Abstract
The year of 2016 has witnessed the conclusion of 14 cases of abuse of dominant market position and 5 cases of monopoly agreement in all levels of courts in China. This article comprehensively reviews the key points embodied in the judgments of those cases, and provides comments on certain important issues such as the legality of RPM, the probative value of administrative enforcement decisions before courts and the arbitrability of monopoly disputes.
I. Introduction
2016 has seemed to be a relatively insipid year for anti-monopoly litigations in China. It is first reflected in the small number of cases. Chinese courts have adjudicated on 18 monopoly disputes nationwide, rendering 20 judgements or rulings.【1】It is also reflected in the lack of landmark cases like Huawei v. IDC and 360 v. Tencent in previous years. Nevertheless, the adjudicated cases in 2016 have certain features, and some of them are either of important referential value or have provoked heated discussion or even criticism.
In the procedural aspect, the Supreme People’s Court concluded 2 retrial cases, which signals its determination to reinforce judicial supervision and its efforts towards more judicial consistency. With respect to regional difference, Guangdong Province and Beijing Municipality have adjudicated the largest numbers of cases with 5 and 4 cases respectively, while around 20 provinces/municipalities have heard no case at all. The cause of action is diversified. 14 cases concern abuse of dominant market position, where specific monopoly behaviours involved include unfairly high prices, exclusive dealing, tie-in sales and refusal to trade. 5 cases concern monopoly agreements, of which 3 are vertical and 2 are horizontal. In one case the plaintiff even accused the defendant to have violated provisions of Article 20 of the Anti- Monopoly Law regarding concentration of undertakings. As to the results, there is only 1 case where the plaintiff prevailed ultimately, i.e. Wu Xiaoqin v. Shaanxi Broadcasting Media. It is also worthy to note that objections to jurisdiction have been frequently raised (6 cases), and the ratio of withdrawal of claims is surprisingly high (6 cases, accounting one third of the total).
Below we will review the monopoly cases in 2016 and provide comments from the aspect of abuse of dominant market position, monopoly agreement, objections to jurisdiction and the relationship between monopoly disputes and other type of disputes in turn.
II. Abuse of Dominant Market Position
- Determination of Dominant Market Position
In Changsha Zhenshanmei Ltd. v. Ningbo Bull Electric【2】, the Supreme People’s Court held that the relevant market cannot be defined as, as Plaintiff alleged, the Bull brand switch market in the Changsha city. To start with, experience from daily life suggests that there exist other competing and closely substitutable switch products against the Bull brand switch. Given that the Plaintiff cannot substantiate its claim of relevant product market, there would be no need to determine the relevant geographic market. Even assuming that the relevant market is the switch market in Changsha, the Plaintiff has failed to provide with sufficient evidence about the defendant’s market share to prove its dominant position in the relevant market.
In Yang Zhiyong v. China Mobile【3】, Shanghai Intellectual Property Court ruled that Plaintiff did not prove China Mobile has dominant position in the relevant market. In the area of mobile communication service, there are other domestic operators such as China Unicom, China Telecom. In addition, China Mobile, the Defendant, also provides various packages of service for consumers to choose from. Therefore, the Defendant does not possess the capability to manipulate price and gain monopoly profits in the relevant market.
In Wu Xiaoqin v. Shaanxi Broadcasting Media, the Supreme People’s Court determined without hesitation that the Defendant held dominant position in the cable TV transmission market, given that the Defendant is the only legally permitted operator of cable TV transmission service in the Shaanxi Province. - Determination of Tie-In Sales
In Wu Xiaoqin v. Shaanxi Broadcasting Media【4】, having confirmed the Defendant’s tie-in sale practice of selling basic TV programs and other programs requiring extra payment as a package, the Supreme People’s Court ruled that the Defendant has conducted tie-in sales without justifiable reasons because the two type of programs are independent from each other and the Defendant has not proven that it is trade practice to do so or to charge the two types of programs separately would result in detriment to the performance or use value of the two. - Determination of the Unfairly High Price
In Yang Zhiyong v. China Mobile, the Plaintiff alleged that the Defendant China Mobile’s 4 types of practices, namely charge of monthly fee, charge of roaming service, billing method that approximates second to minute and pricing at 0.39 yuan per minute, constitute “selling commodities at unfairly high prices” prohibited by Anti-Monopoly Law.【5】Shanghai Intellectual Property Court decided that the Plaintiff did not provide evidence to prove its claim.
