China’s 2025 Anti-Monopoly Guidelines for Distribution Agreements Review: What Foreign Companies Must Know

In June 2025, China’s State Administration for Market Regulation (SAMR) published a significant update to its Anti-Monopoly Guidelines for the Field of Intellectual Property, with a new dedicated section addressing distribution agreement restrictions. While the guidelines technically fall under IP-related anti-monopoly regulation, their practical effect extends to virtually all distribution agreements involving foreign-branded products in China.

This review examines the 2025 Anti-Monopoly Guidelines for distribution agreements—what they regulate, how they differ from previous frameworks, which distribution agreement clauses carry the highest risk, and what foreign companies must change in their China distribution contracts to remain compliant.

Background: Why New Guidelines Were Needed

China’s Anti-Monopoly Law (AML), originally enacted in 2008 and substantially revised in 2022, has always prohibited monopoly agreements—including vertical monopoly agreements between suppliers and distributors. However, the application of these general provisions to distribution agreements was unclear. The 2019 Anti-Monopoly Guidelines for the IP Field had only passing references to distribution restrictions, leaving foreign companies (and their legal advisors) to guess which common distribution clauses were permissible.

The uncertainty was particularly acute for vertical restraints in distribution agreements:

• Resale price maintenance (RPM) — setting minimum or fixed resale prices
• Territorial restrictions — limiting which geographic areas a distributor can serve
• Customer group restrictions — limiting which customer types a distributor can sell to
• Exclusive dealing — requiring distributors to carry only one brand
• Selective distribution — limiting which retailers can carry a product

The 2025 guidelines were prompted by several high-profile enforcement actions and industry complaints. Between 2021 and 2024, SAMR investigated 37 distribution-related vertical monopoly cases, with total fines exceeding ¥1.2 billion. Foreign companies were disproportionately affected—accounting for 22% of investigations but only representing approximately 8% of market participants—suggesting that foreign brand distribution agreements were structurally more likely to contain problematic clauses.

What the 2025 Guidelines Regulate

The new guidelines create a three-tier classification system for distribution restrictions, based on their likelihood of harming competition:

Tier 1: Hardcore Restrictions (Presumed Illegal)

These restrictions are considered so inherently anticompetitive that they are presumed illegal without the need for market analysis. If found, the burden shifts to the company to prove pro-competitive benefits:

• Resale Price Maintenance (RPM): Fixing minimum resale prices or establishing fixed resale prices is per se illegal (with narrow exceptions for genuine agency relationships and first-sale loss leader prevention). Maximum resale prices and recommended retail prices are permitted if genuinely non-binding.
• Hub-and-Spoke Conspiracies: A supplier facilitating price coordination among competing distributors (e.g., sharing distributor pricing information) is treated as a hardcore cartel violation, not a vertical agreement. Penalties start at 4% of revenue.
• Market Allocation: Agreements among competing distributors to divide markets, territories, or customers—even if facilitated by the supplier—are hardcore horizontal violations.

Tier 2: Grey-Restrictions (Subject to Rule-of-Reason Analysis)

These restrictions require a case-by-case competitive effects analysis. They are not presumptively illegal but carry significant risk:

• Absolute Territorial Protection: Preventing a distributor from selling outside its designated territory, or prohibiting parallel imports from other regions, is now explicitly grey-listed. Only “qualified territorial restrictions” are permitted—where the supplier can demonstrate a legitimate justification such as safety certification requirements, product-specific after-sales service needs, or investment protection for distributors making relationship-specific investments.
• Customer Group Restrictions: Limiting which customer segments a distributor may serve is grey-listed unless the supplier can justify it through legitimate differentiation (e.g., separate channels for commercial vs. consumer customers where the products or service requirements genuinely differ).
• Exclusive Supply Obligations: Requiring a distributor to purchase exclusively from the supplier is grey-listed if the supplier has a market share above 30% in the relevant product market. Below 30%, it is generally permissible.
• Non-Compete Clauses: Preventing distributors from carrying competing brands is grey-listed for agreements exceeding one year (for non-dominant firms) or any duration (for dominant firms).

Tier 3: Generally Permitted (with Conditions)

These restrictions are generally allowed but must be clearly documented and proportional:

• Selective Distribution: Qualifying criteria for authorized retailers are permitted if applied uniformly and objectively. The guidelines specifically recognize brand image protection, quality assurance, and pre-sale service standards as legitimate criteria.
• Recommended Resale Prices (RRP): Non-binding price recommendations are permitted, provided they are clearly labeled as non-mandatory. The distributor must have genuine freedom to set its own final prices.
• Quantity Forcing: Minimum purchase requirements are permitted if based on good-faith demand forecasts and not used as a tool to enforce RPM.
• Exclusive Distribution for New Products: A supplier may grant exclusive distribution rights for a new product entering the Chinese market for up to three years, to incentivize distributor investment in market development.

Safe Harbor Provisions

The 2025 guidelines introduce an important Safe Harbor mechanism: if the supplier’s market share in the relevant product market is below 15% and the agreement does not contain Tier 1 hardcore restrictions, the distribution agreement is presumed not to restrict competition. This safe harbor creates a clear compliance target for smaller foreign brands.

For larger brands (market share 15-30%), Tier 2 restrictions are evaluated under a rule of reason analysis. The supplier must demonstrate that the restriction generates efficiencies—such as improved service quality, reduced free-riding, or protection of relationship-specific investments—that outweigh any anticompetitive effects.

For dominant firms (market share above 50% or meeting other dominance criteria under AML Article 22), even Tier 3 restrictions may be scrutinized. Dominant firms are effectively prohibited from imposing any territorial or customer restrictions on distributors.

