It has recently been reported that the plaintiff in a private antitrust litigation, heard by the Xian Intermediate People’s Court, was successful in bringing a lawsuit involving abuse of dominant market position. Given that there have been very few cases won by plaintiffs in China’s private antitrust enforcement since the Anti-Monopoly Law (“AML”) entered into force in 2008, a plaintiff victory is quite rare and encouraging. According to the statistics, there has not been a single plaintiff victory in civil antitrust litigations brought in China since June 2012. In this regard, the concerning case is full of significance and reflects to some extent the effect of the Judicial Interpretation on private antitrust litigation (“the Judicial Interpretation”) published in May of 2012.
On June 4th, 2012, Wu Xiaoqin, a consumer located in Xianyang of the Shanxi province, sued Shanxi Broadcast & TV Network Intermediary (Group) Co., Ltd. (“the Company” or “the defendant”) in the Xian Intermediate People’s Court (“the Court”) claiming that the Company, as the only local cable service provider, has tied basic cable TV program services with value-added paying TV programs by taking advantage of its dominant market position. Through the court proceedings, involving further investigation and debate, the Court upheld the plaintiff’s suit, finding that the Company’s practice violated Article 17(5) of the AML regarding tying sales and imposition of unreasonable trading conditions.
Definition of the relevant market
Market definition did not seem to be the main issue of contention in this case. According to the court, the relevant market refers to the specific scope of products and geographic area in which undertakings compete with each other in supplying specific products or services. By determining the relevant market, two elements should be taken into account: The relevant product and geographic market. In this case, the court determined that the relevant product market is the market for cable TV transmission services, and that the relevant geographic market is the scope of Shanxi Province.
Determination of the Dominant Position
In a majority of the previous private antitrust proceedings, the plaintiff is unsuccessful mainly due to a failure in proving the dominant market position of defendants. This is especially true for non-corporate plaintiffs, whom lack the necessary financial and technical resources to collect evidence. In this regard, the plaintiff in this case may have benefited in a large degree from the implementation of the Judicial Interpretation.
Article 9 of the Judicial Interpretation provides that where the alleged monopolistic behavior is an abuse of the dominant position by a public utility entity, or any other undertaking that has a dominant position pursuant to the law, the People’s Court may, in light of the market structure and the specific circumstances of competition, determine that the defendant has a dominant position in the relevant market, unless there is the evidence to the contrary.
It seems to us that the Company, in considering its nature of services as a broadcast and network intermediary, may be categorized as a public utility entity. The Court also seems to have followed this approach in determining the dominant position of the defendant in this case.
It is alleged that the defendant has abused its dominant position by conducting tying, thus, violating Article 17(5) of the AML. Tying encompasses a practice whereby a particular undertaking supplies a product (the tying product) on the condition that the customer obtains something else (the tied product) from the supplier, or, provides them at a lower cost if the consumer accepts, or if the undertaking only supplies the two things together. Tying can be practiced by non-dominant undertakings, but it may constitute an abuse when pursued by an undertaking in a dominant position.
According to the presiding judge in this case, Yao Jianjun, two issues aided in determining that the behavior of the Company constitutes tying sales as prohibited by the AML.
First, the behavior of tying sales requires the tying and tied products or services to be independent and separable from each other, otherwise it should be considered as common commercial practice. Yao illustrated that “access to basic TV programs is the basic consumption of consumers, while access to value-added paying TV programs is beyond the scope of basic consumption. Therefore, these services are independent services and can be consumed separately. In addition, the two services have different demand groups. Therefore, the basic TV program services and value-added paying TV program services are separable services in terms of both the nature and transaction practices.”
Second, Yao declared that “the Company did not inform the user of their optional right to receive relevant TV program services, rather the Company directly required users to pay the digital TV program maintenance fee along with the digital TV paying program fees.” This, Yao ruled “is in essence forcing the user to accept the tied services provided by the Company, by abusing its dominant position in the cable television transmission services market in the Shanxi Province.”
“The Company’s behavior,” Yao ruled, “violated the wishes of the user.”
Lastly, Yao mentioned the defendant did not provide sufficient evidence in proving the legitimacy of its tying practice, therefore, the presumption of illegality of the abusive behavior cannot be effectively overturned.
Generally speaking, although this case has neither a detailed legal reasoning, nor the strong social repercussions as in the Qihoo vs. Tecent case, it can indeed contribute to the development of private antitrust litigation in China to a great extent. In particular, it encourages individual parties’ to initiate a private antitrust in Chinese courts. This case may also be of significance to the public utility entities in China, as it stresses the importance in reviewing their standards and format of contracts to ensure that they are in compliance with the AML.