Engineering Certification Ex1. Introduction

An energy procurement cartel occurs when competing buyers of energy or energy-related inputs coordinate their purchasing conduct instead of independently negotiating with suppliers. The coordination may concern:

• procurement prices;
• maximum prices offered to suppliers;
• quantities purchased;
• allocation of suppliers;
• geographic procurement territories;
• allocation of coal, gas, oil or electricity suppliers;
• joint refusal to deal with particular suppliers;
• exchange of commercially sensitive procurement information;
• coordinated tender bids for energy procurement;
• common purchasing formulas designed to suppress supplier competition.

In China, such conduct can constitute a horizontal monopoly agreement under the Anti-Monopoly Law (AML), particularly where competing purchasers divide an 原材料采购市场 (raw-material procurement market), coordinate purchasing conditions, or engage in other concerted conduct restricting competition. Article 17 of the 2022 AML expressly prohibits competing undertakings from dividing sales markets or raw-material procurement markets.

Energy markets require particular care because electricity, coal, natural gas, petroleum products and heating services may involve regulated infrastructure or natural-monopoly components. China's 2026 Public Utilities Antitrust Guidelines expressly cover electricity, gas and heating and emphasize preventing monopoly advantages from being extended into competitive upstream or downstream markets.

2. Meaning of an Energy Procurement Cartel

A procurement cartel is essentially the buyer-side counterpart of a conventional seller cartel.

Example

Suppose five electricity generators independently need to purchase large quantities of coal.

Normally:

Generator A → negotiates independently with Coal Supplier X
Generator B → negotiates independently with Coal Supplier Y
Generator C → negotiates independently with Coal Supplier Z

Competition among the buyers can increase suppliers' bargaining opportunities and potentially produce different procurement terms.

But suppose the generators agree:

"None of us will pay more than RMB X per tonne."

or:

"Generator A will purchase from northern suppliers; Generator B will purchase from southern suppliers."

or:

"We will jointly refuse Supplier X unless it accepts our coordinated price."

The arrangement may eliminate competition between the purchasers and distort the procurement market.

3. Relevant Chinese Legal Framework

A. Article 16 — Definition of Monopoly Agreement

Article 16 of the AML defines a monopoly agreement as an agreement, decision or other concerted conduct that eliminates or restricts competition.

Thus, a cartel does not necessarily require a formal written contract.

Evidence may include:

• emails;
• WhatsApp/WeChat messages;
• meeting minutes;
• industry-association documents;
• procurement spreadsheets;
• common pricing formulas;
• coordinated bids;
• telephone records;
• synchronized purchasing decisions;
• common supplier-allocation arrangements.

B. Article 17 — Horizontal Monopoly Agreements

Article 17 prohibits competing undertakings from entering into agreements involving:

1. fixing or changing prices;
2. restricting production or sales;
3. dividing sales markets or raw-material procurement markets;
4. restricting purchase of new technology or equipment;
5. joint boycott;
6. other monopoly agreements recognized by the enforcement authority. 

For energy procurement, Article 17(3) is particularly important.

The 2025 Provisions on Prohibiting Monopoly Agreements expressly explain that procurement-market allocation can include dividing:

• procurement regions;
• types of materials;
• quantities;
• procurement periods; or
• suppliers. 

That makes the provision highly relevant to coordinated coal, gas, petroleum, equipment and other energy-input procurement.

4. What Conduct Can Constitute an Energy Procurement Cartel?

A. Coordinated procurement prices

Competing energy purchasers agree on:

• a maximum purchase price;
• a common bidding price;
• a common discount;
• a common price formula; or
• a common ceiling for energy inputs.

This removes independent buyer-side price competition.

B. Allocation of suppliers

For example:

Company A gets Supplier 1;
Company B gets Supplier 2;
Company C gets Supplier 3.

If competing purchasers agree to divide suppliers, the arrangement may amount to division of the procurement market.

C. Allocation of geographic procurement markets

Competing purchasers may agree:

• northern coal suppliers belong to Purchaser A;
• western suppliers belong to Purchaser B;
• LNG suppliers in a particular region belong to Purchaser C.

