The Provisions of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trial of Civil Dispute Cases Arising from Monopolistic Conduct ("Anti-Monopoly Judicial Interpretation"), as adopted at the 1539th Session of the Judicial Committee of the Supreme People's Court ("SPC") in January 2012, were issued on May 3, 2012 and came into force on June 1, 2012. The Anti-Monopoly Judicial Interpretationreflects important experience accumulated in the judicial practice of monopoly civil disputes and is expected to play an important role in monopoly civil dispute cases. This article will briefly discuss the key issues involved in the Anti-Monopoly Judicial Interpretation.

  1. The Drafting Background of the Anti-Monopoly Judicial Interpretation

As early as August 1, 2008, when the Anti-Monopoly Law ("AML") became effective, the SPC had already begun preparing for the possible issues that may be raised in monopoly civil disputes. On October 24, 2008, the SPC held a seminar in Tianjin to discuss urgent issues that should be solved in the monopoly civil disputes.

In 2009, the Higher People's Court ("HPC") and Intermediate People's Court ("IPC") in some provinces, autonomous regions and municipalities have conducted research on 19 subjects regarding monopoly civil dispute, including jurisdiction and the scope of coverage, standing, the burden of proof, coordination between AML administrative enforcement and civil litigation, the statute of limitations, civil liability for monopolistic conduct, and IP abuse.

In July 2009, the SPC hosted a seminar to discuss the research report on Anti-Monopoly litigation and the Provisions on Several Issues Concerning the Application of Law in the Trial of Monopoly Civil Dispute Cases (First Draft) (including 30 articles).

On April 25, 2011, after two years of modifications and preparation, the SPC issued the Provisions on Several Issues Concerning the Application of Law in the Trial of Monopoly Civil Dispute Cases (Draft for Comments) ("Draft for Comments") (including 20 articles).

On the basis of extensive solicitation, on May 8, 2012, the SPC announced the Anti-Monopoly Judicial Interpretation, which contains 16 provisions covering the scope of application, standing of the plaintiff, jurisdiction, the allocation of the burden of proof, the relation between monopoly civil litigation and Anti-Monopoly administrative enforcement, liability, and the statute of limitations, among other subjects.

  1. The Scope of Coverage and Jurisdiction of Monopoly Civil Disputes
  1. The scope of coverage - civil dispute cases arising from monopolistic conduct

Article 1 of the Anti-Monopoly Judicial Interpretation indicates that the interpretation applies to civil dispute cases arising from monopolistic conduct, which means civil lawsuits filed with the people's courts by natural persons, legal persons, and other organizations for disputes over losses caused by monopolistic conduct or violations of the AML by contractual provisions, bylaws of industry associations, etc.

According to Article 3 of the AML, "monopolistic conduct" includes reaching monopoly agreements between operators; abuse of dominant market position by operators; and concentration of operators which has had or may have the effect of eliminating or restricting competition.

The caption and Article 1 of the Anti-Monopoly Judicial Interpretation emphasize the concept of "monopolistic conduct". This section indicates that the Anti-Monopoly civil dispute cases include not only the monopoly agreement disputes and abuse of market dominance disputes, but also the concentration of business operators disputes. Based on our understanding, in the judicial practice of other jurisdictions, the concentration of business operators disputes are rare. The vast majority of cases are civil disputes caused by the abuse of market dominance or monopoly agreement.

In addition, it must be noted that litigation arising from abuse of administrative power to exclude or restrict competition is not within the scope of monopoly civil disputes, because the nature of such litigation is administrative proceedings and abuse of administrative power to exclude or restrict competition is not "monopolistic conduct" listed in Article 3 of the AML.

  1. Jurisdiction of monopoly civil disputes
  1. Jurisdiction by forum level

Because of the specialization and complexity of monopoly civil disputes and the need to harmonize judicial standards, the jurisdiction over monopoly civil disputes of first instance shall be with some of the IPCs. According to Article 3 of the Anti-Monopoly Judicial Interpretation, these IPCs include the IPCs of a city where the people's government of a province, autonomous region, or municipality directly under the Central Government is located or a city under separate state planning or the IPCs designated by the SPC.

