examination system, and create a favorable public opinion atmosphere and working environment for the implementation of the fair competition examination system.
V. Improving the Supporting Measures for the Fair Competition Examination System
1. Improving the competition policies. The Anti-Monopoly Committee of the State Council shall play the functional role, organize, coordinate with, and direct the anti-monopoly work, research and draft relevant competition policies, organize the survey and assessment of the overall competition situation in the market, and lay a solid foundation for promoting and gradually improving the fair competition examination system. All localities and departments shall, according to the requirements of establishing the fundamental status of the competition policies, develop policies and measures in a targeted manner, research the market supervision issues in the new economic fields in a timely manner, continuously improve the rules on market competition, and accelerate the formation of a unified and open market system with orderly competition.
2. Improving the government integrity mechanism. The government's commitments to the public shall be strictly performed, performance in government affairs and promise-keeping services shall be incorporated into the government performance evaluation system, and the government affairs and administrative commitment assessment system shall be established and improved. People's governments at all levels shall seriously perform and fulfill the policies and commitments made according to the law and various contracts signed. The mechanism of constraint and accountability of integrity in government affairs shall be improved. The rules for publication and hearing of the major decision-making issues shall be further promoted, the channels for public participation in decision-making shall be expanded, and social supervision and constraint of the operation of power shall be strengthened.
3. Strengthening law enforcement and supervision. All entities and individuals shall have the power to tip-off the policies and measures suspected of violating the standards for fair competition examination and relevant departments shall handle them in a timely manner; and where the policies and measures are suspected of violating the Anti-Monopoly Law of the People's Republic of China, the anti-monopoly law enforcement institutions shall conduct survey and verification according to the law and offer handling suggestions to relevant authorities at the higher level. The circumstances of the cases and the handling suggestions shall be disclosed to the public. The policymaking organs shall correct the policies and measures that eliminate and restrict competition in a timely manner, and maintain the market order of fair competition.
4. Strengthening accountability. Local governments and departments that issue policies and measures without conducting fair competition examination or in violation of the standards for fair competition examination, and failing to correct relevant policies and measures in a timely manner shall be seriously punished by relevant departments after verification according to the law. Where it is necessary to investigate the Party or administrative disciplinary action liabilities of relevant personnel for negligence of duty and malfeasance, and other reasons, relevant situation shall be transferred to the discipline inspection and supervision organs in a timely manner.
State Council
June 1, 2016