7. Private Actions
China is a jurisdiction which allows both standalone and follow-on antitrust actions. Although the number of standalone actions are steadily growing in China, follow-on actions and actions against administrative decisions remain scarce. Notably, as on 1 Jan 2019, China started to implemented an interim arrangement that all antitrust disputes that are appealed should be heard by the Supreme People’s Court of China (SPC), and Huang v Didi became the first of such cases. Table 3 below detailed a few high-profile private action cases that were brought before the courts in China in 2019.
Table 3 Some of the Private Action Cases Observed in 2019
Huawei v IDC
Shenzhen Intermediate People's Court
Purported violation of FRAND obligation by IDC in licensing 3G, 4G and 5G wireless communication standards
2 Jan 2019 - commencement of litigation proceedings
JD v Ali (Pingduoduo and vip.com joined in as third parties)
Beijing High People’s Court
Abuse of dominance (Ali’s “choose one from two” restrictions on vendors on its Tmall platform)
1 Jan 2019 - commencement of litigation proceedings
9 Oct 2019 - SPC ruled on Ali’s jurisdictional challenge finding the Beijing High People’s Court has jurisdiction
Nov 2019 - Pingduoduo and vip.com joined in as third parties
Galanz v Tmall
Guangzhou IP Court
Abuse of dominance (Tmall’s “choose one from two” restrictions)
28 Oct 2019 - Galanz filed for litigation
4 Nov 219 - filing accepted
Ruixin v Starbucks
Shenzhen Intermediate People’s Court
Abuse of dominance (Starbucks’ exclusive terms in tenancy agreements and “choose one from two” terms in supply agreements)
16 May 2018 - Ruixin filed for litigation
14 Nov 2019 - Ruixin withdrew the filing
Huang v Didi
Zhenzhou Intermediate People’s Court; SPC
Abuse of dominance (excessive pricing)
4 May 2018 - Huang filed for litigation
March 2019 - Zhenzhou Intermediate People’s Court rejected all of Huang’s claims; Huang appealed later to SPC
24 Sep 2019 - hearing by SPC
Hytera v Motorola
Beijing IP Court
Abuse of dominance (Motorola’s purported exclusive dealing and refusal to deal behaviours in the subway network wireless communication equipment market in Chengdu)
Around Nov 2019 - hearing
Dec 2019 - Beijing IP Court found Motorola dominant on the market delineated by the requirements set out in the tender invitation documents, but did not abuse such dominance due to lack of intention and presence of substitutable technologies
Arbitrability of antitrust disputes
In its decision in Huili v Shell handed down in August 2019, the SPC deliberated that since the AML has obvious public law characteristics and the finding of monopoly is beyond just contractual relationships, AML disputes should be adjudicated by courts and not by arbitration. This clarification from the SPC contrasted with a decision of the Beijing High People’s Court handed down 2 months earlier in which it found that antitrust disputes were arbitrable. Whether the SPC would consistently apply this principle in its future decisions remain to be observed.
8. Intellectual Property and AML
Dawn raid on Ericsson
The SAMR raided Ericsson’s office in Beijing and conducted on-site forensics in April 2019. The dawn raid was believed to be related to complaints made by Chinese mobile phone manufacturers in relation to Ericsson’s alleged abuse of dominance in the 3G and 4G non-SEP markets by charging excessive royalty rates. The case is still under investigation.
Investigation against Tencent Music Group
Tencent Music Entertainment Group is reportedly under investigation by SAMR since January 2019 for the alleged exclusive licensing agreements with several of the world's largest record labels such as Universal Music Group, Sony Music Entertainment and Warner Music Group and then re-licensing music rights in China to its rival platforms at unreasonably high prices.
KTV v CAVCA
On 21 March 2019, 9 KTVs from Guangdong province sued the China Audio-Video Copyright Association (CAVCA) in the Beijing IP Court. The causes of action were CAVCA’s alleged abuse of dominance by imposing unfair trading terms. The rulings of the above series of cases are still pending.
Xiaomi v Sisvel
Around December 2019, the electronic products manufacturer Xiaomi sued the Italian patent licensing firm Sisvel in the Beijing IP Court asking the court to determine the royalty rates of the China SEPs within the wireless transmission technology package Sisvel licenses.
9. Abuse of Administrative Power
On 2 September 2019, China launched a campaign against abuse of administrative power and called for enforcement focus on anti-competitive conducts exercised by government departments in sectors including pharma, construction, transport, tendering, government procurement, and production of seals.
10. Outlook on 2020
Although there is no industry sector, perhaps excluding agriculture products, which are excluded from the scrutiny of the AML, it could arguably be said that certain industry sectors may attract more enforcement focus. For instance, as was reiterated multiple times by officials of the SAMR, the so-called industry sectors concerning the people’s livelihood has become and will continue to be the focus of AML enforcement. Sensitive sectors or sectors of strategic importance to China such as semicon or the chemical industries would also be expected to attract regulatory attention. It is also obvious that the SAMR is not unwilling to delve into new areas such as exclusionary conducts by internet platforms or restrictive agreement that has the effect of delaying new technologies from entry to the market.
Exclusionary conducts by internet platforms likely to attract continued regulatory attention
In March 2019, Tencent Music Group was reportedly being investigated by the SAMR for charging excessive fees in sub-licensing digital music distribution rights it owned exclusively to its competitors. So far, the enforcement focus seem to have been on Chinese internet companies. In March/May 2019, the online food delivery platform eleme was reportedly being investigated by the SAMR’s Heilongjiang and Zhejiang provincial subsidiaries for imposing terms on local restaurants forcing them to choose one from the two. In November 2019, the SAMR called meetings with 20 e-commerce firms and stated that it intends to conduct antitrust investigation into the problematic “choose one from the two” tactics.
Dawn raids and pending investigations
In April 2019, the SAMR dawn raided Ericsson’s Beijing office for the alleged abuse of dominance conducts including excessive pricing and tying in the licensing of 3G and 4G SEPs. There have also been reports about the SAMR’s investigation into the exclusive arrangements by Tencent Music Group, the agreement to delay entry of new emission technologies in the car industry, and “choose one from the two” tactics adopted by many, but especially some internet giants. Northeast Pharma disclosed that it is under antitrust investigation by the Liaoning AMR since 4 November 2019. China Mobile also disclosed on 29 April 2019 that four of its provincial-level subsidiaries are under antitrust investigation by the SAMR concerning the distribution of bespoke 4G+ mobile phones.
Interplay between antitrust merger review and national security review
China’s national security review (NSR) system was introduced as early as 2011, but it has largely remained a wall flower until August 2019 when the NDRC informed Yonghui Supermarket that its proposed acquisition of another retail group Zhongbai should be notified for national security review. This notice of the NDRC came only 6 days after Yonghui received an unconditional clearance from the SAMR in its concentration of undertaking review. It thus raised the question whether antitrust notifications would attract regulator’s attention to launch a parallel or following national security review. The most recent development is Yonghui announced in December 2019 that it decided to abort the acquisition one month after the NDRC brought the case to the special review process of the NSR.
In summary, the dynamics in antitrust legislation in 2019 seem to suggest that whilst China hopes to raise the awareness of businesses and deter AML violations by raising the bar of legal consequence, it is also seeking to encourage the reporting and detection of AML violations. Parallel enforcement activities in other jurisdiction would also inform China’s enforcement activities. Any key developments under the AML deserve to be closely observed.