The 2025 monopoly-agreement provisions specifically identify procurement-region allocation as a prohibited form of procurement-market division.

D. Coordinated procurement quantities

Purchasers may agree to limit their purchases so that suppliers face artificially reduced demand.

For example:

"Each power company will purchase no more than 500,000 tonnes."

This can become problematic where the purpose or effect is to restrict competitive procurement.

E. Joint boycott

Several energy purchasers may agree:

"We will not purchase from Supplier X."

A coordinated refusal to deal can fall within the prohibition against joint boycotts.

F. Bid coordination

Energy procurement often occurs through tenders or competitive procurement systems.

Potentially problematic conduct includes:

• bid rotation;
• designated winners;
• complementary bids;
• exchange of intended bids;
• agreement not to compete;
• coordinated withdrawal;
• allocation of procurement contracts.

China's enforcement authorities have specifically emphasized that collusive bidding can seriously undermine procurement-market competition. In 2025, the Supreme People's Court and NDRC jointly published cases concerning bid-rigging and emphasized that collusion may occur throughout procurement chains, including engineering and material procurement.

5. Six Important Chinese Cases / Enforcement Decisions

A caution is important here: Chinese authorities have relatively few published decisions that use the precise English label "energy procurement cartel." Consequently, the strongest case-law set combines directly relevant electricity/gas/energy cases with Chinese cartel decisions establishing principles applicable to procurement cartels.

Case 1 — Shanxi Direct-Supply Electricity Price Cartel

Shanxi Electricity Industry Association & 23 Thermal Power Enterprises

Authority: Shanxi Development and Reform Commission / NDRC
Year: 2017

This is one of China's most important electricity cartel cases.

The Shanxi Electricity Industry Association organized 23 thermal-power enterprises to discuss direct-supply electricity prices. The enterprises entered into an industry agreement designed to prevent "malicious competition" and coordinated the discount levels applicable to direct electricity supply.

The agreed arrangement effectively controlled the pricing of direct-supply electricity.

Authorities concluded that the enterprises had implemented a monopoly agreement and imposed aggregate fines of approximately RMB 72.88 million, while the industry association received a separate penalty.

Relevance to procurement cartels

Although this was principally a seller-side electricity price cartel, it establishes an important principle:

Competitors in an energy market cannot replace independent market negotiation with collective price coordination.

The same reasoning can operate on the purchasing side where competing electricity generators coordinate their acquisition prices for coal or other inputs.

Case 2 — Harbin–Daqing–Qiqihar Natural Gas Vertical Monopoly Agreement

PetroChina Natural Gas Sales Daqing Branch & Daqing Oilfield Gas Branch

Year: 2018

Chinese antitrust authorities investigated natural-gas businesses in the Harbin–Daqing–Qiqihar region.

The companies were found to have imposed a minimum resale price for compressed natural gas, constituting a vertical monopoly agreement. The two companies received aggregate fines of approximately RMB 84.06 million, equivalent to 6% of the relevant annual sales.

Procurement significance

This case is not itself a buyer cartel. It is important because it demonstrates that competition restrictions in the natural-gas supply chain can be examined through the AML even where the restriction operates through contractual pricing arrangements.

For procurement-cartel analysis, it demonstrates the importance of distinguishing:

• horizontal buyer coordination;
• vertical supplier restrictions; and
• unilateral conduct by a dominant energy supplier.

Case 3 — Eight Dyeing Companies v. Electricity Company

Unfair-Pricing Dispute Concerning Pipeline Steam

Supreme People's Court, (2023) Supreme People's Court IP Civil Final No. 2862

This is a particularly important recent energy-sector case.

Eight dyeing enterprises challenged an electricity/steam supplier concerning prices for pipeline-transported steam. The supplier was found to have a dominant position in the relevant local pipeline-steam market.

The Supreme People's Court held that a short-term price increase does not automatically amount to unfair pricing. The court examined:

• the duration of the price increase;
• cost changes;
• the pricing mechanism;
• transparency;
• commercial rationality;
• comparable prices; and
• whether the pricing system systematically produced excessive profits. 

