[5] Discretion must be exercised with caution, as judicial adjudication is key.
Compiled from: Jufa
Case review
[2] Recently, lawsuits arising from administrative agencies imposing "maximum" penalties on violations have garnered widespread public attention and heated discussion. On April 14, 2020, the State Administration for Market Regulation decided to impose severe penalties on three raw material pharmaceutical companies that abused their market dominance to engage in monopolistic practices, with total fines and confiscations amounting to 325.5 million yuan.
[3] Among the three penalty decisions by the State Administration for Market Regulation, the leading company was fined the "maximum" penalty of 10% of its 2018 annual sales revenue, and was also ordered to disgorge over 100 million yuan in illegal gains, totaling 252.7 million yuan in fines and confiscations. Since the Antimonopoly Law took effect on August 1, 2008, this marked the first time a company had faced the "maximum" penalty. On December 15, 2020, China's open trial website livestreamed the court proceedings of this case, with the related video garnering nearly 150 million views, fully demonstrating the high level of public attention to this case.
Relevant legal provisions
[4] Article 47 of the Antimonopoly Law
[5] Where an operator, in violation of the provisions of this Law, abuses its dominant market position, the antimonopoly enforcement agency shall order it to cease the illegal act, confiscate its illegal gains, and impose a fine of not less than 1% but not more than 10% of its sales revenue in the preceding year.
[6] Article 49 of the Antimonopoly Law
For the fines stipulated in Articles 46, 47, and 48 of this Law, the anti-monopoly enforcement agency shall, when determining the specific amount of the fine, consider factors such as the nature, severity, and duration of the illegal act.
Article 38 of the Administrative Penalty Law
Upon conclusion of the investigation, the head of the administrative agency shall review the findings and, based on the circumstances, make the following decisions:
(1) If there is indeed an illegal act subject to administrative penalty, an administrative penalty decision shall be made based on the severity and specific circumstances of the act;
(2) If the illegal act is minor and may be exempted from administrative penalty in accordance with the law, no administrative penalty shall be imposed;
(3) If the illegal facts cannot be established, no administrative penalty shall be imposed.
(4) If the illegal act constitutes a crime, it shall be transferred to the judicial authorities.
(5) For complex or major illegal acts that warrant a heavier administrative penalty, the responsible persons of the administrative agency shall make a collective decision through discussion.
[1] The author's perspective
(6) One of the focal points of dispute in this case is that the subject of enforcement being penalized believes that the decision to impose a "maximum" heavier penalty is too severe, potentially causing the subject to "collapse" directly due to the enormous fine. Article 38 of the Administrative Penalty Law does not provide specific provisions on how administrative agencies should exercise their discretionary power. Special laws in various enforcement fields generally offer highly generalized guiding provisions on discretionary power.
(7) In practice, administrative agencies often formulate benchmarks or guidelines for exercising discretionary power based on their actual duties, guiding agencies at all levels to perform their duties in accordance with laws and regulations. However, when courts review an administrative agency's decision to impose a heavier penalty, they may not necessarily adopt the same approach as the agency. In fact, a systematic and effective set of judgment methods has gradually formed in judicial practice, which is recognized and accepted by most courts. Systematically sorting out and summarizing common practices in judicial adjudication holds significant practical importance for effectively handling disputes, improving the efficiency of judicial rulings, and ensuring "consistent judgments in similar cases."
