Authored by Dr. Zhan Hao (zhanhao@anjielaw.com) & Dr. Song Ying (songying@anjielaw.com) at Anjie Law Firm

Public enforcement and private enforcement of competition law should be complementary mechanisms each other. It is witnessed a situation of “leaning to one side” in China previously, namely the public antitrust enforcement progressed more rapidly than the private enforcement system. While from 2012, a leap-forward development of China’s private AML enforcement has impressed people. This article mainly introduces the tendency and evolvement in China’s private AML enforcement, with the hope to give readers some enlightenment.

i. Rapidly Rising Case Amount

It has been seen the tendency of a scaled case amount for private antitrust litigations before Chinese courts. According to statistics, Chinese courts have closed 172 of 188 officially accepted cases as of May 2014. In the single year of 2013, 71 cases were accepted, which accounts for almost half of the aggregate and represented an increase of 40 cases compared to 2012.

Besides, the landmark ruling issued by the Supreme Court on16th October, 2014, will not only influence how Chinese courts measure similar issues, it also encouraged and ignited people’s passion of proceeding private antitrust litigations before Chinese courts.

On the second day after the Supreme Court’s ruling on the dispute between Qihoo 360 and Tencent, it is reported that emiage, a mobile internet company, had sued Qihoo 360 on the ground of abusing dominant position and conducted the unfair competition behavior in the mobile security market of mainland China.

It was also released that Shanghai Second Intermediate People’s Court’s hearing on the private antitrust litigation against Qihoo 360 was live webcast in November 2014, although there is hearsay that the plaintiff withdrew the case subsequently.

With gradually deepening awareness and understanding of AML and its private enforcement by the public and market players, we believe that private enforcement of AML will become a parallel forceful mechanism with the public investigation of antitrust agencies in the near future.

 

ii. Courts are Equipped with More Experience and Techniques

Compared with previous years, Chinese courts have demonstrated remarkable progress with respect to the trial standard and quality. Prior to 2011, the court rarely delivered detailed analysis in rulings on the definition of relevant market and competitive effects. Cases such as ZHOU Ze V. China Mobile, LIU Dahua V. Nissan,Tangshan Renren V. Baidu are good examples. While from around 2012, courts started to unfold more delicate and self-contained legal reasoning in private antitrust proceedings. In the Qihoo 360 V. Tencent case, Guangdong High Court as the court of first instance has made bold trials in the analysis of several issues, although some viewpoints of the court is open to debate. In the second trial by the Supreme Court, we can observe a more sophisticated and complete definition of relevant market and competitive analysis in the judgment. Putting the issue of whether the Supreme Court’s findings are appropriate aside, the serious attitude and efforts of the court in building its reasoning are visible and worth a nod. In the Rainbow V. Johnson & Johnson case, the first private antitrust action involving vertical monopoly agreements, the conditions developed by the Shanghai High Court to determine the existence of vertical monopoly agreements are constructive and conforms to international common practice. The Court found that incomplete market competition is the primary condition to determine a vertical monopoly agreement. Only when competition in the relevant market is insufficient, it is necessary to examine competitive and anticompetitive effects of concerning suspected vertical monopoly agreement as a second step. Besides, the court also considers that concerning market play possessing market power is an important condition for the determination of a vertical monopoly agreement. Furthermore, in the Huawei V. IDC case, the court firstly established the reasoning on the dominant position for the standard essential patent (SEP) holder, which has pathbreaking significance.

 

iii. Diversification of Case Types

In the past, a large part of private antitrust actions were triggered by consumers, who feel they received unfair treatments, such as the ZHOU Ze V. China Mobile case, the LI Fangping V. China Netcom case. While recent years, competitors come to realize private antitrust actions could be employed as an effective and forceful counter strategy against their competitors, especially in the context that antitrust agencies in China are understaffed and thus the public enforcement has a preference to some extent. Taking the Huawei V. IDC case as an example, Huawei was complained by IDC in the U.S and suffered a 337 investigation. In 2011, Huawei filed a complaint against IDC before Shenzhen Intermediate People’s Court as a fightback, and accused IDC of abusing its dominant position, requesting discriminatory royalty rates, and tying the licensing of SEPs with non-SEPs. In the final judgment, IDC was affirmed to have abused its dominant position and ordered to compensate Huawei RMB 20 million. It should be recognized that Huawei initiated the lawsuit as a countermeasure against patent infringement litigation brought by IDC in the U.S., and succeeded in at least a partial counterattack.

Moreover, private antitrust actions mainly centered on accusation of abuse of market dominance in traditional public industries, like telecommunication, electricity and gas. While it started to expand to complaints of both monopoly agreements and abuse of market dominance in wide areas, such as oil and gas, internet, high-tech, pharmaceutical, etc.