Cartels in China

Cartels in China: what the law prohibits

Cartels in China are monopoly agreements between competing undertakings. Article 17 of the Anti-Monopoly Law (AML) prohibits agreements, decisions and other concerted practices among competitors that:

• fix or change the price of goods;
• restrict production or sales volumes;
• divide sales markets or raw material procurement markets;
• restrict the purchase of new technology or new equipment, or the development of new technology or products;
• jointly boycott transactions;
• other monopoly agreements identified by the enforcement authority.

An agreement does not need to be written or signed. A concerted practice can be inferred from parallel conduct combined with communication or information exchange, unless the parties can give a reasonable explanation such as independent responses to market conditions. The Supreme People's Court interpretation of 2024 confirms that simple market-following without coordination is not a concerted practice, and that concerted practices carried out through data, algorithms or platform rules are treated in the same way as conventional ones.

Information exchange

Exchanges of competitively sensitive information are among the most common routes into cartel liability. Information about current or future prices, discounts, capacity, output plans, bids or customer allocations is the most sensitive, particularly when it is specific to individual companies and not public. Historical, aggregated data compiled by an independent third party, with sufficient delay and anonymity, is usually lower risk. The 2024 judicial interpretation lists factors for deciding whether parallel behaviour reflects a concerted practice, including whether the parties communicated or exchanged information and whether the conduct can be explained by independent business decisions.

What is not a cartel

Not every contact between competitors is unlawful. Legitimate supply relationships between competitors, properly structured joint ventures, research collaborations, standard-setting with open and transparent procedures, and lobbying on regulatory issues through associations can all be lawful. Independent decisions to follow a competitor's public price increase are not, by themselves, a concerted practice. The key distinction is between independent decision-making based on public information and coordination that replaces the risks of competition with cooperation. Documenting the independent basis for pricing decisions helps demonstrate the former if questions are later raised.

Algorithms and digital tools

Pricing software, shared data platforms and online marketplaces can facilitate coordination without direct human contact. Where competitors use the same third-party pricing tool that pools their confidential data, or a platform aligns merchants' prices, the arrangement may be treated as a concerted practice or as hub-and-spoke facilitation. Businesses adopting algorithmic pricing should understand what data the tool uses and whether competitors' data flows into recommendations.

Exemptions and defences

Article 20 of the AML exempts agreements that the parties can prove serve listed purposes, such as technological improvement and research and development, product standardisation, improving the efficiency and competitiveness of small and medium-sized enterprises, energy saving and environmental protection, mitigating sharp falls in sales or overproduction during an economic recession, and safeguarding legitimate interests in foreign trade. For most of these grounds the parties must also show that the agreement will not substantially restrict competition and that consumers will share in the benefits.

In practice, exemption arguments rarely succeed for hard-core price fixing or market sharing. They are more relevant for research collaborations, standardisation and some joint purchasing arrangements.

The burden is on the parties, so an exemption analysis should be prepared before the collaboration starts, not after a complaint. It should explain the efficiencies sought, why the restrictions are necessary to achieve them, why competition will not be substantially restricted, and how customers benefit. Restrictions that go beyond what the collaboration needs, such as agreeing the resale prices of products developed jointly, can undermine an otherwise defensible arrangement. Where the collaboration also amounts to a concentration, for example a full-function joint venture, the merger control rules may apply as well; see merger control filings.

Government encouragement and industry self-regulation

Chinese industries are sometimes encouraged by ministries or local governments to reduce overcapacity or stabilise prices. The Anti-Monopoly Law allows exemptions for certain agreements, for example to mitigate sharp falls in sales or overproduction during an economic downturn, but the parties must prove that the conditions are met. The law also prohibits government bodies from abusing administrative power to force undertakings to engage in monopolistic conduct. Where an industry initiative involves prices or output, businesses should obtain advice before participating and keep a record of the basis on which they acted.

Trade associations and hub-and-spoke arrangements

A large share of Chinese cartel cases involve industry associations, which may circulate price guidance, organise meetings on "self-discipline" or coordinate responses to price wars. The AML prohibits associations from organising members to engage in monopolistic conduct, and an association can be fined up to RMB 3 million and, in serious cases, have its registration cancelled. SAMR's 2025 enforcement included a case against a vehicle inspection association in Daqing and 31 inspection institutions, as well as driving school cartels in Chongqing, as reported in SAMR's 2025 annual report.

Since 2022, Article 19 of the AML prohibits undertakings from organising other undertakings to reach monopoly agreements or providing substantial assistance to them. This captures hub-and-spoke arrangements, such as a supplier coordinating prices between competing distributors, or a platform or software provider facilitating price alignment. The 2024 judicial interpretation describes substantial assistance to include creating intent, providing facilities, acting as an information channel or helping to enforce discipline.

Rules for association meetings

• Attend only meetings with a written agenda circulated in advance, and review it for sensitive topics.
• Ensure minutes are taken and reflect what was actually discussed.
• Object, leave and record the departure if prices, capacity, customers or bids are raised.
• Do not sign or endorse "self-discipline conventions" that set prices, minimum prices or output.
• Treat informal dinners and messaging groups linked to the association with the same caution.

Penalties for cartels in China

Leniency can reduce or eliminate the fine for undertakings that report early and provide important evidence; see antitrust investigations and leniency. Customers harmed by a cartel may also sue for damages; see private antitrust litigation.

