Proposed Rules for China s Anti- Monopoly Law Private Litigation. June 22, 2011

Transcription

1 Proposed Rules for China s Anti- Monopoly Law Private Litigation June 22, 2011

2 Fundamentals of Private Litigation under China s Anti-Monopoly Law Susan Ning, Partner, King & Wood June 2011

3 Contents Overview of AML Prohibitions under the AML Enforcement Structure under the AML Role of Courts

4 Overview of AML Three Pillars* The Anti-Monopoly Law of China ( AML ) was released on August 30, 2007 and took effect on August 1, The AML mainly deals with (i) concentration of undertakings, (ii) monopoly agreements and (iii) abuse of dominant market position. AML Concentration of Undertakings Monopoly Agreements Abuse of Dominant Market Position

5 Prohibition under the AML Anti-Competitive Concentration of Undertakings The AML prohibits concentration of undertakings that has or may have the effect of eliminating or restricting competition.

6 Prohibitions under the AML Monopoly Agreement AML prohibits horizontal and vertical monopoly agreements. Forms of monopoly agreements: A written agreement or a written decision A verbal agreement or a verbal decision Other concerted actions in the absence of a written or verbal agreement or decision

7 Prohibitions under the AML Horizontal Monopoly Agreement The following horizontal monopoly agreements shall be prohibited: fixing or altering prices of commodities; restricting the production quantity or sale quantity of commodities; dividing sales market or market of raw materials procurement;

8 Prohibitions under the AML Horizontal Monopoly Agreement (Cont.) restricting the procurement of new technologies and new equipment or restricting the development of new technologies and new products; joint boycott of transactions; and any other monopoly agreements as defined by the anti-monopoly enforcement agency of the State Council, such as bid rigging.

9 Prohibitions under the AML Vertical Monopoly Agreement The following vertical monopoly agreements shall be prohibited: fixing the price of commodities for resale to third parties; fixing the lowest price of commodities for resale to third parties; and any other monopoly agreements as defined by the anti-monopoly enforcement agency of the State Council.

10 Exemptions to Monopoly Agreement Monopoly agreements can be exempted by the AML if the agreements are for the purposes of: Technological improvement, or research and development of new product Raising product quality Reducing cost Enhancing efficiency Standardizing product specifications and standards Implementing specialization (to be continued)

11 Exemptions to Monopoly Agreement Cont. Monopoly agreements can be exempted by the AML if the agreements are: Improving business efficiency and enhancing competitiveness of small and medium-sized operators To fulfill public interests, such as energy-saving, environment protection and disaster relief To alleviate serious drop in sales quantity or apparent over- production in times of economic downturn to protect the legitimate interests in foreign trade and economic cooperation To claim exemptions under the above grounds (except the last item), the monopoly agreements shall not seriously restrict competition in the relevant market and shall enable customers to share the benefits.

12 Prohibitions under the AML Abuse of Market Dominance Concept of Dominant Market Position A business operator is able to: control the prices, quantities or any other terms of transaction in the relevant market or obstruct and affect the entry of other business operators into the relevant market.

13 Abusive Conducts of Dominant Enterprise Enterprises with dominant market position are prohibited from engaging in the following conducts: sell commodities at unfairly high prices or purchase commodities at unfairly low prices; sell commodities at below-cost prices without a valid reason; refuse to transact with trading counterparts without a valid reason;

14 Abusive Conducts of Dominant Enterprise Cont. restrict trading counterparts to transact only with the business operator or only with designated business operators without a valid reason; bundling without a valid reason or imposition of any other unreasonable terms of transaction; or implement differential treatment for terms of transaction such as transaction price for similar trading counterparts without a valid reason.

15 Determining Dominant Market Position The AML established market-share-based presumptions of dominant market position: the market share of one operator in relevant market accounts for more than 1/2; the combined market share of two operators in relevant market accounts for more than 2/3; the combined market share of three operators in relevant market accounts for more than 3/4. In cases provided in the above items of (ii) and (iii), if any operator has a market share of less than 1/10, it shall not be presumed to hold a dominant market position.

16 Enforcement of AML AML Enforcement Administrative Proceedings Civil and Administrative Litigations

17 Enforcement of AML Administrative Enforcement A two-tiered administrative structure is established under the AML. Anti-monopoly Commission under the State Council MOFCOM (Ministry of Commerce) SAIC (State Administration For Industry and Commerce) NDRC (National Development and Reform Commission) MOFCOM reviews merger control notifications. SAIC supervises price-related monopoly agreements and abuse of market dominance. NDRC supervises non-price-related monopoly agreements and abuse of market dominance.

