Rules on civil causes of action
The revised Rules on Civil Causes of Action came into effect on April 1, 2011. They confirm that parties harmed by anticompetitive agreements (also known as "monopoly agreements" under the AML) and abuses of dominant market position may obtain redress in court. The new rules also indicate that private parties may bring suits to challenge "concentrations of undertakings," that is, mergers and acquisitions. However, it is unclear at this stage whether this means that private parties may challenge in court either (i) the legality of concentrations that (whether properly or improperly) never were notified to MOFCOM or (ii) MOFCOM decisions clearing notified concentrations.
Draft Rules on Civil Litigation under the AML
The draft Rules on Civil Litigation under the AML were published for comment after two years of deliberation. Comments have been requested by the SPC before June 1, 2011. Some highlights:
Jurisdiction. The draft Rules confirm that civil AML disputes must be heard in the first instance by a relatively limited number of intermediate courts that are believed to be more capable of addressing the complex legal, economic and proof issues expected in AML cases. The set of AML-competent courts is essentially the same as those designated to hear intellectual property-related cases, and indeed AML cases also will be heard by IP Tribunals within those intermediate courts. (See our prior alert: PRC Courts Beginning to Establish Procedural Framework for Anti-Monopoly Litigation.)
Eligible plaintiffs. The draft Rules confirm a broad approach to eligibility for bringing claims under the AML. Any natural person, legal person or other entities, including business operators and consumers, harmed by anticompetitive ("monopolistic") conduct may bring civil lawsuits under the AML. Where several lawsuits have been brought by different plaintiffs against the same defendant for the same conduct, a competent court may combine such cases together for hearing. This provision enables "collective actions," although not in the sense of U.S.-style class action litigation in which named plaintiffs act on behalf of a broader class of unspecified plaintiffs.
Burden of proof. In general, plaintiffs bear the burden of proving alleged monopolistic conduct. If plaintiffs claim compensation for damages, they have the burden to prove loss suffered, the existence of alleged monopolistic conduct, and the causal link between the two. However, the draft Rules try to make it easier for plaintiffs to discharge their burden of proof under certain circumstances.
For monopoly agreements, the draft Rules provide that plaintiffs do not need to prove anticompetitive effects – i.e., that the alleged monopolistic conduct has the effect of excluding or restricting competition – for certain kinds of horizontal and vertical agreements, essentially hard core cartel activity, but also resale price maintenance. The draft Rules allow defendants to produce evidence to rebut any presumed anticompetitive effect.
Similarly, in cases alleging abuses of dominance, the burden of proof may be shifted in some cases. First, where the allegations involve public utility companies, companies enjoying monopolies granted by law, undertakings operating in markets lacking effective competition, or companies on which transaction counterparties are highly dependent, then courts may find dominant market positions without requiring proof from plaintiffs unless defendants produce evidence to the contrary. Also, where the infringed party provides prima facie evidence of dominant market position, and the presumptively dominant firm does not deny such allegation or provide supporting evidence for its denial, the courts may conclude the existence of a dominant market position. Finally, information disclosed by a publicly listed company, self-acknowledgements made by allegedly dominant firms, and market research, economic analysis, and statistics from qualified independent third parties also may be adopted by the courts as prima facie evidence of dominance.
Discovery. The draft Rules also make provision for court-assisted evidence gathering. In particular, they specify that plaintiffs may request courts to order defendants to produce relevant evidence if only the defendant is in possession of the evidence that is necessary to prove the plaintiff’s case. Refusal to produce demanded evidence unfavorable to the defendant may lead the court to find that the allegation to be supported by such evidence is valid.
This appears somewhat to amplify the normal evidence-gathering provisions available under Articles 64 and 65 of the Civil Procedure Law and Articles 2, 3 and 17 of the Provisions of the Supreme People's Court on Evidence in Civil Procedures, which permit courts to assist litigants in gathering evidence only under certain specified circumstances and in practice rarely are used.
Passing-on defense. The draft Rules do not exclude the application of the so-called "passing-on" defense, by which defendants may argue that plaintiffs have failed to suffer injury from alleged anticompetitive conduct because they were able to pass price increases or other injury onto downstream customers. However, the burden of proof remains with defendants to demonstrate that plaintiffs have not suffered because they were able to pass any price increases.
Statute of limitations. The statute of limitations for civil AML disputes is two years, starting from when victims of monopolistic conduct knew or should have known of an AML violation. The two-year limitations period is consistent with those for most tort and contract claims under the Civil Procedure Law. This two-year period can be suspended under certain circumstances.
The draft Rules on Civil Litigation under the AML lay down a comprehensive procedural framework for civil litigation in China. If adopted as such, they are likely to ease plaintiffs’ burden of proof in civil AML actions. Given that China already now is the most litigious in the world by some measures – and in particular in intellectual property cases – these rules appear likely to pave the way for a significant increase in AML litigation.