Antitrust Litigation 2021

Last Updated September 16, 2021

China

Law and Practice

Authors



FenXun Partners established a joint operation office with Baker McKenzie in April 2015. The Baker McKenzie FenXun (FTZ) Joint Operation is the world’s leading Chinese legal platform, delivering integrated international and PRC legal services. The Joint Operation is staffed by both locally admitted and foreign-licensed lawyers from Baker McKenzie and FenXun Partners, advising leading Chinese and multinational companies on both Chinese domestic and cross-border issues across the full spectrum of corporate and commercial law.

The Anti-monopoly Law of China has, since its implementation in 2008, operated a dual-track regulatory mechanism focusing on public execution of administrative enforcement, supplemented by private execution of anti-monopoly litigation. The amount, professional difficulty and types of anti-monopoly litigation cases in 2020 have significantly increased and also undergone a substantial change.

According to publicly available information, by the end of 2020, courts nationwide had received 897 civil first instance monopoly cases (854 concluded), of which 61 new civil first instance monopoly cases were received in 2020 (107 concluded). The Intellectual Property Court of the Supreme People’s Court (Supreme Court), since its establishment on 1 January 2019, has received 42 civil second instance cases (29 concluded). Taking the Supreme Court as an example, the following features were particularly notable in the monopoly disputes received by the Supreme Court in 2020, as compared to 2019:

  • a significant increase in numbers, from nine in 2019 to 30, including up to 25 substantive cases;
  • the industries and sectors involved covered a wide range of areas, both traditional and modern technologies (including medicine, computers, information networks), among them, monopoly disputes involving information and communication technologies are the most common; and
  • the variety of disputes, including eight disputes over abuse of dominant market position, six disputes over monopoly agreements, and 16 other cases in which the cause of action was determined by monopoly disputes.

Some of the most topical anti-monopoly litigation cases in different industry sectors in China are set out below.

Information and Communications

In the information and communications sector, the number of civil anti-monopoly litigation cases related to standard-essential patents (SEPs) continues to be high. Recent examples include:

  • TCL v Ericsson for abuse of dominant market position (hereinafter referred to as TCL v Ericsson);
  • Hytera v Motorola for abuse of dominant market position in the licensing of SEPs for cost-optimised private network communications (both this case and TCL v Ericsson are currently being heard by the Shenzhen Intermediate People's Court); and
  • OPPO v Sisvel for abuse of dominant market position by charging unfairly high patent licence fees, bundling and selling expired patents and charging repeated fees for the same patents (hereinafter referred to as OPPO v Sisvel), which was settled globally in July 2021.

Such cases usually involve numerous parallel international proceedings between the parties, with the parties initiating multiple proceedings in multiple jurisdictions over patent infringements, disputes over the SEP licensing fees and anti-monopoly litigation. In the above cases, the Chinese courts have addressed the following topical issues.

Determination of the jurisdictional rules for civil anti-monopoly disputes involving monopolistic conduct outside the territory of China

If a party brings a lawsuit for damages suffered in China as a result of this monopolistic conduct outside China. The exclusionary or restrictive effect of such overseas monopolistic conduct on market competition in the Chinese market may be used as the jurisdictional connection point for the case. In turn, the plaintiff’s place of domicile can be used as the place where the infringement occurred, thus confirming the jurisdiction of Chinese courts.

Clarifying the applicable rules of the doctrine of forum non conveniens

In TCL v Ericsson and OPPO v Sisvel, the defendants both argued for the application of the doctrine of forum non conveniens on the grounds that parallel proceedings abroad included the conduct involved in the case and requested the court to dismiss the plaintiff's suit. In regard to this argument, the Supreme Court expressly held that the defendant who applied the doctrine should bear the burden of proving forum non conveniens.

In the above two cases, the courts did not support the defendants' claims for the application of forum non conveniens on the grounds that the cases involved the interests of Chinese legal persons and that the infringements involved in the lawsuits took place in China.

Platform Economy

China's digital economy is developing rapidly and vigorously, and platform operators are taking advantage of network efforts, scale effects and lock-in effects in the internet sector to enhance their market concentration while gradually using the dominant position of their platforms and the dependence of the operators within the platform to perform secretive monopolistic acts. This includes using big data analysis to price products to the disadvantage of existing customers, and the use of some algorithmic mechanisms to achieve collusion. Topical litigation cases in this area are set out below.

Huaduo Network Technology is suing NetEase for abuse of market dominant position by restricting the retransmission of the game in question on other live streaming platforms and implementing tie-in sales of the game in question with NetEase software. The case was finalised at second instance, where it was found that NetEase did not have a dominant position in the market and that the conduct in question did not constitute an abuse. The plaintiff's claim was dismissed.

JD is suing Alibaba and is seeking CNY1 billion in damages for Alibaba’s abuse of its dominant market position by coercing merchants to "pick one from the two" – ie, requiring merchants to choose only one platform during a particular promotion period. The case is currently pending at the first instance Beijing High People's Court. The case has received much attention due to the dramatic growth of e-commerce in China in recent years and its close relevance to consumers.

ByteDance is suing Tencent for abuse of dominant market position by restricting users from sharing TikTok content through WeChat and QQ. The case is currently pending before the Beijing Intellectual Property Court.

Pharmaceutical Industry

The pharmaceutical industry has been a key area of anti-monopoly enforcement and judicial attention, as it concerns the public interest and national livelihood and has features of a commercial, technology-intensive and government-controlled market. Key cases in this area in 2020 are set out below.

In the case of Yangtze River suing three pharmaceutical ingredient companies for abuse of market position (hereinafter referred to as Yangtze River v API Enterprises), the Nanjing Intermediate People's Court in the first instance found that some of the monopolistic acts were established and upheld compensation for economic losses of nearly CNY70 million. The case is currently being heard in the Supreme Court at second instance.

Weifang Puyunhui Pharmaceutical Co., Ltd. v the State Administration of Market Regulation (SAMR) is an administrative litigation against the SAMR for illegal anti-monopoly administrative penalties. The plaintiff and two other companies distributing calcium gluconate API were found to have jointly implemented unfairly high prices and imposed unreasonable deal conditions and were subject to a maximum administrative penalty. The plaintiff appealed the penalty decision and filed an anti-monopoly administrative litigation, which is currently being heard at first instance in the Beijing No 1 Intermediate People's Court.

In addition to the anti-monopoly litigation cases mentioned in 1.1 Recent Developments in Antitrust Litigation, the Anti-monopoly Law has undergone updates and rapid development, both in terms of legislation and of administrative enforcement.

Legislation

The revision of the Anti-monopoly Law will be launched in China in 2021, which will be the first revision since its introduction 13 years ago.

In order to promote the revision, the SAMR has released the Draft Revision of the Anti-Monopoly Law (Draft for Comments). The main focus of the revision include a new system of fair competition review by the administrative authorities, additional factors for determining the dominant market position of operators in the internet sector, and adding that "organising or helping" operators to enter into monopoly agreements should bear the same legal responsibilities as directly participating in monopoly agreements, etc.

