A China antitrust authority has for the first time published its approach to using econometric tools and techniques in market definition via a recent platform abuse of dominance decision.
On 12 April 2021, the Shanghai Municipal Administration for Market Regulation (Shanghai AMR) announced an antitrust penalty on Sherpa’s, a Shanghai-based platform. Sherpa’s was found to have abused its dominance in the market for English-language online food delivery platform services in Shanghai by forcing in-platform restaurants into entering exclusive co-operation agreements.
Notably, the Shanghai AMR defined the relevant market by using a Small but Significant Non-transitory Increase in Price (SSNIP) test to reinforce its prima facie view on market definition, which was derived from a routine qualitative demand and supply-side substitution analysis.
Consistent with the Alibaba case, the Shanghai AMR took into account the two-sided nature of platforms and relevant network effects in finding that Sherpa’s was dominant. The other factors considered in its dominance assessment included market share (as calculated by the number of users, number of in-platform restaurants, daily orders, and sales amounts) and the company’s competitive advantage in associated delivery services and commercial data resources.
China’s antitrust law allows exclusive dealing to be justified on IPR grounds, as was claimed by Sherpa’s in its defence. However, this case suggests that China antitrust regulators may also assess whether a true and effective ownership of IP in fact exists.
The USD180,000 fine amounted to 3% of the company’s total annual sales rather than the turnover directly affected by the sanctioned exclusive arrangement, in line with Chinese regulators’ practice to date.
Business Law Digest is compiled with the assistance of Baker McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker McKenzie by e-mailing Howard Wu (Shanghai) at firstname.lastname@example.org