18 Enforcement of AML Civil and Administrative Actions The AML allows two types of judicial remedies: AML civil litigation: Article 50 of the AML allows private parties injured by monopoly conducts to file civil actions under the AML. AML administrative litigation: Article 53 of the AML allows administrative actions be brought against the specific administrative decisions reached by AML administrative enforcement agencies.

19 Role of Courts in AML Administrative Actions For administrative decisions in relation to concentration of undertakings, the business operator shall first file for administrative review before it brings an administrative action. For administrative decisions in relation to abuse of market dominance and monopoly agreements, the business operator is not required to file for administrative review first and may directly bring an administrative action.

20 Role of Courts in AML Private Actions The Supreme Court has stipulated the following causes of actions regarding AML private actions: Disputes regarding concentration of undertakings Disputes regarding monopoly agreements Disputes regarding abuse of market dominance The Supreme Court has categorized AML disputes as intellectual property disputes.

21 THANK YOU. Questions & Comments Susan Ning

22 Existing Litigation in Private Actions Under China s AML Joseph J. Bial Cadwalader Wickersham & Taft LLP June 22, 2011 ABA Teleconference

23 Overview According to the Supreme People s Court ( SPC ), courts accepted 43 first instance civil AML cases from August 1, 2008 through 2010, 29 of which have concluded Private plaintiffs have yet to yield any significant victories Primarily abuse of market dominance cases Private action litigation has remained low since AML adoption. Draft rules currently under consideration are hoped to provide guidance and likely will encourage further litigation

24 Baidu Tangshan Renren Information Co. v. Baidu Allegation: Renren alleges the number of page views of its website dropped significantly due to Baidu s manipulation because Renren reduced expenditures on Baidu s paid listing - therefore abusing its search engine dominance Decision: (1) the evidence advanced by Renren is insufficient to establish Baidu has market dominance (2) even if Baidu has market dominance, Baidu has valid justification in blocking Renren from gaining access to potential customers, because Renren s website contained junk links, thus violating Baidu s policy; (3) Renren failed to prove causation linking loss of revenue to Baidu s lowering its search result ranking Result: Claims dismissed in December 28, 2009, appeals in process to Beijing Higher People s Court Zhongjing Zhongheng Information Center v. Baidu Allegation: Baidu abused its market dominance by not allowing Plaintiff s links to appear in Baidu s search results Result: Pending Hudong.com v. Baidu Allegation: Baidu, now China s largest search engine with a 75.5% market share, abused its market dominance by blocking Hudong.com from appearing in Baidu s search results, in favor of Baidu Baike, an encyclopedia service competing with Hudong.com Result: Pending

25 China Mobile Allegations: Plaintiff, a customer of China Mobile, alleged that China Mobile abused its dominance (it was then the world s largest phone company as measured by subscribers) and engaged in unlawful price discrimination by charging monthly phone rental fees in addition to the basic mobile phone fees Result: Case withdrawn and settled for RMB 1000 (not as reimbursement, but as a token of gratitude for Plaintiff s input on fees)

26 QQ/360 Dispute Background: Qihoo (360) produces privacy/anti-virus software known as 360 Privacy Protector. After Qihoo publicized that QQ (Tencent), a producer of an instant messaging service was peeking into its users computers (an allegation QQ denied), QQ made its instant messaging service incompatible with 360 Privacy Protector. AML Allegation: QQ abused its dominance in the instant messaging market by forcing customers to uninstall and discontinue using 360 Privacy Protector Result: Settled November 2010 QQ announces they will resume their product s compatibility with 360 Privacy Protector

27 Concrete Cartel Background: The first published cartel case decided under the AML (case was brought by SAIC) Allegation: Horizontal restraint of trade by a concrete trade association that allocated geographic markets amongst 16 concrete producers Result: 5 companies in association fined varying amounts; the trade association fined RMB 200,000; 11 companies received immunity as a result of their cooperation

28 Proposed Rules for China's Anti-Monopoly Law Private Litigation Matthew I. Bachrack June 22, 2011 ABA Teleconference 2011 Cleary Gottlieb Steen & Hamilton LLP. All rights reserved. Throughout this presentation, Cleary Gottlieb and the firm refer to Cleary Gottlieb Steen & Hamilton LLP and its affiliated entities in certain jurisdictions, and the term offices includes offices of those affiliated entities.