Administrative Enforcement of the Anti-monopoly Law

According to the statistics, China concluded 108 cases of anti-monopoly administrative penalties in 2020, with a fine of CNY450 million. The administrative enforcement was characterised by a large number of cases with high penalties, such as the decision to penalise Alibaba Group for alleged monopoly in the "picking one from the two" case in April 2021 with a penalty of CNY18.2 billion and the aforementioned calcium gluconate API companies with a heavy penalty of CNY325.5 million.

To further standardise the implementation of anti- monopoly administrative investigations and penalties, the Anti-Monopoly Committee of the State Council has issued and made public a number of Anti-Monopoly Guidelines for key industry sectors in the past year, providing detailed and operable guidelines on specific issues in the enforcement process, including the Guidelines for Countering Monopolisation in the Field of Intellectual Property Rights and the Guidelines for Anti-monopoly in the Field of Platform Economy. These guidelines provide more detailed regulation of specific matters in their respective sectors, such as the market dominance and abuse of SEP rights in the intellectual property sector, which, respond to the topical issues and difficulties in practice.

Article 50 of the Anti-monopoly Law of China stipulates that if a business operator carries out monopoly actions and causes losses to others, the operator shall bear civil liability according to law. Article 14(1) of the Judicial Interpretation of the Supreme Court on Monopolistic Disputes (Judicial Interpretation of Monopolistic Disputes) clearly stipulates that where a defendant's monopolistic conduct has caused any losses to the plaintiff, the court may, in light of the plaintiff's claims and the finding of facts, order the defendant to cease infringement, compensate for losses, and otherwise assume civil liability in accordance with law. These two forms of civil liability are in line with the forms of bearing civil liability stipulated in Article 179 of the Civil Code of China.

Article 2 of the Judicial Interpretation of Monopolistic Disputes clearly stipulates that where a plaintiff directly files a civil lawsuit with the people's court or files a civil lawsuit with the people's court after a decision of the Anti-monopoly Enforcement Authority affirming the existence of monopolistic conduct comes into force, if that lawsuit satisfies other conditions for lawsuit acceptance as prescribed by law, it will be accepted by the people's court in question. In this regard, anti-monopoly civil litigation does not rely on administrative identification as a prerequisite. In China, monopoly damages can be claimed by means of follow-on and standalone claims.

There are no special antitrust tribunals or judges in China. As monopoly disputes are highly specialised, complex and have a significant impact, the Supreme Court has determined that the intellectual property courts are uniformly responsible for hearing all types of civil monopoly dispute cases and has also determined that civil monopoly dispute cases are subject to the same centralised jurisdiction as intellectual property cases.

In this regard, Article 3 of the Judicial Interpretation of Monopolistic Disputes makes clear that the intermediate people's court of a city where the people's government of a province, autonomous region, or municipality directly under the central government is located; or a city under separate state planning; or the intermediate people's court designated by the Supreme Court shall have jurisdiction over civil monopoly dispute cases as the court of first instance. For appeals against civil anti-monopoly litigation, all second instance cases will be heard directly by the Intellectual Property Court of the Supreme Court .

Case Transfer

Anti-monopoly disputes may be transferred between courts in China, as follows.

  • If the court accepting the case filing finds that it has no jurisdiction over anti-monopoly civil disputes, it shall transfer the case to the court with jurisdiction usually in the following specific situations:
    1. the case has an anti-monopoly cause of action;
    2. the defendant raises an anti-monopoly defence or countersuit; or
    3. where the case requires the application of the antitrust law.
  • Where two or more plaintiffs file lawsuits in different courts with jurisdiction for the same monopolistic conduct, the second court shall transfer the case to the court that has filed the case first.

If the forwarded court considers that the case does not fall within its jurisdiction in accordance with the provisions, it shall report this to a higher court for the appointment of jurisdiction and shall not transfer the case unilaterally.

On whether the Decisions of the National Competition Authority (NCA) are Binding on the Court

The Anti-monopoly Law and the Judicial Interpretation of Monopolistic Disputes do not specify whether the administrative decision of the NCA has any binding force or effect on the court. The Judicial Interpretation of Monopolistic Disputes (Draft for Comments) once stipulated that "where a fact that has been determined to constitute a monopoly by the decision of an anti-monopoly administrative authority has been established by a party in a relevant civil monopoly dispute case, the party is not required to prove such fact, unless the opposing party has evidence to the contrary sufficient to disprove it". However, this article was deleted when the interpretation was formally introduced. According to Article 114 of the Interpretation of the Supreme Court on the Application of the Civil Procedure Law of China (Interpretation of the Civil Procedure Law), the court presumes that matters recorded in documents produced by state authorities within its purview are true, unless there is sufficient evidence to the contrary to disprove it.

As a result, the administrative penalty decisions issued by the Chinese anti-monopoly enforcement authorities have only evidential but not mandatory binding effect on the courts. There is no doubt that the facts recorded in Chinese administrative penalty decisions are highly influential in the courts' factual determinations. It is also noteworthy that in the case of HANTAI Tyre Vertical Monopoly Agreement and Abuse of Dominant Market Position, the court made the opposite determination of the nature of the agreement involved in the lawsuit and the administrative penalty decision, which again indicates the above conclusion – ie, the determination of the administrative authority has only the effect of evidence.

There are no publicly available substantive decisions in which Chinese courts have determined the validity of administrative decisions made by competition authorities in other countries. In the case of Shanghai Electric Power Company v VISCAS regarding the horizontal monopoly agreement, based on the European Commission's decision to penalise a cartel agreement for high-voltage cable producers, the plaintiff brought a lawsuit against VISCAS in the Shanghai Intellectual Property Court. The case was elevated by the Shanghai High People's Court and is still under trial. It is worth paying attention to the court's findings of fact and the final outcome of the case.

On whether the NCA Can Participate in Civil Actions for Damages

In Chinese anti-monopoly follow-on litigation, the anti-monopoly administrative authorities cannot directly intervene into civil litigations as either a plaintiff or a defendant. However, as the issuing body of a public document submitted by a party to litigation, if necessary, the administrative enforcement agency that produced the administrative penalty decision may be requested by the court to clarify the authenticity of the document.

In addition, the court may access evidence obtained by the anti-monopoly enforcement agency during the administrative investigation phase through the application of the parties' or the court’s authority, This is the subject of some controversy in academic circles: on the one hand, if the court is not allowed to obtain such evidence, the plaintiff's difficulty in providing evidence will be aggravated; on the other hand, because China has not exempted or mitigated the civil monopoly liability of the applicant for leniency, and that applicant may become the defendant in anti-monopoly civil litigation. The establishment of the leniency system and the suspension system is intended to encourage offenders to stop their illegal acts as early as possible and actively reduce adverse effects, as well as, at the same time, improving the efficiency of law enforcement and saving administrative resources. If the court can "easily" obtain the evidence of the parties' violation of the law obtained by the Anti-monopoly Law enforcement agencies in the procedure of suspension or leniency, it may affect the enthusiasm of the parties to apply the leniency system in the anti-monopoly investigation in practice, thus affecting anti-monopoly administrative law enforcement to a certain extent.

