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Competition Policy & Enforcement in : January 2017 Update

APPENDIX

Merger Reviews Completed by MOFCOM (2008 – present)

Merger Reviews Completed by MOFCOM, 2008-2016

Approved Total Unconditionally Conditionally Rejected Reviewed 2008 16 1 0 17 2009 72 4 1 77 2010 113 1 0 114 2011 164 4 0 168 2012 158 6 0 164 2013 211 4 0 215 2014 236 4 1 241 2015 312 4 0 316 2016 351 3 0 354 TOTAL 1,633 31 2 1,058

Sources: Fei Deng, “Merger Review and Private Litigation under China’s Anti-Monopoly Law,” US-China Business Council Annual Meeting, June 2, 2014; Ministry of Commerce Antimonopoly Bureau Quarterly Reports.

Mergers and Acquisitions Rejected or Conditionally Approved by MOFCOM

Date Case Announced Industry Parties Remedy Duration November 2008 Beverage InBev, Conditionally approved: Pre-merger, Anheuser-Busch had a 27 percent stake in 70 days Manufacturing Anheuser-Busch Tsingtao Brewery (the second-largest beer producer in China) and InBev had a 29 percent stake in Zhujiang Brewery (fourth-largest). MOFCOM imposed three conditions on the post-merger entity: InBev and AB should not increase their stakes in Zhujiang Brewery and Tsingtao Brewery from pre-merger levels; InBev may not acquire any stakes in Snow Breweries or Yanjing Brewery (largest and third-largest, respectively); and InBev will be obliged to notify MOFCOM of any changes in its controlling shareholders. March 2009 Beverage Coca-Cola, Rejected: MOFCOM asserted that the proposed acquisition would enable Coca- 182 days Manufacturing Huiyuan Cola to leverage its dominant position in the carbonated soft drinks to dominate the neighboring juice market. Such dominance would raise entry barriers and limit the ability of medium and small-sized juice companies to compete and innovate. MOFCOM stated that since the two parties were not able to agree on an acceptable remedy with MOFCOM, they had to reject the transaction. April 2009 Chemical Mitsubishi Rayon, Conditionally approved: This case raised competition concerns in the 124 days Manufacturing Lucite methylmethacrylate (“MMA”) market, where the parties would have a post- merger market share of 64 percent. According to MOFCOM, Mitsubishi had businesses in both the MMA market and downstream markets, and thus would have been able to foreclose downstream competitors by leveraging its dominant position in the MMA market. MOFCOM required the parties to divest assets, with Lucite to divest 50 percent of its annual MMA production capacity for five years to one or more unaffiliated third party purchasers. Lucite China must also grant third-party purchasers the right to purchase 50 percent of Lucite China's annual MMA production for five years at cost (equal to the production and management cost per unit), with no added profit margin, with compliance verified annually by an independent auditor.