Regarding the 0.39 yuan per minute call charges, the Court considered that, the Defendant provides various packages of service for consumers to choose from, where the price varies from 0.1 yuan to 0.39 yuan. The Plaintiff is free to opt for other packages.
In terms of whether the monthly fee and domestic roaming charge is overly high and whether it is reasonable in relation to its operating costs, the Court considered that the Plaintiff should have submitted evidence to establish the Defendant’s operating costs and profitability and what would be the reasonable level of profit.
As to the billing method that approximates second to minute, the Court held that this method is recognized by the competent authority and that the Plaintiff provided no proof regarding whether charging by minute or by second is more economic and efficient and whether the current charging method imposes a negative effect on competition. - Brief Comments
An impression the above cases have left us is that, burden of proof is one of the key factors in winning a case of abuse of dominant market position. Article 7 of Provisions of the Supreme People's Court on Application of Laws in the Trial of Civil Disputes arising from Monopolistic Practices (hereinafter, as Provisions for Monopoly Case) allocates the burden of proof as follows: Plaintiff bears the burden to prove Defendant’s dominant market position in the relevant market, and its abuse and Defendant shall bear the burden to prove its behaviors are justifiable in defense.
The above cases seem to suggest that plaintiffs bear a relatively heavier burden of proof. Particularly in the case of Yang Zhiyong, in order to prove that the monthly fee and the roaming service charge are unfairly high, the Plaintiff was expected to provide evidence proving the Defendant’s operational costs, profitability and its reasonable level of profit, which might be an impossible task for an individual consumer.
It is also worthy to note that, except for the evidence submitted by the parties, the Court may take into consideration “common sense” and attach importance to documents issued by competent authorities.
III. Monopoly Agreements - RPM Is Not a Monopoly Agreement Per Se
In Dongguan Guochang Electrical Appliance Shop v. Dongguan Shengshi Ltd. and Dongguang Heshi Ltd.【6】, Guangzhou Intellectual Property Court held, although it contains provisions that restrict the minimum resale price (RPM), the agreement concerned does not constitute a monopoly agreement as prohibited under the Anti-Monopoly Law.
First of all, the common sense suggests that there are various comparable domestic brands and foreign brands that compete with Gree in the air conditioner market in the Dongguan city. Evidence submitted by the Defendant regarding Gree’s participation in promotions also establishes the sufficiency of competition in the air conditioner market in Dongguan and that Gree does not possess dominant market position. Even though Gree restricts resale prices, consumers are fully free to opt for other similar brands. In addition, no evidence suggests that competition in the other industries related to air conditioners has been affected by Gree’s RPM practice. Therefore, the agreement concerned does not have the effect of eliminating or restricting competition.
Furthermore, although the Defendant’s RPM practice may have affected the intra-brand price competition among distributors, the Plaintiff and other distributors can still compete among one another in terms of pre-sale marketing, sale promotions and after-sale services. - The Probative Value of Administrative Penalty Decisions in Anti-Monopoly Litigations
In Tian Junwei v. Carrefour Shuangjing Branch and Abbott Ltd.【7】, the Plaintiff mainly relied on the Decision on Penalty made by NDRC against Abbott in September 2013. According to that Decision, Abbott has fixed resale prices through contract arrangements since 2011, and thus constituting vertical monopoly agreements.
