High-profile judgment draws focus towards antitrust civil actions

With the recent publication of the first instance judgment in Qihoo v QQ, antitrust civil actions have drawn a great deal of attention. Although only article 50 of the Anti-Monopoly Law (AML) – which states “if in committing a monopolistic act a business operator causes third parties to incur losses, it shall bear civil liability in accordance with the law” – has any bearing on civil actions, anti-monopoly actions have consistently been an important means of seeking private remedy against monopolistic acts.

The Provisions of the Supreme People’s Court on Several Issues Concerning the Application of the Law in Trials of Civil Dispute Cases Triggered by Monopolistic Acts, implemented on 1 June 2012, is the first set of judicial interpretations issued by the Supreme People’s Court in the field of antitrust civil litigations. The judicial interpretation clarifies the basic procedural issues in antitrust civil actions, such as filing for suit, acceptance, jurisdiction, rules of evidence and civil liability.

Q: Who has standing to initiate antitrust civil actions?

A: Any natural person, legal person, or other organisation that has been injured by a monopolistic act or is involved in a dispute arising from contractual provisions, industry association charters, etc. in violation of the AML may institute a civil action in a People’s Court. This means that antitrust civil actions include both actions based on a contractual relationship, and where no contractual relationship exists but damages were incurred as a result of a monopolistic act. Accordingly, the plaintiffs can range from business operators or consumers who have a transactional relationship with an enterprise suspected of monopolistic behaviour, to actual and potential competitors, or indirect consumers with no such relationships.

The plaintiff may file suit directly in a People’s Court or wait to do so after the penalties imposed by the AML enforcement authorities for monopolistic behaviour have taken effect. In other words, an administrative law enforcement procedure is not a precondition to the institution of an antitrust civil action.

Q: Which courts have jurisdiction to hear antitrust cases?

A: Due to the technical nature, complexity and great social impact of antitrust civil actions, the judicial interpretation established a centralised system for adjudication. Pursuant to the judicial interpretation, jurisdiction in first-instance antitrust civil cases rests in the Intermediate People’s Courts of provincial capitals and municipalities directly under the central government, and cities separately designated in the state plan, as well as Intermediate People’s Courts designated by the Supreme People’s Court. In special circumstances such cases may, subject to the approval of the Supreme People’s Court, be tried by a basic-level People’s Court.

Q: What are the differences in burden of proof between antitrust civil actions and ordinary civil actions?

A: Building on a basic assumption of plaintiffs bearing the burden of proof, the judicial interpretation adjusts the burden based on what is reasonable, given the specific circumstances of the case. In special instances, the burden of proof may be transferred to the defendant, greatly lessening plaintiffs’ burden of proof.

The judicial interpretation divides monopolistic acts into different categories and specifically provides for the allocation of the burden of proof between the parties in each instance. For example, with respect to horizontal monopoly agreements – e.g. agreements reached between competing business operators who manipulate the prices of goods, limit the quantity of goods produced or sold, or divide up market shares – that are expressly prohibited in article 13 of the AML, the plaintiff is required only to produce evidence of the existence of such horizontal monopoly agreements, and is not required to show that a monopoly agreement has the effect of eliminating or limiting competition. As for legal actions involving the abuse of dominant market position, the plaintiff is required to produce evidence showing that the defendant has a dominant position in the relevant market and that it has abused such position; the defendant may argue that its act is legitimate, in which case it will bear the burden of proving the same.

However, the judicial interpretation is silent on the allocation of the burden of proof between the parties in cases involving vertical monopoly agreements. Adhering to the general principle of “the burden of proof is on the party who claims” in civil actions, this may imply that the plaintiff not only has to show the existence of a vertical limiting agreement, but also bears the burden of proving that such vertical agreement has the effect of eliminating or restricting competition. In a first-instance judgment of the vertical price monopoly agreement case in Shanghai No.1 Intermediate People’s Court – i.e. Beijing Ruibang Yonghe Science and Technology Trade Company v Johnson & Johnson Medical – the court did not apply the same evidentiary requirement as that for horizontal monopoly agreements mentioned above. One of the major reasons why the plaintiff lost the case was that it was unable to show that the agreement by which the defendant limited the price for selling to third parties had the effect of eliminating or restricting competition.

Q: How does one guard against the risk of antitrust actions?

A: As mentioned above, the judicial interpretation lessened plaintiffs’ burden of proof in antitrust civil actions while proportionately increasing the burden of proof on defendant enterprises. This may, to a certain extent, change the longstanding trend of low success rate for plaintiffs due to difficulty in gathering evidence. Conscientious large companies must act with caution as any potentially monopolistic statement or action could attract a series of high-stakes civil litigation. Especially noteworthy is that according to the judicial interpretation, information made public by an enterprise – e.g. a self-proclamation of being an “industry leader” or “ranking number one in market share” on a website, or in the company’s annual report – could become evidence of its dominant market position in litigation.

Accordingly, enterprises must be more vigilant and eschew exaggerated and unfounded claims, so as to avoid an unfavourable position when responding to an anti-monopoly action. In short, large companies should strengthen their AML compliance training and establish a strategy for preventing and defending against antitrust litigation.

Michael Gu is a partner and Song Ying is an associate at AnJie Law Firm