29 SPC Draft Judicial Interpretation on Private Antitrust Litigation Article 50 of the AML Permits private enforcement action s operators who implement monopolistic conduct and cause loss to others shall bear civil liability according to law No details Work on SPC s draft Judicial Interpretation began in 2009 Judicial Interpretation designed to Establish rules for accepting and hearing civil disputes Provide guidance to courts for conduct of trial and appropriate application of law Based on AML, General Principles of the Civil Law, Contract Law, and Tort Law 29

30 Jurisdiction and Standing Jurisdiction Certain Intermediate People s Courts are the courts of first instance (Art. 1) IP Tribunals within each court are responsible for hearing cases Territorial jurisdiction otherwise determined pursuant to the Civil Procedure Law (Art. 2) Draft does not address jurisdiction over foreign companies However, AML applies to companies operating outside of China if their operations have the effect of restricting or eliminating competition in China Standing Civil Procedure Law standing requirements Plaintiff is citizen, legal person, or entity having direct interest in the case There is a specific defendant There is a concrete claim, factual basis, and a cause of action Action falls within scope of acceptable civil lawsuits and court has jurisdiction Anyone harmed by monopolistic conduct may sue (Art. 4) Includes direct purchasers and, impliedly, indirect purchasers (Art. 4) Passing-on defense impliedly recognized by draft, which states that defendant bears burden of proof if it argues that the plaintiff has transferred part or all of the alleged loss to a third party (Art. 10) 30

31 Statute of Limitations and Consolidated Proceedings Statute of Limitations (Art. 20) Two years from time at which plaintiff knew or should have known about infringement If AMEA investigated and found infringement, statute of limitations begins to run on day plaintiff knew or should have known about the decision If plaintiff filed a complaint with the AMEA, statute of limitations is tolled until plaintiff knows or should have known about AMEA decision not to initiate an investigation, to dismiss the case, or to terminate the investigation Consolidated Proceedings Civil Procedure Law allows collective actions Does not authorize U.S.-style, opt-out class actions At discretion of court, plaintiffs may join their claims Courts may consolidate actions brought against the same defendant and alleging the same monopolistic conduct (Art. 5) Courts shall refer such cases to the court that was the first to accept such a case 31

32 Discovery 32 Civil Procedure Law does not allow U.S.-style discovery Parties ability to compel production is very limited, as there are no penalties for failure to comply with discovery requests Court may order discovery SPC understands that lack of discovery is a major obstacle to successful civil litigation Draft allows court to compel defendants to disclose evidence in the following limited circumstances (Art. 12): Existing evidence is sufficient to prove that alleged unlawful, monopolistic conduct probably caused plaintiff to suffer damages Evidence is not otherwise reasonably available Evidence is relevant Plaintiff can prove defendant has the evidence Sanctions and adverse presumptions may be applied when a defendant refuses to comply with a discovery order (Art. 12) Experts (Art. 13) Parties may apply to the court to appoint independent experts to conduct market research or economic analysis Parties may engage expert witnesses on their own initiative

33 Burden of Proof 33 Generally, plaintiff bears burden of proving (Art. 7): Existence of alleged monopolistic conduct The existence and amount of damages Causal relationship between the alleged conduct and claimed damages Recognizing the difficulty of plaintiff s burden, the draft introduces certain presumptions Rebuttable presumption that the following agreements have an anti-competitive effect (Art. 8) Horizontal agreements to fix prices, limit output, divide markets, restrict the purchase or development of new technology, or jointly boycott transactions Vertical agreements to fix resale prices or set minimum resale prices Rebuttable presumption of dominance if plaintiff can prove any of the following (Art. 9): Defendant is a public utility supplying water, electricity, heat, or gas Defendant has been granted an exclusive legal right to supply certain products or services Relevant market lacks effective competition and the counterparty is highly dependant on the products and services supplied by defendant Court may make a determination of dominance when plaintiff provides certain preliminary evidence and the defendant does not adequately refute it (Art. 9) Preliminary evidence includes public disclosures by listed companies, information acknowledged by defendant, market research, economic analyses, monographic studies, and statistics provided by qualified, independent third parties Plaintiff need not prove any fact established in a court s legally effective judgment or ruling or AMEA s legally effective decisions (Art. 11)

