China’s first conclusive judgment on a vertical monopoly agreement handed down by a Shanghai court has far-reaching implications, writes Zhan Hao
On 1 August 2013, Shanghai People’s High Court handed down its judgment on the first private antitrust action involving vertical agreements under the minimum resale price maintenance (RPM) clause of China’s Anti-Monopoly Law (AML). The court rescinded the judgment of the first instance court and ordered a subsidiary of the US-based healthcare giant, Johnson & Johnson Medical (China), and its Shanghai branch (collectively, J&J) to pay their Beijing-based former distributor Rainbow Medical Equipment & Supply RMB530,000 (US$86,000). This judicial decision was made against the backdrop of recent high-profile cases, one involving luxury liquor and the other baby formula, that were handled by antitrust implementing agencies of China, and which demonstrated a new trend of striking both horizontal and vertical monopolies; previously, the agencies used to invest much more efforts in investigating horizontal monopolies. The J&J case marks the first official deliberation of Chinese judicial bodies over vertical monopoly agreements.