China levels the playing field: Measures for the Implementation of the Regulation on Fair Competition Reviews in force

16 May 2025

On 20 April 2025, the Measures for the Implementation of the Regulation on Fair Competition Reviews (公平竞争审查条例实施办法) (“Implementation Measures”) issued by the People’s Republic of China (“PRC”) State Administration for Market Regulation (“SAMR”) on 28 February 2025 came into effect.

A significant step towards establishing a fair and unified market and business environment for all enterprises in the PRC, the Implementation Measures provide guidelines and details on the legal framework established by the PRC Anti-Monopoly Law (中华人民共和国反垄断法) and the Regulations on Fair Competition Review (公平竞争审查条例) (“Review Regulations”). The Anti-Monopoly Law and the Review Regulations, which came into effect on 1 August 2024, aim to ensure a level playing field for all market players (both foreign and domestic), free from regional protectionist and unfair administrative practices.

Under the Review Regulations and the Implementation Measures, PRC administrative authorities and legally empowered public affairs entities, including public institutions, industry associations, community-level self-governing bodies, and professional technical institutions (collectively, “Drafters”) are required to conduct a fair competition review (“Fair Competition Review”) in accordance with these regulations and measures.

This requirement applies when Drafters formulate (1) laws, regulations, and rules including administrative and local regulations and regulatory documents; and (2) specific policies and measures, such as policy documents, standards, technical specifications, administrative agreements, and memoranda of understanding.

The Fair Competition Review is mandatory where such instruments relate to matters that govern or impact market access/exit, investment promotion, investment attraction, government procurement, bidding, qualification standards, or legal and regulatory enforcement impacting businesses’ economic activities (collectively, “Policies”).

The Implementation Measures regulate the Fair Competition Review in three major aspects: review standards, review mechanisms and procedures, and supervision and safeguards. This Alert provides an overview of the Implementation Measures.

Fair Competition Review: Standards

The Implementation Measures refine the standards to which the Fair Competition Review must adhere by specifying four major angles, listing detailed review criteria under each angle, and setting out specific non-compliant practices under each criterion.

Restrictions on market access or exit

Policies must not unlawfully establish market access barriers beyond existing market access requirements; create government franchises without a legal basis; mandate the use of goods/services from specific businesses; or impose unreasonable or discriminatory access/exit conditions.

Typical non-compliant practices include but are not limited to setting administrative pre-approvals or filings without legal basis (e.g. “special permits” for new entrants beyond the existing negative lists for market access); imposing requirements on ownership types or equity ratios in certain projects (e.g. mandating state-owned enterprises hold majority stakes); restricting the operation, purchase or use of goods of specific enterprises by various means; and creating hidden barriers for exits or disposal of business (e.g. making business deregistration conditional on full repayment of debts to local suppliers).

Obstacles to the free flow of goods and production factors

Policies must not impede the free movement of goods, services, or production factors across regions or impose discriminatory measures against non-local business operators in investment and operational matters, local government procurement, fees/pricing, qualifications standards, or legal or regulatory enforcement.

Typical non-compliant practices include but are not limited to discriminatory technical or inspection standards (e.g. requiring additional local certifications for non-local businesses); forcing, rejecting, or obstructing non-local businesses from making investments or engaging in operations in the local area; local quotas (e.g. awarding a specific ratio of procurement contracts to local suppliers); discriminatory pricing for non-local or imported goods or services; and restrictions or prohibitions on non-local services (e.g. prohibiting third-party platforms from operating in specific provinces). 

Distortions of production and operation costs

Policies must not deliberately inflate, reduce, exempt, or manipulate production or operational costs in any form affecting specific undertakings.

Typical non-compliant practices include but are not limited to granting selective tax breaks to local enterprises; granting selective financial incentives or subsidies to local enterprises; and granting preferential policies or charging lower fees for local enterprises (e.g. imposing higher environmental levies on non-local manufacturers compared to local counterparts).

Interference with business autonomy

Policies must not include coercive measures to undermine enterprises’ operational independence and autonomy.

Typical non-compliant practices include but are not limited to forcing or inducing monopolistic behaviour through administrative orders or guidance (e.g. directing enterprises to form price-fixing alliances or divide markets geographically); setting government-guided prices for goods outside the scope of the government pricing catalogue (e.g. preferential rates of utility fees for enterprises without legal basis); and intervening in market-regulated prices (e.g. manipulating fees, premiums, or discounts for goods under market pricing mechanisms to distort competition).

Notwithstanding the above, to balance the relationship between public benefit and fair market competition, Policies that have or may have the effect of excluding or restricting competition may be allowed if they serve national security, scientific or technological advancement, public welfare, or other legally prescribed interests (e.g. environmental production caps, emergency resource allocation), provided that:

• there is no alternative plan that would have less impact on free competition; and
• a defined and reasonable implementation period or termination conditions can be set.

Fair Competition Review: Mechanisms and procedures

The Implementation Measures clarify that SAMR oversees the implementation of the Fair Competition Review system nationwide, conducting the Fair Competition Review with the Drafters of the Policies to be promulgated at the state level and enforcing mechanisms like spot checks and complaint handling. Local counterparts of the SAMR (above the county/district level) (“Local AMR”; together with SAMR, “AMR”) are in charge of implementing the Fair Competition Review system at their respective levels.

Under the Fair Competition Review regime, a dual-tier review mechanism is adopted to promote transparency and accountability, comprising:

• Initial review by the Drafters during the drafting phase, including consultations with stakeholders (e.g. competitors, upstream/downstream operators, industry associations, chambers of commerce); and
• Re-assessment by AMR before the draft Policies are submitted for adoption and enactment. Drafters are required to submit the relevant Policies for a substantive reassessment by the AMR at the same level, and provide supporting documents (e.g. drafting notes, conclusions drawn from the initial-tier review) to obtain written clearance.

A Fair Competition Review is primarily triggered top-down by the Drafters in the process of formulating the Policies. However, business operators (including entities and individuals) can also initiate an ad-hoc Fair Competition Review from the bottom-up through a public complaint mechanism. Business operators may report any non-compliant Policies to the competent AMR, which will conduct investigations and assessments within a statutory period. If the AMR finds that the relevant Policies violate the Implementation Measures, the competent AMR may request rectification from the Drafters if the Policies in question have not yet been promulgated, or refer the case to the competent authority if the Policies in question have been promulgated.

Implications for foreign invested enterprises (“FIEs”)

The Implementation Measures is a welcome and positive move that further promotes market fairness for all enterprises (local and non-local, domestic and foreign) and reinforces principles of market orientation and fair competition by removing market entry barriers, eliminating local protectionism, and ensuring equal treatment at an early legislative phase. It enhances the business environment for FIEs who seek to expand their business in various regions of China where local market access/exit conditions beyond the negative lists will be removed, operational hurdles such as illegal pre-approval procedures or mandatory branch establishment will be eliminated, and free flow of goods, services, and production factors will be protected.

However, with the promotion of national treatment for FIEs and enhanced scrutiny on local preferential policies, FIEs will increasingly be treated as local players and enter into more levelled competition with domestic companies. Under such circumstances, FIEs may need to consider reducing their reliance on financial benefits or support provided by local governments primarily because of their foreign ownership component. Moving forward, FIEs may need to strategically pivot towards innovation, upgrading product/service quality, and improving efficiency to boost their market performance in China in view of the evolving regulatory framework.

Overall, the refined fair competition reviews and standards provided by the Implementation Measures will help FIEs better access, navigate, and integrate into PRC markets and encourage cross-border and inter-regional investments and operations, which will in turn improve the efficient allocation of resources and further boost the next stage of China’s economic development.