34 Interplay with Administrative Proceedings Judicial and administrative processes are independent Plaintiff may bring case (Art. 6): Before an administrative investigation by AMEA exists During pendency of an AMEA investigation As a follow-on action after an AMEA ruling Exception for cases involving administrative monopolies, which may be filed only after an administrative decision If case filed during pendency of an AMEA investigation, court Shall conduct a comprehensive review of the plaintiff s claims (Art. 15) May suspend the case pending results of AMEA investigation (Art. 16) 34

35 Remedies Courts may order the following (Art. 17): An end to the alleged conduct That defendant take action to eliminate the threat of damage to plaintiff(s) Payment of damages Validity of contracts or clauses of contracts will be determined in accordance with the General Principles of Civil Law and Contract Law (Art. 18) A technology contract that has not been found to violate the AML may be annulled if it unlawfully monopolizes technologies or impedes technology development as provided under Article 329 of the Contract Law 35

36 Proposed Rules for China s Anti-monopoly Law Private Litigation Concerns and open issues on the Draft Provisions Michael Han, Partner, Freshfields Bruckhaus Deringer, 22 June 2011

37 Substantive issues (1): Passing on defence How to manage proceedings where there are both direct/indirect purchasers An issue that US and EU are rather divided on, with developing jurisprudence Draft Provisions can be clarified to provide for standing to both direct/indirect purchasers Options to manage lawsuits involving both types of purchasers consolidation?

38 Substantive issues (2): Potentially broad basis on which the court grants remedies to eliminate eliminate the danger Broader than civil damages and injunction? Potential for inconsistent remedial measures adopted by courts and AML authority Allowing reference to unfair technology contracts in AML Draft Provisions Prohibition on unfair technology contracts captures a wider range of conducts than AML prohibition Is it appropriate to include the broader prohibition on unfair contracts in AML Draft Provisions?

39 Difficulties inherent in two-track enforcement system Requirements for the courts with later filed cases to transfer on a purely timing basis query whether this is the most appropriate determinant May encourage races to courthouses Other more relevant determinants may be: location of parties and witnesses geographic scope of the conduct Consider alternative means for more sensible management of multiple proceedings

40 Procedural mechanisms to assist plaintiffs: unduly broad presumption of dominance? Draft Provisions intend to provide assistance to plaintiffs by introducing a number of procedural mechanisms However, some issues are to be considered Article 9(3) provides for presumption for finding dominance, where: The relevant market lacks effective competition, and the transaction counterparts highly depend on the products or services supplied by the enterprise Appears to be unduly broad Dependence by one firm to another does not necessarily equate dominance contrasts with the other presumptions which are arguably better proxies for dominance

41 Evidentiary and procedural issues: Plaintiff s burden of proof Express prohibition on the Plaintiff from relying on commitment to directly infer the existence of monopolistic conduct Any scope for any indirect inferences to be allowed? Ability of Plaintiff to request for production of evidence by Defendant Recognition that plaintiffs are often in a weaker position vis-à-vis defendants Should such ability to request for production of evidence be reciprocal? Confidentiality in court proceedings Promote consistency between cases in other courts Promote awareness of potential litigants

42 Matthew Bachrack Senior Attorney, Hong Kong Cleary Gottlieb Specialization Antitrust and Competition Litigation and Arbitration Education George Washington University Law School (J.D., 2001) University of Virginia (B.A., 1998) Bar admissions Virginia, District of Columbia, Hong Kong Mr. Bachrack joined the firm in 2001 and became a senior attorney in From 2001 to 2009, he was resident in the Washington, D.C. office mbachrack@cgsh.com Mr. Bachrack s practice focuses on antitrust counseling, particularly with respect to the United States and the developing antitrust regimes in Asia, cartel investigations, and civil antitrust litigation. He also has extensive experience with multi-jurisdictional pre-merger filings. He has represented clients from around the world in various industries, including chemicals and plastics, oil & gas, branded consumer products, defense, information technology, pharmaceuticals, medical equipment and health care, and banking and insurance. Mr. Bachrack has published articles and spoken regarding the development of China s competition regime. In addition, he has worked with the ABA s Sections of Antitrust Law and International Law that provide comments to China s antitrust agencies regarding draft rules and guidelines under China s Anti-Monopoly Law.