September 2009 Auto General Motors, Conditionally approved: MOFCOM argued that GM would have the ability to 42 days Manufacturing / Delphi bar its competitors in the auto manufacturing market as Delphi was the exclusive Equipment supplier for various Chinese auto manufacturers. MOFCOM cleared the Manufacturing transaction subject to conditions: GM/Delphi must continue to supply Chinese auto manufacturers on a non-discriminatory basis; GM and Delphi would not exchange confidential information relating to any third party; GM/Delphi must cooperate with customers to achieve a smooth transition when they switch to other auto parts suppliers; and GM must continue its diversified and non- discriminatory policy of purchasing auto parts from multiple suppliers. September 2009 Pharmaceuticals Pfizer, Conditionally approved: MOFCOM believed the acquisition would have anti- 113 days Wyeth competitive effects on the swine mycoplasma pneumonia vaccine (SMPV) market in China. The agency argued that the combined entity would possess a 49 percent market share in an increasingly concentrated SMPV market in China. According to MOFCOM, this would have enabled Pfizer/Wyeth to enlarge their market share and consequently increase the price of SMPV and raise entry barriers to the SMPV market. MOFCOM ordered a divestiture of Pfizer’s SMPV business in China. Pfizer had to find a third party buyer approved by MOFCOM within six months and ensure that the divested business included all tangible and intangible assets necessary for the survival and competitiveness of the divested business. October 2009 Battery Panasonic, Conditionally approved: MOFCOM argued that the acquisition would have anti- 283 days Manufacturing Sanyo competitive effects in three highly concentrated battery markets: rechargeable button-shaped lithium batteries, nickel-hydride batteries for daily use, and nickel-hydride batteries for automobile use. Post-transaction, Panasonic/Sanyo would have market shares of 62, 46, and 77 percent, respectively. MOFCOM considered that the high market shares in already concentrated markets would easily enable the parties to raise prices. Both parties were ordered to divest substantial businesses in all three merger-relevant markets. Sanyo and Panasonic were to spin off their relevant businesses within six months to an independent third party approved by MOFCOM. August 2010 Healthcare Novartis, Conditionally approved: MOFCOM believed that post-transaction 116 days Alcon Novartis/Alcon would be able to coordinate with Hydron (a key supplier of contact lens care products) on price, quantity, and sales territories. Therefore, the transaction was cleared on conditions that Novartis cease sales of its ophthalmic anti-inflammatory/anti-infective combinations under its current brands in China, and not sell any of these products under the same or different brands in China for the next five years. Furthermore, Novartis would terminate its distribution agreement with Hydron within 12 months. June 2011 Chemicals / Uralkali, Conditionally approved: The potassium chloride market was highly concentrated 81 days Fertilizer Silvinit with the top three producing countries accounting for more than 80 percent of the world’s total reserves. MOFCOM believed that, since China relies heavily on imports of these products, 50 percent of which are from Uralkali, Silvinit, or their affiliated companies, the transaction would increase the level of concentration in the market. In addition, the merged entity would benefit from an increased market power through the ownership of more potassium resources and stronger production capabilities. Thus, MOFCOM imposed acquisition conditions to maintain a stable level of imports of potassium chloride into China. The merged entity would have to continue to provide the whole range of potassium chloride products to the Chinese market in sufficient quantity and maintain the current methods, processes, and existing customary negotiations procedures. October 2011 Textile Machine Alpha V, Conditionally approved: Uster (28 percent owned by private equity investor 110 days Manufacturing / Savio Alpha V) and Leopfe (a wholly-owned subsidiary of Savio) were the only two Private Equity global suppliers of yarn clearers – devices to remove faults from yarn and improve its quality—remove faults (thick places, thin places, foreign matter) from the yarn. MOFCOM believed that after the transaction it is likely that Uster and Leopfe could coordinate with each other through Alpha V to restrict and/or eliminate the competition in the yarn clearer market. MOFCOM imposed several conditions on the acquisition, including requiring Alpha V to divest its shares in Uster to an independent party within six months upon MOFCOM’s approval of the transaction and prohibiting Alpha V from participating in or influencing Uster’s operations and management before completion of the divesture process. November 2011 Energy General Electric, Conditionally approved: GE China and China Shenhua Coal to Liquid and 212 days Shenhua Chemical Co., Ltd. (CSCLC, a subsidiary of state-owned Shenhua Group) had (formation of a JV) announced plans to establish a 50/50 joint venture (JV) to license coal-water slurry (CWS) gasification technology to industrial and power projects in China. GE Infrastructure Technology, another subsidiary of GE, would license GE’s CWS gasification technology to the proposed JV. MOFCOM found that this transaction might exclude or restrict competition in the CWS gasification technology licensing market. The JV was approved, subject to the condition that it may not force potential licensees for CWS gasification technologies to use its technology. Further, it may not raise these licensees’ cost of using other technologies by restricting feedstock supply. December 2011 Computing Seagate, Conditionally approved: MOFCOM raised concerns regarding market share in 208 days Components Samsung the hard disk drive (HDD) manufacturing industry, with Seagate and Samsung representing two of the top five companies that collectively hold a virtual monopoly in the market. MOFCOM believed that reducing the number of competitors would encourage collusion. The acquisition was approved, but required that Samsung HDD remain an independent competitor to Seagate and others. Seagate was also required to ensure that an unaffiliated Chinese supplier would not be restricted from supplying other HDD manufacturers. February 2012 Chemical Henkel Hong Conditionally approved: MOFCOM’s review of the proposed joint venture 186 days Manufacturing Kong, focused on three chemical products that appear in correlated upstream and Tiande (formation downstream roles in compound production. MOFCOM’s fear that a JV between of a JV) these parties that supply each other with inputs for different chemical compound outputs would eventually lead to them stifling competition by restricting competitor access to product inputs. MOFCOM required Tiande to provide one of the concerned chemicals to all downstream customers on a “fair, reasonable and non-discriminatory” basis. Tiande was also prohibited from selling this chemical at an unreasonably high price, offer more favorable terms of supply to the JV, or exchange competitive information with Henkel or the JV. March 2012 Electronics Western Digital, Conditionally approved: Western Digital and Hitachi were among the world’s 336 days Components Hitachi five largest manufacturers of data storage drives at the time. MOFCOM was concerned that because China has the world’s greatest number of consumers who buy computers, they would potentially suffer most widely from increased HDD prices. China is also home to large numbers of manufacturers which incorporate HDDs in their computer products. MOFCOM approved the acquisition but imposed conditions requiring Hitachi GST to remain as an independent competitor in the global HDD market, with independent manufacturing, pricing, and marketing. Western Digital and Hitachi were also prevented from substantially altering their business models or coercing customers into exclusively purchasing their HDDs. May 2012 Mobile Phone Google, Conditionally approved: MOFCOM was concerned with the dominant market 233 days Manufacturing Motorola Mobility share in China of Google’s mobile operating system, Android. It believed Google could provide preferential licensing conditions to Motorola to use Android on Motorola devices, giving it an advantage over other mobile phone manufacturers. MOFCOM also stated that Google’s acquisition of Motorola’s patent portfolio would allow it to impose unreasonable licensing conditions of such patents to competitors. MOFCOM’s remedy required Google to license Android free of charge and to treat all mobile device OEMs equally.1

June 2012 Aviation UTC, Conditionally approved: UTC and Goodrich comprised 84 percent of the market 187 days Electronic Goodrich share in aircraft electronic systems, a market that MOFCOM stated had high Systems entry barriers due to research costs. MOFCOM approved the acquisition but required the companies divest Goodrich’s electronics systems business, and find a suitable buyer for this business divestiture within six months. August 2012 E-Commerce , Conditionally approved: MOFCOM argued that Walmart’s rich experience in 242 days Yihaodian operating physical markets for goods and grocery shopping could allow it to expand and eliminate competition in the online e-commerce goods and groceries shopping space. MOFCOM limited Walmart’s acquisition to Yihaodian’s online direct sales business, and prohibited the company from providing online trading services to other trading parties without first obtaining a value-added telecom services permit. Walmart was also prohibited from operating Yihaodian’s current online trading platform service. December 2012 Application ARM, G&D, Conditionally approved: Key concerns raised by MOFCOM about this joint 217 days Processors / Gemalto venture focused on licensing of intellectual property related to application Intellectual (formation of a JV) processors to offer a trusted execution environment (TEE)—a secure area in Property application processors used in electronics. MOFCOM argued that ARM’s globally dominant position in IP licensing and role in establishing TEE created risk that the JV would restrict other companies from providing TEEs by limiting IP licensing. MOFCOM ruled that ARM disclose the security monitoring code and other information that is necessary to develop alternative TEE solutions based on its application processor technology.

