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Chen & Co. Law Firm held seminar on competition in pharmaceuticals and medical device industries advocating fair competition review system and anti-trust economic analysis

Chen & Co. Law Firm held a seminar on 21 April 2017 to discuss anti-monopoly and anti-unfair competition issues in the pharmaceuticals and medical device industries. Attendees included heads of legal, financial and sales departments from various pharmaceutical companies.The seminar included four sections, covering the topics of fair competition review system, anti-monopoly compliance of the pharmaceutical industry, enforcement against commercial bribe, and methods of coping with anti-monopoly enforcement.


Seminar background


Since 2015, regulations against the pharmaceutical and medical device industries by various competition authorities around the world have been greatly intensified. In China, competition enforcement has already come to an era of normalization and refinement, thus drawing more concerns on competition risks from pharmaceutical and medical device enterprises. Moreover, the newly issued Opinions of the State Council on Establishing a Fair Competition Review System in the Development of the Market System has provided a legal basis for the formulation of such fair competition review system, under which the medicine collective bidding regime will go through legal examination. For pharmaceutical enterprises, such system provides a possible mean of legal relief.

 

Brief introduction

 

Under this background, Chen & Co. Law Firm held a seminar on 21 April 2017 to discuss anti-monopoly and anti-unfair competition issues in the pharmaceuticals and medical device industries. Attendees included heads of legal, financial and sales departments from various pharmaceutical companies. The panel of speakers included industry leaders and professionals such as Zhu Zhongliang, governmental expert of the Bureau of Price Supervision and Anti-Monopoly pf the National Development and Reform Commission (NDRC); Xu Shiying, professor at the East China University of Political Science and Law, and chairwomen of the Asian Competition Forum; Yang Chao, governmental expert of the Shanghai Municipal Administration of Industry and Commerce; Dr. Zhong Zhou, economist at the Industrial Economy and Competition Policy Research Center of the Renmin University of China; Dr. Lin Zhong, senior partner of Chen & Co. Law Firm; Li Xing, partner of Chen & Co. Law Firm; Dr. Xu Mingyan, senior lawyer of Chen & Co. Law Firm; Chen Chi, partner of EY’s Fraud Investigation & Dispute Services (FIDS) team; Max Ma, senior manager of EY’s FIDS team; and Zhou Ying, manager of EY’s Risk Advisory team.

 

The seminar included four sections, covering the topics of fair competition review system, anti-monopoly compliance of the pharmaceutical industry, enforcement against commercial bribe, and methods of coping with anti-monopoly enforcement.

 

Section I Fair competition review system – how to deal with unfair competition in pharmaceutical biddings?

 

l. Fair competition review system

 

To begin with, Zhu Zhongliang, governmental expert of the Bureau of Price Supervision and Anti-Monopoly of NDRC, introduced the establishment and implementation of the fair competition review system in China. Zhu emphasized that the review system functions as a “sifter”, filtering out those rules having effects of damaging market competition. Such review system draws a line between government and market, which can fully guarantee market’s role in allocating resources.

 

2. Fair competition promotion in pharmaceutical biddings

 

Professor Xu Shiying, chairwomen of the Asian Competition Forum, delivered a speech on the topic of How to Promote Fair Competition in Pharmaceutical Biddings. To help analyze this issue, Professor Xu shared her opinions on three aspects, including the impact of administrative monopoly on operators, path selection to regulate administrative monopoly and implementation of fair competition review system.

 

3. Administrative monopoly in pharmaceutical biddings

 

Dr. Xu Mingyan, senior manager at Chen & Co. Law Firm, concluded this section by illustrating her points of view on administrative monopoly in pharmaceutical biddings from a practical point of view. Dr. Xu stated that using economic data to conduct competition analysis is a global trend in the area of fair competition review. Meanwhile, in order to better realize policy goals, governments can also seek assistance from third party bodies to assess competition impact.

 

Section II Anti-monopoly compliance for industries of pharmaceuticals and medical devices – how to conduct risk self-examination and control by sales and compliance departments?