The IPCs which can hear monopoly civil disputes of first instance include:

  • lIPCs in 22 provincial capital cities: Harbin, Changchun, Shenyang, Shijiazhuang, Lanzhou, Xining, Xi'an, Zhengzhou, Jinan, Taiyuan, Hefei, Wuhan, Changsha, Nanjing, Chengdu, Guiyang, Kunming, Hangzhou, Nanchang, Guangzhou, Fuzhou, Haikou;
  • lIPCs in 5 autonomous region capital cities: Urumqi, Hohhot, Yinchuan, Nanning, Lhasa;
  • lIPCs in 4 municipalities: Beijing, Shanghai, Tianjin, Chongqing;
  • lIPCs in 5 cities under separate state planning: Dalian, Qingdao, Ningbo, Xiamen, Shenzhen;
  • lIPCs designated by the SPC

In addition, Article 3 of the Anti-Monopoly Judicial Interpretation also provides that, with the approval of the SPC, a Basic People's Court ("BPC") may have jurisdiction over civil monopoly dispute cases as the court of first instance. This provision could facilitate consumers to initiate monopoly civil litigation.

In judicial practice, some monopoly civil disputes were originally accepted by the BPC, but all were eventually handed to the IPCs. For example:

Li Fangping v. China Netcom Beijing Branch monopoly civil dispute of abuse of dominance was originally accepted in Sep. 2008 by Beijing Chaoyang District People's Court. The case was transferred to Beijing No. 2 IPC in Oct. 2008.

Zhouze v. China Mobile Group Beijing Co., Ltd. monopoly civil dispute of abuse of dominance was originally accepted on Mar. 30, 2009 by Beijing Dongcheng District People's Court.The case was transferred to Beijing No. 2 IPC on Jun. 5, 2009.

  1. Territorial jurisdiction

Monopoly civil disputes include both torts and contract disputes.

According to Article 4 of the Anti-Monopoly Judicial Interpretation the territorial jurisdiction over tort claims of monopoly civil disputes shall be determined in accordance with the jurisdiction provisions of Article 29 of the Civil Procedure Law(1) and relevant judicial interpretations regarding torts; the territorial jurisdiction over contract claims of monopoly civil disputes shall be determined in accordance with the jurisdiction provisions of Article 24 of the Civil Procedure Law(2) and relevant judicial interpretations regarding contract disputes.

  1. Transfer jurisdiction

Where the cause of action for a civil dispute case is not a monopoly dispute when a case is docketed but there is evidence supporting the defendant's defense or counter-claim that the plaintiff has committed monopolistic conduct or judgment or ruling on the case is to be rendered in accordance with the AML, the people's court accepting the lawsuit, if having no jurisdiction over civil monopoly dispute cases, according to Article 5 of the Anti-Monopoly Judicial Interpretation, shall transfer the case to the people's court having jurisdiction.

It should be noted that the people's court cannot, on the ground that it does not have jurisdiction over monopoly civil disputes, ask the party who raised an Anti-Monopoly defense or counter-claim to file a separate monopoly civil litigation, because it may lead to contradictory judgments on the validity of the same contract by two people's courts, which may undermine the judicial authority and credibility.

However, in order to prevent parties from abusing the Anti-Monopoly defense or counterclaim to delay the proceedings, the people's court shall review the Anti-Monopoly defense or counterclaim to see whether there is evidence to support the allegation. If there is evidence to support, the case should be transferred to the people's court having jurisdiction; if there is lack of evidence to support, the case should not be transferred.

In addition, according to Article 6 of the Anti-Monopoly Judicial Interpretation, where two or more plaintiffs have respectively filed lawsuits for the same monopolistic conduct with different courts having jurisdiction, the court that dockets the case later shall, after learning another court's earlier docketing of the case, rule within seven days to transfer the case to the court which dockets the case earlier.

  1. The Standing to Sue of the Plaintiff in a Monopoly Civil Dispute

According to Article 1 of the Anti-Monopoly Judicial Interpretation, natural persons, legal persons, and other organizations can file civil lawsuits with the people's courts for disputes over losses caused by monopolistic conduct or violations of the AML by contractual provisions, bylaws of industry associations, etc.

Article 50 of the AML provides that operators which implement monopoly conduct and causing others to suffer losses therefrom shall assume civil liability pursuant to the law.

