NDRC drafts antitrust guidelines for automotive industry

China’s National Development and Reform Commission (“NDRC”), the antitrust agency responsible for investigating price related infringements of the PRC Anti-monopoly Law (“AML”), is leading the drafting of antitrust guidelines applicable to the auto industry. The guidelines will be China’s first sector specific antitrust guidelines.

The guidelines are expected to clarify how the AML and related regulations, which prohibit anti-competitive agreements and abuses of dominance, should be applied in the auto sector.

The NDRC, which has been entrusted by the Anti-monopoly Commission under the State Council to draft the guidelines, is well-placed to lead the drafting since it has accumulated significant enforcement experience as a result of a series of antitrust investigations and surveys into sales of vehicles and the auto parts industry over the past few years.

The NDRC has appointed an academic think tank to work on the first draft of the guidelines and stakeholders (including OEMs, auto parts suppliers, distribution and after-sales service providers, and industry associations) are invited to provide their thoughts and comments on the draft documents.

Recently, the NDRC sent out a questionnaire to around twenty stakeholders to seek their opinions on certain issues relating to the auto sector. The questionnaire may reflect the areas the NDRC intends to address, or potentially the preliminary solutions the NDRC may propose, in the guidelines. In particular:

 
  • the NDRC asks in the questionnaire the circumstances under which resale price maintenance arrangements imposed on distributors by OEMs should be exempt under Article 15 of the AML. Similarly, the NDRC probes the circumstances under which other vertical restraints imposed on distributors, such as territorial and customer restrictions; exclusive purchase or supply arrangements; and tying, should be exempt under Article 15. These questions suggest that the agency is considering providing clarifications on how the exemptions stipulated under Article 15 can be applied to vertical restraints in the auto sector, which is notable since no company has been eligible for exemption under this clause to date.
  • the questionnaire also poses a number of questions in relation to spare parts, reflecting a key area of interest for the NDRC. The NDRC consults on the definition of, and distinction between, original parts and “matching quality” parts; parts bearing suppliers’ trade marks or logos; genuine subcontracting agreements; and restrictions on access to OEM/OES/“matching quality” parts.
  • the questionnaire also demonstrates the NDRC’s willingness to pursue an independent path in addressing antitrust issues in China’s auto sector. In the questionnaire, the NDRC refers to the rules and case law in the EU and the US in relation to limitations on the supplier's ability to place its trade mark or logo on spare parts; independent repairers’ access to original parts; and technical information, etc. However, interestingly, the agency asks the extent to which the same approaches should be followed in China, having regard to the particularities of China’s regulatory framework and market practices. 
  • a policy paper issued by ten ministries in 2014 prohibits OEMs and authorised repairers from making repair services during the vehicle warranty period conditional upon the car having been previously repaired or maintained only by authorised repairers. However, the questionnaire asks stakeholders whether permitting independent repairers’ access to the aftermarket during the warranty period would conflict with the laws on consumer protection and product liability, and if so, how the conflicts can be reconciled.

The first draft of the auto antitrust guidelines is likely to be released for public consultation by the end of this year or early next year.