Notice of the Shanghai Municipal Development and Reform Commission on Issuing the Revised Guiding Opinions on Monopoly Agreement Exemptions in the China (Shanghai) Pilot Free Trade Zone for Small and Medium-Sized Enterprises

· Document Number：No. 5 [2017] of the Shanghai Municipal Development and Reform Commission

· Area of Law： China (Shanghai) Pilot Free Trade Zone

· Level of Authority： Local Regulatory Documents

· Date issued：09-20-2017

· Effective Date：10-25-2017

· Status： Effective

· Issuing Authority： Other Institutions of Shanghai Municipality

Notice of the Shanghai Municipal Development and Reform Commission on Issuing the Revised Guiding Opinions on Monopoly Agreement Exemptions in the China (Shanghai) Pilot Free Trade Zone for Small and Medium-Sized Enterprises
(No. 5 [2017] of the Shanghai Municipal Development and Reform Commission)
All relevant entities in the China (Shanghai) Pilot Free Trade Zone:
The revised Guiding Opinions on Monopoly Agreement Exemptions in the China (Shanghai) Pilot Free Trade Zone for Small and Medium-Sized Enterprises are hereby issued to you. Please conscientiously comply with and implement them.
Shanghai Municipal Development and Reform Commission
September 20, 2017
Annex:
Guiding Opinions on Monopoly Agreement Exemptions in the China (Shanghai) Pilot Free Trade Zone for Small and Medium-Sized Enterprises
For the purposes of maximizing the spearheading role of the China (Shanghai) Pilot Free Trade Zone ("SHFTZ"), directing small and medium-sized enterprises (“SMEs”) to cooperate in compliance with the law, and promoting the sound development of SMEs, the following guiding opinions on the monopoly agreement exemptions in the SHFTZ for SMEs are hereby offered in accordance with the Anti-Monopoly Law of the People's Republic of China (hereinafter referred to as the "Anti-Monopoly Law"), the Plan for Further Deepening the Reform and Opening of the China (Shanghai) Pilot Free Trade Zone, and other laws, regulations, and regulatory documents:
I. Scope of application
Where SMEs under investigation of the anti-monopoly law enforcement body of Shanghai (hereinafter referred to as the "law enforcement body") consider that Article 15 of the Anti-Monopoly Law may be applicable to their agreements, at least one party to such an agreement is registered in the SHFTZ, and the relevant market is in the administrative region of Shanghai, they may file a written application with the law enforcement body, with relevant materials submitted, according to these Guiding Opinions.
The relevant market shall be defined according to the Guide of the Anti-Monopoly Committee of the State Council to the Definition of a Relevant Market
II. Standards for determination of SMEs
For the purposes of these Guiding Opinions, "small and medium-sized enterprises" are businesses within the meaning of the Anti-Monopoly Law. In practice, they shall be determined in the relevant market by referring to the Provisions on the Classification Criteria for Small and Medium-Sized Enterprises (No. 300 [2011], Ministry of Industry and Information Technology) and taking into account factors such as an enterprise's employees, revenue, total assets, and industry characteristics, but do not include the affiliates of large-scale enterprises. Affiliates shall be determined according to the provisions on "related parties" in the Accounting Standards for Business Enterprises No. 36—Disclosure of Related Parties.
III. Monopoly agreements
For the purposes of these Guiding Opinions, "monopoly agreement" means an agreement, a decision, or any other act in concert to preclude or restrict competition, as specified in the Anti-Monopoly Law.
IV. Conditions for application for exemption
A small or medium-sized enterprise may file a written application for exemption if considering that the monopoly agreement reached by it meets the following conditions:
(1) It falls under any of the circumstances as described in paragraph 1 of Article 15 of the Anti-Monopoly Law.
(2) It falls under any of the circumstances as described in paragraph 1 (1) to (5) of Article 15 of the Anti-Monopoly Law, with proof that it will not seriously restrict competition in the relevant market.
(3) It falls under any of the circumstances as described in paragraph 1 (1) to (5) of Article 15 of the Anti-Monopoly Law, with proof that consumers can share the benefits from it.
V. "Improving the operating efficiency and increasing the competitiveness of small and medium-sized businesses"
The monopoly agreements of SMEs that produce the effects of their improved operating efficiency and increased competitiveness mainly include:
(1) acts of precluding or restricting competition in procurement, production, marketing, sale, storage, logistics, and after-sale maintenance, among others;
(2) acts of precluding or restricting competition in order to achieve differentiation of products (services);
(3) acts of precluding or restricting competition in order to achieve vertical cooperation; and
(4) other acts of precluding or restricting competition.
Explanation may be made from the following standpoints to prove that the aforesaid monopoly agreements can "improve the operating efficiency and increasing the competitiveness of small and medium-sized businesses":
(1) The operating costs of SMEs are reduced on a year-on-year basis.
(2) Operating income rises due to non-price factors on a year-on-year basis.
(3) Product quality is improved on a year-on-year basis.
(4) Other relevant circumstances.
VI. Regarding "not seriously restrict competition in the relevant market," SMEs may make explanations from the following standpoints:
(1) Participants are not unnecessarily restricted by efforts to achieve the purposes of paragraph 1 of Article 15 of the Anti-Monopoly Law.
(2) The possibility of participants to compete for the major part of the relevant products is not precluded.
(3) Participants have a relatively small share of the relevant market.
(4) Other relevant circumstances.
The market share may be calculated based on the sales data of an enterprise by reference to the sales revenue of an enterprise. If the sales data of an enterprise are unclear, the procurement data of the enterprise may be referred to; and if both the sales and the procurement data are unclear, estimates may be made according to the sales volume of the enterprise.
VII. Regarding "consumers can share the benefits from it," SMEs may make explanations from the following standpoints:
(1) Consumers may pay a lower price provided that the quality of products (services) remains unchanged.
(2) Consumers may receive better products (services) provided that the price remains unchanged.
(3) Consumers may conduct transactions more conveniently.
(4) Other relevant circumstances.
VIII. Examination of application materials
The law enforcement body shall, according to its power, examine the application documents submitted by enterprises, and if determining that Article 15 of the Anti-Monopoly Law is applicable, terminate its investigation. Upon termination of investigation, relevant SMEs shall, as required by the law enforcement body, regularly submit written reports on the implementation of their monopoly agreements. If the facts based on which the aforesaid decision is made change substantially, the law enforcement body shall reopen the investigation.
The law enforcement body shall take enforcement action according to the law if determining that Article 15 of the Anti-Monopoly Law is not applicable.
IX. Date of entry into force
These Guiding Opinions shall take effect on October 25, 2017, and remain in force until October 24, 2022.