According to the Circular of Supreme People's Court on Earnestly Studying and Implementing the Anti-Monopoly Law of the People's Republic of China(3), if the party initiates a civil litigation against monopoly conduct, the People's Court shall accept and hear the case according to law, provided that the requirements stipulated in Article 108 of the Civil Procedure Law and the AML are met. The requirement for initiation of a civil litigation provided in Article 108 of the Civil Procedure Law is that the plaintiff shall have a direct interest in the case. Therefore, whether the plaintiff has a direct interest is the primary standard for establishing the standing to sue. Whether the monopoly conduct is the immediate cause of the losses is another important test in the determination of whether a direct interest exists.

In a monopoly tort dispute, whether "the plaintiff shall have direct interest in the case" refers to natural persons, legal persons, and other organizations that have suffered losses caused by monopolistic conduct; in monopoly contract disputes, whether "the plaintiff shall have direct interest in the case" refers to natural persons, legal persons, and other organizations that have a dispute over the violation of the AML under contractual provisions, bylaws of industry associations, etc.

Normally, the interested parties can be divided in to the following two categories: direct victims and indirect victims.

Direct victims are the parties whose losses are caused directly by a monopoly conduct. For example, two competing household chemical product manufacturers collude with each other to increase the distribution price for supermarkets and other retailers by 20%. The retailers are direct victims of monopolistic conduct. Even though the standing to sue of a direct victim may be clear in many cases, whether a direct victim has the standing to sue remains to be decided on a case-by-case basis.

In the above case, if the supermarkets and other retailers increase the retail price of household chemical products, and pass the mark-up on to consumers, the consumers become the indirect victims of the monopolistic conduct of the household chemical product manufacturers. According to Article 1 of the Anti-Monopoly Judicial Interpretation, consumers can initiate monopoly civil litigation.

It should be noted that consumers should be the actual consumers, i.e. consumers purchasing goods directly or indirectly from the operators of monopolistic conduct. Potential consumers should not be assumed to have the standing to sue, because it is hard to prove they have direct interest with the monopolistic conduct.

In addition, since there is no the corresponding laws to regulate public interest litigation, coupled with the restrictions of Article 108 of the Civil Procedure Law, public interest litigation is not applicable in the current monopoly civil disputes.

  1. The Burden of Proof in Monopoly Civil Disputes

In monopoly civil disputes, due to the complexity and specialized nature of the evidence, the allocation of the burden of proof often determines the success or failure of the litigation. In a vast majority of monopoly civil disputes in China, plaintiff losses can be difficult to prove because of a lack of strong evidence. The Anti-Monopoly Judicial Interpretation, to some extent, alleviates the burden of proof for the plaintiff.

  1. Allocation of the burden of proof
  1. The plaintiff's burden of proof

According to the Civil Procedure Law and the Several Provisions of the Supreme People's Court on Evidence in Civil Proceedings and the Anti-Monopoly Judicial Interpretation, in monopoly civil disputes, the plaintiff has the burden to prove the following facts:

  • Monopoly agreement disputes: the defendant implemented monopolistic conduct under Article 13 or Article 14 of the AML; other monopoly agreement, as defined by the Anti-Monopoly Enforcement Agencies of the States Council ("AMEAs") under Article 13.1(6) of the AML, has the effect to eliminate or restrict the competition.
  • Abuse of market dominance disputes: the defendant committed the monopolistic conduct under Article 17.1 of the AML; the defendant holds dominant market position in the relevant market; the monopolistic conduct has the effect to eliminate or restrict the competition.
  • If the plaintiff requests for compensation for the losses: the plaintiff has suffered loss, and the nature and amount of the loss; causation between accused monopoly conduct and losses suffered by the plaintiff.
  1. The defendant's burden of proof

Article 7 and 8 of the Anti-Monopoly Judicial Interpretation provides that the defendant shall bear the burden to prove the following facts:

  • Where the alleged monopolistic conduct is a monopolistic agreement as described in Article 13.1(1)-(5) of the AML, the defendant shall assume the burden to prove that the agreement does not have the effect of excluding or restricting competition.
  • Where the alleged monopolistic conduct is an abuse of a dominant market position as described in Article 17.1 of the AML, the defendant shall assume the burden to prove a defense of justifiable cause of its conduct.

