Baidu beats Renren in second dominance case

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Baidu-beats-Renren-in-second-dominance-case

Dismissing China’s first internet-related anti-monopoly case on 18 December 2009, a Beijing court ruled in favour of Baidu, China’s top search engine, citing not enough evidence of either dominance or abuse of dominance.

The landmark case is only the second court case to be decided under the PRC Anti-Monopoly Law (AML). It was brought by Tangshan Renren Information Service Company, an online platform that links medicine manufacturers with distributors and users.

Renren claimed that by deliberately downgrading it in search engine results, Baidu had abused its dominant market position. Justifying its actions, Baidu alleged that Renren posted junk links to boost its ranking in search results, and that the downgrading was intended to ensure the accuracy and integrity of its service for the benefit of its users.

Dismissing Renren’s claim of RMB1,106,000 (US$163,000) for lost revenues, the Beijing No. 1 Intermediate People’s Court said it was not convinced that Baidu was dominant in the search engine market. The court added that even if Baidu was seen to be dominant, its actions were justified and so did not amount to abuse of dominance under Article 17 of the AML.

This decision comes just two months after China’s first court judgment under the AML. In that case, the Shanda-Sursen case (see China Mobile settles anti-monopoly suit, but Shanda case thrown out, China Business Law Journal December 2009/January 2010), the Shanghai’s No.1 Intermediate People’s Court rejected the abuse of dominance claim, ruling that there was insufficient evidence to prove abuse of dominance.

In both judgments the courts ruled that the alleged abuse of dominance was justified on business grounds, suggesting that China’s courts will need rigorous proof to be convinced of abuse of dominance.

But despite Baidu’s victory, 2010 is shaping up to be a testing year for internet search engines. While Google is engaging in a stand-off with the government and has threatened to leave China altogether, Baidu in January lost both its chief operating officer and its chief technology officer. Media reports suggest Baidu is struggling with the introduction of its new keyword system, called Phoenix Nest. The company says revenue in the final quarter of 2009 will be at least 10% below analysts’ expectations.

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