Shaanxi Promulgates the First Anti-monopoly Compliance Guidelines for Building Materials Industry in China

On September 18, according to the official website of Shaanxi Provincial Market Regulatory Bureau, in order to help relevant operators in the building materials industry better identify and prevent monopoly risks, the Bureau formulated the Guidelines for Anti-monopoly Compliance in the Building Materials Industry of Shaanxi Province (hereinafter referred to as the Guidelines). The term "building materials industry operators" as mentioned in

these Guidelines refers to natural persons, legal persons and non-legal organizations engaged in the production and operation of building materials such as clinker, cement, concrete, glass, sand and gravel aggregates, bricks, tiles and stones, or providing construction services.

On the basis of summarizing the practice of law enforcement, the Guidelines further provide a reference for building materials enterprises to comply with anti-monopoly regulations. Several experts told Nandu reporters that this is the first anti-monopoly compliance guideline for the building materials industry in China. Gathering

in the same industry should avoid exchanging sensitive information

such as price and output. According to Nandu reporters, in November 2021, Shaanxi Provincial Market Regulatory Bureau issued the Guidelines for Anti-monopoly Compliance of Operators in Shaanxi Province. Among them, special tips are given to operators of four specific industries, namely, public utilities, building materials, APIs and platform economy, on how to reduce anti-monopoly risks.

Combined with the characteristics of the building materials industry, this guideline further gives hints. The Guidelines first clarify the relevant concepts, such as the so-called building materials industry operators, which refer to natural persons, legal persons and non-legal organizations engaged in the production and operation of clinker, cement, concrete, glass, aggregate, brick, tile and stone building materials, or providing construction services.

The Guidelines also popularize the legislative purpose of the Anti-monopoly Law, emphasizing that it does not oppose monopoly status, but monopolistic behavior. The three kinds of monopolistic behaviors regulated by the law include the conclusion and implementation of monopoly agreements, the abuse of dominant market position, and the illegal implementation of concentration.

According to Nandu reporters, due to the limitations of commodity characteristics and transportation costs, the characteristics of localized sales of building materials are obvious, and the sales market is relatively fixed. As a result, some enterprises are easy to reach monopoly agreements to collude with price increases and divide the sales market, and the phenomenon of industry associations taking the lead in participating is prominent.

In order to avoid collusion among enterprises, the Guidelines remind operators in the building materials industry to pay attention to the fact that competitive operators should avoid exchanging sensitive information such as price, output and sales in meetings or gatherings of the same industry, even if they have not explicitly signed a written agreement or reached an oral agreement. However, if the price, quantity and market share of commodities are adjusted in a unified time after the exchange of the above sensitive information, there is also the possibility of being identified as collaborative behavior.

As for the abuse of market dominance, the Guidelines emphasize that when their size and scale reach a certain level, such as market share exceeding 50%, they should pay more attention to the compliance management of anti-monopoly related parties than ordinary operators and standardize their own business practices. It should be noted that market share is an important indicator to determine and presume whether an operator has a dominant market position, but it is not the only criterion.

In terms of concentration of operators, the Guidelines suggest that enterprises that meet the threshold of declaration should declare in advance when merging and acquiring. At the same time, it is mentioned that on August 1, 2022, the State Administration of Market Supervision and Administration entrusted the Shaanxi Provincial Market Supervision and Administration to contact the relevant regions of Shaanxi, Gansu, Qinghai, Ningxia and Xinjiang to be responsible for the anti-monopoly review of some summary cases of concentration of operators. In July

2022, law enforcement agencies announced that 13 cement enterprises organized by Shaanxi Cement Association had reached and implemented a monopoly agreement, with a total fine of 451 million yuan, which set a new record for anti-monopoly fines in the domestic building materials industry. The trade association involved in the case also received a fine of 500000 yuan.

"Operators in the building materials industry need to pay attention to the fact that the legal liability for monopoly is more stringent." In particular, the Guidelines remind that anti-monopoly law enforcement agencies may impose a fine of up to 10% of the sales of the operator in the previous year for the implementation of monopoly agreements, abuse of market dominance and illegal concentration of operators.

"If the circumstances are particularly serious, the impact is particularly bad and the consequences are particularly serious, the Anti-monopoly Law Enforcement Agency under the State Council may determine the amount of the fine at least two times and less than five times the amount of the aforementioned fine.". The above provisions indicate that operators can be fined up to 50% of their sales in the previous year for monopolistic acts.

It is worth mentioning that the Guidelines only provide general guidelines for anti-monopoly compliance of building materials industry operators, aiming at providing reference for enterprises to identify and prevent anti-monopoly risks, and have no legal effect.

Also in September, the Beijing Anti-monopoly Compliance Guidelines were officially announced. This compliance guideline specifically provides anti-monopoly compliance reminders for seven special industries, including public utilities, APIs, building materials, automobiles, insurance, Internet platforms, and overseas related businesses. In 2021, Beijing also issued anti-monopoly compliance guidelines in the field of platform economy. Clarifying market competition rules

for key industries is also a major feature of this wave of anti-monopoly compliance guidelines. For the two major anti-monopoly "disaster areas" such as APIs and automobile industry, the Anti-monopoly Committee of the State Council has given special guidance before. At the local level, some provinces have introduced compliance guidelines for public utilities and platform economy, but focusing on the building materials industry is relatively rare at present.

Several experts who have long been concerned about anti-monopoly told Nandu reporters that the special guidelines issued by Shaanxi Province are the first anti-monopoly compliance guidelines for the building materials industry in China. As for the local competition to issue compliance guidelines, some people in the industry suggest that more attention should be paid to the actual effect and avoid becoming a mere paper.