Competition Law in Bottled Water Source Allocation in China

1. Introduction

“Bottled water source allocation” concerns the allocation, licensing, extraction, processing, transportation, and commercial use of natural water sources—particularly mineral-water springs, groundwater, surface water, and other drinking-water sources—for bottled-water production.

In China, allocation of a water source is not simply an ordinary commercial transaction. It involves water-resource regulation, administrative licensing, environmental protection, public-interest considerations, and competition law. The competition-law question arises when a government authority, water-resource operator, landowner, or dominant bottled-water enterprise uses control over a scarce source to exclude competing bottlers, reserve the source exclusively, discriminate among downstream enterprises, or tie access to other services or products.

The key distinction is:

A legally granted exclusive water-extraction right is not automatically an antitrust violation. The problem arises when that exclusivity is unlawfully created, extended, or abused so as to eliminate or restrict competition.

China's 2022 Anti-Monopoly Law prohibits a dominant undertaking from refusing to deal without justification, imposing exclusive dealing, tying transactions, or applying unjustified discriminatory conditions. (National People's Congress)

2. Legal Framework in China

A. Anti-Monopoly Law 2022

The principal provisions are Articles 22–24.

Article 22 — Abuse of Dominant Position

A dominant undertaking may not, without justification:

refuse to deal;

require counterparties to deal exclusively with it or its designated undertaking;

impose tying or unreasonable transaction conditions;

discriminate among equivalent trading partners; or

engage in other forms of abuse recognized under the Anti-Monopoly Law.

The provision is particularly important where a bottled-water company controls a commercially important spring or groundwater source. (National People's Congress)

Article 23 — Factors for Dominance

The assessment includes:

market share;

competitive conditions;

control over sales or raw-material procurement;

financial and technical strength;

dependence of trading partners;

barriers to entry; and

other relevant factors.

Thus, control over a unique natural water source can be much more important than the enterprise's downstream bottled-water market share. (National People's Congress)

Article 24 — Presumption of Dominance

Dominance may be presumed where:

one undertaking has at least 50% market share;

two undertakings together have at least two-thirds; or

three undertakings together have at least three-fourths,

subject to the statutory qualifications and rebuttal rules. (SAMR)

3. Water-Resource Regulation and Competition Law

China's water-resource regime is highly relevant because commercial exploitation of water generally requires governmental authorization.

Current water-taking rules emphasize:

water conservation;

total-volume control;

quota management;

coordinated allocation;

priority for domestic residential water;

protection of groundwater; and

differentiated administrative approval according to the scale and type of extraction.

For example, the current water-taking licensing framework specifically regulates extraction of groundwater and mineral water and uses different approval thresholds depending upon extraction volume. (Ministry of Justice)

Therefore, not every exclusive source allocation is an antitrust matter.

A government may legitimately allocate a water resource to one operator because of:

environmental carrying capacity;

geological limitations;

public health;

sustainable extraction;

water-quality protection;

investment requirements;

public drinking-water priorities; or

a competitive concession/tender process.

The antitrust problem becomes stronger where the exclusive right is used beyond its legitimate scope.

4. Relevant Market

The relevant market must be defined carefully.

Several possibilities exist.

A. Bottled-water product market

The relevant product market may include:

mineral water;

natural spring water;

purified drinking water;

natural drinking water; or

particular categories of bottled water.

Substitutability, consumer perception, price differences and regulatory standards matter.

B. Upstream water-source market

In some cases, the relevant market may be much narrower:

commercial access to a particular class of natural water sources within a defined geographical area.

For example, if only one spring in a mountainous region produces water satisfying the characteristics necessary for a particular mineral-water product, competitors may not be able to substitute another source economically.

C. Geographic market

The geographic market could be:

a particular spring;

a county;

a city;

a group of neighbouring regions; or

potentially a wider national market.

Transportation costs are particularly important because bottled water is heavy and relatively low-value per unit.