Procurement-cartel significance

The case demonstrates that high energy procurement prices alone do not prove cartel conduct.

A cartel investigation requires evidence of coordination between competitors.

Therefore:

High coal prices ≠ cartel automatically.

High gas prices ≠ cartel automatically.

Similar electricity procurement prices ≠ cartel automatically.

There must be evidence of prohibited coordination or another legally cognizable restriction.

Case 4 — Natural Gas Company Bundling Case

Haidong Huamou Gas Appliance Trading v. Minhe Chuammou Petroleum & Natural Gas

Supreme People's Court, (2023) Supreme People's Court IP Civil Final No. 1547

The local natural-gas company required customers seeking gas connections to install a specified gas boiler.

The company possessed a dominant position in the relevant local pipeline natural-gas supply market.

The court treated the conduct as bundling/tie-in abuse of dominance, following an administrative antitrust decision. The Supreme People's Court upheld compensation to the affected gas-appliance company.

Procurement significance

This case illustrates an important distinction:

An energy company may use its position in an infrastructure market to influence the procurement of related products.

Therefore, an energy-procurement investigation should ask:

1. Who controls access to the energy network?
2. Does the network operator control procurement of connected equipment?
3. Is procurement genuinely voluntary?
4. Is the energy supply conditioned on purchasing from a specified supplier?
5. Does the arrangement foreclose competing suppliers?

Case 5 — Bottled LPG Cartel Cases

Anhui Huaiyuan Bottled LPG Operators

Year: 2024

The Anhui market-regulation authority investigated nine bottled-LPG operators.

The operators agreed to establish a joint company and allocate sales profits according to their existing market shares. The arrangement effectively divided the market and profits among competing LPG businesses.

The authorities imposed aggregate fines of approximately RMB 750,800 and ordered termination of the conduct.

Why it matters

Bottled LPG is an energy product.

The case demonstrates that Chinese enforcement authorities will apply cartel principles to localized energy markets, particularly where competitors coordinate market allocation rather than competing independently.

For procurement-cartel analysis, the analogous concern is:

competing energy purchasers cannot agree among themselves which suppliers, regions or procurement channels each will use.

Case 6 — Nanjing Bottled LPG Cartel

Nanjing Zhongran Baijiang Energy-related LPG Case

Period: 2018–2021

According to the market-regulation enforcement materials, the businesses adopted self-regulatory arrangements involving:

• price coordination;
• market division;
• penalties for deviations;
• self-regulatory deposits; and
• communications through WeChat.

The authorities concluded that the participants had fixed or changed prices and divided the sales market.

Procurement relevance

This case is particularly useful for understanding implementation evidence.

A cartel does not have to rely on sophisticated written agreements. Authorities can examine:

• WeChat communications;
• self-regulatory rules;
• financial arrangements;
• market-allocation records;
• enforcement mechanisms;
• penalty systems.

The same evidentiary approach could be used against an energy-buying cartel.

Case 7 — Shanxi Electricity Procurement / Market Coordination as a Regulatory Warning

Electricity-market coordinated bidding

Chinese energy authorities have also increasingly focused on coordinated bidding strategies.

In a 2025 notice concerning electricity-market transactions, the National Energy Administration identified cases in which generating enterprises used unified market strategies, centralized personnel and trading guidance to engage in coordinated bidding. It also identified coordinated pricing arrangements among enterprises within a generating group.

This is highly relevant to procurement-cartel compliance because modern electricity markets can create opportunities for competitors to coordinate through:

• centralized trading desks;
• common algorithms;
• common market strategies;
• shared procurement personnel;
• information exchanges;
• common bidding instructions.

The legal risk therefore extends beyond traditional written cartel agreements.

6. Distinguishing a Procurement Cartel from Legitimate Joint Procurement

Not every joint procurement arrangement is unlawful.

This distinction is extremely important.