Burden of Proof

In China, monopoly liability is a liability without fault. According to this principle of liability imputation, the plaintiff bears the burden of proof for demonstrating that:

  • the defendant has carried out monopolistic conduct;
  • the plaintiff has suffered an actual loss; and
  • there is a causal relationship between the monopolistic conduct and the losses suffered.

In the case of monopoly agreements, the plaintiff is required to prove that the agreement reached by the defendant satisfies the statutory conditions for monopoly agreements and that the agreement has the effect of "excluding or restricting competition" when proving the establishment of the monopoly agreement. In this regard, for horizontal monopoly agreements, it is usually presumed that they have the effect of excluding or restricting competition, and the burden of proof is shifted to the defendant to prove that its conduct does not have the effect of excluding or restricting competition. For vertical agreements, the general rules on allocation of the burden of proof should, in principle, still apply, and the plaintiff should bear the burden of proof that the vertical agreement has the effect of excluding or restricting competition.

In cases of abuse of dominant market position, the plaintiff shall bear the burden of proof in respect of:

  • the definition of the relevant market;
  • the fact that the defendant has a dominant market position;
  • the defendant's act of abuse of dominant market position; and
  • demonstrating that the conduct has the effect of excluding or restricting competition.

As to the reasonable justification for the act complained of, according to Article 8(2) of the Judicial Interpretation of Monopolistic Disputes, such reasonable justification shall be raised, and the burden of proof shall be on the defendant.

Relevant Standards of Proof

China's standard of proof in anti-monopoly cases in principle adopts the general standard of proof in civil litigation, which is high degree of probability (75%). However, there is a judicial view that the plaintiff’s standard of proof can be lowered for the core element of "excluding or restricting competition" – ie, it can be presumed that an act has the effect of excluding or restricting competition if it can be inferred that there is a substantial likelihood that an act will have that effect on the basis of the available evidence, combined with basic economic experience and common sense. The burden of proof will be shifted to the defendant in due course, and the defendant will provide counter-evidence that its conduct does not have the effect of excluding or restricting competition.

As for the burden of proof regarding passing-on defences, it is understood that the passing-on defence means that when the direct purchaser (such as a wholesaler or retailer), as the plaintiff, brings an anti-monopoly civil damage compensation lawsuit against the defendant's monopoly practitioner (such as the manufacturer), the defendant will argue that the plaintiff has already transferred all or part of its monopoly price loss to the indirect purchasers, who are typically represented by general consumers. Such claims have not been clarified in Chinese legislation or in judicial practice but may be clarified in the future.

The plaintiff may bring a civil anti-monopoly litigation on the basis of meeting the conditions for prosecution stipulated in Article 119 of the Civil Procedure Law and the conditions for eligible plaintiffs in civil anti-monopoly disputes stipulated in Article 1 of the Judicial Interpretation of Monopolistic Disputes. Both direct and indirect purchasers can make claims as long as they can prove that they have suffered actual losses as a result of the monopolistic conduct complained of, and there are no restrictions on this under China's Anti-monopoly Law and judicial interpretations.

Chinese civil lawsuits operate on a “final-after-two-trials” system: six months for the substantive hearing in civil lawsuits of first instance and three months for second instance hearings. If there are special circumstances that require an extension, this period may be extended by statutory procedures. Anti-monopoly litigation is no exception, and it follows the above-mentioned statutory trial period system and rules.

Asdiscussed in 1.1 Recent Developments in Antitrust Litigation, the Anti-monopoly Law of China implements the dual-track law enforcement system and does not regard administrative law enforcement procedure as the precondition of a civil lawsuit. In 2011, the Judicial Interpretation of Monopolistic Disputes (Draft for Comments) provided that “if the anti-monopoly enforcement agency conducts an investigation into the monopoly being sued, the people's court may, when necessary, decide to suspend the proceedings in accordance with the specific circumstances of the case.” However, this provision was deleted in the official published version. A litigant may attempt to apply to the court for a stay of proceedings under Article 150(5) of the Civil Procedure Law on the grounds that the outcome of the "administrative investigation" must be the basis for the trial of the civil proceedings and that the administrative investigation has not yet been completed.

Under China's litigation system, there is no class action/collective action that directly corresponds to the one under, for example, the American litigation system. However, the rules on joint litigation, representative litigation, and public interest litigation under the Civil Procedure Law and the Consumer Protection Law could be seen as forming the basis of litigation for anti-monopoly “class actions”.

Joint Litigation

Article 6 of the Judicial Interpretation of Monopolistic Disputes stipulates that if there are multiple plaintiffs who file litigations to the same court for the same monopoly behaviour, then the litigations can be consolidated for trial; and if lawsuits are filed before different courts, the courts which receive the cases at a later time shall transfer the cases to the court that received the first case. This article further stipulates that the defendant shall take the initiative to disclose to the court any information related to the same monopoly behaviour during the response stage so that the transfer and consolidation of the above cases could be completed.

Representative Litigation

Articles 53 and 54 of the Civil Procedure Law provide the basis for the representative litigation system in China:

  • for the joint lawsuit with a large number of parties on one side (generally ten entities or more), the parties may select a representative to attend the litigation; and
  • when the subject matter of the lawsuit is of the same kind, the court may issue a notice to notify the right-holders to register with the court within a certain period of time and have the lawsuit be attended by the representative.

The judgment or ruling made by the court shall be effective for all right-holders who participate in the registration. If a right-holder who did not participate in the registration files a lawsuit during the period of limitation of action, the existing judgment or ruling shall apply. This representative litigation system is also applicable to anti-monopoly litigation, such as cases in which many consumers claim damages because of monopolistic behaviour.

Public Interest Litigation

Article 55 of the Civil Procedure Law provides that public interest litigation on acts that infringe on the legitimate rights and interests of many consumers and other acts that harm the public interest of society may be brought before the people's courts by the procuratorial organ, as well as by the authorities and relevant organisations that are provided by law. In judicial practice, the Consumers Association of Jiangsu Province filed an anti-monopoly public interest lawsuit against the water company for unilaterally determining an excessive amount of liquidated damages for late payment of water bills, requesting the invalidation of the liquidated damages clause. The Consumers Association withdrew the lawsuit after the water company took the initiative to adjust the relevant terms.

As to whether a lawsuit can be filed on behalf of indirect purchasers and direct purchasers, there is no doubt under Chinese Anti-monopoly Law. Both direct and indirect purchasers have the right to file civil monopoly lawsuits, and therefore both shall have the possibility of being represented.

In representative actions, there is a process for a right-holder to apply to the court for registration. According to Article 54 of the Civil Procedure Law and Article 80 of the Interpretation of the Civil Procedure Law, the right-holder who applies to a people's court for registration in a representative action shall prove the legal relationship with the other party and the damage it suffered. If the above cannot be proved, the litigation cannot be registered, and the right-holder may file a separate lawsuit on their own. The ruling of the court should be enforced within the scope of registration. If a right-holder who has not participated in the registration files a lawsuit and the court finds that their request is established, it could rule that the judgment or ruling already made by the court shall apply.