5. When Can a Water Source Become a Competitive Bottleneck?

A water source is more likely to constitute a competitive bottleneck where:

it is geographically unique;

alternative sources are unavailable;

transportation from alternative sources is economically impractical;

regulatory approval for alternative sources is difficult;

consumers strongly value the source's characteristics;

the source has a recognized mineral composition;

the source has limited sustainable extraction capacity;

downstream bottlers depend heavily upon it;

duplicating the source is impossible; and

access is controlled by a single undertaking.

The dependence of other undertakings and difficulty of entry are expressly relevant to dominance under Article 23. (National People's Congress)

6. Exclusive Allocation of a Bottled-Water Source

Suppose a local government grants Company A a 20-year right to extract water from a particular mineral spring.

The mere grant of that right does not automatically violate competition law.

The legal inquiry should instead ask:

Question 1

Was the right lawfully created?

Question 2

Was the right allocated through a competitive and transparent process where competition was feasible?

Question 3

Does Company A have dominance in the relevant market?

Question 4

Does Company A use the right to exclude competing enterprises?

Question 5

Is the exclusion necessary for environmental, health, investment or resource-management reasons?

Question 6

Could access be provided to other enterprises without compromising the water source?

This distinction is crucial.

7. Refusal to Supply Water Source Access

Article 22 may become relevant if a dominant enterprise controls a water source and refuses access to another bottler without legitimate justification.

For example:

Company A controls the only commercially viable mineral-water spring in County X. Company B possesses all required downstream licenses but Company A refuses to permit any commercially reasonable access, while itself using the source to supply the entire local market.

Potential issues include:

whether Company A is dominant;

whether the water source is indispensable;

whether alternative sources exist;

whether access is technically feasible;

whether capacity is exhausted;

whether access would compromise water quality;

whether Company A made investments specifically necessary for extraction;

whether the refusal excludes competitors; and

whether reasonable access terms could be imposed instead.

A refusal is therefore not automatically unlawful merely because the resource is important.

8. Exclusive Dealing and Source Allocation

An especially serious problem arises when a dominant source operator says:

“You may obtain access to this water source only if you agree not to purchase water from any competing source.”

This can resemble exclusive dealing under Article 22.

The same problem can arise indirectly where the operator:

offers substantially better extraction terms only to exclusive purchasers;

imposes punitive charges on non-exclusive bottlers;

threatens to terminate supply;

allocates insufficient capacity to non-exclusive customers;

requires downstream distributors to sell only its bottled water; or

conditions access to the source upon exclusive downstream distribution.

The Chinese courts recognize that exclusive dealing need not always be expressed in an explicit contractual clause.

9. Case Law

Because there are relatively few reported Chinese judicial decisions dealing specifically with allocation of natural bottled-water sources, the following cases are particularly useful analogical authorities involving water utilities, exclusive access, infrastructure, tying, discrimination and allocation of scarce commercial rights.

Case 1 — Weihai Hongfu Property Co. v. Weihai Water Group Co.

Supreme People's Court, (2022) Zui Gao Fa Zhi Min Zhong 395

This is the most important Chinese water-sector analogy.

Weihai Water Group occupied a dominant position in the local water-supply and drainage market. Its service information identified itself and its affiliated companies but failed to adequately inform customers that other qualified enterprises could be selected.

The Supreme People's Court held that exclusive dealing can be:

express or direct; or

implicit or indirect.

The decisive question is whether the conduct substantially restricts the counterparty's freedom of choice. (IPC Court)

Relevance to bottled-water sources

A water-source operator could violate competition law if it formally allows competition but practically communicates that only its own affiliated bottlers may use the source.

Principle:

Hidden exclusion can constitute exclusive dealing just as effectively as an express contractual prohibition.

Case 2 — Tiyu (Beijing) Culture Media v. Chinese Super League Co.

Supreme People's Court, (2021) Zui Gao Fa Zhi Min Zhong 1790

The Chinese Super League publicly tendered exclusive rights to official league photographs. The winning enterprise obtained exclusive commercial rights.

The Supreme People's Court rejected the antitrust challenge.

The Court emphasized that exclusivity resulting from open competitive bidding and the legitimate exercise of an underlying exclusive right is not necessarily an abuse of dominance. (IPC Court)

Relevance to water-source allocation

This is extremely important for a government concession or water-source allocation.

