*AI-generated translation, for reference only.

Keywords: Administrative; Antitrust Administrative Penalty; Monopoly Agreement; Price Fixing;

Case Facts

On June 15, 2021, the Chongqing Municipal Administration for Market Regulation issued Administrative Penalty Decision No. 41 [2021](hereinafter referred to as the "Contested Administrative Penalty Decision"), the main content of which is as follows: Based on issues raised in a letter from the Chongqing Municipal Public Security Bureau, the Chongqing Municipal Administration for Market Regulation initiated an investigation on October 14, 2019, into Chongqing X Building Materials [REDACTED] Company. for suspected monopolistic conduct. Upon   investigation, Chongqing X Building Materials [REDACTED] Company. was found to have committed the following illegal acts and facts: (1) Chongqing X Building   Materials [REDACTED] Company. entered into a monopoly agreement with a competing operator to "fix or alter commodity prices, or divide   sales markets or raw material procurement markets" (hereinafter referred to as the "Agreement in Question").Chongqing   A Certain Building Materials [REDACTED] Company. and Chongqing A Certain Concrete [REDACTED] Company. are two independent ready-mix concrete producers   . Prior to May 2019, only Chongqing A Certain Building Materials [REDACTED] Company. and Chongqing A Certain Concrete [REDACTED] Company. were actually producing and selling ready-mix concrete within Fengdu County, Chongqing.In early 2014, Chongqing X Building Materials [REDACTED] Company.   and Chongqing Y Concrete [REDACTED] Company. began negotiating a joint venture   to prevent price undercutting and eliminate cutthroat competition, and reached the Agreement in Question in April 2014. (2) Chongqing X Building Materials [REDACTED] Company. and its competitor, Chongqing Y Concrete [REDACTED] Company., engaged in the conduct of fixing commodity prices and dividing   sales markets.1. Price-fixing. Starting on April 20, 2014, Chongqing X Building Materials [REDACTED] Company. and Chongqing X Concrete [REDACTED] Company. exchanged statistical staff to work at each other's companiez . After reaching an agreement, the two companies set a standard sales price for ready-mix concrete   and assigned mutual supervisors. If a supervised company was found to be selling below the standard price due to special circumstances   , the supervisor would report the situation to their own company's management and seek instructions. 2. Market-sharing , including: (1) Dividing sales territories. Both parties dispatched personnel to conduct daily mutual inspections of the Global Positioning System (GPS) data from concrete mixer trucks to ensure that delivery addresses matched the contracts and invoices, while also ensuring that the other company's mixer trucks did not deliver to construction sites supplied by their own company.

During actual implementation, both companies will supplement the division of sales territories by adjusting the allocation of concrete volumes.(2) Allocating sales volumes and profits. Both parties will dispatch personnel to collect and verify the other company's ready-mix concrete sales contracts and invoices, and to track the daily sales volume and prices of the other company's ready-mix concrete; at the beginning of each month, each company will separately compile and submit the total sales volume and total profit for the previous month, and both companies will   allocate the total sales volume and total profit according to the agreed-upon ratio based on the statistical data.

In March 2019, a certain building materials company in Chongqing and a certain concrete company in Chongqing mutually withdrew the staff members assigned to the other party during the implementation of the agreement in question and ceased to implement the agreement   in accordance with the previous arrangements. The sales revenue of the building materials company in Chongqing for 2018 was 242,985,217.65 yuan.Chongqing [Name] Building Materials [REDACTED] Company. and Chongqing [Name] Concrete [REDACTED] Company. are independent operators engaged in the same business   and are in a clear competitive relationship with each other within the Fengdu County area of Chongqing. By entering into the agreement in question   and implementing practices to fix ready-mix concrete prices and partition the ready-mix concrete sales market, the parties disrupted the fair   competitive market environment, severely excluded and restricted competition, and harmed consumer interests.

Pursuant to Article 46, Paragraph 1 of the Anti-Monopoly Law of the People's Republic of China (2007), it is decided to impose the following penalty on Chongqing X Building Materials [REDACTED] Company.: a fine equivalent to 5% of the previous year's sales revenue, totaling 12,149,260.88 yuan.