1 On January 29, 2014, Lenovo and Google announced an agreement under which Lenovo would purchase the Motorola Mobility smartphone business from Google. The deal closed on October 30, 2014, prompting Google to apply to MOFCOM to eliminate some of the conditions imposed under the original transaction – namely, that Google will treat all original equipment manufacturers in a non-discriminatory manner with respect to the provision of its Android platform. On January 9, 2015, MOFCOM approved Google’s application and removed that requirement. April 2013 Natural Glencore, Conditionally approved: MOFCOM was concerned with competition in the 381 days Resources/ Xstrata minerals market, largely due to China’s heavy reliance on imports of copper, Mining lead, and zinc. Specifically, the agency was concerned that the post-merger market shares of Glencore and Xstrata for these three minerals would harm competition, with downstream Chinese users of Glencore’s inputs likely affected negatively. MOFCOM required the combined entity to divest and sell a copper mine in Peru within 18 months of the decision. Additionally, Glencore was required to provide lead and zinc concentrate to Chinese customers for eight years after the decision.

April 2013 Agricultural Marubeni, Conditionally approved: MOFCOM argued that Marubeni’s sales infrastructure 308 days Products Gavilon in China and share of the soybean import market in China, combined with Gavilon’s US soybean sourcing operations, would limit competition in the soybean import market. MOFCOM approved the acquisition with conditions on the deal: establishing two independent subsidiaries as relating to soya bean exports and sales to China; maintaining two separate operating teams with independent operations; prohibiting the exchange of competitive information between the two subsidiaries, backed up by a mandatory firewall; and prohibiting the Marubeni subsidiary’s purchase of soya beans from the Gavilon subsidiary, except on an arm’s length basis. August 2013 Medical Devices Baxter, Conditionally approved: Baxter and Gambro were both major competitors in the 221 days Gambro highly concentrated CRPT device market (equipment used for treatment of kidney issues). MOFCOM concluded that Baxter would have a dominant market position for CRPT products after the merger, since the transaction would eliminate one of Baxter's main competitors and thus negatively impact competition. The transaction was approved, but with conditions that Baxter divest its worldwide CRPT business and discontinue its OEM agreement with competitor Niplo in the Chinese market. August 2013 Electronic Mediatek, Conditionally approved: MOFCOM found that Mediatek and MStar were 417 days Components MStar primary competitors in the LCD TV control chip market, which they stated was a market with high technical barriers to entry. MOFCOM argued that the post- acquisition environment would eliminate the benefits the competitive relationship brought to the market, as the combined company would have a market share as high as 61 percent in the global market and 80 percent in China. MOFCOM also alleged that other LCD TV control chip manufacturers would not be able to compete effectively with the combined entity, meaning that downstream TV makers in China would have restricted choices in the procurement of LCD TV control chips. MOFCOM’s approval required MStar’s Taiwanese subsidiary to take ownership of MStar’s LCD TV control chip business, and continue operating as a competitor in the Chinese market. January 2014 Biotechnology Thermo Fisher, Conditionally approved: MOFCOM found considerable overlap in the two 196 days Life Technologies companies’ businesses in three biotechnology areas, with 59 relevant products between them. MOFCOM’s analysis led it to focus on a portion of those products that would have high market concentration and estimated price increases in a post-acquisition environment. The final approval of the acquisition set conditions that Thermo Fisher divest its global cell culture business, sell its 51 percent stake in a Chinese bioengineering subsidiary, and reduce prices of certain products that had potential for significant price increases due to market concentration after the acquisition. (Those prices should be reduced by one percent per year for 10 years.) April 2014 IT / Software / Microsoft, Conditionally approved: While Microsoft’s acquisition of Nokia’s handset 208 days Mobile Nokia business seemed to have little direct impact on competition in China’s mobile Equipment market because of the parties’ relatively small market shares in operating systems Manufacturing and devices, MOFCOM raised concerns that the transaction could result in restrictions in licensing of patents deemed essential to competition for smartphones. The agency argued that Microsoft held essential patents for Android operating system licenses, which has an 80 percent market share of mobile devices in China, and would have an incentive to increase licensing costs to other smartphone makers utilizing the Android operating system. MOFCOM imposed conditions that Microsoft and Nokia were required to honor fair, reasonable, and non-discriminatory (FRAND) commitments for standard- essential patents (SEPs); and to refrain from seeking injunctions for infringement of such SEPs against smartphones produced by Chinese producers. May 2014 Mobile Device Merck kGaA, Conditionally approved: Merck kGaA is the world’s leading manufacturer of 106 days Manufacturing AZ Electronic liquid crystal for use in tablets and smartphones, while AZ Electronic Materials Materials has significant global and China market share in photoresist, a complementary product used in tablets and smartphones. MOFCOM found that after the acquisition, Merck would be the world’s largest supplier of both, while competitors would only be able to supply one of the two aforementioned raw materials. This, they argued, would thus allow Merck to restrict competition. MOFCOM’s conditions for acquisition include: Merck must report any licensing deals it signs in China to the ministry; Merck cannot force Chinese customers to buy products from both companies; and