In public interest litigation, if the procuratorial organ discovers acts that harm the public interest of society when performing its duties, and intends to initiate public interest litigation, it shall provide thirty days' notice of this in accordance with the law, and the procuratorial organ may initiate litigation in the court only if the relevant organisations as provided by the law do not initiate litigation after the expiration of the notice period.

In representative litigation, the action is conducted by the representative, but the settlement by a representative must be agreed to by the represented party. The parties may settle on their own, after which the plaintiff withdraws the lawsuit; the parties may also engage in mediation under the direction by the court, and the court will issue a mediation letter after the mediation is done.

In public interest litigation, after the parties reach an agreement, the court shall make a public announcement of the agreement for a period of no less than thirty days. After the expiration of the notice period, the court shall issue a mediation letter; if the court considers that the agreement between the parties is against the public interest, it shall not issue a mediation letter and continue to hear and decide the case.

The Chinese civil litigation system has a dismissal system, but it is not entirely consistent with the strike out system available in common law jurisdictions. The Chinese system of dismissal refers to the judicial act of rejecting a plaintiff's lawsuit when the court finds that the plaintiff's lawsuit does not meet the legal requirements. The statutory circumstances for dismissal of a lawsuit include (i) failure to meet the conditions for filing a lawsuit under Article 119 of the Civil Procedure Law; (ii) agreement between the parties on an arbitration clause, which does not fall within the competence of the court; and (iii) repeated lawsuits.

There is no system of summary judgment in China's civil procedure system. An analogous system is the simplified procedure. The law divides procedures of first instance into ordinary procedures and simplified procedures. As the Judicial Interpretation of Monopolistic Disputes, revised by the Supreme Court of China in 2020, has determined that all anti-monopoly cases in China are under the jurisdiction of intermediate courts, there is no room for the application of simplified procedures in anti-monopoly cases. At the same time, anti-monopoly cases are usually of a complex nature in terms of merits and rights and obligations and are highly contested by the parties, and thus do not meet the substantive conditions for simplified procedure.

Jurisdiction

Civil anti-monopoly litigation is subject to centralised jurisdiction, as set out in 2.2 Specialist Courts.

The territorial jurisdiction of civil anti-monopoly litigation is determined by the nature of the case, whether it is a tort dispute (eg, where the plaintiff claims that the conduct complained of constitutes an abuse of a dominant market position) or a contractual dispute (eg, where the parties to a monopoly agreement sue for the invalidation of the contract). Anti-monopoly tort disputes fall under the jurisdiction of the court of the place of tort and the place of the defendant's domicile; monopoly contract disputes fall under the jurisdiction of the court of the place of performance of the contract and the place of the defendant's domicile.

The level of jurisdiction of civil anti-monopoly litigation is determined by the amount of claimed compensation. The Higher People's Court has jurisdiction over IP rights civil cases at first instance when the subject matter of the action has a value of more than CNY200 million, and more than CNY100 million provided that the domicile of a party concerned is outside the court's territorial jurisdiction, or a foreign country or region, Hong Kong, Macao or Taiwan is involved. The rest of the cases are under the jurisdiction of the intermediate courts of first instance. According to the cases concluded by the Supreme Court in 2020, it is known that for special types of cases (including civil anti-monopoly litigation) that are directly heard by the Intellectual Property Court of the Supreme Court on appeal, the new rules on the level of jurisdiction of the intermediate people's courts, over cases involving less than CNY5 billion, which were introduced by the Supreme People's Court in 2019, do not apply. At present, there is significant controversy about the level of jurisdiction of such cases, and further clarification by the Supreme Court is expected.

Appeals of civil monopoly litigation are heard directly by the Intellectual Property Court of the Supreme Court.

Applicable Law

China’s Anti-monopoly Law applies to monopolistic conduct occurring in domestic economic activities and monopoly acts that, although occurring abroad, have exclusive and restrictive competition effects on the domestic market.

China's Anti-monopoly Law only applies to conduct that restricts competition and has an impact on the Chinese market, regardless of the nationality or domicile of the perpetrator or the place of origin of the restrictive conduct. The basis for the extra-territorial application of China's Anti-monopoly Law is the "effects principle". This principle is reflected in Huawei v IDC’s abuse of market dominant position case, TCL v Ericsson and OPPO v Sisvel. In the case of Qualcomm's administrative penalty for abuse of dominant market position, China's National Development Reform and Commission applied the same principles but made a negative finding (finding that the licensing of wireless SEPs by the patentee Qualcomm outside of China did not have a significant effect of excluding or restricting competition in the domestic market and should not lead to a penalty based on China's Anti-monopoly Law).

The Civil Code of China provides for a limitation period of three years to require the people's courts to protect civil rights. The Judicial Interpretation of Monopolistic Disputes has also been amended accordingly, and the statute of limitations is three years from the date when the plaintiff knew or should have known of the infringement upon its rights and interests. No protection shall be granted for more than twenty years from the date when the rights have been infringed. In special circumstances, the court may decide to extend the period upon the application of the right-holder.

The Civil Procedure Law of China does not provide a system of evidence disclosure or discovery that corresponds to that of the common law system. Chinese law stipulates that the parties have the burden of proof for their claims, and if the burden of proof is not completed, they will bear the negative legal consequences.

There is a pre-trial evidence exchange system in civil litigation in China. When the Court accepts a case that needs to be heard in court, it will clarify the focus of the dispute in the case by requiring the parties to exchange evidence before the trial hearing. The exchange of evidence shall be conducted under the supervision of the judge. Due to the fact that both parties will submit a large amount of evidence in civil anti-monopoly litigation, the court will normally organise multiple rounds of evidence exchange. The procedure of evidence exchange has no effect on a party's compulsory disclosure, so it cannot realise the same function as that under the evidence discovery system in common law system.

The Civil Procedure Law of China provides for a system of "evidence submittal" and "obstruction of proof", whereby the party bearing the burden of proof may apply to the court to order the other party to submit the necessary evidence. If a party refuses to submit evidence without reasonable justifications, submits false evidence, destroys evidence or commits other acts that render the evidence unusable, the court may presume that the other party's claim regarding the matter to be proved by the evidence is established.

In China, there is no system directly corresponding to the system of legal professional privilege. Lawyers are obliged to keep the following information confidential: national secrets, trade secrets, private information of the parties and information that clients are unwilling to disclose.

However, this does not constitute a reason for refusing to provide evidence to the court. The Civil Procedure Law of China operates system of evidence collection based on application to the court application/the court’s authority, evidence submittal and the obstruction of proof. Once the court agrees to a party's application to collect evidence, or based on the court's own authority, the party or individual concerned cannot refuse.

In China, leniency/settlement agreements aimed at achieving lenient treatment from anti-monopoly law enforcement agencies refers specifically to the "operator’s commitment" system.