C hongqing X Building Materials [REDACTED] Company. contested the administrative penalty decision and filed an administrative lawsuit with the Yubei District People's Court of Chongqing on November 22, 2021; on March 22, 2022, the Yubei District People's Court of Chongqing ruled to transfer jurisdiction of this case to the First Intermediate People's Court of Chongqing.The Chongqing No. 1 Intermediate People's Court   held that Chongqing X Building Materials [REDACTED] Company. and Chongqing Y Concrete [REDACTED] Company. had entered into and implemented the agreement in question. The essence of this conduct was to eliminate competition between them through joint business practices such as price-fixing and market-sharing, with the aim of monopolizing supply and manipulating prices. This not only eliminated the competitive relationship between them and undermined the market order of fair competition, but also caused construction enterprises of their bargaining power and freedom of choice regarding ready-mix concrete, thereby infringing upon the interests of construction companies within Fengdu County. This constitutes an act by operators to reach and implement a monopoly agreement; therefore, on October 8, 2022,Administrative Judgment No. (2022) Yu 01 Xing Chu 55: dismissing the lawsuit filed by a certain building materials company in Chongqing. The company appealed the decision. On August 31, 2023, the Supreme People's Court issued Administrative Judgment No. (2023) Supreme Court Intellectual Property Administrative Final 29, dismissing the appeal and upholding the original judgment.

Judge's Opinion

The court's final judgment held that Chongqing X Building Materials [REDACTED] Company. and Chongqing Y Concrete [REDACTED] Company.   met at the Juxian Teahouse in Fengdu County in April 2014 and reached the agreement in question regarding their joint venture for ready-mix concrete. The main provisions of the agreement covered the fixed supply price of ready-mix concrete, the division of the ready-mix concrete sales markets between the two companies   , the allocation of sales volumes and profits between the two companies based on the agreed-upon market shares,and the establishment of supervision mechanisms sufficient to ensure the agreement's implementation. It is evident that the content of the agreement in question complies with "Fixing or altering the prices of goods" and "dividing sales markets," as regulated by Article 13 of the 2007 Anti-Monopoly Law of the People's Republic of China.The specific manifestations of price-fixing by a certain building materials company in Chongqing and a certain concrete company in Chongqing through the agreement in question were as follows: by stipulating "the range of price fluctuations," "pouring fees for different pouring methods and transportation fees for distances exceeding a certain threshold," "the standard formula for calculating prices," and "the prohibition on changing prices without the consent of other operators participating in the agreement ," among other conditions, to jointly fix the prices of ready-mix concrete of different grades.The methods of price-fixing involved in horizontal monopoly agreements regarding the fixing of commodity prices, as stipulated in Article 13, Paragraph 1, Item 1 of the 2007 Anti-Monopoly Law of the People's Republic of China, include not only the fixing of minimum prices or the direct determination of specific price values, but also the fixing of price ranges or the fixing of calculation methods and standards that can be used to indirectly control price values.According to the terms of the agreement in question, the parties were not prohibited from selling below the agreed-upon standard price during the term of the agreement due to special circumstances, provided that such sales were approved by the responsible persons of both parties. Therefore, this practice of requiring mutual consent for price adjustments still constitutes a method of jointly fixing commodity prices through negotiation. The argument by a certain building materials company in Chongqing that the agreement in question does not constitute a horizontal monopoly agreement, is inconsistent with the intent of Article 13, Paragraph 1, Item 1 of the 2007 Anti-Monopoly Law of the People's Republic of China and is therefore not supported.

Judgment Digest

The methods of price fixing involved in a monopoly agreement to fix commodity prices include not only fixing minimum prices or directly determining specific prices, but also fixing price ranges or fixing calculation methods and standards that can be used to indirectly control prices.

Related Index

Articles 3 and 17 of the Anti-Monopoly Law of the People's Republic of China (the provisions applicable to this case are Article 3 and Article 13(1) of the Anti-Monopoly Law of the People's Republic of China, which came into effect on August 1, 2008)

First Instance: Administrative Judgment No. (2022) Yu 01 Xing Chu 55 of the First Intermediate People's Court of Chongqing (October 8, 2022)

Appeal: Supreme People's Court Administrative Judgment No. (2023) Supreme Court Intellectual Property Administrative Appeal No. 29 (August 31, 2023)