Navigating new waters: China formally introduces safe harbor rules for vertical anti-competitive agreements

After years of uncertainty, China’s long‑awaited safe harbor regime for vertical agreements finally became effective on February 1, 2026. China's State Administration for Market Regulation (SAMR) published revisions to the Provisions on the Prohibition of Monopoly Agreements (the Revision), formally introducing safe harbor rules for vertical agreements. This follows the release of a draft version for public consultation in June 2025, which was detailed in our earlier blog post, SAMR to introduce long-awaited clarification on safe harbor rules for vertical agreements. 

While China first introduced a general safe harbor mechanism for vertical agreements in the 2022 amendments to the Anti‑Monopoly Law (AML), the absence of detailed implementing rules had limited its practical application. The Revision closes this gap, providing much‑needed clarity and operational guidance for businesses and enforcers and is expected to shape enforcement priorities and practice in this area going forward.

The safe harbor thresholds 

The Revision sets out distinct criteria for two categories of vertical agreements to qualify for the safe harbor under the AML: (i) resale price maintenance (RPM) agreements, and (ii) other non‑price vertical restrictions (such as territorial and customer restrictions, non-compete, exclusive dealing and MFN clauses).

* Where a vertical agreement involves multiple counterparties operating in the same relevant market (eg, one supplier vs. multiple distributors), the market shares of those counterparties within the same relevant market should be assessed on an aggregated basis. 

The safe harbor thresholds helpfully provide a baseline for undertakings to self-assess the risk profile of vertical restrictions. If challenged, the undertaking under investigation can claim for safe harbor exemption by submitting evidence demonstrating that the agreement satisfies the applicable criteria. However, such exemption may be rebutted if there is evidence showing that the agreement has anti-competitive effects.

Issues to watch out in self-assessment 

While the Revision provides welcome clarification, several issues will need to be tested in SAMR’s enforcement practice.

• Market definition

In the past SAMR enforcement against RPM, the authority typically does not strictly define a relevant market. Now that the safe harbor criteria are market share based, it becomes a critical threshold question as to how the market should be defined. Given the lack of precedents in the investigation context, SAMR’s merger control precedents may serve as a reference or starting point.  That said, those should be treated with caution, as SAMR does not necessarily follow the same market definition approach in investigations. For example, cases in the finished pharmaceutical sector indicate that SAMR’s approach to market definition in investigations can be narrower than that adopted in merger reviews.

• Revenue and market share calculation

Under the safe harbor rules, revenue for the turnover threshold should be calculated based on the products specifically covered by the vertical agreement, excluding products that fall outside the scope of the agreement even if those products are in the same relevant market. By contrast, market share calculation should cover all products falling within the relevant market, not just the specific products subject to the restriction. 

This means that if a supplier offers several models of products within the same relevant market and RPM only applies to a specific model, the revenue of other models within the same relevant market will be irrelevant for the revenue calculation. However, the market share of those other models will be included in the market share calculation. If a supplier’s market share in the relevant market is above 5%, it will not benefit from the safe harbor, even if it only applies RPM to a small number of products with limited revenue.  

Similarly, where a supplier imposes vertical restrictions on a distributor that distributes products for multiple competing suppliers, the supplier will not benefit from the safe harbor if the distributor’s market share exceeds 5 or 15% in the distribution market. In sectors where the distribution market is relatively concentrated (eg, the pharmaceutical wholesale market in China), applying the above approach may make it almost impossible in practice for undertaking to benefit from the safe harbor rules. 

It is worth noting that market share should be assessed based on a consolidated group basis. In other words, even if a vertical restriction is implemented at the level of a single subsidiary, the market shares of the parent company and any sister companies under common control that are active in the same relevant market will be taken into account. This has further limited the application of the safe harbor. 

• Interaction with sector-specific safe harbor rules

The Revision confirms that sector‑specific safe harbor rules issued by SAMR shall prevail. Therefore, the 30% safe harbor threshold for IP-related vertical non-price agreements should take precedence. In contrast, the 30% safe harbor threshold for non-price vertical restrictions in the auto sector – issued by the Anti-Monopoly Commission of the State Council through antitrust guidelines – serves only as non-binding guidance and does not formally override the general safe harbor rules. That said, they remain relevant when assessing the risk profile and potential efficiency defenses for non‑RPM vertical restraints in the auto sector.

Potential implications for enforcement trends

• Will enforcement against RPM resume? 

Since the amended AML was adopted in 2022, SAMR has published only three penalty decisions against RPM – likely due to the uncertainty around whether and how RPM can be exempted. With the thresholds formalized, enforcement in this area is likely to resume. While the safe harbor rules also apply to RPM agreements, the thresholds are stringent and are expected to be subject to close scrutiny by the authority. This may effectively limit the RPM safe harbor to agreements of very limited commercial scale with little or no impact on the relevant markets. 

• Are there increased risks for non-price vertical agreements falling outside the 15% safe harbor threshold? 

To date, non-price vertical restrictions have not been an enforcement priority for SAMR. Notably, in past enforcement practice, non‑price vertical restrictions have been treated as tools to facilitate or reinforce price control, and SAMR has yet to publish any penalty decisions targeting standalone non‑price vertical agreements. Against this background, the newly introduced 15% market‑share threshold generated considerable debate during the consultation process, not least because it is significantly lower than the 30% threshold under the EU’s Vertical Block Exemption Regulation (VBER), as well as the 30% safe harbors previously adopted in China for both the automotive sector and IP‑related agreements.

It remains to be seen whether non‑price vertical agreements that fall outside the 15% safe harbor will face increased enforcement risk in practice. Unlike RPM which is presumed to be illegal, SAMR continues to bear the burden of proving that a non‑price vertical agreement has anti‑competitive effects, even where the relevant parties exceed the safe harbor threshold. This burden may be particularly difficult to discharge where a company’s market share only modestly exceeds 15% and where it continues to face effective competition in the market.

That said, given that the 15% threshold has been formalized despite the controversy, it cannot be ruled out that SAMR may, in certain cases, conclude that a market share moderately above 15% confers sufficient market power to render a non‑price vertical agreement anti‑competitive, depending on the market structure and competitive dynamics – for example, where moderate concentration, high entry barriers, and parallel restraints contribute to cumulative anti‑competitive effects. 

As a practical matter, undertakings whose market share exceeds the threshold could benefit from conducting an effects‑based assessment when considering or implementing non‑price vertical restrictions in China. This will be particularly relevant for multinational companies accustomed to relying on the EU VBER for compliance assessments, given the lower thresholds applicable to antitrust risk management in China.