Since China's Anti-Monopoly Law (the "AML") came into force in 2008, Chinese citizens and companies are increasingly turning to the courts to seek redress for infringements of the AML. According to Judge Zhu of the Supreme People's Court (the "SPC"), the courts of first instance handled only six antitrust cases during 2008 to 2009, but the number has increased sharply to 23 in 2010 and 24 in 2011. Despite this growing trend, very few plaintiffs have successfully obtained damages pursuant to the AML. However, a recent judicial interpretation issued by the SPC (the "Judicial Interpretation") looks set to shake up private enforcement of the AML by making it easier for plaintiffs to prove infringements. Notably, facilitating private enforcement of competition law is also a live issue in other jurisdictions, with such measures currently being considered, for instance, in the UK and proposals expected from the European Commission in this area later this year.
The Judicial Interpretation
To date, the absence of an adequate system of disclosure in China and the lack of guidance on how courts should apply the AML in civil litigation cases seems to have hampered plaintiffs' ability to successfully prove a breach of the AML. To address some of the practical difficulties plaintiffs face in antitrust cases, the SPC has, since 2009, been drafting the aforementioned Judicial Interpretation. This guidance was finally published on 8 May 2012, and will become effective on 1 June 2012.
The Judicial Interpretation introduces a series of measures aimed at alleviating the plaintiff's burden of proof, including, among others:
- in horizontal 'hard core' agreement cases, defendants shall bear the burden of proving that the agreement does not have the effect of eliminating or restricting competition (Article 7);
- in abuse of dominance cases, the plaintiff may use public information disclosed by the defendant (e.g., press releases by the defendant on its market shares) as evidence to establish the defendant's dominance in the relevant market and a court will decide whether such evidence is sufficient to establish the defendant's dominance (Article 10);
- court appointed independent experts may provide economic analysis or explain industry specific issues (Articles 12 and 13).
Despite these developments, there is still no equivalent to the broad disclosure systems of, for instance, the UK or the United States. This may continue to hinder the plaintiff's efforts to gather evidence in support of its claims. Under China's current rules of procedure, although parties have the right to investigate and collect evidence, there are no penalties for failure to comply with disclosure requests.
'Watch this space'
Recently, several high-profile antitrust actions were filed against large domestic and multi-national companies before the Chinese courts—it may be that the first impact of the Judicial Interpretation will be seen in these cases.
- In December 2011, a Nissan car owner and activist lawyer, brought a suit against the automobile producer Dongfeng Nissan and its repair store, alleging that it had abused its dominant position by tying Nissan's car parts and repair service together and charging excessively high prices. The plaintiff's claim was dismissed at first instance on the basis of the failure to prove that the defendant held a dominant position on the market for the supply of spare parts for Nissan cars. The plaintiff has appealed to the High Court in Hunan Province.
- In February 2012, a case was filed against the Shanghai branch of Johnson & Johnson Medical (China) Ltd. The plaintiff alleged that its contract to act as a distributor of Johnson & Johnson's suturing products was terminated on the basis that it had sold the products below the minimum resale prices set by Johnson & Johnson. The plaintiff alleged that Johnson & Johnson's actions violated the AML and it sought damages of more than RMB 14 million. The court heard the case on 3 February 2012 but judgment remains pending. Resale price maintenance is prohibited under the AML (subject to a few limited exceptions) and this is the first time this provision has been tested in a Chinese court.
- On 18 April 2012, the High Court in Guangdong Province held the first hearing of an abuse of dominance action filed by Qihoo 360 Technology Co, a leading Chinese computer security software developer, against Tencent, an operator of QQ, China's most popular instant messaging software. Qihoo alleged that Tencent had abused its dominant position by forcing its users to un-install Qihoo's products and sought damages of RMB150 million. This case has received considerable media attention in China and both parties engaged economists to provide expert testimony in court.
The future of private enforcement
Although private enforcement of the AML remains in its infancy, private actions are clearly on the rise. Thus far, precedents for the AML have been predominantly restricted to the output of the Chinese administrative authorities. However, decisions by Chinese courts in cartel and abuse cases, which tend to be more reasoned, are likely to have considerable influence in future interpretation of the AML. The new Judicial Interpretation is therefore likely not only to serve as a significant catalyst to increased private antitrust enforcement in China, but will play a crucial role in shaping the future landscape of Chinese antitrust law - a fittingly dramatic start for the Year of the Dragon.