Key Objectives of the Regulations

The *Regulations on the Review of Fair Competition* are designed to ensure that all business operators, regardless of their size or origin, have an equal opportunity to participate in the Chinese market. The regulations seek to eliminate unfair competitive practices by introducing clear standards for reviewing and approving policy measures that may affect market competition. The primary objectives include:

• Promoting Fair Market Competition: By preventing monopolistic practices and ensuring equal access to production factors, the regulations aim to create a level playing field for all businesses.
• Optimizing the Business Environment: The regulations contribute to a more predictable and transparent regulatory environment, which is crucial for businesses planning long-term investments in China.
• Building a Unified National Market: By eliminating regional protectionism and ensuring the free flow of goods, services, and capital across provincial borders, the regulations support the development of a truly national market.

Scope and Application

The regulations apply to the drafting of laws, administrative regulations, local regulations, rules, normative documents, and specific policy measures that affect economic activities in China. Both administrative organs and organizations with public affairs management functions are required to conduct fair competition reviews when drafting these policies. This comprehensive scope ensures that no policy measure escapes scrutiny, thereby minimizing the risk of market distortions.

Review Standards

The regulations set out detailed standards for conducting fair competition reviews, which are crucial for ensuring that policy measures do not impede market competition. These standards are divided into several key areas:

• Market Access and Exit: Policies must not impose unjustified restrictions on businesses entering or exiting the market. This includes avoiding unnecessary approval procedures, discriminatory conditions, or franchise rights that are not justified by the negative list for market access.
• Free Flow of Goods and Factors: The regulations prohibit policies that restrict the free movement of goods, services, and capital within China. This is particularly important for foreign businesses, as it ensures they can operate across provincial borders without facing discriminatory practices.
• Cost of Production and Operation: Policies that increase the cost of doing business, such as selective tax incentives or subsidies, are discouraged unless they have a clear legal basis. This aims to prevent market distortions caused by uneven playing fields.
• Business Operations: The regulations also target policies that interfere with the normal operations of businesses, such as those that coerce companies into monopolistic practices or set preferential prices for specific operators.

Exceptions and Flexibility

While the regulations are stringent, they do allow for some flexibility. If a policy measure is necessary for national security, technological advancement, or public interest (such as environmental protection), it may still be approved even if it restricts competition. However, such policies must be carefully justified, and no less restrictive alternative must be available.

Review Mechanisms and Enforcement

To ensure compliance, the regulations establish a robust review and enforcement mechanism:

• Coordination and Oversight: The State Council will coordinate and oversee the implementation of the fair competition review system, with local governments playing a key role in their respective regions.
• Transparency and Public Participation: The regulations encourage transparency by requiring drafting units to seek input from businesses, industry associations, and the public during the review process. This participatory approach ensures that the regulations are grounded in the realities of the market.
• Supervision and Accountability: The State Council and local market regulation departments are tasked with conducting spot checks and handling reports of non-compliance. Officials who fail to conduct fair competition reviews properly or who cause significant negative impacts through their actions will face disciplinary action.

Implications for Businesses 

The new regulations will have several implications for businesses operating in China:

• Increased Compliance Requirements: Companies will need to be more vigilant in understanding the regulatory environment and ensuring that their operations align with the new fair competition standards.
• Greater Market Opportunities: By leveling the playing field, the regulations may create new opportunities for businesses to expand across China, particularly in regions that were previously challenging due to local protectionism.
• Enhanced Risk Management: Businesses will need to incorporate fair competition considerations into their risk management strategies, particularly when engaging in mergers, acquisitions, or other activities that could be seen as anti-competitive.
• Strategic Planning: Companies should consider the long-term implications of these regulations on their market strategy, particularly in terms of compliance costs and potential market expansion.

Conclusion 

China’s *Regulations on the Review of Fair Competition* mark a significant shift in the country’s approach to market regulation. By emphasizing fair competition, transparency, and accountability, the regulations are poised to enhance the business environment in China and promote sustainable economic growth. Businesses operating in China should closely monitor the implementation of these regulations and adjust their strategies accordingly to remain competitive in this evolving landscape.