State Administration for Market Regulation
DATE OF ISSUANCE
April 14, 2020
In accordance with the PRC Anti-monopoly Law (AML), the State Administration for Market Regulation (SAMR) investigated and issued large fines to both individuals and corporate entities in a major case regarding abusing dominant market position in the field of active pharmaceutical ingredients (API). The administrative penalties issued to the three companies involved a total amount of RMB 325.5 million. Those three companies are Shandong Kanghui Pharmaceutical Co., Ltd. (Shandong Kanghui), Weifang Puyunhui Pharmaceutical Co., Ltd. (Weifang Puyunhui) and Weifang Taiyangshen Medicine Co., Ltd. (Weifang Taiyangshen).
SAMR found that Kanghui was the de facto controller of both Puyunhui and Taiyangshen through the use of common personnel and other control mechanisms. At one point, the three companies had a collective market share of 94%. As such, SAMR were able to use the concept of collective dominance contained within the AML whereby a rebuttable presumption in favor of dominance can be utilized if the companies collectively have a market share of over 75%. SAMR also considered other factors such as the companies were collectively able to control the market before concluding that dominance existed. SAMR then turned to the issue of abuse.
SAMR found that the three companies abused their dominant position in the sales market of injectable calcium gluconate API in China, and carried out monopoly behaviors of selling products at an unfair high price and attaching unreasonable trading conditions, which excluded and limited market competition and harmed the interests of patients. In view of the serious and unconscionable nature of their conducts, SAMR decided to impose a heavy penalty on those three companies. Shandong Kanghui, was fined 10% of its 2018 annual sales, the maximum amount permissible under the AML, and Weifang Puyunhui and Weifang Taiyangshen were fined 9% and 7% of their 2018 annual sales respectively. Their illegal gains were also confiscated.
In addition, SAMR imposed administrative penalties on Shandong Kanghui and Weifang Puyunhui, and their related personnel for refusing or obstructing the anti-monopoly investigation in the case. On April 14, 2020, SAMR announced 16 administrative penalty decisions with a total amount of RMB 2.53 million. Among them, Shandong Kanghui and Weifang Puyunhui are subject to a legal person penalty of RMB 1 million, the two legal representatives of these two companies are subject to a personal penalty of RMB 100,000, and the remaining employees who refused or obstructed the law enforcement are subject to a penalty ranging from RMB 20,000 to RMB 50,000.
This case is not only the first case regarding the field of API, but also the case with the largest amount of penalty and the largest number of people for the illegal act of refusing or obstructing the anti-monopoly investigation after the implementation of the Anti-monopoly Law in China.