In addition, when the defendant raises the following defense under the AML, it should bear the burden:

  • To assert its conduct is subject to a statutory exemption. For example, its conduct may be applicable to the exemptions to the monopoly agreement under Article 15 of the AML or the agricultural exemption under Article 56 of the AML.
  • To assert it should not be presumed to have a dominant market position according to Article 19.3 of the AML.

Is worth noting that compared with the Draft for Comments, the Anti-Monopoly Judicial Interpretation removed the provisions that the defendant shall bear the burden of proof to show the vertical agreement does not have the effect of eliminating or restricting competition. Does this mean that the plaintiff should bear the burden of proof to show the vertical agreement does not have the effect of eliminating or restricting competition? It remains to be clarified.

  1. Facts which need not be proved
  1. Dominant market position of the public enterprise or other operators with monopolistic position

Article 9 of the Anti-Monopoly Judicial Interpretation provides, where the alleged monopolistic conduct is abuse of the dominant market position by a public utility or any other operator that has a dominant position pursuant to the law, the people's court may in light of the market structure and the specific circumstances of competition, determine that the defendant has a dominant position in the relevant market, unless such a determination can be overturned by contrary evidence.

China's public utility include water supply, electricity supply, heating, gas supply and other operators providing public services through a network or other infrastructure. Most public utilities belong to natural monopoly industries and have monopoly positions.

According to the Reply on the Issue of How to Identify Other Operators with Dominant Position Pursuant to the Law issued by the State Administration for Industry and Commerce in 2000, other operators with dominant position pursuant to the law refers to operators other than the public utilities, which are given the exclusive status by laws, rules, regulations or other legal normative documents to provide specific commodities (including services). So-called dominant position refers to the operating status that the market access is subject to special restrictions of the laws, regulations, rules or other legal normative documents, that the operator is doing business exclusively in the relevant market or there is no sufficient competition, and that users or consumers have a strong dependence on their commodities.

In the enforcement practice of the Anti-unfair Competition Law, tobacco companies and salt companies have been identified as operators with dominant position pursuant to the law.

It should be noted that regardless of the circumstances, in determining whether an operator has a dominant position, it is necessary to define the relevant market.

  1. Information released by the defendant

According to Article 10 of the Anti-Monopoly Judicial Interpretation, the plaintiff may submit the information released by the defendant as proof of its dominant positions in the market. And the people's court may determine the dominant market positions of the conductor when the information could demonstrate the defendant's dominant position in the relevant market, unless the conductor has sufficient evidence to prove otherwise.

The above provisions put forward higher requirements on the publications of an operator. If the operator claims it has more than 50% market share in the relevant market, such information released may be used as evidence in future monopoly civil litigation to prove it has a dominant market position.

  1. Economic experts and economic analysis report
  1. Economic experts

According to Article 61 of the Several Provisions of the Supreme People's Court on Evidence in Civil Proceedings, the parties may apply to the people's court for the appearance of one or two persons with professional knowledge to provide explanations in certain specialized areas in the court.

According to Article 12 of the Anti-Monopoly Judicial Interpretation, the parties may apply to the people's court for the appearance of one or two persons with professional knowledge to provide explanations in certain specialized areas in the court.

The judge and parties may make inquiries to the persons with professional knowledge that appear in court. Each party may apply for the persons with professional knowledge to appear in court and cross-examine on the issues concerned in the case. The persons with professional knowledge may inquire of judicial authenticators.

Persons with professional knowledge are different from expert witnesses. The main role of the persons with professional knowledge is to help parties to provide relevant explanations and statements regarding issues and areas in which the parties lack specialized knowledge and experience in the court. There are no requirements regarding such a person's qualifications. An expert witness is usually required to be authoritative and independent. Otherwise, his/her testimony may be challenged.

For example, in the Qihoo 360 v. Tencent monopoly civil dispute, both parties have invited persons with professional knowledge to assist the people's court in forensic investigation.

