Two steps forward, one step back According to article 6, an abuse may take the shape of (for example) restrictions on the trading partners’ business dealings with third parties; exclusive purchasing; abusive charges on (or requiring unreasonable economic benefits from) trading partners; or the imposition of unreasonable conditions. The “relatively advantageous position” concept is fairly – though not completely – new in China. In the past, there were a limited number of similar rules in other pieces of legislation. In particular, in 2006, the Chinese antitrust authorities – the Ministry of Commerce, the National Development and Reform Commission, and the State Administration for Industry and Commerce – and two other ministries jointly issued the Administrative Measures for Fair Transactions between Retailers and Suppliers. These measures aim to regulate the relationship between retailers – basically, large shops, supermarkets and chain stores – and individual suppliers. They contain a broad range of rules including the prohibition of unfair transaction practices by retailers vis-a-vis their suppliers by “abusing an advantageous position”.

In Wumei v Lifeng, a court applied this prohibition, holding that a big supermarket chain abused such an advantageous position by forcing “unconditional rebates” on its supplier. Internationally, China is not completely isolated with the proposed relatively advantageous position draft: Germany, Japan and Korea have similar rules. In fact, article 6 in the proposed AUCL amendment draws heavily on German – and to a lesser extent – Japanese and Korean competition laws. From an enforcement perspective, the experience in these jurisdictions suggests that proving a relatively advantageous position (or similar concept) is often easier than proving a dominant position. Broadly speaking, the former often only requires a comparison between the relative positions of the trading parties involved, while the latter typically demands an overall market assessment. Among the jurisdictions with rules similar to the Chinese relatively advantageous position concept, some enforce the rules more actively than others – for example, in Korea, the Korean Fair Trade Commission (KFTC) reportedly prosecuted over 3,000 cases from 1981 to 2014.

The 2007 Posco judgment by the Supreme Court, overturning a KFTC abuse of dominance decision, may have led to a further shift of focus on abuse of “superior position” cases with their relatively lighter burden of proof (as opposed to abuse of dominance cases). If the Draft’s proposals remain in the final amendment of the AUCL and are enforced vigorously in practice, the impact of article 6 on companies doing business in or with China could be far-reaching. While the relatively advantageous position concept may potentially be beneficial to small(er) companies, it risks creating a new level of rather opaque compliance obligations on larger companies. Moreover, the penalties for breaching article 6 can be high.

The Draft provides for fines of up to five times the “illegal revenues,” a concept not explained in the Draft. If those revenues cannot be determined, a statutory fine ranging between RMB100,000 and RMB3m can be imposed. Unfair competition in the internet sector Other antitrust reforms can be found in the Draft’s new rules on unfair competition between internet companies. Over the past few years, many of China’s largest internet and ecommerce companies were entangled in legal disputes with Competition Law Insight • 10 May 2016 each other. Most of these disputes were channelled through the Chinese court system.

The disputes involved new types of unfair competition conduct such as adblocking; enabling users free access to others’ non-free content; and inducing users of other products to use one’s own products. Given the lack of specific rules on internet-based conduct in the AUCL, the Chinese courts dealt with these cases on the basis of article 2 of the AUCL, a provision referring to highlevel principles such as voluntariness, equality, fairness, honesty and good faith. From these principles, the courts developed other, more concrete principles – such as “noninterference” with the legitimate operations of competitors – though the case law is uneven across different courts in China. Now the Draft attempts to codify some of the existing case law on unfair competition in the internet arena – drawing on the courts’ experience from (among others) the Qihoo 360 v Tencent and Tencent v Sogou cases – by inserting a specific provision applicable to internet disputes. In particular, article 13 of the Draft incorporates the noninterference principle into the AUCL, prohibiting companies from “interfering” with users’ options or other companies’ normal business operations by using network technology or app services. Without prior consent, companies are prohibited from using technical methods to stop users from using other companies’ online services; inserting links in others’ online services to force skipping to targeted content; misleading, cheating or forcing users to revise, close, uninstall or stop the normal use of online services legally provided by others; or interfering with, or destroying, the regular operations of online services legally provided by others. In general, the insertion of article 13 is an understandable attempt to make sure the rules are applied consistently among courts and authorities.

At the same time, the internet industry is a vibrant sector with fast-moving technologies and business practices and the provision in the Draft risks becoming outdated quickly. Conclusions The Draft may be seen as an attempt by the Chinese government to modernise Chinese unfair competition rules. If the proposals in the Draft are enacted, the AUCL’s rules would be brought more in line with other Chinese legal texts, such as the Trademark Law or the AML, and – to an extent – international practices. From an antitrust perspective, seeking to align the AUCL and the AML is surely laudable, and the abrogation of prohibitions of predatory pricing, tying and imposition of unreasonable conditions by companies irrespective of their market position appears to make sense. At the same time, the introduction of the new concept of a “relatively advantageous position” may add significant compliance obligations for companies and hence risks significantly reducing the benefits of the AUCL reform. The new provision on unfair competition conduct in the internet space provides the benefit of codifying – and thus streamlining – existing case law, but its static nature may freeze developments at a particular moment in time. Looking ahead, the State Council has already collected stakeholder feedback on the Draft.

As a next step, the Draft may either be further amended (and potentially circulated for comment again) or be directly sent to the Standing Committee of the National People’s Congress for enactment. 9 .