- within Antitrust/Competition Law topic(s)
- in United States
On Dec. 19, 2025, the State Administration of Market Regulation of China (SAMR) published the amended Measures on Prohibition of Monopoly Agreements (Amended MPMA) clarifying the long-expected conditions under which a vertical agreement containing restraints on competition (i.e., a vertical restraint) may be exempted from the prohibition under China's Anti-Monopoly Law (AML). The Amended MPMA will take effect on Feb. 1, 2026.
Article 18 of China's AML prohibits vertical constraints such as resale price maintenance (i.e., fixing the resale price or setting the minimum price for resale), and certain non-price restraints as specified by SAMR in a "vertical" agreement – an agreement between businesses operating at different levels of the supply chain (e.g., manufacturers and distributors). Article 18 also contains a safe harbor rule exempting the vertical constraint if a business and its counterparty in a vertical agreement can prove, among other conditions, that their market shares are below a certain threshold. The Amended MPMA now clarifies the conditions of that safe harbor rule.
- For any resale price maintenance, the exemption will apply if the business can prove that during each year of the vertical agreement: each the business and its counterparty has a share below 5% in the relevant market, and each business and its counterparty has a turnover of the relevant product or service under the vertical agreement below RMB 100 million.
- For any prohibited non-price restraints, the exemption will apply if the business can prove that during each year of the vertical agreement, each the business and its counterparty has a share below 15% in the relevant market.
The Amended MPMA burdens the businesses to prove that they have satisfied the above conditions by submitting the following materials to the enforcing government agency if any investigation against illegal vertical restraint is initiated or threatened: (1) the transaction it has entered into with the counterparty and its implementation, (2) the ownership restructure and business operation of both the business and its counterparty, (3) the annual market share and/or annual turnover in the relevant market of both the business and its counterparty during the term of the agreement and the basis of calculation, and (4) other supporting documents. The enforcing government agency will stop investigation if the businesses can prove they have satisfied the above conditions. In addition, if the business enters the vertical agreement with multiple counterparties – e.g., the supplier enters into the distributor agreement with more than one distributor – the market share and turnover of each counterparty shall be added up for determination whether the aforementioned threshold is satisfied.
Under an earlier proposal, SAMR proposed that, to qualify for an exemption for non-price restraint, the businesses to the vertical agreement must prove that each of their annual turnover are below RMB 300 million and that its market share are below 15%. In the final version of the Amended MPMA, the SAMR removed the condition on annual turnover. This may suggest the SAMR has an interest in relaxing controls over vertical agreements. That said, even for any vertical restraint that satisfies the above safe harbor, the SAMR may still be able to continue its investigation and penalize a vertical restraint under Article 18 of AML if (1) the SAMR publishes a different safe harbor rule for certain special industry sector, or (2) there is clear evidence supporting the restrictive effect on competition.
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