Chinese e-commerce giant JD.com has emerged victorious in its nearly seven-year anti-monopoly battle against Alibaba, securing a win in the initial stage.
Beijing High People’s Court issued the first instance judgment at the end of last year, ruling that Alibaba’s Tmall engaged in monopolistic behaviour known as “picking one from two”, which abused its dominant market position.
The court ordered Alibaba to pay JD.com RMB1 billion (USD141 million) as compensation, marking a record in anti-monopoly damages awarded since the Anti-monopoly Law came into effect in 2008.
Wu Peng, a partner at Zhong Lun Law Firm and one of JD.com’s attorneys, said the substantial damages awarded were “caused by an anti-monopoly nature”, similar to how such penalties were significantly higher than in other cases. “It’s because the anti-monopoly behaviour harmed market competition, causing damages to competitors and customers’ rights and interests, which has serious social implications,” said Wu.
Plaintiffs in monopoly litigation cases in China historically have had a low success rate. Wu said that in this context, the adjudication principles in the JD.com lawsuit would play a crucial guiding role in future anti-monopoly civil litigations and would contribute to the determination of damages in similar cases.
In the second-instance civil ruling of the Supreme People’s Court, JD.com claimed that in 2013, Tmall compelled merchants not to participate in promotional activities organised by JD.com, prohibited them from opening stores on the website, and forced them to choose between the two platforms. In 2017, JD.com filed both an administrative report and civil lawsuit against Alibaba at the same time.
Initially, the case faced jurisdictional challenges that persisted for several years. Tmall argued that the case should be heard by the Zhejiang High People’s Court. However, in the first instance, the Beijing High People’s Court rejected Tmall’s objection in 2017, and Tmall subsequently appealed. In the second instance in 2019, the Supreme People’s Court also dismissed the appeal and confirmed that the Beijing court had jurisdiction over the case.
Yang Yi, a senior associate at Tian Yuan Law Firm who also represented JD.com, said the case encountered difficulties in obtaining evidence and calculating losses. “China generally adopts an inclusive and prudent regulatory attitude towards the internet industry. There is no precedent for determining that platform companies possess market dominance and constitute a monopoly. Establishing that the ‘picking one from two’ behaviour amounts to a monopoly is a major challenge in this case,” said Yang.
In 2022, China’s Anti-Monopoly Law underwent its first revision in 14 years. Huang Wei, Tian Yuan’s managing partner also involved in this case, said the revised law standardised the use of cyber tools such as data and platform rules to implement a monopoly, which “will have a positive impact on this case and future monopoly cases in the platform field”.
In its response to the judgment, Alibaba said it respected the court’s decision. Notably, this is not the first time Alibaba has been punished for “picking one from two” behaviour. In 2021, the State Administration for Market Regulation fined Alibaba RMB18.2 billion under the Anti-Monopoly Law, marking the largest fine imposed since its implementation.
According to the Anti-Monopoly Law, administrative penalties range from 1% to 10% of the previous year’s sales for illegal operators, with the fines being remitted to regulators. Alibaba’s fine of more than RMB18.2 billion was calculated based on 4% of Tmall’s sales in China in 2019. The RMB1 billion compensation paid to JD.com will be allocated based on its economic losses.
Huang said this case could encourage monopoly victims, consumers and other entities to seek compensation through litigation in the future. “This case further investigates the civil liability of Alibaba’s ‘picking one from two’ behaviour following the administrative penalty, compensating JD.com for the economic losses incurred and providing tangible financial compensation to the affected parties,” Huang said.