Merck must license liquid crystal patents on non-exclusive terms. June 2014 Transportation Maersk, MSC, Rejected: MOFCOM rejected plans by three leading European shipping 273 days Shipping CMA CGM companies – Denmark’s Maersk, Switzerland’s MSC, and France’s CMA GCM – to form a shipping alliance that would allow the companies to share ships and port facilities. In its decision, MOFCOM noted that the three companies involved in the alliance already held a 46.7 percent market share in the Asia-Europe container shipping line market, and that the alliance would allow them to enhance their market dominance in ways that would restrict competition and unfairly increase their bargaining power against consignors and ports. July 2014 Battery Primearth EV Conditionally approved: MOFCOM’s review of the proposed JV focused on 184 days Manufacturing Energy, Toyota nickel metal-hydride car batteries, used in the vast majority of hybrid vehicles. Motor China Globally, the top four suppliers of nickel metal-hydride car batteries have 97 Investment, Toyota percent global market share, with Primearth EV Energy (PEVE) among them. Tsusho, MOFCOM considered that, due to high concentration of major players and high Corun New market entry barriers, this joint venture could restrict or even eliminate Energy, competition in the hybrid vehicle market. Further, MOFCOM believed that the JV Sinogy Venture would further increase Toyota’s dominance in the hybrid vehicle market and Capital (formation thwart development of China’s domestic hybrid vehicle companies. The JV was of a JV) approved with the conditions that it must continue to sell products to third parties on a non-discriminatory basis. Also, within three years, the JV must bring their product(s) market to meet market demand. October 2015 Electronics Western Digital, Conditions amended: MOFCOM investigated Western Digital's application to lift 1326 Components Hitachi Data the first two conditions originally imposed in 2012. Although Western Digital has days Systems violated the first condition twice since it was imposed, it has paid fines in a since timely manner and has not violated any other conditions since. MOFCOM conditio concluded that competition in the HDD market has significantly increased, which ns reduces the need to continue maintaining all of the restrictive conditions. approve However, Western Digital and Hitachi are still the largest competitors in the d; 262 HDD market, making it necessary to retain some conditions. MOFCOM decided days to partially lift the conditions: Western Digital and Hitachi's production and since research teams no longer have to remain independent; however the two start of companies' brand and sales team must still remain independent. Restrictions on investiga altering business models or coercing customers into exclusive purchases are also tions kept. October 2015 Mobile Device Nokia, Alcatel Conditionally approved: MOFCOM found considerable overlap in the two 181 days Manufacturing Lucent companies' businesses in telecommunications, including their core network systems and network infrastructure services. Investigations show that Nokia may use the standard-essential patents (SEPs) it acquired from the acquisition to exclude or restrict market competition. Most Chinese wifi equipment and mobile terminal manufacturers do not have the basis to carry out cross-license with Nokia, and Nokia's large holding SEPs post-acquisition will impair consumer interests. MOFCOM required Nokia to abide by fair, reasonable, and non- discriminatory terms (FRAND) with regards to SEPs, and also make commitments restricting the transferal of SEPs by providing details of the transferal to the affected licensees. October 2015 Computing Seagate, Samsung Conditions amended: In May 2013 MOFCOM investigated Seagate's application 1407 Components Hard Drives to lift conditions originally imposed in 2011 and announced that Seagate has days fulfilled all obligations. However, not all conditions can be lifted due to the fact since that the traditional hard disk market still remains uncompetitive. MOFCOM conditio decided to partially lift the first two conditions originally imposed: Seagate and ns Samsung no longer have to be independent competitors; Seagate also no longer approve need to promise to maintain and expand Samsung's production capacity. d However, Seagate is still required to not change its business model, not to compel customers to exclusively purchase Seagate hard disk products, and not to compel suppliers to exclusively supply Seagate parts. Seagate must also continue to input funds into production innovation. November 2015 Electronics NXP, Freescale Conditionally approved: MOFCOM found that NXP's acquisition of Freescale 236 days Components may lead to enhanced market control of NXP in the semiconductor market, because they have the two largest power transistor market shares in the world. The transaction will also eliminate competition between two close leading competitors in the field, possibly impairing technological innovation and consumer interests. MOFCOM required NXP to fully divest the RF power transistor business by selling it to JAC Capital. The share acquisition transaction between NXP and Freescale shall also not be carried out prior to the closing.

May 2016 E-Commerce Walmart, Conditions lifted: In July 2015 MOFCOM investigated Walmart's application to 1020 Yihaodian lift conditions originally imposed in 2012 and announced that Walmart has days fulfilled all obligations required in the original approval. MOFCOM also since explained that since 2014, competition in the value-added telecommunication conditio market has decreased, lowering barriers to entry. The market in China also ns maintained a rapid growth rate. Sales growth of Yihaodian also slowed after the approve acquisition, with no substantial market growth. A circular issued by MIIT on June d 19, 2015 lifted all foreign stake holding limitations in the online data processing and transaction processing market, stating that foreign stake holding can be as high as 100 percent. MOFCOM therefore decided to lift the restrictive conditions originally imposed in 2012.

