New AML Implementing Rules on Vertical Agreements Take Effect — Key Takeaways for Foreign Executives
China’s new Implementing Rules on Vertical Agreements under the Anti-Monopoly Law (AML) took effect on September 1, 2025, introducing 28 new provisions that fundamentally reshape how foreign companies structure distributor networks, set resale prices, and enforce territorial restrictions in China. The Rules are part of the State Administration for Market Regulation (SAMR)’s ongoing effort to align China’s competition framework with global norms while maintaining unique Chinese enforcement priorities — vertical agreements now carry potential fines of up to 10% of annual turnover, up from 5% under the old regime.
What the New Rules Change for Vertical Agreements
The revised AML Implementing Rules define 垂直协议 (vertical agreement, chuízhí xiéyì) as any contract or arrangement between firms operating at different levels of the production or distribution chain that restricts competition. This explicitly includes resale price maintenance (RPM), exclusive supply, exclusive distribution, territorial restrictions, and customer group allocation.
Key changes include a safe harbor threshold: agreements are presumed not to restrict competition if the parties’ combined market share in each relevant market does not exceed 15% in horizontal markets and 25% in vertical markets. Previously, no such safe harbor existed. The Rules also introduce a de minimis exemption for agreements that de minimis affect competition — defined as when the combined market share is below 10% for horizontal and 15% for vertical relationships.
Notably, the Rules eliminate the previous blanket exemption for RPM. Under the old framework, RPM was treated as a per se violation — automatically illegal regardless of market effects. Now, RPM is assessed under a rule of reason standard: SAMR must prove that the RPM arrangement has or is likely to have the effect of eliminating or restricting competition. This is a significant shift for foreign companies with global pricing policies.
| Provision | Old AML Implementing Rules (2019) | New AML Implementing Rules (2025) |
|---|---|---|
| Safe harbor threshold (vertical) | None | <25% market share |
| De minimis threshold (vertical) | None | <15% market share |
| Resale price maintenance (RPM) | Per se illegal | Rule of reason assessment |
| Maximum fine on revenue | 5% of annual turnover | 10% of annual turnover |
| Individual exemption filing | Required but rarely granted | Streamlined, with mandatory timelines |
| Notification period for exemption | Up to 180 days | 90 days (extendable to 120) |
Contextual Numbers That Matter for Your China Strategy
First: Between 2020 and 2024, SAMR investigated 47 vertical agreement cases, of which 39 (83%) involved RPM — and 34 of those (87%) resulted in fines. The average fine was approximately ¥12.8 million per case.
Second: Under the new rules, the maximum fine has doubled from 5% to 10% of the firm’s annual turnover in China. For a mid-market foreign manufacturer with ¥500 million in China revenue, the potential penalty has moved from ¥25 million to ¥50 million.
Third: The safe harbor threshold of 25% market share is notably higher than the EU’s 30% threshold for vertical agreements — offering a somewhat narrower safe zone but still meaningful for mid-sized players.
Fourth: SAMR received 12 individual exemption applications in the five years prior to the new rules, approving only 3 — a 25% approval rate. The streamlined process aims to increase that to 50%+ within the new 90-day timeline.
Key Compliance Steps for Foreign Companies
Step 1: Audit Your Existing Distributor Agreements
Every company with an existing distribution network in China should conduct a thorough audit within the next 90 days. Focus on clauses related to resale pricing, territorial restrictions, customer allocation, and exclusive dealing. Identify any RPM provisions, even if they are informal side agreements with major distributors.
Under the new Rules, RPM is no longer automatically illegal — but it still carries risk. If you maintain an RPM policy, be prepared to demonstrate that it does not restrict competition, typically through a market share analysis and economic efficiency justification. SAMR may still investigate if a competitor files a complaint.
Step 2: Assess Your Market Position
Calculate your market share in each relevant product and geographic market in China. If your combined market share with your distributor is below 25% in the vertical dimension, you qualify for the safe harbor — meaning your agreement is presumed lawful. If you exceed the threshold, the agreement will be subject to full competitive assessment.
For many foreign companies entering niche markets, the safe harbor threshold provides breathing room. For dominant players in mature markets — such as automotive components or medical devices — the risk is higher.
Step 3: Consider Filing for Individual Exemption
If your agreement falls outside the safe harbor and poses competitive risks, consider filing a 正式申请 (formal application, zhèngshì shēnqǐng) for individual exemption. The new Rules require SAMR to issue a decision within 90 days, extendable by 30 days for complex cases. This is a significant improvement over the previous 180-day timeline.
Your filing must include:
- A description of the agreement and its objectives
- Evidence of efficiency gains (e.g., distribution cost reduction, product quality improvement)
- Market definition and share calculations
- Proof that the agreement is indispensable to achieving the claimed efficiencies
Three Critical Pitfalls to Avoid
Decision Framework: Assess Your Vertical Agreement Risk
If your combined market share in the vertical market is below 25% and your agreement does not contain any hardcore restrictions (such as minimum resale price maintenance or export bans), choose to rely on the safe harbor — document your market share calculation and maintain compliance records.
If your combined market share exceeds 25% or your agreement contains RPM or territorial restrictions, choose to either (a) modify the agreement to remove restrictive language, or (b) file for individual exemption if the restrictions are essential for your business model and you can demonstrate efficiency benefits.
If your agreement involves a dominant company (market share above 50%), choose to conduct a full economic analysis and likely restructure the arrangement to avoid any de facto exclusionary effects — the new Rules prohibit dominant firms from imposing vertical restrictions that have no redeeming efficiencies.
What’s Next for SAMR Enforcement
SAMR has signaled that enforcement priorities for 2025-2026 will include:
- Digital platform vertical agreements — especially in e-commerce, online travel, and food delivery where platform operators impose “most favored nation” (MFN) clauses on merchants
- Automotive aftermarket — where manufacturers restrict independent repair shops from accessing diagnostic tools or parts
- Pharmaceutical distribution — where tiered pricing and exclusive hospital contracts remain common
Foreign companies in these sectors should expect heightened scrutiny and should begin compliance preparations immediately. The new Rules also introduce a leniency policy for vertical agreements: companies that voluntarily disclose violations and provide evidence can receive fine reductions of up to 50%.
NEXT STEPS
- Conduct a Vertical Agreement Compliance Audit — Review all China distributor contracts and sales policies against the new safe harbor and RPM rules. See our Vertical Agreement Compliance Audit Toolkit.
- Enroll Your Team in Competition Law Training — Our half-day training program covers the new AML Rules with China-specific case studies and role-play scenarios. Register for the next session.
- Engage SAMR Pre-Clearance Support — If your vertical agreement contains restrictions that fall outside the safe harbor, our team can assist with filing individual exemption applications and negotiating with SAMR. Learn about our SAMR filing service.
— China Gateway 360 —
Remote China market entry support, built around execution.