Civil consequences

Beyond administrative penalties, a cartel agreement is void, and participants may face damages claims from customers in Chinese courts. Under the 2024 judicial interpretation, basic facts found in a final administrative decision can be relied on by claimants, and the limitation period restarts when the decision takes legal effect. International cartels can also lead to claims in other jurisdictions, such as the Netherlands, Germany or the United Kingdom in Europe, and class actions in the United States.

Exposure of individuals

Since 2022, the legal representative, principal responsible persons and directly responsible persons who bear personal responsibility for reaching a monopoly agreement can be fined up to RMB 1 million. Individuals who obstruct an investigation also face fines. For international groups, this personal exposure affects how internal investigations are conducted and whether employees should be separately advised. Employment policies should make clear that participation in cartels in China or elsewhere is a serious disciplinary matter.

Bid rigging and criminal risk

The AML itself does not create a general criminal cartel offence. However, bid rigging is also an offence under Article 223 of the Criminal Law (collusive bidding), and the Bidding Law imposes its own sanctions, including disqualification. Companies that participate in public tenders, including through local agents and distributors, need specific controls on contacts with other bidders, consortium arrangements and subcontracting. The text of the Criminal Law and AML is available through the National Database of Laws and Regulations.

Bid rigging can take several forms: agreeing in advance who will win, submitting deliberately high "cover" bids, rotating wins among competitors, withdrawing bids by agreement, or arranging for losing bidders to receive subcontracts. Collusion between a bidder and the tendering party is also prohibited by the Bidding Law and may involve bribery. Because tender data is increasingly analysed by procurement authorities and regulators, patterns such as identical errors in bids, regular rotation of winners or unusual pricing can trigger enquiries.

Tender controls

• Require approval before any contact with other potential bidders about a tender.
• Review consortium and subcontracting arrangements with competitors before bids are submitted.
• Prepare bids independently and keep records of how prices were set.
• Extend controls to agents and distributors who bid on the company's behalf.

How cartels in China are detected and investigated

SAMR and provincial regulators identify cartels in China through complaints from customers and competitors, leniency applications from participants, analysis of pricing and tender data, referrals from procurement authorities, and sector campaigns. Recent campaigns have targeted local services, public utilities, building materials and pharmaceuticals, and SAMR has said it will watch industries affected by price wars. Once a case is opened, investigators may carry out unannounced inspections, question employees and request documents from customers and competitors. See antitrust investigations and leniency for the process.

International cartels and parallel proceedings

Global cartels affecting China can lead to parallel investigations in several jurisdictions. The US Department of Justice prosecutes hard-core cartels as crimes, the European Commission imposes large administrative fines, and Hong Kong's Competition Ordinance treats price fixing, market sharing, output restriction and bid rigging as "serious anti-competitive conduct" under its First Conduct Rule. A Chinese group whose staff coordinate with competitors in export markets can therefore face exposure abroad even if the conduct is not investigated in China. Coordinating leniency and defence across all affected jurisdictions is essential.

Practical risk areas for international businesses

• Local sales teams discussing pricing with competitors at industry events or through messaging groups.
• Exchanges of forward-looking information on prices, capacity or customers, including through benchmarking services.
• Joint ventures and cooperation agreements between competitors where the scope of permitted information sharing is unclear.
• Competitor collaborations on procurement or logistics that drift into coordination on downstream prices.
• Global cartels involving products sold into China, which can lead to parallel Chinese proceedings.
• Distributor meetings where a supplier's dealers discuss local pricing among themselves.
• Staff moving between competitors who bring or share confidential pricing and customer information.
• Recruitment practices: agreements between competitors not to hire each other's staff or to align salaries have been pursued by authorities in the United States and Europe, and should be approached with caution in China under general cartel principles.

First steps if a cartel issue is discovered

1. Stop the conduct immediately, unless advised otherwise in the context of a leniency application.
2. Preserve documents and data, suspending routine deletion for relevant custodians and messaging accounts.
3. Establish the facts quickly through a focused internal review led by legal, with external advisers where appropriate.
4. Assess which jurisdictions are affected by the conduct, including export markets, and whether leniency is available in each.
5. Decide on leniency applications in a coordinated way, recognising that the first applicant usually receives the greatest benefit.
6. Plan communications with employees involved, including whether separate advice is needed.
7. Review contracts and pricing affected by the conduct, and consider exposure to customer claims.

A worked example

Two competing manufacturers set up a joint purchasing arrangement for a raw material to reduce costs. Over time, the purchasing managers start sharing their companies' production plans to forecast demand, and sales staff begin referring to each other's price lists. What started as a potentially defensible cooperation could now support a finding of output coordination and price fixing. Clear ring-fencing of the joint purchasing team, limits on the information it receives, and periodic legal review would have reduced the risk.

Common mistakes

• Assuming that a meeting organised by an association or a government department cannot create cartel liability.
• Responding to competitors' messages about prices by staying silent rather than objecting and reporting.
• Using benchmarking services that circulate recent, company-specific data.
• Failing to train regional sales staff who attend industry events.
• Waiting too long to consider leniency once a problem is discovered.

How TRW & Co helps

We help international and Chinese groups identify and manage the risk of cartels in China and abroad. We review trade association participation and competitor collaborations, design information exchange protocols and clean-team arrangements, run internal reviews when concerns arise, and coordinate multi-jurisdiction leniency and defence strategy. Where PRC legal advice, contact with SAMR or representation before Chinese authorities or courts is needed, we work with licensed PRC law firms and coordinate their input with advisers elsewhere. See also antitrust compliance programmes and joint ventures in China. Please contact us to discuss a concern.