  1. Economic analysis report

Article 13 of the Anti-Monopoly Judicial Interpretation provides that a party may apply to the people's court to employ a professional institution or professionals to produce market investigation or economic analysis reports on special issues of a case. With the permission of the people's court, both parties may, by consultation, determine the professional institution or professionals; and if such consultation fails, the people's court shall designate the professional institution or professionals. Such regulation directly borrows the judicial practice regarding identification conclusions.Since the professional institution or professionals are determined by parties or designated by the court, therefore the identity or independence of such third party professional institution or professionals cannot be challenged, but the contents of the report can be examined.

  1. Interaction between Administrative Investigation and Civil Litigation

The AML has established parallel law enforcement systems of administrative law enforcement and civil litigation.

According to Article 2 of the Anti-Monopoly Judicial Interpretation, where a plaintiff directly files a civil lawsuit with the people's court, if the lawsuit satisfies other conditions for lawsuit acceptance as prescribed by law, the people's court shall accept the lawsuit. This indicates that the plaintiff can directly file a monopoly civil litigation without an administrative investigation by the AMEAs.

According to Article 2 of the Anti-Monopoly Judicial Interpretation, where a plaintiff files a civil lawsuit with the people's court after a decision of the AMEAs affirming the existence of monopolistic conduct comes into force, if the lawsuit satisfies other conditions for lawsuit acceptance as prescribed by law, the people's court shall accept the lawsuit.

We note that Article 2 of the Anti-Monopoly Judicial Interpretation only regulates the "direct litigation" and "follow-up litigation", but it does not explain whether the people's court shall accept the lawsuit where an Anti-Monopoly investigation has been initiated, but no decision is rendered, or the decision has not yet come into force.We understand, in such cases, the court has the discretion to accept or not accept the lawsuit.

  1. Civil Liability of Monopolistic Conduct
  1. Cease infringement, compensate for losses

Article 50 of the AML provides that operators which implement monopoly conduct causing others to suffer losses therefrom shall assume civil liability pursuant to the law. This clause does not limit the liabilities of the monopolistic conductor to damages, but uses the concept of "civil liabilities". Thus, it leaves a lot of choice to the civil liability of monopoly conduct. The types of civil liabilities under the General Principles of Civil Law, Tort Liability Law and the Contract Law are applicable to the monopolistic conduct.

According to Art 134 of the General Principles of Civil Law, civil liabilities include: (1) Ceasing the infringement; (2) Removing obstacles; (3) Eliminating the danger; (4) Returning the property; (5) Restoring to original condition or state; (6) Repairing, rebuilding or replacing; (7) Compensating for damage; (8) Making a default payment; (9) Eradicating effects, restoring reputation; and (10) Making an apology.

Article 14 of the Anti-Monopoly Judicial Interpretation provides, where a defendant's monopolistic conduct has caused any losses to the plaintiff, the people's court may, in light of the plaintiff's claims and the finding of facts, order the defendant to cease infringement, compensate for losses, and otherwise assume civil liability in accordance with law.

  1. Reasonable costs for investigation and stopping the infringement

In IP litigation, claims for reasonable costs (including attorney's fees) for the investigation and stopping of the infringement shall be supported by the court, according to relevant provisions of the Trademark Law, the Interpretation of the Supreme People's Court on the Application of Law in Trial of Copyright Civil Dispute Cases, the Patent Law, and the Several Provisions of the Supreme People's Court on Questions Concerning the Application of Law in Hearings on Patent Disputes Cases.

According to Art 14 of the Anti-Monopoly Judicial Interpretation, according to the plaintiff's claim, the people's court may include the plaintiff's reasonable expenses on investigation and prevention of the monopolistic conduct in the scope of compensation for losses.

  1. Conclusion

From the implementation of the AML to December 2011, the People's Court had accepted 61 Anti-Monopoly civil suits and concluded 53, of which the majority concerned abuse of dominance and others concerned monopolist agreement. With the exception of one case, the claims of all other plaintiffs in cases in which the court has issued rulings have been rejected by courts or settled mainly because plaintiffs failed to adduce adequate evidence regarding the relevant market, dominance and/or abusive conduct.

The promulgation of the Anti-Monopoly Judicial Interpretation will further detail the understanding of the AML and will provide guidance on the application of the AML to the public. It is also likely that the introduction of the Anti-Monopoly Judicial Interpretation will further promote the incidence of monopoly civil litigation.