If:

the source is legitimately subject to exclusive exploitation;

the law permits exclusive allocation;

the concession is competitively awarded;

the process is transparent; and

the exclusivity is reasonably connected with the underlying resource,

the existence of exclusivity alone should not be treated as an antitrust violation.

Case 3 — Cable Digital Television Public-Utility Case

Supreme People's Court, (2023) Zui Gao Fa Zhi Min Zhong 383

This case concerned a dominant public-utility operator and allegations involving tying and refusal to deal.

The Supreme People's Court included it among its important antitrust cases dealing with abuse of dominance. (Supreme People's Court)

Relevance

A bottled-water source operator cannot necessarily say:

“You can access the water only if you purchase our unrelated equipment/service.”

Where source access is indispensable, such conditions may constitute tying or unreasonable transaction conditions.

Case 4 — Natural Gas Company Tying Case

Supreme People's Court, (2023) Zui Gao Fa Zhi Min Zhong 1547

The gas company required customers seeking natural-gas access to install boilers designated by the company.

Customers who had already purchased other boilers were required to replace them.

The relevant market operator had been found by the market-regulation authority to have violated the prohibition on tying by a dominant undertaking. (Supreme People's Court)

Relevance to bottled water

The analogy is strong.

Suppose a dominant water-source operator tells bottlers:

“You can obtain access to the spring only if you use our bottles, filtration equipment, transportation service or packaging company.”

This may amount to tying, particularly if the tied product is commercially separate and the source operator possesses substantial market power.

Case 5 — Vegetable Wholesale Market Case

Supreme People's Court, (2024) Zui Gao Fa Zhi Min Zhong 748

The case concerned alleged abuse of dominance involving a wholesale market.

The Supreme People's Court treated antitrust issues as matters affecting competition order and held that the existence of an arbitration clause does not necessarily remove an antitrust civil dispute from judicial scrutiny. The case is included among the Court's important recent antitrust cases. (Supreme People's Court)

Relevance to bottled-water source allocation

Water-source agreements may contain:

arbitration clauses;

long-term concession terms;

exclusivity provisions;

minimum-purchase requirements.

A contractual dispute can therefore also generate an antitrust claim where the contractual mechanism allegedly restricts competition.

Case 6 — Tan v. Agricultural Products Company

Supreme People's Court, (2025) Zui Gao Fa Zhi Min Zhong 777; publicized as a 2026 typical antitrust case

This is a particularly useful recent case.

A market operator with approximately very high local market power required a trader to “choose one of two” markets. When the trader also operated through a competing market, the operator imposed a substantially higher service fee.

The Supreme People's Court treated punitive differential treatment used to force the trader into exclusive dealing as an abuse of dominance. (Supreme People's Court)

Relevance

A bottled-water source operator could face similar scrutiny if it says:

“You can buy water from another source, but if you do so, your extraction price from our source will triple.”

That structure could be characterized as indirect exclusive dealing.

Case 7 — Rice-Noodle Producers Joint Boycott Case

Supreme People's Court, (2023) Zui Gao Fa Zhi Min Zhong 653

Several competing producers coordinated their conduct and used supply agreements to prevent retailers/stalls from selling products supplied by excluded producers.

The Supreme People's Court found a horizontal monopoly agreement involving joint boycott/exclusion of competing suppliers. (IPC Court)

Relevance

This is useful where multiple bottled-water source operators cooperate.

For example:

Several spring-water companies agree that distributors will not purchase bottled water from any producer using an independent water source.

Such coordination may constitute a horizontal monopoly agreement, independently of a dominance analysis.

Case 8 — Changsha South Railway Station Bottled-Water Case

Supreme People's Court, (2021) Zui Gao Fa Zhi Min Zhong 1020

This case is unusually relevant because it involved bottled drinking water itself.

The claimant alleged that several sellers at Changsha South Railway Station sold 555 ml bottled water at RMB 3 while the same product was sold outside the station for RMB 2, arguing that the sellers had coordinated their pricing.