Potentially legitimate

Two smaller energy purchasers may jointly purchase coal because joint purchasing:

• reduces transaction costs;
• improves logistics;
• permits access to suppliers;
• reduces transportation costs;
• creates efficiencies.

China's AML recognizes potential exemptions for certain agreements that improve technology, reduce costs, increase efficiency or achieve specified public-interest objectives, subject to the statutory conditions.

Potentially unlawful

The same arrangement becomes much more problematic where competing purchasers use joint purchasing to:

• fix purchase prices;
• allocate suppliers;
• suppress supplier competition;
• exchange competitively sensitive information;
• exclude a supplier;
• divide procurement territories;
• coordinate procurement quantities.

7. Buyer Power and "Monopsony" Concerns

Energy procurement cartels can create monopsony-like effects.

A conventional cartel says:

"We will jointly charge suppliers more."

A buyer cartel may instead say:

"We will jointly pay suppliers less."

This can harm:

• coal producers;
• gas suppliers;
• renewable-energy developers;
• equipment manufacturers;
• independent power producers;
• oil suppliers;
• smaller energy companies.

The immediate effect may appear beneficial to the cartel members because procurement costs decline.

But competition law looks beyond the cartel members' immediate savings.

Potential long-term effects include:

• supplier exit;
• reduced investment;
• reduced production capacity;
• reduced innovation;
• lower quality;
• reduced supply resilience;
• foreclosure of smaller suppliers.

8. Energy Procurement Cartels and Natural Monopoly

Energy markets present a special complication.

Certain activities may have natural-monopoly characteristics, such as:

• electricity transmission;
• electricity distribution;
• gas pipelines;
• district heating networks.

But competitive activities may exist around them.

China's 2026 Public Utilities Antitrust Guidelines expressly identify electricity, gas and heating as public-utility sectors and emphasize preventing natural-monopoly advantages from being extended into competitive activities.

Thus:

Natural monopoly in infrastructure does not automatically justify cartelization of competitive procurement.

9. Information Exchange as a Major Risk

Energy procurement frequently requires sophisticated market information.

Competitors may legitimately obtain public information concerning:

• coal indices;
• LNG benchmarks;
• electricity prices;
• freight rates;
• government regulations.

The risk arises when competing buyers exchange non-public strategic information, such as:

• intended bid;
• maximum purchase price;
• minimum acceptable price;
• planned procurement quantity;
• supplier negotiations;
• future purchasing strategy;
• contract-renewal dates;
• supplier-specific offers.

The Chinese antitrust framework recognizes "other concerted conduct" as capable of constituting a monopoly agreement.

10. Industry Associations

Industry associations present significant risk.

The Shanxi electricity case demonstrates how an industry association can become a mechanism for coordinating competitors.

An association should not become a forum for:

• coordinating energy procurement prices;
• allocating suppliers;
• discussing future procurement strategies;
• coordinating bids;
• fixing purchasing quantities;
• agreeing common negotiation positions against suppliers.

China's AML prohibits industry associations from organizing undertakings to engage in prohibited monopoly conduct.

11. Digital Energy Procurement and Algorithmic Cartels

Modern energy procurement increasingly uses:

• algorithmic bidding;
• centralized trading platforms;
• automated procurement systems;
• AI forecasting;
• smart contracts;
• digital tendering;
• energy-management software.

This creates new cartel risks.

For example, four competing generators might independently use a common platform that receives their confidential purchasing information.

If the platform facilitates coordination regarding:

price + quantity + supplier + timing,

the competition-law analysis may become significantly more serious.

China's AML expressly provides that dominant undertakings may not use data, algorithms, technology or platform rules to engage in prohibited abuses.

12. Evidence of an Energy Procurement Cartel

Authorities would typically look for a combination of evidence.

Direct evidence

• cartel agreement;
• meeting minutes;
• emails;
• WeChat messages;
• signed procurement protocols;
• common bidding instructions;
• supplier-allocation documents.

Circumstantial evidence

• synchronized procurement prices;
• identical unusual purchasing patterns;
• simultaneous withdrawal from suppliers;
• unexplained supplier allocation;
• identical tender strategies;
• communications followed by market changes.

