PRC - Regulations on Anti-Monopolistic Pricing
In August 2009, the National Development and Reform Commission ("NDRC") issued a draft set of implementing regulations, The Regulations on Anti-Monopolistic Pricing ("Draft Regulations") for public comment. The NDRC is one of the agencies in China tasked with enforcement of the Anti-Monopoly Law ("AML"), in particular, price-related matters. The Draft Regulations are intended to provide guidance on the monopolistic pricing provisions of the AML and are applicable to agreements or acts that eliminate or restrict competition with respect to price and to pricing that may be an abuse of a dominant position in a market.
The Draft Regulations may impact acts taking place inside or outside China if such acts restrict competition in the domestic market. As a result, foreign multi-nationals selling goods and services, including software and other technology products, in China will have to be aware of the provisions when formulating their pricing strategy.
Amongst other things, the Draft Regulations prohibit activities such as: (a) selling products at unfairly high prices or purchasing at unfairly low prices; (b) selling products below cost without reason; and (c) refusing to deal with or discriminating against parties by setting excessively high or low prices, as being pricing that is an abuse of a dominant position in a market.
Last year, prior to the issue of the Draft Regulations, Microsoft was the subject of a complaint that it had been abusing its dominant market position by setting excessively high prices for the sale of its products in China. With the Draft Regulations providing clearer guidance on enforcement of the pricing restrictions of the AML, competitors of foreign technology companies operating in China may be more likely to bring complaints against foreign companies which may be seen as selling significantly above or below cost or refusing to deal with potential licensees. In particular, software and hardware vendors charging high licence fees for use of their technology may be targeted by local technology companies and manufacturers. The Draft Regulations do, however, provide some relief by allowing selling at higher prices if similar products can be bought from other companies. The rules on what will be considered a similar product are still somewhat vague.
The Draft Regulations are likely to come into full effect some time towards the end of the year after a period of public consultation which ends on 6 September.
This article is one of several that appear in
Hong Kong and China Technology, Media and Telecommunications Bytes, September 2009.