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China: Revised Price Control Rules Provide Harsher Penalties for Price Manipulation

(Dec. 22, 2010)

On December 4, 2010, the State Council of China published its decision to revise the Provisions on Administrative Penalties on Price Violations (Penalty Provisions), which was adopted by the executive meeting of the State Council on November 29, 2010. (State Council Decision on Revising the “Provisions on Admlinistrative Penalties on Price Violations” [in Chinese], XINHUANET (Dec. 10, 2010),

Effective on the day of their publication, the revised Penalty Provisions raise the maximum administrative fine for violations against government price controls from the previous Renminbi one million to five million (about US$750,000) (id. art. 5) and provide harsher penalties for a series of specific price violations. The price violations, if they result in serious disturbance of the market order, will be subject to criminal punishment, according to the revised Penalty Provisions (id. art. 19).

“Price violations,” as regulated by the Price Law, refer to the following activities of business operators:

  • colluding with another party to manipulate market prices and damage the legitimate interests and rights of other business operators or consumers;
  • dumping goods, except for fresh goods, seasonable goods, and old stock, at a price lower than the costs of the goods in order to affect the normal manufacturing and business order;
  • forging and dispensing price-raising information to boost prices;
  • adopting a discriminatory price with the same transaction conditions;
  • increasing or decreasing the price of goods indirectly by increasing or decreasing the supply levels of the goods;
  • reaping staggering profits in violation of laws; or
  • engaging in other unlawful pricing activities. (Jia Ge Fa [Price Law] (Dec. 29, 1997, effective May 1, 1998), art. 14, 1997 The Laws of the People's Republic of China 281, 286 (1998).)

Based on the Price Law, the Penalty Provisions were initially issued in 1999. This is the third revision of the Penalty Provisions since they were first amended in 2006. As the Xinhua News Agency points out, the new penalties come as China tries to deal with rising inflation. (Price Fixers Face Harsher Penalties Under Chinese Government Regulations, XINHUANET (Dec. 10, 2010), The regulators responsible for revising the Penalty Provisions related the recent surge in prices of living necessities in China, in particular some agricultural products including garlic, mung bean, and sugar, to the business operators' hoarding, collusion in price raising, and dispensing false price-raising information to boost prices. The regulators believed the current provisions were not harsh enough to punish the violations and thereby maintain a stable price order. (Fagaiwei, Fazhiban Tan Xin Xiugai de Jiage Weifa Xingwei Xingzheng Chufa Guiding [The National Reform and Development Commission and the State Council Legislative Affairs Office Discuss the Newly Revised Provisions on Administrative Penalties on Price Violations] [in Chinese], XINHUANET (Dec. 10, 2010),

Major changes in penalties applicable under the revised Penalty Provisions include:

  • collusion to manipulate market prices that causes price surges: maximum fine raised from RMB1 million to RMB5 million (Penalty Provisions, art. 5);
  • hoarding of a large number of goods to raise the price: maximum fine raised from RMB0.5 million to RMB3 million (id. art. 6);
  • failure to comply with government price guidance: maximum fine raised from RMB0.5 million to RMB2 million (id. art. 9);
  • failure to comply with government price control measures: maximum fine raised from RMB1 million to RMB5 million (id. art. 10);
  • refusal to provide documentation for price inspection or providing false documentation: maximum fine raised from RMB50,000 to RMB100,000 (id. art. 14); and
  • price violation resulting in serious disturbance of the market order: violator will be subject to criminal punishment (id. art. 19).