Responding to hot topical issues in anti-monopoly litigation, the Supreme People’s Court (SPC) issued its latest Provisions on Several Issues Concerning the Application of Law in the Trial of Monopolistic Civil Dispute Cases (Draft for Public Comment) last November, updating the original 2012 provisions, which were last revised in 2020.
The provisions 2022 (draft) has 52 articles in total, more than three times the articles of provisions 2012. It is divided into six sections, namely procedural rules, definition of relevant markets, monopoly agreements, abuse of market dominance, civil liabilities and supplementary provisions.
This article compares the previous and updated versions, analysing the logic and consequences of latest revisions regarding the new Anti-Monopoly Law (AML).
REFINING 2012 PROVISIONS
The provisions 2022 (draft) includes several important amendments to provisions 2012. Notably, the term “trade association” is replaced with the concept of “operator group”. As the new Anti-Monopoly Law (AML) retains the expression “trade association”, introducing the concept of “operator group” in the 2022 draft provisions seems to be an expanded interpretation, and it is difficult to determine the legal liability of an operator group in practice.
Secondly, articles 7 and 11 of the 2012 provisions are deleted, while article 8 is retained, with a large number of provisions added with respect to burden of proof, which is great progress.
ALIGNING WITH AMENDED AML
The 2022 draft provisions adds many provisions in line with the new AML, also drawing on relevant regulations and guidelines.
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On definition of relevant market, article 16 makes clear for the first time the plaintiff’s burden of proof for the relevant market definition in civil litigation. Articles 17 to 19 relate to the relevant market definition, with substantially the same content as the Guidelines on Definition of a Relevant Market and the Guidelines for Anti-monopoly in the Field of Platform Economy.
Regarding monopoly agreements, article 21 clarifies the concept of “single economic entity” for the first time. This term transplants from EU competition law, and has appeared in a few final decisions of enforcement agencies. It is a very important inclusion.
Article 22 is meanwhile a response to article 9 of the new AML, with the same provisions contained in the Guidelines for Anti-monopoly in the Field of Platform Economy and the Provisions on Prohibiting Monopoly Agreements.
With provisions on vertical agreements in the new AML substantially adjusted, articles 25 to 27 have also responded. Besides distinguishing burden of proof between different types of vertical agreements, they also clearly link the anti-competitiveness of vertical agreements with market power.
For the first time, the agency agreement, new product promotion agreement and safe harbour are specified as circumstances that exclude the anti-competitiveness of vertical agreements. These provisions are more explicit and straightforward than the Provisions on Prohibiting Monopoly Agreement.
Interestingly, article 29 on the exemption of monopoly agreements differs from article 19 of the Provisions on Prohibiting Monopoly Agreement, but is more consistent with EU’s four principles of exempting monopoly agreements.
Finally, in the section regarding abuse of market dominance, except for provisions on the burden of proof, other newly added articles correspond with some commonalities to the Provisions on Prohibiting Abuse of Market Dominance in terms of provisions on abuse of dominance.
But there are differences between them, showing the administrative enforcement system and judicial trial system differ in the substantive judgment of abuse. From the perspective of expression, the enforcement agency is more cautious, while the 2022 draft provisions provides more clarity.
RESPONDING TO HOT ISSUES
The 2022 draft provisions boldly responds to some hot anti-monopoly issues.
Firstly, article 23 explicitly addresses reverse payments for generic drugs for the first time, even though such cases are rare in China.
Secondly, although articles 24 and 38-42 provide for hub-and-spoke agreements, MFNs, preferential treatment for proprietary business, differentiated treatment (“big data-enabled price discrimination”) and other typical platform monopoly behaviour, they do not clarify how to judge or go beyond content of the Guidelines for Anti-monopoly in the Field of Platform Economy.
Thirdly, the 2022 draft provisions expands the section on civil liability to include seven articles. Article 44 obliges defendants to restore competition in anti-monopoly civil litigations. Article 45 defines the plaintiff’s losses as a combination of direct losses and reduced available benefits, introducing three comparable differential methods and the loss transfer deduction principle to calculate losses. Article 48 provides that an undertaking participating in a monopoly agreement shall not claim compensation from other participating undertakings.
Finally, the 2022 draft provisions adds content regarding administrative enforcement and arbitration-litigation connection. Article 3 addresses the connection between arbitration and litigation, making it clear that the arbitration agreement shall not oppose the jurisdiction of courts. But it does not clarify whether monopoly disputes are arbitrable, or whether the court system recognises their arbitration awards.
Article 4 involves administrative monopoly derivative litigation, although it is debatable whether a civil litigation needs to be premised on a determination of administrative monopoly. Article 11 provides that effective administrative enforcement decisions can be directly used as evidence. Article 13 relates to public interest litigation of procuratorial agencies, while articles 14 and 15 address the handover of clues for ongoing administrative enforcement or litigation.
KEY TAKEAWAYS
Overall, compared with the 2012 provisions, the 2022 draft provisions has made a stride forward, outlining latest thinking and direction of the judicial system regarding anti-monopoly civil trials, and filling many practical gaps in implementation of the AML.
Most of the new provisions crystallise trials over the years. Some incorporate the EU experience and theories more resolutely than administrative enforcement agencies. Most provisions regarding the internet field are still in the exploratory stage, probably requiring more future co-ordination with the administrative enforcement agencies to not only improve anti-monopoly judicial work, but also play a bigger role in ensuring effective implementation of the AML.
Wan Jiang is a partner at AllBright Law Offices.
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