July 2016 Beverage Anheuser-Busch, Conditionally approved: MOFCOM found that Anheuser-Busch's acquisition of 143 days Manufacturing SABMiller SABMiller may lead to enhanced market control of Anheuser-Busch in the beer market. There is limited competition in the Chinese beer market as Anheuser- Busch and CR Snow - a joint venture partly owned by SABMiller to operate in China - control 43 percent of the market share. The acquisition will further reduce competition in the market and raise barriers to entry. This will also harm downstream distributors as beer dealers are small in size and have low bargaining power against the producers. MOFCOM required Anheuser-Busch to divest the interest held by SABMiller in CR Snow to Company Limited, who is the Chinese counterpart in the joint venture. December 2016 Healthcare Abbott, St. Jude Conditions Amended: Summary to be added tbd Medical Monopoly Investigations Conducted by SAIC and Its Provincial Branches, 2008-present

Completed Cases

Date Announced Industry Location Companies Involved Description

August 2010 Concrete Construction Jiangsu investigators ruled that in 2009, the Lianyungang Material and Machinery Construction Material and Machinery Association's Association and 16 member Concrete Committee and 16 member companies signed companies agreements to monopolize the market. The deal prohibited all involved from independently signing contracts with buyers. The Jiangsu AIC ruled that this behavior constituted an illegal monopoly agreement under the AML. It confiscated illegal profits of more than RMB 136,481.20 ($20,046) and fined five participants in the cartel a combined total of RMB 530,723.19 ($77,950). April 2011 Liquefied Petroleum Taihe County Huawei LPG According to the investigation report, Taihe County

Gas Station and six other gas Huawei Liquefied Petroleum Gas (LPG) Station in October companies 2008 signed an agreement with six other LPG companies to monopolize and divide up the market, with each company getting a specific piece. The Jiangxi AIC found such behavior illegal under Article 14(1) of the AML, and as a result, confiscated illegal gains of RMB 205,537 ($31,665) and fined Taihe County Huawei LPG Station RMB 130,230 ($20,063). January 2012 Second-hand 11 secondhand car SAIC ruled that a group of three secondhand auto

automobiles dealerships in , dealerships in Anyang, Henan formed a cartel and signed Henan an agreement to set a uniform price and market share in 2007. By 2009, this cartel expanded to include 11 dealerships. SAIC ruled that these activities violated Article 13 of the Antimonopoly Agreement. It then confiscated RMB 1.468 million ($232,691) in illegal profits and imposed a fine of RMB 265,000 ($42,005) on the participants. August 2012 Cement Liaoning Construction According to investigation reports, the Liaoning Material Industry Construction Material Industry Association's Cement Association and 12 member Committee and 12 member companies from central companies Liaoning signed agreements in 2010 to monopolize the market, control production, and set market share. The Liaoning AIC ruled that their behavior constituted an illegal monopoly agreement under the AML and imposed fines of RMB 16.37 million ($2.6 million) on the association and the 12 involved members.

November Insurance Hunan Insurance SAIC ruled that the Yongzhou (Hunan) Insurance Industry 2012 Association and 10 member Association and 12 insurance companies in October 2011 companies signed an agreement establishing a new car insurance service center. This center served as a window for consumer purchases of new car insurance, of which 10 proceeded to set-up. SAIC judged the agreement to be an illegal monopoly agreement under the Antimonopoly Agreement, fining the insurance companies RMB 400,000 ($64,194) and the twelve companies a combined total of RMB 972,000 ($155,990).

December Insurance Hunan Insurance Investigation reports indicate that the Zhangjiajie (Hunan) 2012 Association and 8 member Insurance Industry Association and 8 insurance companies companies in October 2010 signed agreements to establish a new car insurance service center as a window for consumer purchases of new car insurance. SAIC determined the agreement was an illegal monopoly agreement under the Antimonopoly Agreement and fined the association RMB 400,000 ($64,192).

December Insurance Hunan Insurance SAIC ruled that the Changde (Hunan) Insurance Industry 2012 Association and 9 member Association and nine insurance companies in May 2006 companies signed agreements to establish a new car insurance service center as a window for consumer purchases of new car insurance. SAIC believed the agreement was an illegal monopoly agreement under the Antimonopoly Agreement and fined the association RMB 450,000 ($72,216). December Insurance Hunan Insurance SAIC investigation reports indicate that the Chenzhou 2012 Association and 14 member (Hunan) Insurance Industry Association and 10 insurance companies companies in June 2007 signed an agreement to establish a new car insurance service center as a window for consumer purchases of new car insurance. Ultimately, 14 companies participated. SAIC judged the agreement to be an illegal monopoly agreement under the Antimonopoly Agreement and fined the association RMB 450,000 ($72,216).

December Concrete Tiger Product The Zhejiang AIC ruled that three concrete companies— 2012 Concrete, Jiangshan Jiangshan Tiger Product Concrete, Jiangshan Yongcheng Concrete, and Concrete, and Jiangshan Hengjiang Product Concrete—in Jiangshan Hengjiang September 2009 made an oral agreement to divide the Product Concrete city's concrete market, set prices, and eliminate competition between them. The Zhejiang AIC judged the agreement to be an illegal monopoly agreement under the Antimonopoly Agreement and fined the three companies a total of RMB 1.18 million ($189,367). March 2013 Construction Zhejiang Cixi Construction and The Zhejiang AIC stated that the Cixi Construction and

Equipment Engineering Testing Engineering Testing Association, along with the Cixi Association, Cixi Building Building and Engineering Quality Supervision Station's and Engineering Quality Energy Office and three companies, signed in March 2010 Supervision Station Energy an agreement to divide market share among the three Office, and three companies companies and set ground rules for competition. The Zhejiang AIC determined that this was illegal behavior, but decided in early 2012 to suspend the investigation for one year based on initial submissions provided by the parties. In March 2013, the Zhejiang AIC closed the investigation without punishing the enterprises. March 2013 Bricks/ceramics Building Material The Sichuan AIC ruled that three major brickmaking Industry Association Brick companies working under the Yibin Building Material Committee, three of its Industry Association Brick Committee signed a series of member companies, and agreements in May 2009 designed to limit the output of one individual bricks in the market and control market share. The Sichuan AIC judged the agreement to be an illegal monopoly agreement under the Antimonopoly Agreement and fined the three companies a total of RMB 1 million ($161,093). The Sichuan AIC also fined an individual involved in the case RMB 60,000 ($9,666).