According to Article 45 of Anti-monopoly Law, if the operator under investigation promise to eliminate the effects of the conduct through the use of concrete measures within the time limit accepted by the enforcement agency, the enforcement agency may decide to suspend the investigation. The decision to suspend the investigation shall set out the specific content of the commitment of the operator under investigation. If the operator fulfils the commitment, the enforcement agency may terminate the investigation.

In addition, according to the "Guidelines of the Anti-Monopoly Committee of the State Council to the Commitments Made by Undertakers in Monopoly Cases", the enforcement agency may publicly consult the public on the measures the operator undertakes if it considers that the operator's suspected monopoly conduct has affected the legitimate rights and interests of an unspecified majority of other operators, consumers or the public at large. The consultation period shall normally be no less than 30 days. The enforcement agency may, based on the public opinion, suggest the operator amend the promised measures or re-propose the promised measures. If the operator does not agree without reasonable justifications or is unable to propose a feasible alternative, the enforcement authority may terminate the review and communication procedures related to the operator's commitment and continue the investigation of the suspected monopolistic conduct.

Witness testimony is one of the eight types of legal evidence in China’s Civil Procedure Law. Fact witnesses are frequently used in civil anti-monopoly cases, and they often testify relating to business mode, business operation conduct, and content of the agreement.

In principle, witnesses should testify in court and be questioned by the trial judge and the parties. However, with the permission of the court, those who cannot appear in court for legitimate reasons, such as health reasons, long distances and inconvenient traffic, can testify by means of written testimony, audio-visual transmission technology or audio-visual materials.

All legal evidence, including witness testimony, shall be presented in court and cross-examined by the parties concerned. Evidence without cross-examination by the parties shall not be used as the basis for ascertaining the facts of the case. For witnesses who do not appear in court without a valid reason to provide testimony in writing and other means, the court shall not use the written testimony as the basis for determining the facts of the case.

Since the identification of a monopoly often requires the application of complex economic analysis methods, and judges are usually not economic experts, expert witnesses with economic expertise play a very important role in civil anti-monopoly cases. In this regard, the Judicial Interpretation of Monopolistic Disputes clearly stipulates that the parties may apply to the court for the appearance of one or two persons with corresponding professional knowledge to explain the specialised issues of the case. With the permission of the court, the parties may question the expert witness. In practice, more and more civil anti-monopoly cases adopt expert witnesses and use economic analyses on specialised issues.

In addition to expert witnesses, written economic analysis is often involved in anti-monopoly civil litigation, and also plays an important role in solving key economic issues in cases. Article 13(1) of Judicial Interpretation of Monopolistic Disputes stipulates that "a party may apply to the people's court to employ a professional institution or professionals to produce market investigation or economic analysis reports on special issues of a case." The court will still judge the probative validity of such reports, focusing on issues including:

  • whether the report has sufficient factual or data basis;
  • whether reasonable and reliable market investigation or economic analysis has been used, considering the characteristics of the market investigation or economic analysis report itself;
  • whether relevant facts that could change the results of the market research or economic analysis are taken into account; and
  • whether the experts have met the prudence and diligence requirements of professionals.

During the evidence exchange proceedings, the court usually organises the exchange of expert opinions/reports issued by each of the parties' expert witnesses. If requested by the litigant, the court will usually allow the expert to appear in court to explain the report and to analyse and evaluate the other party's report.

Monopoly damages adopt the principle of compensating the loss only, not punitive damages. The scope of compensable damages is limited to the actual loss caused by the illegality of the monopolistic act, which in principle is the difference between the economic situation of the victim during the period of infringement by the monopolistic act and the economic situation that would have obtained assuming that there had been no monopolistic infringement. The scope of damages also includes the reasonable expenses paid for investigating and stopping monopolistic acts.

The determination of actual damages resulting from the illegality of the monopolistic act may be quantified by economics or at the discretion of the court.

Frequently used economic calculation methods include the front-and-back method, the benchmark method, the market share method and the regression analysis method. One of the important roles of the aforementioned economic analysis is to prove the existence and amount of damages.

When the plaintiff has evidence that the monopoly has caused actual damages, but the amount is difficult to determine, the court may also have discretion to determine the amount of compensation based on factors such as the nature, extent and duration of the monopolistic act.

In the case of Yangtze River v API Enterprises, the Nanjing Intermediate Court of first instance ruled that API Enterprises had abused their dominant positions in the market and awarded nearly CNY70 million in damages, the largest amount of damages in a civil anti-monopoly litigation in China (the case is currently in the second instance of the Supreme Court). The first instance court identified the difference between the monopolistic high price and the unit price previously agreed upon by the parties in their trading history as the actual economic loss and determined the amount of damages accordingly.

The passing-on defence refers to a defendant, who is prosecuted by the direct purchaser for engaging in monopolistic acts. If the defendant can prove that the direct purchaser has transferred the loss caused by the excessive high price to the follow-up consumer through onward sales, then the defendant will not be liable for the losses passed on.

The current Chinese Anti-monopoly Law does not explicitly provide for the passing-on defence system, but it was mentioned in the discussion of the preliminary stage of China’s anti-monopoly civil litigation system. The Judicial Interpretation of Monopolistic Disputes (Draft for Comments) in 2011 provided for the allocation of the burden of proof for the passing-on defence, but this was deleted in the effective version. In current judicial practice, there are no examples of defendants claiming the passing-on defence. In view of the fact that the Supreme Court has granted standing to sue to both direct purchasers and other indirect purchasers (including consumers), and that the scope of civil tort damages under China’s Anti-monopoly Law is the actual loss caused by the illegality of the monopolistic acts, the passing-on defence has room for application and may be supported in specific cases.

China’s Anti-monopoly Law and regulations do not explicitly provide that damages include interest, but damages are based on the principle of equalisation and are compensated for actual losses caused by the illegality of the monopolistic act. In general infringement cases, the Supreme Court has upheld the position that the infringer should be liable for the interest incurred during the period from the occurrence of the damage to the compensation, with the interest rate calculated at the same annual rate as that of the People's Bank of China. In practice, there are civil anti-monopoly cases in which the court supported the plaintiff's claims regarding the interest on damages.

In addition, if the obligation to pay money is not fulfilled within the specified period, the interest on the debt of the delayed period of performance shall be doubled.

According to the provisions of the Civil Code of China, two or more persons shall be jointly and severally liable if they jointly commit infringing acts and cause damage. Therefore, operators who jointly commit monopolistic conduct (such as jointly abusing the dominant market position or entering into/implementing a monopolistic agreement) causing damage to others shall be jointly and severally liable for civil liability in accordance with the law. In civil anti-monopoly litigation, there are cases in which the plaintiff claims that multiple defendants jointly committed monopolistic conduct requesting joint and several liability.

The leniency system is an anti-monopoly enforcement system, which refers to the fact that at any stage before being given prior notice of an administrative penalty, if a member of a monopoly proactively reports to the competent authority and actively co-operates with them by, for example, providing sufficient evidence, the authority may, as a consequence, mitigate or exempt that member from being punished. At present, the Anti-Monopoly Committee of the State Council has issued a specially applicable "Guidelines for the Application of the Leniency System in Horizontal Monopoly Agreement Cases" to clarify the forgiveness system for cases related to horizontal monopoly agreements.

