China's First Penalty Against an Individual in Cartel Case

On 21 March 2025, the Shanghai Administration for Market Regulation (Shanghai AMR) issued a series of penalty decisions against three pharmaceutical companies and an individual involved in a cartel in the sale of neostigmine methylsulfate injection, a critical drug used in anesthesia and other medical treatments.

There are several factors of note relating to these decisions, in particular that this represents the first case in which liability has been imposed on an individual for an infringement of China's competition law (the Anti-Monopoly Law, or AML), since such power was introduced to the AML in 2022.

This case also represents one of the most significant cases in which leniency was confirmed to have been granted by China's antitrust enforcement agencies.

Background of the Case

The case was initiated by the central State Administration for Market Regulation (SAMR), and was subsequently taken forward by the Shanghai AMR. The Shanghai AMR formally established the case on 30 April 2024.

The Shanghai AMR's investigation revealed that Shanghai Sine United Pharmaceutical and Medicinal Materials (Sine), Henan Runhong Pharmaceutical (Runhong), and Chengdu Hui Xin Pharmaceutical (Hui Xin) have engaged in anti-competitive agreements (known as monopoly agreements under the AML), including price-fixing and market allocation, in breach of Article 17 of the AML.

Key Findings of the Shanghai AMR

The Shanghai AMR found that, between January 2020 to December 2023, the parties reached and implemented the following in relation to neostigmine methylsulfate injections:

• Price Coordination: The parties coordinated to raise the prices of neostigmine methylsulfate injection across various provinces, significantly increasing the cost for public hospitals and patients.
• Market Division: The companies divided the sales markets for public and private hospitals, ensuring stable market shares for each. This included exclusive agency agreements and shared provincial agents to maintain market stability.

The parties formalized these agreements in writing, and implemented the agreed prices and market divisions by coordinating their sales strategies and adjusting their pricing structures accordingly.

Moreover, the companies communicated and agreed on price increases and market division through various meetings and phone calls, and monitored each other to ensure compliance.

The Shanghai AMR concluded that this conduct restricted market competition, harmed patient interests, and negatively impacted public welfare.

Individual Accountability

In a significant move, the Shanghai AMR also penalized an individual, Guo Suning, who was the general manager of Sine's agency business unit.

Guo played a direct role in negotiating and implementing the anticompetitive agreements by organising and participating in various meetings with representatives from Runhong and Hui Xin to discuss and finalise the monopoly agreements. He ensured that the agreements were implemented by directing his team to adjust pricing and market strategies accordingly.

He was held personally accountable for his role in the cartel activities and imposed a fine of RMB 500,000. This is the first case in which liability has been imposed on an individual, since such power was introduced to the AML in 2022.

Penalties imposed & leniency

Runhong and Hui Xin were each fined 4% of their 2023 sales. On the other hand, whilst Sine was fined at the maximum level of 10% of its sales turnover in 2023 for its lead role in the infringement, this fine was reduced by 80% as it voluntarily reported the conduct and submitted critical evidence during the investigation

This is one of the most significant cases in which leniency was confirmed to have been granted by China's antitrust enforcement agencies, demonstrating the growing emphasis from the Chinese competition authorities on proactive compliance by companies.

Key takeaways

Recently, the Chinese competition authorities (including both central SAMR, and local branches of the AMR) have adopted a more "soft touch" approach to enforcing the AML by introducing the "Three Letters, One Notice" policy in 2023.

Under this policy, the Chinese competition authorities may issue a "Reminder and Urging Letter" as the first step in its enforcement activities when it suspects an infringement of the AML has occurred. This provides the relevant undertakings an opportunity to rectify the infringement before the relevant competition authority takes more formal action to open an investigation.

Nevertheless, this case is a stark reminder that the Chinese competition authorities remain active in enforcing the AML, particularly in critical sectors that directly impact the national economy and citizens' livelihoods, such as the pharmaceutical sector.

China has also started enforcing newly introduced and revised clauses in the AML, following the significant overhaul to the law in 2022. In addition to fines for anti-competitive conduct, SAMR has also issued several decisions on gun-jumping cases, applying the higher penalty levels that were introduced in the reforms. Under the revised AML, the maximum fines for gun-jumping in transactions that do not give rise to any anti-competitive effects have increased from CNY 500,000 to CNY 5 million, whereas the maximum fines for gun-jumping in transactions that do give rise to anti-competitive effects have increased to a maximum of 10% of the turnover of the relevant undertakings.

Companies active in China are encouraged to continue to take a cautious approach to competition law compliance. Under another recently introduced policy, discounts from penalties may be applied by the Chinese competition authorities where companies can show that they have in place robust compliance policies, and taken steps to seek to prevent the relevant infringement from occurring.