China has a very different approach to price gouging restrictions than the state level system in place in the United States. As the Chinese market is of particular importance to our readers and their businesses, operators may benefit from unpacking the anti-price gouging rules contained in national laws and the reinforcing measures against price gouging adopted by Chinese regulators since the outbreak of the COVID-19.

PRC Price Law

In China, the state regulates price gouging centrally through the PRC Price Law, which was originally promulgated on December 29, 1997. In addition to the Price Law, certain price gouging practices may also raise anti-monopoly, unfair competition or consumer protection concerns under the PRC Anti-Monopoly Law, the PRC Anti-Unfair Competition Law, or the PRC Consumer Rights and Interests Protection Law.

Under the Price Law, with some exceptions, business operators in China are required to set prices for their goods and services based on the costs of manufacturing, operation and market supply and demand, and as such reasonable price increases due to rising costs or changes in market supply or demand are allowed. (This does not account for the limited number of goods and services that are subject to government-set prices or government-guidance prices.)

Certain types of “unfair price behaviors” are also explicitly prohibited, including:

  • fabricating and/or disseminating price increase information to drive up prices;
  • hoarding commodities with tight supply or abnormal price fluctuations;
  • using other price gouging practices to push up commodity prices excessively;
  • using misleading or false pricing practices;
  • covertly manipulating prices by raising or reducing grade levels of goods or services; and
  • illegally seeking exorbitant profits (even absent any market power).

SAMR Guidance

In response to the COVID-19 pandemic, and to deter hoarding and price gouging of daily necessities and epidemic prevention products, Chinese regulators took additional steps to enhance the implementation of the Price Law and other relevant laws and regulations. On February 1, 2020, the China State Administration for Market Regulation (“SAMR”, the agency that enforces the Price Law) issued the Guidance on Investigation and Handling of Illegal Acts of Price Gouging During the Novel Coronavirus Pneumonia Epidemic Prevention and Control Period (the “SAMR Guidance”). The SAMR Guidance sets out detailed guidance on the application of the Price Law and determination of illegal price gouging for daily necessities and products related to epidemic prevention.

Specifically, the SAMR Guidance categorizes the following practices of excessive pricing as illegal price gouging:

  • selling the same product in such a manner that results in the margin between the seller’s cost and the selling price being significantly higher than that of the last actual transaction on or before January 19, 2020 (being the day immediately prior to the Chinese government’s official declaration of the Novel Coronavirus as a Class B level communicable disease); or
  • otherwise selling products at a margin above levels determined as acceptable by the local counterparts of SAMR. Although SAMR has not issued national guidance on acceptable margins, local governments have set thresholds ranging between 15% and 35%.

Penalties

Violation of the price gouging laws may result in administrative penalties, including: (i) restitution, (ii) confiscation of any illegal gains and a fine up to 5 times of the illegal gains (capped at RMB3 million, or approximately $450,000 USD, if there is no illegal gain), (iii) halting business operation pending rectification, and/or (iv) revocation of business licenses.

For more significant violations (e.g., those involving a large amount of illegal gains, or causing significant market disruption), the individuals directly responsible for the violations may incur criminal liability, which may include imprisonment for up to 5 years (or longer for “extremely serious” violations).

In addition to administrative and criminal penalties, affected consumers may also launch civil lawsuits against violators to recover losses caused by the violation.

Follow this space

This international spotlight series will unpack country-specific laws that may be of particular interest. Watch for additional overviews of price gouging restrictions applied in markets that are important to our readers.

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Visit Proskauer on Price Gouging for antitrust insights on COVID-19.

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Proskauer’s cross-disciplinary, cross-jurisdictional Coronavirus Response Team is focused on supporting and addressing client concerns. Visit our Coronavirus Resource Center for guidance on risk management measures, practical steps businesses can take and resources to help manage ongoing operations.

Photo of Christopher E. Ondeck Christopher E. Ondeck

Chris Ondeck is co-chair of the Firm’s nationwide Antitrust Group. He represents clients in civil and criminal antitrust litigation, defending mergers and acquisitions before the U.S. antitrust agencies, defending companies involved in government investigations, and providing antitrust counseling.

Chris has handled antitrust matters…

Chris Ondeck is co-chair of the Firm’s nationwide Antitrust Group. He represents clients in civil and criminal antitrust litigation, defending mergers and acquisitions before the U.S. antitrust agencies, defending companies involved in government investigations, and providing antitrust counseling.

Chris has handled antitrust matters for clients in a number of industries, including advertising, aerospace, alcoholic beverages, appliances, building materials, consumer products, defense, franchise, medical devices, metals, mining, natural resources, oil and gas, packaging, pharmaceuticals, software and telecommunications. He also has developed substantial experience advising clients regarding the application of the antitrust laws to the pharmaceutical industry, the agriculture industry, trade associations and the energy industry.

Photo of John R. Ingrassia John R. Ingrassia

When competition or antitrust questions arise, John Ingrassia is sought out for his knowledge, reputation and credentials.

John is a recognized authority on Hart-Scott-Rodino antitrust merger review, and for more than 20 years has counselled businesses facing the most challenging antitrust issues and…

When competition or antitrust questions arise, John Ingrassia is sought out for his knowledge, reputation and credentials.