43 Joseph J. Bial Special Counsel (Antitrust) Washington D.C. +1(202) Joe has previously also worked at law firms in Chicago, New York, and Tokyo. His practice involves all areas of antitrust law, as well as general commercial litigation and corporate and securities matters. In addition to his work in the United States, Joe focuses on antitrust and anti-monopoly issues arising in Asia and has provided comments on several of China's proposed revisions of, and guidance relating to, its Anti-Monopoly Law. Joe has spoken at the International Seminar of AML Civil Litigation at the East China University of Politics and Law regarding private litigation arising in China under the AML and how US litigation may be useful in informing China s experience with antitrust litigation.

44 Yee Wah Chin Counsel Yee Wah Chin joined the firm as Of Counsel in Early in her career, Yee Wah was an associate and then partner of Shea & Gould. Later, Yee Wah was Assistant General Counsel of AlliedSignal Inc. (now Honeywell International Inc.). Yee Wah s practice encompasses all aspects of antitrust counseling and litigation, advising on all matters with antitrust exposure. She has defended clients before the Antitrust Division of the U.S. Department of Justice and the Federal Trade Commission in investigations over transactions and conduct as well as for criminal price fixing, and litigated antitrust matters in Federal courts in New York and other parts of the country. Yee Wah is a frequent writer and speaker on antitrust subjects. She is a leader at the American Bar Association in antitrust, particularly on the intellectual property antitrust interface, China and other international antitrust areas, and active in OECD and U.S. Chamber of Commerce projects on China. Education J.D., Columbia University, 1977 S.B. in Mathematics, Massachusetts Institute of Technology, 1974

45 Michael Han Freshfields Bruckhaus Deringer T E michael.han@freshfields.com Michael is a partner in the Beijing office of Freshfields Bruckhaus Deringer. Prior to joining the firm, he worked with the Ministry of Foreign Trade and Economic Cooperation (now the Ministry of Commerce), the authority which is currently responsible for foreign investment approval and merger review in China. Michael s practice focuses on the competition and regulatory aspects of Chinarelated direct foreign investment and cross-border mergers and acquisitions. Michael is ranked in Band 1 of international competition lawyers in China by Chambers Asia 2009, 2010 and He also features as a leading antitrust practitioner in China in Global Competition Review s International Who s Who of Competition Lawyers and PLC s Which Lawyer.

46 Susan Ning Senior Partner and Head of Antitrust and Competition, Beijing King & Wood In 2006, Susan started up the Antitrust and Competition Group in King & Wood. Susan s current practice focuses on two main areas: securing MOFCOM merger clearance for clients; and advising on AML compliance issues. Prior to the enactment of the AML, Susan took a very active role in terms of assisting and consulting with the Chinese Government on the enactment of the AML. Since the enactment of the AML, Susan continues to be actively involved in terms of assisting and consulting with the Chinese Government with drafting regulations and guidelines accompanying the AML. Susan chairs the Antitrust Committee of the Inter-Pacific Bar Association and is an active participant of the American Bar Association s antitrust forum. For two consecutive years (2010 and 2011), Susan was listed in the International Who s Who of Competition Lawyers and Economist by Global Competition Review; in 2009, she was awarded with a Practice Excellence award by Corporate INTL. Under her leadership, the Antitrust & Competition Group won the Competition Law Firm of the Year 2010 (China) from Dealmaker s Monthly. Susan holds a Bachelor of Laws from Peking University and a Masters in Law from McGill University.

47 The Regulation on the Relevant Issues Concerning the Application of Law in the Trial of Civil Monopoly Dispute Cases of the Supreme People s Court, People s Republic of China (Translation prepared for December, 2010 Seminar in Boao, Hainan, China, updated to incorporate revisions included in April 2011 Draft) To ensure the proper judgment of civil monopoly dispute cases, prevent monopolistic conducts, protecting fair competition in the market, safeguarding the interests of consumers and social public interest, this regulation is enacted in pursuant to the relevant regulations in the Anti-monopoly Law of the People s Republic of China ( Anti-Monopoly Law ), the General Principle of the Civil Law of the People's Republic of China ( General Principle of the Civil Law ), the Law of the People s Republic of China on Tort Liability ( Tort Liability Law ), the Contract Law of the People s Republic of China ( Contract Law ) and the Civil Procedural Law of the Peoples Republic of China ( Civil Procedural Law ). Section 1 Jurisdiction Article 1 (Jurisdiction by Level and Designation of Jurisdiction) The intermediate courts of the capital cities of the provinces and autonomous regions, the intermediate courts of the cities specifically designated by the state plan, the intermediate courts within the municipalities and the intermediate courts designated by the Supreme People s Court shall have jurisdiction over civil monopoly dispute cases as courts of first instance. Article 2 (Territorial Jurisdiction) The territorial jurisdiction over infringement disputes and contractual disputes arising from monopolistic conducts shall be determined in pursuant to the jurisdiction rules in the Civil Procedural Law and relevant judicial explanations related to the infringement dispute cases and contractual dispute cases, together with the rule in Article 1 of this Regulation. Article 3 (Exclusive Jurisdiction) In civil dispute case, of which the subject matters are not monopolistic dispute, provided the defendant defends or files a counterclaim based on the monopolistic conducts conducted by the plaintiff, and the people s court where the case are filed do not have jurisdiction over civil monopoly dispute cases, the case shall be referred to the people s court with jurisdiction if the court where the case are filed find there are evidence for the defence or counterclaim of the defendant or the ruling of the case would be based on Anti-monopoly Law. 1