The Supreme People's Court ultimately rejected the antitrust claim because the evidence did not sufficiently establish communication or coordination among the sellers. Identical prices alone were insufficient, especially given the narrow and transparent market and the possibility of independent pricing based on local costs. (IPC Court)

Relevance to source allocation

This case demonstrates an important evidentiary principle:

A common price or common commercial condition is not by itself proof of a monopoly agreement.

For bottled-water source allocation, evidence of actual coordination, communication or exclusionary strategy may be necessary.

10. Administrative Allocation vs. Private Antitrust Conduct

This distinction is especially important in China.

Situation A — Legitimate administrative allocation

Government grants Company A a source license because:

the aquifer has limited sustainable capacity;

extraction must be capped;

public drinking water receives priority;

environmental protection requires one controlled operator; or

a lawful competitive concession process was conducted.

This is generally not automatically an Article 22 abuse by Company A.

Situation B — Abuse after allocation

Company A obtains the legitimate license but then:

prevents competing bottlers from obtaining legally available access;

refuses reasonable access to surplus capacity;

discriminates without objective justification;

uses punitive pricing against non-exclusive customers;

ties source access to unrelated equipment;

acquires competing source operators solely to eliminate alternatives; or

extends its exclusive right beyond the legally authorized resource.

The competition-law risk becomes much greater.

11. Essential-Facility-Type Analysis

China's Anti-Monopoly Law does not simply say:

“Every indispensable facility must be shared.”

A court would likely examine the factual circumstances.

A bottled-water source is more likely to justify an access remedy where:

1. Indispensability

No realistic alternative source exists.

2. Duplication

A rival cannot reasonably create or develop an equivalent source.

3. Dominance

The source controller possesses substantial market power.

4. Feasibility

Access can technically be provided.

5. Capacity

The source has commercially available capacity.

6. Exclusionary effect

Refusal substantially prevents competitors from entering or expanding.

7. No legitimate justification

The refusal is not justified by water safety, environmental restrictions, capacity or other legitimate reasons.

12. Discriminatory Allocation of Water

Article 22 also prohibits unjustified differential treatment among trading partners with equivalent conditions. (National People's Congress)

For example:

Differential pricing is not automatically unlawful.

The operator could justify differences based on:

extraction volume;

infrastructure investment;

treatment costs;

transportation;

water-quality testing;

peak/off-peak demand;

environmental costs.

But if the real reason is simply:

“They are our competitors,”

the discrimination becomes much more problematic.

13. Tying in Bottled-Water Source Allocation

Possible tying arrangements include:

Water source + bottles

“You may extract our spring water only if you buy our bottles.”

Water source + filtration

“You must use our filtration equipment.”

Water source + logistics

“You must use our transportation subsidiary.”

Water source + distribution

“You must distribute exclusively through our network.”

Water source + branding

“You must sell the water under our trademark.”

The competition-law analysis asks whether the products/services are separate, whether the undertaking is dominant in the tying market, whether customers are coerced, and whether there is a legitimate justification.

The natural-gas case provides a particularly close Chinese analogy. (Supreme People's Court)

14. Source Allocation Through Government Procurement or Concession

A competitive tender can be very important.

Suppose a city has one mineral-water spring and awards a 15-year exploitation concession after an open tender.

The winning company obtains exclusivity.

This is more defensible because the exclusivity is the result of competition, rather than a device used by an existing dominant enterprise to exclude rivals.

This principle is supported by the Supreme People's Court's Super League exclusive-rights case. (IPC Court)

However, the concession should remain within its lawful boundaries.

For example, a concession to extract water from Spring A should not automatically become a right to:

control Spring B;

prevent independent purification companies from entering;

control unrelated distribution markets; or

impose exclusivity on downstream retailers.

15. Government Administrative Monopoly

Another dimension is administrative monopoly.

Suppose a local government:

refuses to grant source access to outside bottled-water companies solely because it wants to protect a locally owned bottling enterprise.

This can raise issues under the Anti-Monopoly Law's restrictions on administrative bodies abusing administrative power to eliminate or restrict competition.