John is a recognized authority on Hart-Scott-Rodino antitrust merger review, and for more than 20 years has counselled businesses facing the most challenging antitrust issues and helped them stay out of the crosshairs — whether its distribution, pricing, channel management, mergers, acquisitions or joint ventures.

John is a senior counsel at the Firm, advising on the full range of antitrust matters in diverse industries, including chemicals, pharmaceutical, medical devices, telecommunications, financial services and health care, among others.  His practice focuses on the analysis and resolution of antitrust issues related to mergers, acquisitions, and joint ventures, and the analysis and assessment of pre-merger notification requirements. John has extensive experience with the legal, practical, and technical requirements of merger clearance and is regularly invited to participate in Federal Trade Commission and bar association meetings regarding Hart-Scott-Rodino practice issues.

Photo of Kelly Landers Hawthorne Kelly Landers Hawthorne

Kelly Landers Hawthorne is an associate in the Litigation Department.

While at Columbia, she served as an articles editor of the Columbia Journal of Law & the Arts and was involved with the Lawyering in the Digital Age Clinic.  She also worked as…

Kelly Landers Hawthorne is an associate in the Litigation Department.

While at Columbia, she served as an articles editor of the Columbia Journal of Law & the Arts and was involved with the Lawyering in the Digital Age Clinic.  She also worked as a judicial intern for the Honorable Sandra Townes of the United States District Court for the Eastern District of New York.

Kelly is a Teach For America alumnus and taught middle school special education and math in Washington, D.C. prior to law school.

Photo of Nathaniel Miller Nathaniel Miller

Nat Miller is an associate in the Litigation Department.

Nat earned a J.D. degree from NYU School of Law, where he was a Managing Editor of the Journal of Law & Business, and a B.A. from Harvard University. While at NYU Law, he…

Nat Miller is an associate in the Litigation Department.

Nat earned a J.D. degree from NYU School of Law, where he was a Managing Editor of the Journal of Law & Business, and a B.A. from Harvard University. While at NYU Law, he worked as a research assistant for Professor Arthur R. Miller on his treatise, Federal Practice and Procedure. After law school, Nat served as a law clerk to the Honorable Claria Horn Boom of the Eastern and Western Districts of Kentucky.

Photo of Nicollette R. Moser Nicollette R. Moser

Nicollette Moser is an associate in the Litigation Department and a member of the Antitrust Group and the Price Gouging team.

Nicollette represents clients on matters related to mergers and acquisitions, allegations related to unlawful conspiracy and anticompetitive agreements, price fixing claims and…

Nicollette Moser is an associate in the Litigation Department and a member of the Antitrust Group and the Price Gouging team.

Nicollette represents clients on matters related to mergers and acquisitions, allegations related to unlawful conspiracy and anticompetitive agreements, price fixing claims and price gouging class actions. She also counsels clients on state Attorneys General and Department of Justice investigations regarding price gouging allegations.

Nicollette is a regular contributor to Proskauer’s commercial litigation blog, Minding Your Business.

Nicollette earned her J.D. from Georgetown University Law Center, where she was as an editor of the Georgetown Journal of Law & Public Policy. While at Georgetown, she served as an intern to the Hon. Craig Iscoe of the Superior Court of the District of Columbia. In addition, Nicollette was a law clerk with the House Judiciary Committee’s Subcommittee on Regulatory Reform, Commercial and Antitrust Law.

Photo of Jennifer Tarr Jennifer Tarr

Jennifer E. Tarr is a senior associate in the Litigation Department, and a member of Proskauer’s Sports Law and Antitrust Groups. She regularly litigates on behalf of sports leagues and counsels clients active in the sports industry on a variety of matters, including…

Jennifer E. Tarr is a senior associate in the Litigation Department, and a member of Proskauer’s Sports Law and Antitrust Groups. She regularly litigates on behalf of sports leagues and counsels clients active in the sports industry on a variety of matters, including issues pertaining to antitrust, team relocation, league governance, contract disputes, sponsorship and fan-league relationships.

In addition to sports antitrust work, Jennifer also has experience counseling and defending clients on issues related to mergers and acquisitions, claims related to unlawful conspiracy and anticompetitive agreements, monopolization claims, and price fixing claims. Jennifer is also a member of the firm’s price gouging team.

In 2019, she was a panelist on the Environmental Law Institute’s Managing Private Sector Environmental Initiatives panel, where she spoke about the Antitrust Implications of Corporate Environmental Collaborations.

Jennifer maintains an active pro bono practice and is a member of the Firm’s Pro Bono Committee. She received Proskauer’s Golden Gavel Award for excellence in pro bono work in 2018 and 2019.

Prior to joining Proskauer, Jennifer clerked for the Honorable Lorna G. Schofield on the United States District Court for the Southern District of New York. She also was a Staff Attorney at the Environmental Law & Policy Center, where she represented clients as lead counsel in litigation before multiple federal district and appellate courts and in federal mediation.

While in law school, Jennifer was a member of the Harvard Legal Aid Bureau, one of three honors societies at the law school and the nation’s oldest student-run legal services center. In that capacity, she argued and won a case of first impression before the Massachusetts Supreme Judicial Court. She also argued over 20 motions in state trial court and successfully represented clients in federal mediation and before federal administrative tribunals.