*AI-generated translation, for reference only.

[Case No.] the Supreme People's Court (2023) SPC IP Admin. Final 30 and the Intermediate People's Court of Nanjing, Jiangsu Province (2021) Su 01 Xing Chu No. 753 (Huang[REDACTED] Chemical Pharmaceutical Co., Ltd. v. the Administration for Market Regulation of [REDACTED] Province and the State Administration for Market Regulation, a Case Concerning an Anti-Monopoly Adm

[Case Facts] Huang[REDACTED] Chemical Pharmaceutical Co., Ltd. (hereinafter "Huang[REDACTED] Company"), together with the outsiders Suzhou You[REDACTED] Technology Co., Ltd. (hereinafter "You[REDACTED] Company") and Jiangsu Jia[REDACTED] Pharmaceutical Co., Ltd. (hereinafter "Jia[REDACTED] Company"; the above three companies are collectively referred to as the "three companies involved"), were the only three enterprises within China that actually produced the active pharmaceutical ingredient (API) camphor at the time the challenged monopolistic conduct occurred, among which Huang[REDACTED] Company and You[REDACTED] Company produced synthetic camphor and Jia[REDACTED] Company produced natural camphor. After receiving leads from a report of suspected monopoly, the Administration for Market Regulation of [REDACTED] Province launched an investigation into the three companies involved and related enterprises, and on May 31, 2021, issued an administrative penalty decision finding that the three companies involved had reached and implemented a horizontal monopoly agreement; it ordered Huang[REDACTED] Company to cease the illegal conduct, confiscated its illegal gains, and imposed a fine of 5% of its sales in the previous year. Dissatisfied, Huang[REDACTED] Company applied for administrative reconsideration. Upon reconsideration, the State Administration for Market Regulation upheld the decision. Huang[REDACTED] Company filed an administrative lawsuit requesting the revocation of the administrative penalty decision and the administrative reconsideration decision. The Court of First Instance rendered a judgment dismissing Huang[REDACTED] Company's claims. Dissatisfied, Huang[REDACTED] Company filed an appeal.

Upon hearing the case at second instance, the Supreme People's Court held that natural camphor and synthetic camphor were essentially the same in terms of use, quality testing, and sales channels, and that for downstream finished-drug manufacturers the two were interchangeable without difference, with strong demand substitutability, so that the three companies involved were business operators in a competitive relationship in the domestic API camphor market. After You[REDACTED] Company ceased producing API camphor, it commissioned Huang[REDACTED] Company to produce industrial-grade synthetic camphor for it, and it was agreed that You[REDACTED] Company would assist Huang[REDACTED] Company in opening up the API camphor market and expanding market share; the two parties also linked the commissioned-processing terms for industrial-grade synthetic camphor to the market price of API camphor, so it could be found that Huang[REDACTED] Company and You[REDACTED] Company had reached and implemented a horizontal monopoly agreement to divide the sales market and fix commodity prices. In addition, the three companies involved, through such acts as meetings, WeChat, and telephone, used the prices they had negotiated with one another as the basis for quotations to finished-drug manufacturers, causing downstream enterprises to accept prices that had been subject to negotiated intervention, so it could be found that the three companies involved had reached and implemented a horizontal monopoly agreement to fix or change commodity prices. The conduct of Huang[REDACTED] Company and You[REDACTED] Company in dividing the sales market and fixing commodity prices overlapped with the concerted price conduct carried out by the three companies involved, and the anti-competitive effect of eliminating price competition was compounded, seriously harming the interests of downstream finished-drug manufacturers and end consumers. Huang[REDACTED] Company benefited significantly from the monopolistic conduct, and during the investigation by the Administration for Market Regulation of [REDACTED] Province, Huang[REDACTED] Company on several occasions delayed the investigation procedure and made untrue statements; the fine of 5% of its sales in the previous year imposed on it by the Administration for Market Regulation of [REDACTED] Province fell within the range of administrative penalties prescribed by law, and the fine ratio was commensurate with discretionary factors such as the nature, circumstances, and harmful consequences of the monopolistic conduct carried out by Huang[REDACTED] Company and its cooperation with the investigation, conforming to the principle that the penalty shall be commensurate with the violation. The challenged administrative penalty decision and the challenged administrative reconsideration decision were not improper in finding that Huang[REDACTED] Company had reached and implemented monopolistic conduct, and the fine ratio determined was lawful and appropriate. The court of final instance therefore rendered a judgment dismissing the appeal and upholding the original judgment.

[Typical Significance] This case is an important practice of anti-monopoly enforcement and adjudication in the API industry, and is also a typical example of the people's courts lawfully supervising and supporting anti-monopoly administrative enforcement and jointly maintaining fair competition in the API market. The judgment in this case is of positive significance for clarifying the definition of the relevant commodity market for APIs, regulating the market competition conduct of API enterprises, reducing the production costs of downstream finished drugs, and safeguarding people's basic livelihood.