The competition problem is then not necessarily the private company's dominance but the government-created exclusionary barrier.

This is particularly significant where:

local protectionism exists;

only local companies receive water-resource permits;

outside companies are denied access without objective criteria;

licensing requirements are discriminatory;

government officials pressure distributors to purchase locally produced water.

16. Environmental and Public-Interest Justifications

A water-source operator can have strong legitimate reasons for restricting access.

Valid justifications may include:

sustainable extraction limits;

groundwater protection;

spring replenishment requirements;

contamination prevention;

public-health protection;

source-quality preservation;

infrastructure limitations;

emergency water requirements;

residential drinking-water priority;

legally mandated extraction quotas.

The important principle is proportionality.

The operator should preferably demonstrate:

Why the restriction is necessary, why less restrictive access is not feasible, and why the restriction is proportionate to the environmental or public-health objective.

17. Hypothetical Example

Assume Mountain Spring Co. controls the only commercially viable mineral-water spring in Province X.

It supplies 85% of the locally produced mineral water.

It enters agreements with three bottlers:

Bottler A — receives unrestricted access;

Bottler B — must buy Mountain Spring's bottles;

Bottler C — can access the spring only if it agrees not to source water from competing springs.

Mountain Spring also tells independent distributors:

“Anyone selling water sourced from competing springs will lose access to our spring.”

Competition analysis

Market: commercial mineral-water source/access in the relevant geographic region.

Dominance: potentially very strong because the source is unique and alternative sources are difficult to develop.

Bottler B: possible tying.

Bottler C: possible exclusive dealing.

Independent distributors: possible indirect exclusionary conduct.

Refusal to deal: potentially unlawful if reasonable access is technically and environmentally feasible.

85% share: strongly relevant to dominance, although market share alone is not conclusive.

18. Compliance Framework for Bottled-Water Source Operators

A source operator should maintain:

A. Objective allocation criteria

Allocation should be based on:

capacity;

quality;

extraction limits;

infrastructure;

investment;

technical requirements.

B. Transparent pricing

Prices should be objectively explainable.

C. Non-discrimination

Similarly situated bottlers should normally receive comparable conditions.

D. Separate products

Source access should not unnecessarily be tied to unrelated products.

E. Capacity documentation

The operator should document why additional source allocation is impossible.

F. Environmental documentation

Scientific evidence should support extraction restrictions.

G. Competition compliance

Long-term exclusive arrangements should receive antitrust review.

19. Case-Law Principles — Quick Revision Table

The Supreme People's Court has expressly identified the Weihai Water Group, Super League, cable-TV, natural-gas and other cases as significant Chinese antitrust precedents. (Supreme People's Court)

20. Conclusion

Bottled-water source allocation in China sits at the intersection of resource regulation and competition law.

The allocation of a scarce spring, groundwater source or other drinking-water resource may legitimately be exclusive because water resources are environmentally constrained and subject to licensing. Exclusivity itself is therefore not automatically unlawful.

The competition-law problem arises when a dominant source controller uses that scarcity to:

refuse reasonable access without justification;

exclude rival bottlers;

force exclusive sourcing;

impose discriminatory access conditions;

tie water access to unrelated products or services;

use punitive pricing to enforce “choose one” arrangements;

extend a legitimate source concession into unrelated markets; or

coordinate with other suppliers to exclude competing water producers.

The strongest Chinese precedents are the Weihai Water Group case for hidden exclusion, the Super League case for lawful exclusivity resulting from competitive tender, the Natural Gas case for tying, and the 2026 agricultural-products case for punitive “two-choice” exclusive dealing. (IPC Court)

Exam proposition:

In China, a lawful water-resource concession may create exclusivity, but a dominant bottled-water source operator cannot automatically convert that regulatory or property-based exclusivity into a broader private monopoly. Article 22 of the Anti-Monopoly Law becomes particularly relevant where control of a scarce water source is used, without objective justification, to refuse access, impose exclusive sourcing, discriminate among bottlers, or tie source access to unrelated products or services.