Resale Price Maintenance in China in Contract Drafting

In 2013, the State Development and Reform Commission of the People’s Republic of China and the local pricing authorities of the affected provinces of Sichuan and Guizhou imposed unusually high fines on two of the best-known state-owned enterprises, amounting to approximately EUR 54 million in total. According to the authorities’ findings, both companies set minimum resale prices and penalised dealers who failed to comply with those minimum prices, thereby engaging in vertical price fixing vis-à-vis resellers, also known as resale price maintenance. The authorities based their action on Article 14(1) of the Chinese Anti-Monopoly Law.

This strict action against two of the best-known state-owned enterprises highlights the gradual development taking place in Chinese competition law. While intervention on the basis of complaints by other market participants had previously been rare, the authorities’ current response nevertheless shows that China is undergoing a shift towards stronger protection of competition.

It remains to be hoped that, in the future, the Chinese economic administration will indeed place greater emphasis on market fairness, and that the above intervention was not merely the result of local party-political disputes. In any event, companies should take into account the emerging change in direction of the Chinese economic administration in this respect when drafting contracts with local resellers.