MANAGING CHANNELS UNDER THE NEW PRC ANTIMONOPOLY LAW

Excerpt from Practical China Tax and Finance Strategies
published by WorldTrade Executive, Inc.

By Lefan Gong, S.J.D. (Zhong Lun Law Firm)

With the new Antimonopoly Law (AML) effective on August 1, 2008, manufacturers, distributors and others are now subject to new rules that may significantly change their existing ways of doing businesses. Some of the automakers in China reportedly have already started making changes to agreements with their dealers to be in full compliance with the new law. Antimonopoly lawsuits were filed just within a few days after the AML took effect, marking a start of a likely new wave of litigation in China against large corporations, trade associations and even government agencies.

In particular, the AML will likely have a profound impact on channel management. For instance, Article 14 the AML prohibits “monopoly agreements” that fix resale prices or specify minimum resale prices. Now a host of questions emerge:

• Can a company use methods other than “agreements” to impose minimum resale prices on its distributors?
• Can a company suggest and advertise minimum retail prices for its products?
• Can it terminate those distributors that fail to obey such “suggested retail prices”?
• Can a franchisor continue to impose price and territorial restrictions on its franchisees?

For more information on channel agreements under the China Antimonopoly Law

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EC Adopts New Merger Guidelines

By Yannis Virvilis
of McDermott Will & Emery/Stanbrook LLP
published in 12/15/07 EuroWatch p. 3

The European Commission has adopted the final text of the long awaited Non-Horizontal Merger Guidelines. The Commission had previously launched a public consultation with the publication of the draft guidelines at the beginning of the year. The Guidelines apply to vertical mergers between firms that can have a supplier-customer relationship, and also apply to conglomerate mergers where firms are active on closely related markets. The text describes the market conditions that might lead the Commission to have concerns in non-horizontal mergers. In an attempt to increase legal certainty, the text provides a rather low "safe-harbour" of market share (30 per cent) and market concentration (postmerger HHI of 2000), below which it is unlikely that any concerns will arise.

Several articles on this topic appear in the most recent EuroWatch.

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