However, the law does not stipulate whether the civil liability of the operators applying for leniency should be reduced in civil proceedings, and, in principle, the operators applying for leniency in administrative penalties should bear full civil liability for the actual damages suffered by the plaintiff. How to inspire the operators’ willingness to confess and apply for leniency, however, is a question the authorities have yet to answer.

According to the provisions of the Civil Code of China, the share of liability of persons jointly and severally liable shall be determined based on the gravity of the liability of each person; or the liability shall be evenly shared if it is difficult to determine the gravity of liability of each person. If the liability actually assumed by a person jointly and severally liable exceeds the person's share of liability, the person shall be entitled to claim indemnities from other persons jointly and severally liable. In other words, after the joint tort subject assumes liability for tort damages to the victim, they may file a contribution proceeding against the other subjects of the joint tort. We have not yet seen any judicial cases of contribution proceedings in civil anti-monopoly litigation.

Injunctions, as such, do not exist in Chinese law, an equivalent procedure, which generally corresponds to act preservation in China’s legal system, including the act preservation before and during the litigation, operates instead. Such "injunctions" in China do not include the American “permanent injunction” in the final judgment of the court – in China, a permanent injunction is generally an order to stop the tortious act in a final judgment.

Articles 100 and 101 of the Civil Procedure Law in China, which, respectively, stipulate act preservation during and before litigation, are the substantive legal basis in China. In addition, the Supreme Court's Provisions on Several Issues Concerning the Application of Law in Cases Involving the Review of Act Preservation in Intellectual Property Disputes, promulgated in 2018, refine the specific rules for parties to apply for act preservation in intellectual property disputes and for courts to review and enforce act preservation, which are also applicable to civil anti-monopoly litigation.

The conduct of civil litigation in China is divided into pre-litigation act preservation and in-litigation act preservation, the basic procedures of which are the same, namely, the parties apply to the court and the court decides whether to take act preservation (injunction) measures. The central criterion for the court to judge whether to grant an injunction is its necessity, namely, whether the absence of an injunction will lead to irreparable damage to the rights and interests of the parties or make future judgments unenforceable. The court will determine this based on the specific circumstances of the case. In Chinese judicial practice, there have only been a few cases where pre-litigation injunctions have been granted and even for in-litigation injunctions, courts are very cautious, and it is not common to grant in-litigation injunctions.

In China, alternative dispute resolution methods include arbitration and court mediation, and out-of-court settlements between the parties.

In the anti-monopoly field, there exists a judicial rule in the Supreme Court and Provincial High Courts that civil anti-monopoly disputes are not arbitrable on the grounds that they exceed the scope of arbitration law because of the public law nature of anti-monopoly disputes. The opposite view has recently emerged in a case concluded by the Supreme Court (Shanxi Changlin v Shell). However, the issue still remains highly controversial.

Court mediation refers to parties' voluntary and equal negotiation on civil rights and interests disputes under the auspices of the judges of the people's courts so as to reach an agreement to settle their disputes. Court mediation has a wide range of applicability and runs through the civil trial procedure, including the first instance procedure, the second instance procedure and the retrial procedure. Court mediation should always be based on the consent of the parties. Since the Anti-monopoly Law is a public law generally involving public interest, in practice, there are almost no antitrust litigation cases concluded by court mediation.

Settlement by the parties is a manifestation of the exercise of the right to dispose of the dispute through independent negotiation and agreement by the parties without the participation of the court. After reaching a settlement agreement, the lawsuit is usually terminated by the withdrawal of the plaintiff.

Chinese laws and regulations do not provide for a litigation funding system. Such a system does exist in practice but is mainly limited to environmental public interest litigation and enterprise creditors' rights cases. In the past two years, with the gradual expansion of the market demand for intellectual property rights protection in China, some litigation funds have included trademark, patent and unfair competition infringement and other intellectual property cases in the scope of funding.

Because there are no special provisions, the scale of litigation funds is not publicly known. Due to the lack of disclosure of funding, there are no published cases of anti-monopoly litigation funding in practice.

Access to funding depends on a two-way agreement. After the plaintiff submits a case application to the fund, the litigation foundation usually evaluates the case, including the probability of winning the lawsuit and the benefit of the lawsuit. In China, the success rate of plaintiffs in anti-monopoly litigation is very low, which may reduce the willingness of ordinary litigation funds to invest. However, it is worth noting that the number of monopoly civil cases shows an overall growth trend, and the amount of litigation cases also shows an obvious growth trend, which may help to attract litigation funds to invest in anti-monopoly litigation.

Expenditure on litigation mainly includes the litigation fee, the attorneys' fees, the appraisal fee, and so on. The litigation fee is paid to the court and charged according to the amount of the subject matter, which is first paid by the plaintiff and finally shared, in principle according to the proportion of the winning amount supported by the court.

In China, except for special cases such as those related to intellectual property rights, the attorneys' fees of the winning party are usually not part of the award sought in litigation. Anti-monopoly litigations are considered a category of intellectual property cases in China, and the Judicial Interpretation of Monopolistic Disputes clarifies that in civil anti-monopoly litigation, the winning party may request the other party to pay the reasonable expenses on investigation and prevention of the monopolistic conduct.

For other litigation costs such as the judicial appraisal fee, the court will determine the proportion and amount of those costs to be borne by the parties, but generally it follows the principle that the losing party shall bear the costs.

Chinese law does not have a system of security for litigation costs similar to the common law system. The Chinese civil procedure law has removed the requirement for foreigners to provide security and has instead introduced a mutual exemption from providing security for litigation costs on the basis of reciprocity.

Under the Chinese legal system, appeals are available. Any party who is not satisfied with the first instance judgment could appeal (including appeal on points of law). Appeals of civil anti-monopoly civil litigation are heard by the Intellectual Property Court of the Supreme Court.

As mentioned in 2.6 Timetable, China has a final-after-two-trials system and the judgment rendered by the court of second instance after the appeal is final. There is still a "retrial" system in China's legal system, but this system belongs to the trial supervision procedure of the effective judgment (whether it is first or second instance), and it is not the third trial procedure set up in the conventional way.

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Lifang & Partners is a law firm founded in 2002 and headquartered in Beijing, with regional offices in Guangzhou, Wuhan, Shanghai, Shenzhen and Seoul, South Korea. Lifang has over 70 partners and 190 lawyers. Its legal practice is focused on, but not limited to, intellectual property, dispute resolution services, antitrust and compliance, and corporate and commercial law. Its antitrust team has over 15 years of experience in providing comprehensive antitrust legal services. The firm's rich experience and knowledge of China's legislative and enforcement environment, as well as good communication with regulatory authorities, allows it to provide comprehensive solutions for clients’ legal objectives and business considerations. Notable clients include Samsung, American Superconductor, Tetra Pak, Tencent and Xiaomi.

