Competition law officials from around the globe were in China in early August to help Chinese officials commemorate the fifth anniversary of China's Anti-Monopoly Law (AML). Mead Johnson and Johnson & Johnson (J&J), however, were in no mood to join the celebration — the two companies, and several others, had just been forced to make large payments under the AML in separate actions. Those events serve as helpful reminders to all companies doing business in China to remain vigilant about AML compliance.

Many provisions of the AML would be familiar to those experienced with U.S. antitrust or EU competition laws, such as a ban on price fixing agreements with competitors. Other provisions might be familiar but more controversial, such as a prohibition on excessively high prices to consumers and minimum price requirements for distributors. Finally, some provisions have no American counterparts, such as special rules for state-owned enterprises and a goal of "promoting the healthy development of the socialist market economy." The AML is enforced through private litigation and by three Chinese governmental entities: The Ministry of Commerce (MOFCOM) enforces merger provisions; the State Administration of Industry and Commerce (SAIC) focuses on dominance and non-price actions; and the National Development and Reform Commission (NDRC) takes on pricing arrangements.

It was the NDRC that just fined Mead Johnson, Danone, Abbott Laboratories and several other suppliers of baby milk formula a total of approximately $110M for resale price maintenance. NDRC investigated a large increase in the price of foreign milk since 2008. It found that the formula suppliers were imposing fines and supply reductions on distributors that did not agree to abide by minimum resale price suggestions. All the companies agreed to stop such conduct and many immediately dropped the price of formula by as much as twenty percent. Mead Johnson said the actions would lower its full year earnings by about 12 cents per share.

In addition to the three governmental agencies, private litigation is used to enforce the AML. While the number of cases under the AML is miniscule compared to the numbers in U.S. courts under the Sherman Act, those numbers are growing and plaintiffs finally have started to win. In August, J&J was found to have violated the AML after cutting off one of its Chinese medical device distributors for reselling products below a price floor. J&J will now pay a fine of nearly $100,000. It is not just western companies who are facing AML suits. In April, a local cable provider lost a case to one of its subscribers when it was found to have abused its dominant position by tying the sale of basic cable services to value-added television programming. Finally, China took a step toward allowing group-claim lawsuits in June when draft legislation was introduced that would allow the China Consumers' Association to file actions on behalf of groups of consumers.

Merger specialists have learned in the last five years that MOFCOM can slow down the merger process through its version of the U.S.'s Hart-Scott-Rodino filings. MOFCOM has gained a reputation as a slow reviewer as it seeks comments from other governmental agencies and suppliers and customers in the industry. In its defense, MOFCOM points out that it has conducted well over six hundred reviews in five years and required conditions in just eighteen transactions while blocking one. Even those limited actions have raised eyebrows. One of those eighteen was General Motors' acquisition of Delphi in 2009, a transaction that was unconditionally cleared in a dozen other jurisdictions. The transaction blocked was The Coca-Cola Company's 2009 proposed purchase of China Huiyuan Juice Group, ostensibly on competition grounds but also after many public complaints about a non-Chinese company purchasing a well-known Chinese brand.

Speakers at the anniversary celebrations urged the Chinese enforcers and judges to focus on competition, not industrial policy or political considerations, when interpreting the AML. They also urged the enforcers to be more transparent about the rationales for their actions. Whether such suggestions are followed remains to be seen, but in any event, Chinese AML activity will continue to grow and companies doing business in China must take AML compliance seriously.