Economic evidence

Authorities may compare:

• pre-cartel procurement prices;
• cartel-period prices;
• post-cartel prices;
• supplier margins;
• procurement volumes;
• market shares;
• bid dispersion;
• supplier participation.

13. Penalty and Enforcement Risk

The AML provides significant sanctions for monopoly agreements.

In addition to monetary penalties, enforcement can result in:

• orders to cease the conduct;
• confiscation of illegal gains where applicable;
• corrective measures;
• administrative consequences;
• private damages claims;
• reputational consequences.

The 2024 LPG enforcement cases demonstrate that energy-related cartel enforcement is not merely theoretical.

14. Important Defence Arguments

A company accused of participating in an energy procurement cartel may argue:

1. No agreement

There was no agreement or concerted conduct.

2. Independent commercial decisions

Parallel procurement prices resulted from common market conditions.

3. Public benchmark

The price was derived independently from publicly available energy indices.

4. Legitimate joint procurement

The arrangement generated genuine efficiencies.

5. No competitive relationship

The participating companies were not competitors in the relevant procurement market.

6. No restriction of competition

The arrangement did not actually eliminate or restrict competitive procurement.

7. Regulatory requirement

The conduct was required by applicable government regulation.

However, the existence of government regulation should be carefully established rather than assumed merely because the industry is regulated.

15. Compliance Framework for Energy Companies

Energy companies should adopt specific safeguards.

Procurement meetings

Avoid discussion of:

• future bids;
• maximum purchase prices;
• supplier allocation;
• competitor procurement quantities;
• confidential supplier offers.

Industry associations

Use written agendas and compliance protocols.

Joint purchasing

Document:

• commercial rationale;
• efficiency benefits;
• scope;
• duration;
• participating entities;
• information barriers.

Digital platforms

Ensure competitors cannot see one another's confidential:

• bids;
• prices;
• quantities;
• supplier negotiations;
• procurement strategies.

Employees

Train procurement and trading personnel specifically on:

"Do not coordinate with competitors—even if the objective is to obtain a lower purchasing price."

16. Difference Between Seller Cartel and Procurement Cartel

17. Key Legal Principles from the Cases

Principle 1 — Energy markets are subject to competition law

The fact that electricity, gas or heating is regulated does not remove competition-law scrutiny.

Principle 2 — Coordination of prices is highly risky

The Shanxi electricity case demonstrates the seriousness of coordinated pricing among competing energy businesses.

Principle 3 — Procurement-market division is expressly prohibited

Chinese rules specifically identify allocation of procurement regions, quantities, categories and suppliers as prohibited forms of procurement-market division.

Principle 4 — Energy dominance can affect adjacent markets

The natural-gas boiler bundling case demonstrates how control over gas infrastructure can affect related equipment markets.

Principle 5 — Parallel prices alone are insufficient

The 2026 pipeline-steam judgment illustrates the need to distinguish legitimate market/cost movements from systematic abuse.

Principle 6 — Digital coordination is increasingly important

Electricity-market regulation now expressly addresses coordinated bidding and market strategies, demonstrating increasing scrutiny of coordinated conduct in modern energy markets.

18. Conclusion

Energy procurement cartels in China involve competing energy purchasers coordinating purchasing decisions that should ordinarily be made independently. The most important legal provision is Article 17 of the 2022 Anti-Monopoly Law, particularly its prohibition on dividing raw-material procurement markets. The 2025 Provisions on Prohibiting Monopoly Agreements make the procurement dimension particularly clear by identifying allocation of procurement regions, quantities, categories, periods and suppliers as potential prohibited conduct.

The Chinese energy sector presents heightened risks because electricity, natural gas, heating and related infrastructure combine regulated/natural-monopoly components with competitive procurement and trading activities. The Shanxi electricity cartel, LPG cartel cases, natural-gas cases, pipeline-steam litigation and recent electricity-market coordinated-bidding enforcement collectively demonstrate the breadth of competition-law scrutiny.clusivity . Detailed Explanation With   Case Law