April 2013 Tourism Xishuangbanna Tourism According to investigation reports, the Xishuangbanna Association, Tourism Association launched a new information platform Xishuangbanna Travel in 2003. Between 2009 and 2011, the association convinced Agency Association more than 80 other groups—hotels, attraction, passenger car services, and travel agencies—to sign on. This agreement promoted specific tours to specific stops with punitive actions for those who deviated from those recommendations. Meanwhile, the Xishuangbanna Travel Agency Association and 24 travel agencies signed agreements to set prices and itineraries for travel. The Yunnan AIC found the behavior of both organizations to violate the AML and fined each organization RMB 400,000 ($64,859). July 2013 Civilian Blasting Qianzhong Civilian The Guizhou AIC found that a local subsidiary of Blasting Equipment the Qianzhong Civilian Blasting Equipment Operating Operating Company Company was guilty of abuse of market dominance and excessive prices and fined the company RMB 127,000 ($20,715). December Water supply Daya Bay Yiyuan Investigation reports state that Huizhou Daya Bay Yiyuan

2013 engineering Purified Water Purified Water used its strong market position to require local real estate companies to sign agreements bundling water supply with other services. The Guangdong AIC determined that Yiyuan's behavior constituted a violation of Article 17(5) of the AML and required Huizhou halt business practices, turn over illegal gains of just over RMB 860,000 ($142,056), and to pay a fine of two percent of Yiyuan’s 2012 revenue, or just under RMB 2.4 million ($396,434). June 2014 Sports and Beijing Shankai Sports Shankai Sports International—the authorized vendor of

entertainment International package tours to the 2014 FIFA World Cup in Brazil for China, , and Macao—was accused of bundling various products and services, such as game tickets, accommodation, food and beverages, multilingual hostesses, parking, and requiring customers to purchase set bundles. This violated a March 2011 agreement with Beijing China Travel Service Company in which that agency was assigned to arrange such hotel, transportation, and tourism services. The Beijing AIC launched an investigation, but suspended it in June 2014, stating that Shankai admitted that its actions violated the AML and it took undisclosed steps to address concerns.2 July 2014 Fireworks Inner 6 fireworks companies in Six fireworks companies in , that Mongolia Chifeng, Inner Mongolia were designated by local product production safety bureaus as the sole wholesalers for various fireworks products were accused of abusing their dominant market position. Specifically, these companies were accused of requiring distributors to apply for fireworks purchases, use standard markings, and pay for fireworks in advance throughout the year or see their purchasing quotas cut. Four of the companies also signed an illegal monopoly agreement. The Inner Mongolia AIC fined the six companies RMB 583,700 ($94,580). July 2014 Tobacco Inner Chifeng Subsidiary of the The Chifeng Subsidiary of the Inner Mongolia Tobacco Mongolia Inner Mongolia Tobacco Company was accused of using its market position to Company bundle sales, requiring retailers to purchase both popular and less popular cigarette products. The Inner Mongolia AIC fined the company RMB 5.95 million ($964,108), or one percent of sales. October 2014 Sand and gravel 4 quarry operators in Four Chongqing quarry operators in Wuxi County were mining County, Chongqing accused of setting a verbal monopoly agreement in order to divide the sand and gravel sales required to construct the local portion of the Fengxi Highway. The Chongqing AIC imposed fines of RMB 400,000 ($65,440) on the four operators.