The COVID-19 outbreak occurred in 2020 during the traditional Chinese spring festival, and it is expected to continue to have an impact on the economy, court procedures and the market dynamics of China, bringing fresh uncertainties and challenges for companies, especially multinational ones. In the past year, the courts have introduced new procedural rules, reshaping antitrust litigation. Though the number of newly filed antitrust civil cases has been stable recently (77 in 2019, 66 in 2018 and 72 in 2017, with a total of 897 since 2008), there has been an observable trend towards greater complexity in follow-on actions and the intersection of contract law and antitrust law, as companies are more knowledgeable in this area today than they were prior to the pandemic. With the enactment of the Anti-monopoly Guide of the Anti-monopoly Commission of the State Council for the Platform Economy Sector early in 2021, it is reasonable to expect to see more antitrust litigation arising in the internet sector in near future.

Changes in Procedural Rules on Private Litigation in China

Since the outbreak of the COVID-19 pandemic in China, the Supreme People’s Court of China (SPC) has issued eight notices and rules to address issues raised by the pandemic. These notices and rules cover various issues, relating to evidence, statutes of limitations, online hearings, electronic service, and the use of technology in court activities.

Allowing litigants to postpone submission of evidence and notarisation and authentication of identity documents

Historically, pursuant to China’s Civil Procedural Law, which governs private antitrust litigation, foreign parties have been required to submit identity documents to the relevant court at the outset of litigation. These documents include, for example, certificates of incorporation and powers of attorney. Foreign parties are also required to have those documents notarised and authenticated at a Chinese consulate or embassy. The same rule has historically applied to evidence formulated outside China. The pandemic has made it difficult, however, for some foreign litigants to meet these requirements. Therefore, the SPC is allowing foreign parties to postpone the deadline to submit notarisation and authentication of identity documents, so long as COVID-19 is the cause of the delay. Similarly, the SPC is allowing foreign parties to apply for extensions if evidence collection is difficult due to COVID-19. Nonetheless, any extensions would also apply to other litigants equally.

Extending statutes of limitations and litigation periods

The SPC has issued several rules to allow parties to apply to extend statutes of limitations and other litigation-related deadlines due to obstacles created by COVID-19. For example, the SPC will allow foreign parties to apply to extend the deadline to file its answer to a complaint, or to file an appeal. The SPC is also allowing parties to apply to suspend the running of statutes of limitations if a party cannot exercise their right to sue due to COVID-19. Similar rules also apply to other litigation periods.

Online litigation

The SPC has taken measures to ensure that the rights of the parties are guaranteed in online litigation as much as they would be when using traditional on-site litigation procedures. The SPC has emphasised the importance of using electronic service wherever possible. At this stage, many procedural obstacles caused by COVID-19 are gone, especially in cases involving only Chinese parties. Nonetheless, some local quarantine policies and city-specific travel restrictions may continue to interfere with antitrust litigation. Most importantly, China still adopts strict quarantine policies with respect to foreign visitors, which could make it difficult, if not impossible, for internal counsel from headquarters and foreign experts or litigants to attend on-site hearings. Though the SPC’s new rules allow extensions, Chinese judges are still under the same pressure to close a case quickly, usually within three years. At some point, online hearings might be a must. Such hearings could be challenging for foreign parties, as communication between experts and counsel is crucial in responding to the unexpected situations that can arise during court proceedings. It would be useful to practise extensively in advance, and be prepared for any potential problems, for example, language issues, and challenges relating to cross-examination.

In addition to the procedural changes related to COVID-19, the SPC also introduced specific rules regarding evidence subpoenas, trying to assist the plaintiffs to collect evidence. The chance of winning for plaintiffs in antitrust litigations is extremely low. Some blame this on the heavy burden of proof on the plaintiffs, as they have to prove the antitrust infringement, anti-competitive effect, damages and causal link. This is especially difficult for plaintiffs in China due to lack of US-style discovery under the civil procedural rules. To balance the burden between plaintiff and defendant, Article 112 of the Interpretation of the Supreme People's Court on the Application of the Civil Procedure Law (amended in 2020) established rules of "documentary evidence order." Where the documentary evidence is under the control of the other party concerned, the party under the burden of proof may apply to a people's court in writing before the expiration of the period for adducing evidence to order the other party concerned to submit that documentary evidence. The Several Provisions of the Supreme People's Court on Evidence in Civil Proceedings (amended in 2019) provides detailed provisions on the procedures and substance of the "documentary evidence order."

The SPC’s View on the Arbitrability of Antitrust Cases: Dominance v Cartel

So far, there have been three decisions published by the SPC, clarifying its views on whether the arbitration clause in pre-existing contracts between the litigants may circumvent the court’s jurisdiction over antirust private actions – ie, so-called arbitrability.

In August 2019, the SPC for the first time expressed its view on the arbitrability of antitrust cases in its appeal decision regarding the jurisdiction issue in Huili v Shell. Huili alleged that Shell implemented a horizontal monopolistic agreement (ie, a cartel) in the province of Inner Mongolia and claimed for damages. Shell argued that the court lacks jurisdiction over the dispute because there was an arbitration clause in the distributor agreement between Huili and Shell. The SPC rejected Shell’s argument, finding that the alleged cartel has exceeded the interest of the contracting parties and concerned public interest. Considering the law does not explicitly provide for the arbitrability of antitrust cases, the arbitration clause cannot exclude the court’s jurisdiction.

In April 2020, the SPC published a second decision in State Grid Shanghai v VISCAS, reiterating its view that antitrust cases concerning a cartel are not arbitrable. The SPC found that in the antitrust cases concerning cartels, the contract between the litigants is merely a vehicle of the infringer to implement the cartel, while the cartel agreement itself is at the core of the dispute and the cause of the damages, which far exceeds the business contractual relationship covered by the arbitration clause. Thus, the cartel dispute falls outside the scope of the arbitration clause.

However, in December 2020, the SPC published its retrial ruling in Shanxi Changlin v Shell, which holds the antitrust dispute brought under the cause of abuse of market dominance should be subject to the arbitration clause in the distributor agreement between Shanxi Changlin and Shell, and the retrial application was thus dismissed. Different from Huili, Shanxi Changlin brought the case, accusing Shell of abusing its market dominance. The SPC found such claims to be closely associated with the franchising arrangements under the distributor agreement and thus that the antitrust dispute was by its nature a “dispute arising from performance of the distributor agreement.” It therefore falls within the scope of the arbitration clause. The SPC confirmed the ruling of the lower court that the case should be dismissed as the court shall not have jurisdiction due to the effective arbitration clause.

In summary, it seems that the SPC has adopted different rules for antitrust private actions brought under different causes of action. For cases with causes of action due to cartel behaviour, the SPC has consistently found that in cartel cases, the nature of the dispute is distinct from the dispute arising from the contract between the parties and thus not subject to an arbitration clause. Fundamentally, the SPC believes public interest is at issue in cartel cases. For cases with causes of action due to market dominance, the SPC has provided a different view. Considering the limited number of precedents, it might be premature to conclude that an arbitration clause can circumvent the court’s jurisdiction over antitrust disputes, which is a long-standing area of controversy in China and one in which different courts have expressed different views. The three decisions by the SPC at least provide some guidance on this issue, but companies still need to be cautious as China is not a case law jurisdiction in which the decisions of superior courts constitute binding precedents and the rulings are always highly associated with the specific facts of the dispute at issue.

