China Clarifies Safe Harbor Rules for Price Resale Agreements – New Draft Amendment

China’s market regulator has released a draft revision to regulations on monopoly agreements that seeks to strengthen the safe harbor rule by clarifying conditions under which companies are permitted to enter into vertical monopoly agreements. The proposed amendments provide relief for small companies under China anti-monopoly regulations.

On June 3, 2025, the State Administration for Market Regulation (SAMR) issued the Provisions on Prohibition of Monopoly Agreements (Draft for Comments) (hereinafter, the “draft revision”), soliciting public feedback until July 3, 2025.

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The draft revision amends one article and adds one new article to strengthen the safe harbor clauses outlined in the original Provisions on Prohibition of Monopoly Agreements (the “Provisions”). These Provisions, which came into effect in 2023, were released to supplement the Anti-Monopoly Law (AML). Amended in 2022, the AML permits companies to enter into a resale pricing agreement with a vertical entity under certain market share conditions. However, neither the AML nor the original Provisions defined the specific market share and turnover parameters. 

The amendments to the Provisions clarify the market share and turnover thresholds under which a company is permitted to enter into a vertical agreement to fix or limit the price of resold goods and outline the application process for being exempted from an antitrust probe. 

By clearly defining safe harbor rules, the draft revision protects smaller companies with limited ability to engage in monopolistic behavior from antitrust investigations and penalties. 

Defining market share thresholds for the safe harbor exception 

Under Article 18 of the AML, companies are prohibited from entering into monopoly agreements with transaction counterparties for the following purposes: 

1. Fixing the price of goods resold to third parties;
2. Limiting the minimum price of goods resold to third parties; and
3. Any other monopoly agreements recognized by the State Council Anti-monopoly Law Enforcement Agency. 

Nevertheless, the law also stipulates that if company can prove that its market share in the relevant sector is lower than a certain standard specified by the State Council Anti-monopoly Law Enforcement Agency and meets other conditions specified by the State Council Anti-monopoly Law Enforcement Agency, then it may enter into an agreement to fix or limit the minimum price of goods resold to a third party (hereinafter, “price agreements”). This allowance is also stipulated in Article 17 of the Provisions. 

However, the “certain standard” and “other conditions” were not defined in the AML or the Regulation. The draft revision to the Provisions amends Article 17 to clarify that, in order to enter into a price agreement, the company must prove that its market share in the relevant market is less than 5 percent and meets the following conditions: 

1. The market share of the transaction counterparty in the relevant market is also less than 5 percent; and
2. The annual turnover of the operator and the transaction counterparty in the relevant market does not exceed RMB 100 million (US$13.9 million). 

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For companies entering into a different type of monopoly agreement (that is, “Any other monopoly agreements recognized by the State Council Anti-monopoly Law Enforcement Agency”, as stipulated in the third item of the first paragraph of Article 18 of the AML) and seeks to apply the market share exception, the market share and turnover thresholds for the transaction party are no less than 15 percent and RMB 300 million (US$41.8 million), respectively. The market share threshold for the main business operator remains at 5 percent in this scenario. 

Meanwhile, where there are multiple transaction counterparties, the market share and turnover in the same relevant market must be calculated together. 

However, the article also stipulates that if there is evidence that the agreement has the effect of excluding or restricting competition, the prohibition will remain in place. 

Applying for the safe harbor exception 

The draft revision adds a new article clarifying the procedures for companies to apply for the exception to the prohibition on monopoly agreements. 

The new Article 18 of the Provisions stipulates that if a company can prove that its market share falls below the set thresholds, it must submit a written application to the Anti-Monopoly Law Enforcement Agency. 

The following materials must be provided: 

1. Relevant information on the conclusion and implementation of the agreement between the company and its counterparty;
2. The equity structure and control relationship between the company and its counterparty, and the operating conditions in the relevant markets;
3. The annual market share and annual turnover of the company and the counterparty during the agreement period. The application must also include the basis for calculation; and
4. Other materials that can prove that the operator meets the set market share requirements and conditions. 

If, after reviewing the materials submitted by the company, the Anti-Monopoly Law Enforcement Agency finds that the agreement meets the requirements of the safe harbor provisions, it will not file a case for investigation into the agreement. If the Anti-Monopoly Law Enforcement Agency has already filed a case before receiving the application, it will terminate the investigation. 

However, if the Anti-Monopoly Law Enforcement Agency finds that the decision not to launch an investigation or to terminate an existing investigation is based on incomplete or untrue information provided by the company, or if the facts that informed the decision have changed significantly, it will conduct an investigation into the agreement as otherwise required by law. 

Impact on companies 

If passed in its current form, the draft revision to the Provisions will help to protect smaller companies that have limited scope to impact competition from being the subject of antitrust investigations, and thereby also from facing hefty penalties.

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Under the AML, companies found to have illegally entered into monopoly agreements will be ordered to cease the illegal activity and are liable for a fine of between 1 percent and 10 percent of the company’s previous years’ sales revenue. If the company did not have any sales revenue in the previous year, it will instead be given a fine of up to RMB 5 million (US$696,310), or, if the monopoly agreement that it had illegally entered into has not yet been implemented, a fine of up to RMB 3 million (US$417,786). 

Moreover, if the legal representative, principal person in charge, or person directly responsible for the company is personally responsible for reaching a monopoly agreement, they may be fined up to RMB 1 million (US$139,262).  

By better calibrating enforcement to reflect the actual competitive impact of a company’s conduct, the revised Provisions will reduce undue regulatory burdens on small and medium-sized enterprises, while ensuring that enforcement remains focused on larger market players capable of engaging in serious monopolistic behavior.

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