2 Since Shankai had carried out corrective measures as it promised, Beijing AIC terminated the investigation in January 2015. October 2014 Tobacco Jiangsu Subsidiary of The head of the Pizhou Subsidiary of the Tobacco Xuzhou Tobacco Company Company (Dai Xiangqin) was accused of abusing his company’s dominant market position to unfairly determine supply allotted to different retailers without reasonable cause. The Jiangsu AIC fined Dai just over RMB 1.72 million ($281,394), or one percent of the sales revenue made from selling cigarettes under limited supply conditions. November Natural gas Chongqing Chongqing Gas Group Chongqing Gas Group Co., Ltd. overcharged its customers 2014 for natural gas using fee rates that were inflated using a “correction coefficient.” The Chongqing AIC posted an April decision ruling that the activity was “abuse of market dominance”, and had violated the AML’s Article 17. Since the company had cooperated, the Chongqing AIC decided to lighten its punishment based on company cooperation and attempts to rectify its behavior, as well as the relatively narrow application of the “correction coefficient.” It fined the company RMB 1.79 million ($291,500), or one percent of its 2010 sales revenue. December Concrete Zhejiang Zhejiang Shangyu Concrete The Concrete Association and 8 member companies in 2014 Association and 8 member Shangyu, Zhejiang were determined to be using monopoly companies agreements to divide local market share, in violation of the AML’s Article 16 and Article 46. The Zhejiang AIC fined the association RMB 10,000 ($1,611), and imposed fines of between RMB 10,000 ($1,611) and RMB 400,000 ($64,447) on the eight member companies. December Bricks Hunan 29 operators of the brick The operators formed a brick cartel without permission 2014-January industry in Mayang Miao from the authorities in March 2011 that limited 2015 Autonomous County competition from brick manufacturers and sellers from outside the county. They manipulated brick prices, held secret negotiations, made exclusive deals with property developers, and banned other brick manufacturers from contacting construction sites. The Hunan AIC ruled that these activities violated Article 46 of the AML among other laws, and required the operators to pay a fine of a certain percentage of their revenue. The Hunan AIC imposed fines ranging from 54000 RMB to 205000 RMB on eight operators. All revenues unduly gained from the collusion are also confiscated. February 2015 Water supply Hainan Dongfang Water Dongfang Water Company was accused of abusing its Company market dominance to impose additional water deposit on the new users when providing water supplying services in the city, in violation of the AML’s Article 17 and Article 47. The Hainan AIC confiscated the illegal gains of RMB 38,521 ($6,148) and fined the company RMB 593,208 ($94,683), or two percent of its sales revenue of the previous year. May 2015 Telecommunications China Tietong Telecom China Tietong Telecom was accused of forcing subscribers to its cable internet services to also accept its fixed telephone services. The company submitted a letter to the Ningxia AIC admitting faults and pledging to implement corrective measures. The Ningxia AIC has therefore suspended its investigation. In return, the company promised to discipline its sales representatives, allow customers to freely choose its services, and accept applications from customers wishing to end its fixed phone services. The company must fulfill all its obligations by August 2015 and submit reports to the Ningxia AIC on its progress. The Ningxia AIC will terminate its investigation if the promises are fulfilled.