Increasing Complexity of Antitrust Litigation: Follow-On Actions

Though there has not been a dramatic change in the total number of antitrust litigations, the complexity of antitrust litigation in China is increasing, showing increasing interaction between investigation and litigation, and interaction between China and worldwide antitrust enforcement. One example of this growing complexity is the increasing number of follow-on actions in China. There have been two significant developments in regard to follow-on actions in recent years. In the past, follow-on actions were usually brought by individual end-consumers or between Chinese companies. But recently there have been some high-profile cases in this area. Some of the cases were brought by competitors, while some were brought by customers. The other development is follow-on actions not only being brought based on decisions made by the Chinese antitrust authority, but also brought based on decisions made by foreign antitrust authorities. For example, there have been two cases brought based on a decision made by the European Commission in 2014 related to a cable cartel. State Grid Beijing Electric Company sued LS Cable before the Beijing IP Court and State Grid Shanghai Electric Company sued VISCAS before the Shanghai IP Court. Both cases were heard by courts in 2019. Such a development should alert companies facing investigations outside China that the risk of being sued in China still exist if the investigation involves a global market or could have an impact on the Chinese market.

For a long time, it has been unclear how Chinese courts will defer to the findings in decisions issued by the competition authority and whether these fact findings are reversable by the litigants. It is also unclear whether Chinese courts will calculate damages following the damage theory established by the competition authority. In the past year, two note-worthy decisions have been issued.

In the case Jiacheng Concrete v Fujian No 3 Construction Engineering (2020), Xi’an Intermediate Court decided that, given Jiacheng Concrete did not file an administrative reconsideration or administrative litigation against the administrative decision issued by the Provincial Administration for Market Regulation, the administrative decision could be deemed to have the force of determination. Therefore, Jiacheng Concrete was found to have conducted horizontal monopoly.

Furthermore, the court addressed that freedom of contract between the parties shall not prevail over the binding effect of the Anti-monopoly Law. Fujian No 3 Construction Engineering reached an agreement with Jiacheng Concrete over price rises as it was unable to gain access to a free (non-monopolistic) market; something which clearly contravened Anti-monopoly Law did not permit. As a result, during the period defined as monopolistic by the Provincial Administration for Market Regulation, Jiacheng Concrete’s act of increasing the price that Fujian No 3 Construction Engineering agreed to pay should be considered as the implementation of a horizontal monopoly agreement, and Jiacheng Concrete should compensate for the damage it caused.

When calculating the damage, the court considered two models.

  • The difference between the price fixed by the monopoly agreement and the price of a like product in a free market to which the counterparty should have had access, plus the additional cost to the counterparty of access to the same product in a free market.
  • The difference between the price fixed by the monopoly agreement and the price agreed by the counterparty in previous free market competition.

Considering that the leading concrete suppliers in the local market had formed a price alliance with uniform price increases and that downstream consumers no longer had access to the price of the like product in the free market, the court determined to apply the second model – ie, damage shall be calculated based on the price gap between the monopolistic price and the price fixed in the original contract.

However, in another case Hanyang Guangbing v Hankook Tire (2020), the Shanghai High Court determined that an administrative decision is a separate form of relief and different from civil litigation. The geographical scope and monopolistic behaviour defined in the administrative decision was not admitted by the court. The court conducted a separate analysis based on the evidence provided in the litigation and eventually decided that Hankook Tire was not guilty of monopolistic behaviour, precisely the opposite of the finding in the administrative decision.

The Internet Industry: the Next Growth Area

In 2021, the Chinese competition authority, the SAMR, drew broad attention with their administrative punishment of internet companies, including Alibaba and Tencent. The enactment of the Anti-monopoly Guide of the Anti-monopoly Commission of the State Council for the Platform Economy Sector specified the authority’s views on market definition and the regulation of the internet giants.

In comparison with the active law enforcement by the competition authority, Chinese courts were less active. The last significant decision in the internet area is still the decision by the SPC in Qihoo v Tencent, made in 2013, which provided an informative and comprehensive framework for applying the Anti-monopoly Law in dominance cases involving internet companies. Some views were controversial and criticised by the public and it is expected that the SPC may soon have the opportunity to revisit its views in another high-profile case. Currently, there are a number of active antitrust litigations in progress, including JD.com v Tmall.com and ByteDance v Tencent.

In 2017, JD.com filed antitrust litigation against Tmall.com and its owner Alibaba with the Beijing High Court. JD.com claimed that Tmall.com (together with Alibaba) had abused its dominant position in the B2C online retail platform market in mainland China and that their “either-or” policy on online sellers constituted a transaction restriction practice forbidden by the Anti-monopoly Law. The case has undergone two trials on jurisdiction objection and came into the substantive trial phase last year. However, it is notable that, in April 2021, the State Administration of Market Regulation issued an administrative decision on Alibaba, finding that the company's “either-or” policy constituted an abuse of market position.

In early 2021, ByteDance filed antitrust litigation against Tencent with the Beijing High Court after withdrawing its complaint from Fuzhou Intermediate Court regarding an unfair competition case against the same counterparty. In its 2021 complaint, ByteDance claimed that Tencent had abused its market-dominant position to block links from Douyin, the Chinese version of TikTok, to QQ and Wechat, which are owned by Tencent. Tencent objected to the jurisdiction of this case, and the case is still pending a ruling on jurisdiction.

The results of the antitrust litigation between these internet giants may change the business patterns and market structures of internet commerce in China significantly. With progress in these pending cases expected soon, it is anticipated that the internet sector will be the next key area for antitrust litigation in China.

Lifang & Partners

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guanbinxie@lifanglaw.com; shanjiao@lifanglaw.com www.lifanglaw.com
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FenXun Partners established a joint operation office with Baker McKenzie in April 2015. The Baker McKenzie FenXun (FTZ) Joint Operation is the world’s leading Chinese legal platform, delivering integrated international and PRC legal services. The Joint Operation is staffed by both locally admitted and foreign-licensed lawyers from Baker McKenzie and FenXun Partners, advising leading Chinese and multinational companies on both Chinese domestic and cross-border issues across the full spectrum of corporate and commercial law.

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Lifang & Partners is a law firm founded in 2002 and headquartered in Beijing, with regional offices in Guangzhou, Wuhan, Shanghai, Shenzhen and Seoul, South Korea. Lifang has over 70 partners and 190 lawyers. Its legal practice is focused on, but not limited to, intellectual property, dispute resolution services, antitrust and compliance, and corporate and commercial law. Its antitrust team has over 15 years of experience in providing comprehensive antitrust legal services. The firm's rich experience and knowledge of China's legislative and enforcement environment, as well as good communication with regulatory authorities, allows it to provide comprehensive solutions for clients’ legal objectives and business considerations. Notable clients include Samsung, American Superconductor, Tetra Pak, Tencent and Xiaomi.

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