 

1. How to cope with dawn raids correctly?

 

Li Xing, partner at Chen & Co. Law Firm, delivered her speech on the topic of How to cope with dawn raids. By raising questions to and actively interacting with the audience, Li shared her opinions on key points of reaction by enterprises when facing dawn raids. Li further emphasized that coping with dawn raids in a correct and orderly manner can help mitigate possible punishment, which shall be highly valued by enterprises.

 

2. Anti-monopoly audit

 

Chen Chi, Max Ma and Dr. Xu, all of whom are senior professionals, introduced and presented the current practice of the ways anti-monopoly audit are conducted. They illustrated the implementation pattern and prospective application of anti-monopoly audit, reflecting new opportunities in the area of enterprise compliance by combining competition law, audit and big data.

 

3. Anti-monopoly risks control in pricing

 

Dr. Zhong Zhou, economist at the Industrial Economy and Competition Policy Research Center of the Renmin University of China, carried out analysis from the perspective of economics on the issues of monopoly risks imbedded in enterprises’ pricing strategies, which are seldom considered by the enterprises themselves and external consulting firms. Dr. Zhong pointed out that enterprises are facing both direct and indirect monopoly risks in practice. The former is a direct violation of Anti-Monopoly Law, and the latter might fall within the scope of related “miscellaneous provisions” in the Anti-Monopoly Law due to its nature of harming competition.

 

Section III – Dealing with anti-monopoly enforcement for industries of pharmaceuticals and medical devices - how to apply for exemption in a scientific manner?

 

1. Exemption application of monopoly agreements

 

Dr. Xu analyzed the exemption for vertical monopoly agreements, highlighting that the key point for vertical monopoly agreements to be exempted lies in the determination of competition effects, i.e., comparing the weight between the effect of improving economic efficiency and the effect of restraining competition. Dr. Xu also suggested enterprises to fully use the information belonging to themselves in order to obtain exemption to the largest extent.

 

2. Competition effects of enterprises’ strategic behaviors

 

Dr. Zhong mentioned that in the current legal framework, enterprises are allowed to raise efficiency defense in most cases of abusing market power, which is a favorable factor for enterprises. Furthermore, Dr. Zhong comprehensively explained the issues regarding the processing mode by enforcement authorities upon considering certain strategic behaviors as violation, the role played by economics in better identifying competition effects of strategic behaviors, and how to conduct reasonable defense by using economics.

 

Section IV – New trend of commercial bribe enforcement and experience on the basis of cases in industries of pharmaceuticals and medical devices – what kind of marketing practice might trigger risks?

 

1. Inner control system of commercial bribe prevention

 

Zhou Ying, manager at EY’s Risk Advisory team, gave an insightful presentation of the inner control system of commercial bribe prevention, covering the critical elements of environment control, risk assessment, activity control, information and communication, and internal supervision. Zhou further underlined that lacking inner control is an important factor leading to the occurrence of commercial bribe. Therefore, commercial bribe prevention is in consistency with the establishment of inner control system.

 

2. New trend in anti-commercial bribe enforcement

 

Yang Chao, governmental expert at the Shanghai Municipal Administration of Industry and Commerce, introduced the new trend of anti-commercial bribe from the perspectives of case jurisdiction, case nature and punishment. He further explained the enforcement concept, which focuses on the actual impacts on fair competition. At the end of this part, Yang also responded to questions raised by seminar participants regarding sponsorship fee, lecture fee, enforcement standard against commercial bribe, and the difference between company behavior and personal behavior etc.


Conclusion

 

This seminar covered a wide range of hot topics in practice, from fair competition review to anti-monopoly and anti-unfair competition enforcement, from administrative monopoly to economic monopoly, and from competition risk prevention to reasonable defense. In her closing remarks, Professor Xu concluded that competition behavior, competition policy and competition order are the very three core elements of competition law. In order to evaluate the impacts on competition order, competition behaviors shall be assessed based on the standard of competition policies.



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