Five Departments Issue Rules: Operators Should Not Be Granted Franchise Rights Without Fair Competition


According to the State Administration for Market Regulation, five departments including State Administration for Market Regulation, National Development and Reform Commission, Ministry of Finance, Ministry of Commerce, and Ministry of Justice have recently issued the Implementation Rules for Fair Competition Review System (below Referred to as Implementation Rules. The Implementation Rules clarify that policy-making agencies should not set unreasonable or discriminatory entry and exit conditions, and should not grant franchise rights to operators without fair competition.


The Implementation Rules require that administrative agencies and organizations authorized by laws and regulations with the function of managing public affairs (hereinafter collectively referred to as policy-making agencies) should conduct a fair competition review, assess the impact on market competition, and prevent the elimination or restriction of market competition, when they formulate regulation  such as market entry and exit, industrial development, investment promotion, bidding, government procurement, operating codes, qualification standards, normative documents, other policy documents and specific policy measures such as "one matter, one discussion" that involve market entities’ economic activities.


The Implementation Rules stated that in terms of market entry and exit, franchise rights cannot be granted to operators without fair competition. The application scope of this standard includes but is not limited to: implementing franchising in general competitive fields or adding administrative licenses in the name of franchising; failing to clarify the period of franchising rights or extending the period of franchising rights without legal procedures; failing to adopt competitive methods such as bidding or competitive negotiation in accordance with the law and directly grant franchise rights granted to specific operators; setting discriminatory conditions so that operators cannot participate in franchise competition fairly, etc.


In terms of supervision and accountability, the Implementation Rules emphasizes that if a policy-making agency is suspected of failing to conduct a fair competition review or promulgating policy measures in violation of the review standard, any organization or individual can report it to the policy-making agency, or to the higher-level authority of the policy-making agency or the market supervision department at the same level or above. Anyone who are suspected of violating the Anti-Monopoly Law of the People's Republic of China should be investigated by the anti-monopoly law enforcement agency in accordance with the law.


People's Daily Online