May 2015 Telecommunications Ningxia China United Network The Ningxia branch of China United Network Communications Ltd Communications was accused of forcibly bundling fixed telephone services with its internet service sales. The company submitted a letter to the Ningxia AIC admitting faults and pledging to implement corrective measures. The Ningxia AIC has therefore suspended its investigation. In return, the company promised to discipline its sales representatives, allow customers to freely choose its services, and accept applications from customers wishing to end its fixed phone services. The company must fulfill all its obligations by August 2015 and submit reports to the Ningxia AIC on its progress. The Ningxia AIC will terminate its investigation if the promises are fulfilled. May 2015 Telecommunications Ningxia China Telecom The Ningxia branch of China Telecom was accused of forcibly bundling fixed telephone services with its internet service sales. The company submitted a letter to the Ningxia AIC admitting faults and pledging to implement corrective measures. The Ningxia AIC has therefore suspended its investigation. In return, the company promised to discipline its sales representatives, allow customers to freely choose its services, and accept applications from customers wishing to end its fixed phone services. The company must fulfill all its obligations by August 2015 and submit reports to the Ningxia AIC on its progress. The Ningxia AIC will terminate its investigation if the promises are fulfilled. June 2015 Tobacco Liaoning Fushun Tobacco Company Fushun Tobacco Company was accused of bundling its sale of popular cigarettes with less popular cigarettes in order to achieve sales targets. Tobacco retailers wishing to order popular cigarette supplies from the company must also at the same time order a certain amount of less popular cigarettes as part of the deal. The Wushun AIC fined the company 433 million RMB, or one percent of the revenue made from selling cigarettes under the bundling scheme. June 2015 Insurance China Pacific Insurance The insurance companies formed a coinsurance agreement Group Co Ltd and 11 other with the Construction Safety Technology insurance companies Consultation Center. The agreement requires construction companies to purchase insurance from any one of the 12 insurance companies in order to get approval from the Center to commence their project. The Hubei AIC ordered the companies to terminate the agreement and imposed a fine on each company as a percentage of their revenue, ranging from 130000 RMB to 979300 RMB each. July 2015 Animation and Guangdong Panyu Animation & Game Panyu Animation & Game Association signed an Entertainment Association agreement with 52 of its member companies, banning them from participating in expositions or fairs that are not organized or sponsored by the association. The Guangdong AIC fined the association 10000 RMB and ordered it to terminate the agreement. September Telecommunications Inner China Mobile China Mobile was accused of unfairly clearing unused data 2015 Mongolia at the end of every month from customers instead of rolling it over. The company submitted a letter to the Inner Mongolia AIC admitting faults and pledging to implement corrective measures. The Inner Mongolia AIC has therefore suspended its investigation. In return, the company promised to upgrade its package for customers allowing for more flexibility in choosing different data plans, reduce prices for data usage within the autonomous region, and implement a rollover scheme for unused data. The Inner Mongolia AIC will evaluate the company's progress in implementing the promises before May 2016 and will terminate its investigation if they are fulfilled. September Software Sunyard System Sunyard System Engineering refused to comply with the 2015 Development Engineering Company Ltd Anhui AIC's requests for anti-monopoly investigations. The company failed to submit proper documents and corporate information requested by the Anhui AIC. The company also missed its submission deadlines despite being reminded twice by the Anhui AIC. The Anhui AIC ordered the company to immediately comply with its request and fined the company 200000 RMB. October 2015 Telecommunications Inner China United Network China United Network Communications was accused of Mongolia Communications Ltd bundling its internet services with its mobile phone services. The company terminated internet service for clients who failed to pay their phone bills. The company submitted a letter to the Inner Mongolia AIC admitting faults and pledging to implement corrective measures. The Inner Mongolia AIC has therefore suspended its investigation. In return, the company promised to terminate its bundling scheme. The company will also upgrade its internet services including improving its fiber optic connectivity and increasing broadband speed. The Inner Mongolia AIC will evaluate the company's progress in implementing the promises before June 2016 and will terminate its investigation if they are fulfilled. October 2015 Pharmaceuticals Chongqing Chongqing Chongqing Qingyang Pharmaceutical was accused of Pharmaceutical Co Ltd entering into a contract with Hunan Xiangbaihe Pharmaceuticals. According to the contract, Xiangbaihe would become the company's sole distributor of allopurinol. The company also stopped supplying allopurinol active ingredients to other pharmaceutical manufacturers; instead it increased its own production of the drug. The Chongqing AIC fined the company 439308.53 RMB, or three percent of its allopurniol sales revenue and ordered it to terminate its contract with Xiangbaihe. November Concrete Hunan Seven Yongzhou concrete The companies formed a cartel by forming an office that 2015 companies unifies the management, sales, and production of concrete for all companies. The companies split the profits according to their contributions into the office. However, the cartel failed due to differences over market share and contribution levels. The Hunan AIC fined the six companies 30000 RMB each but canceled the fine for one company for cooperating with the investigation. December Insurance Jiangxi China Life and 16 other The 17 companies signed two agreements that divided the 2015 insurance companies casualty insurance market by determining the market share of each insurance company in a given region. According to the agreement, the companies are also not allowed to sell their insurance products out of their given regions. The Jiangxi AIC imposed a fine on each company equivalent to three percent of their revenue in 2013, ranging from 5934 RMB to 2 million RMB. March 2016 Gas Supply Xin'ao Fuel Gas Qingdao Xin'ao Fuel Gas was accused of forcing 209 Co Ltd enterprises to pay a gas fee equivalent to 50 percent of the enterprises' monthly gas usage for using the company's smart card services to pay gas bills. The fee itself cannot be used in the smart card. As the sole gas provider in the region, the company threatened to stop gas supplies to enterprises if they do not pay the fee. The Shandong AIC confiscated 52308.49 RMB worth of interest from the illegal revenue gained, and fined the company 6.8 million RMB, or three percent of its revenue in 2013. March 2016 Accounting Services Shandong 23 accounting companies in 23 accounting companies in , Shandong were accused Linyi City of forming a committee and signing several agreements that pooled their revenues together in a single bank account. The combined revenues were then redistributed among the member companies depending on their revenue share in the insurance market as well as the number of accountants in each company. The Shandong AIC therefore fined each company one to three percent of their revenue, ranging from 15960 RMB to 304859 RMB. April 2016 Water Supply Inner Municipal Water Supply The Municipal Water Supply and Drainage Company of Engineering Mongolia and Drainage Company in the Alxa Left Banner City was accused of forcing Alxa Left Banner City households to buy water meters sold by the company and to use its own construction services for connecting households to the main water supply. Households that do not comply with the company's requirements had their water supply cut off. The Inner Mongolia AIC confiscated 300741 RMB worth of illegal revenue and imposed an extra fine of 451600 RMB, or two percent of the company's revenue. May 2016 Insurance Hubei Hubei Provincial Insurance The Hubei Provincial Insurance Association's four Association companies signed an agreement in 2003 to centralize insurance management by dividing up the car insurance market in the region. The market share was adjusted annually when the agreements were renewed. The Hubei AIC adjusted their fine on the association downwards to 200000 RMB after considering that the association has duly cooperated with the investigation. June 2016 Fiber Optics and Inner subsidiary The Inner Mongolia Televised Network Company was Cable Television Mongolia of the Inner Mongolia accused of bundling television service fees by charging Televised Network households 26 RMB television maintenance fee each Company without notification. The company also forced households to pay a 4 RMB fee for optional television program services. The Inner Mongolia AIC confiscated 91600 RMB worth of illegal revenue and imposed an extra fine of 98000 RMB, or one percent of the company's revenue. August 2016 Salt Inner Chifeng City branch of the Chifeng City's Inner Mongolia Salt Company was accused Mongolia Inner Mongolia Salt of refusing to supply curing salt in its usual 500 gram- Company package to retailers when seasonal demand for salt was at its peak. Instead, the company only supplied crystallized lake salt in packages of 800 grams at an unresaonably high price. On closer inspection, the ingredients and nutritional content of both types of salt are identical. The Inner Mongolia AIC confiscated 1.9 million RMB worth of revenue from the company, and fined the company an extra one million RMB, or two percent of its revenue. August 2016 Electric Supply Jiangsu Jiangsu Hai'an City Electric The Jiangsu Hai'an City Electric Supply Company was Engineering Supply Company accused of demanding a pre-payment before supplying electricity to enterprises. The pre-payment is not counted towards the electricity bill, and the company has threatened to cut off electric supplies if the enterprises do not comply. The company submitted a letter to the Jiangsu AIC in August 2014 admitting faults and pledging to implement corrective measures. The Jiangsu AIC suspended its investigation in September 2014. The company has since canceled its pre-payment requirement and cleared all pre-payments off their accounts. The company also introduced more flexible electricity plans to its entrepreneurial customers and submitted a request to the Jiangsu AIC in January 2015 to terminate the investigation. The Jiangsu AIC found the corrective measures acceptable and has therefore terminated its investigation.

Ongoing Cases

Date Industry Companies involved Potential Issues Launched

July 2013 Food and beverage packaging Tetra Pak Alleged abuse of market dominance July 2014 Information technology Microsoft Alleged abuse of market dominance August 2014 Information Technology Microsoft Alleged Abuse of Market Dominance