The Beijing High Court rejected the Plaintiff’s appeal. Acknowledging that the Decision may, prima facie, establish Abbott’s vertical monopoly agreements with downstream undertakings, the Court considered that given the Decision fails to identify the counterparty of the monopoly agreements, it cannot serve to prove the existence of a vertical monopoly agreement between Carrefour Shuangjing Branch and Abbott. - Brief Comments
The Judgement of Dongguan Guochang Electrical Appliance Shop again highlights the once- existing (probably still exists) inconsistency between courts and administrative agencies as to the legality of RPM. Following the case Beijing Ruibangyonghe v. Johnson and Johnson China【8】, this judgment adopts the rule of reason doctrine, which means that RPM only constitutes vertical monopoly agreement when it eliminates or restricts competition in the relevant market. In this case, the Court, on the basis that the air conditioner market in Dongguan is a market with full competition and Gree does not possess dominant market position therein, held that the RPM agreement does not constitute a monopoly agreement because it neither restrains inter-brand competition, nor eliminates intra-brand competition other than price competition.
Administrative law enforcement prior to 2016 seems to have adopted the rule of illegal per se with respect to RPM. For example, in Shanghai Municipal Price Bureau’s penalty decisions on 3 distributors of Haier Electronics【9】and SAIC-GM【10】, the law enforcement agency concluded that the parties under investigations violated the anti-monopoly law immediately following its findings that they entered into and implemented RPM agreements. However, certain law enforcement decisions in 2016 have appeared to switch to the rule of reason to some extent. One example is Shanghai Price Bureau’s penalty decision on Smith & Nephew【11】, where analysis was made as to the price-restricting agreement’s effect of eliminating and restricting intra-brand competition. A more noteworthy case is NDRC’s penalty decision on Medtronic【12】. This Decision analyzed more in detail how the RPM concerned had eliminated or restricted both the intra-brand and inter-brand competition. That said, it remains to be seen whether convergency is emerging between the administrative agencies and the courts in determining the legality of RPM.
The focus of Tian Junwei is whether a plaintiff may discharge his burden of proof by relying on NDRC’s decisions on penalty. Notwithstanding administrative decision is not a prerequisite to file a case before the court, facts recorded in instruments prepared by State organs within their competence shall be presumed to be true in court proceedings【13】, which means administrative decisions might help a plaintiff to establish certain facts and result in an enhanced chance to prevail.
The problem is that, as revealed by this case, administrative decisions normally do not disclose the identification of the counterparties of the monopoly agreements. A plaintiff thus cannot rely on such a decision to establish that a particular distributor who sold products to the plaintiff had participated in fixing resale prices, but has to do so by himself. Questions that follow would be: Is a plaintiff entitled to, or does a court have the power to, request the relevant anti-monopoly law enforcement agency to disclose relevant information? - Statistics by the author according to information published by the Website of China Judgements and Rulings (http://wenshu.court.gov.cn).
- Supreme People’s Court (2015) Civ. Retrial Civil Ruling No. 3569, made on March 4th 2016.
- Shanghai Intellectual Property Court (2015) SH IP Civ. F.I. Civil Judgement No. 508, made on April 25th 2016.
- Supreme People’s Court (2016) Civ. Retrial Civil Judgement No. 98, made on May 31st 2016.
- In this case the Plaintiff also claimed that the Defendant’s prohibition on number portability amounts to an exclusivity agreement, which was rejected by the Court.
- Guangzhou Intellectual Property Court (2015) GD IP Comm. Civ. Civil Judgement No. 33, made on 30th August 2016; High People’s Court of the Guangdong Province (2016) GD Civ. Jurisd. Final Civil Ruling No. 273.
- High People’s Court of the Beijing Municipality (2016) BJ Civ. Final Civil Judgement No. 214, made on 22nd August 2016.
- High People’s Court of the Shanghai Municipality (2012) SH HC Civ. 3 (IP) Final Civil Judgement No. 63, made on 1st August 2013.
- Administrative Decision on Penalty No.2520160009, Shanghai Municipal Price Bureau, made on 8th August 2016.
- Administrative Decision on Penalty No.2520160027, Shanghai Municipal Price Bureau, made on 19th December 2016.
- Administrative Decision on Penalty No.2520160028, Shanghai Municipal Price Bureau, made on 29th December 2016.
- National Development and Reform Commission [2016] Administrative Penalty Decision No. 8, December 2016.
- See Article 14 of Interpretations of the Supreme People's Court on the Application of the Civil Procedure Law of the People's Republic of China.