What Changed from Previous Guidance

Foreign companies accustomed to the pre-2025 regulatory environment should note several critical changes:

• Territorial restrictions are now explicitly regulated. Previously, territorial restrictions in distribution agreements operated in a grey area—rarely enforced but technically prohibited. The 2025 guidelines make clear that absolute territorial protection (preventing distributors from selling outside assigned territories) is a Tier 2 grey restriction requiring justification. “Active sales” restrictions (preventing solicitation outside territory) are treated more leniently than “passive sales” restrictions (preventing response to unsolicited orders from outside territory).
• RPM enforcement has been significantly expanded. The 2022 AML revision already clarified that RPM is illegal; the 2025 guidelines extend this to cover “virtual RPM” —suppliers using monitoring systems, penalties, or bonus structures to effectively enforce fixed prices even without an explicit price clause. Any distributor incentive scheme that creates a strong economic disincentive to deviate from a suggested price may now be treated as de facto RPM.
• Digital platform distribution receives specific treatment. The guidelines include a dedicated section on e-commerce platform distribution restrictions. Most-favored-nation (MFN) clauses—requiring a brand to offer its best price on a specific platform—are classified as Tier 2 restrictions. Online marketplace bans (prohibiting distributors from selling on specific platforms) are Tier 2 if the platform has significant market power.
• Increased penalty severity. Maximum fines have not changed (10% of prior-year revenue), but the guidelines make clear that senior management and legal representatives can be held personally liable for serious violations, with personal fines of ¥100,000 to ¥1 million.

Implications for Common Distribution Agreement Clauses

Here is a clause-by-clause review of how the 2025 guidelines affect typical distribution agreement provisions:

Territory and Channel Restrictions

Before 2025: Most foreign brand distribution agreements in China included territory and channel restrictions. Common language: “Distributor shall not sell the Products outside Territory A without Supplier’s prior written consent.”
After 2025: Pure territorial restrictions are Tier 2. To comply, brands should: (1) Document the legitimate justification (e.g., “Distributor A has invested ¥5 million in marketing and service infrastructure in East China and requires protection against free-riding by non-investing distributors”), (2) Ensure the restriction is proportional to the investment, (3) Allow passive sales (unsolicited orders from outside territory), (4) Periodically review whether continued territorial protection remains justified.

Pricing Clauses and Incentive Programs

Before 2025: Many foreign brands set recommended retail prices (RRPs) and tied distributor bonuses to adherence to these prices.
After 2025: Any incentive structure that effectively penalizes below-RRP selling may constitute de facto RPM. Compliance requires: (1) Clear labeling of RRPs as non-mandatory, (2) Rebate/bonus structures tied to volume or service quality, NOT to price adherence, (3) No monitoring or reporting of distributor resale prices, (4) Distributors must be explicitly authorized to set their own final prices in writing.

Exclusive Dealing and Non-Compete

Before 2025: Foreign brands often required distributors to carry their products exclusively, especially in categories where brand representation was important.
After 2025: Non-compete clauses exceeding one year are Tier 2 for non-dominant firms. For dominant firms, any duration is prohibited. Compliance options: (1) Limit non-compete to 12 months after termination (not during the agreement), (2) Offer separate compensation for exclusive dealing (rebate for exclusivity that can be quantified), (3) If the distributor’s purchases from the supplier constitute less than 30% of the distributor’s total procurement in the category, exclusivity is generally considered non-problematic.

Online Sales Restrictions

Before 2025: Many brands restricted distributors from selling online, or limited them to specific platforms, to protect brand image and existing channel relationships.
After 2025: A total ban on online sales is treated as a hardcore restriction—it amounts to an absolute territorial restriction on the internet channel. Selective distribution criteria must apply equally to online and offline channels. Compliance: (1) If online sales are restricted, the criteria must be based on objective quality standards (e.g., “distributor must maintain a customer service response time under 2 hours” — equally applicable online and offline), (2) Platform-specific restrictions are Tier 2 and require justification, (3) Pure online ban without objective criteria is not permitted.

Enforcement Trends and Case Precedents

The 2025 guidelines are not purely prospective—they codify enforcement approaches SAMR has been developing through recent cases:

• Yili Dairy RPM Case (2023): China’s largest dairy company was fined ¥115 million for fixing minimum resale prices for its distributors, despite arguing that RPM was necessary for product quality assurance. The case established that quality justifications must be specific and documented, not general.
• Foreign Auto Brand Territorial Restriction Case (2024): A European luxury automotive brand was investigated for prohibiting its authorized dealers from selling to customers outside their designated provinces. SAMR accepted commitments from the brand to remove territorial restrictions, avoiding a formal fine but requiring a 3-year compliance monitoring period.
• Cross-Border E-Commerce RPM (2024): A US beauty brand was fined ¥18 million for enforcing global minimum resale prices that restricted Chinese distributors’ pricing freedom, even though the prices were set outside China. This case established that RPM restrictions apply to imported goods where the pricing restriction has effects in China.

Action Items for Foreign Companies

Conclusion: A More Regulated but Clearer Landscape

The 2025 Anti-Monopoly Guidelines for distribution agreements represent a significant step toward regulatory clarity in China. For foreign companies, the new framework is simultaneously more restrictive (explicitly regulating territorial and customer restrictions that previously operated in a grey zone) and more predictable (providing clear safe harbors, classification tiers, and justification pathways).

The cost of non-compliance is substantial—fines up to 10% of annual revenue, personal liability for management, and the risk of agreements being declared void. But the cost of over-compliance—abandoning legitimate distribution protections that support brand investment and service quality—is also significant. Foreign companies should approach the 2025 guidelines not as a regulatory burden, but as a framework for designing distribution agreements that are both legally sound and commercially effective in China’s increasingly sophisticated competition law environment.