48 Section 2 Parties and Form of Action Article 4 (Parties with Standing) The natural persons, legal persons, and other organizations who have suffered harm from monopolistic conduct, including the business operators and consumers, may file a civil suit to the people s court in accordance with Article 50 of Anti-monopoly Law. Article 5 (Separate Lawsuit, Joint Lawsuit and Combined Trial) The aggrieved parties of a monopolistic conduct are free to file separate lawsuit or joint lawsuit. In the condition where more than one plaintiffs file lawsuits separately to the same people s court with jurisdiction on one monopolistic conduct, the court may try these cases together. In the condition where more than one plaintiffs file lawsuits separately to different people s courts with jurisdiction against one defendant, the other courts shall determine to refer these cases to the court which accept the case first to try together. Article 6 (Follow-on Law Suit and Direct Lawsuit) The aggrieved parties of a monopolistic conduct may file lawsuits to the people s courts after the validity of the decision of the anti-monopoly authority is ascertained, and they may also file lawsuits directly to the people s courts. The aggrieved parties of a monopolistic conduct which claim civil rights against the designated or forced business operators in according to Article 32 or Article 36 of Anti-monopoly Law, shall file a lawsuit to the people s court after it is determined that the relevant administrative conduct constitutes an act of abusing administrative power to eliminate or restrict competition. Section 3 Evidence and Burden of Proof Article 7 (General Rule in the Attribution of Burden of Proof) The aggrieved parties of a monopolistic conduct shall bear the burden of proof concerning the existence of the alleged monopolistic conduct. The aggrieved parties claiming remedy for their damages shall also bear the burden of proof concerning the damages they claimed and the causal relationship between the alleged monopolistic conduct and the damages. Article 8 (Attribution of Burden of Proof in Monopolistic Agreement Cases) The aggrieved parties of a monopolistic agreement case shall bear the burden of proof about the effectiveness of the alleged monopolistic agreement in eliminating or restricting competition. Where the alleged monopolistic agreement is found to be in accordance with the conditions stipulated in Article 13, paragraph 1(1)(2)(3)(4)(5) and Article 14 (1)(2) of Anti-monopoly Law aggrieved parties do not need to bear the burden of proof about the effectiveness of the alleged monopolistic agreement in 2

49 eliminating or restricting competition, unless the conductor has sufficient evidence to prove otherwise. The conductor shall bear the burden of proof about the conformity with the regulation provided in Article 15 of Anti-monopoly law of the alleged monopolistic conduct. Article 9 (Attribution of Burden of Proof in Cases of Abuse of Dominant Market Positions) The aggrieved parties of the alleged conduct of abuse of dominant market positions shall bear the burden of proof of the involved relevant market, the dominant market positions of the alleged conductor in that relevant market and that the alleged monopolistic conduct fits for the conditions provided in Article 17, paragraph 1 (1)-(7) of Anti-monopoly Law. The conductor for the alleged monopolistic conduct shall bear the burden of proof about the legitimacy of his action after the aggrieved parties fulfilled the aforementioned burden of proof. The people s court may preliminarily determine the dominant market positions of the alleged conductor, when the evidences provided by the aggrieved parties satisfy one of the following unless the conductor has sufficient evidence to prove otherwise: (1) public enterprises including the suppliers of water, electricity, heat and gas; (2) business operators other than public enterprises, who are entitled by relevant laws, regulations and rules to be the dominant operator in specific commodities and services; (3) the relevant market lacks efficient competition, and the business operators provide commodities and services, on which the trading parties have great reliance. The people s court may determine the dominant market positions of the conductor, whereas the aggrieved parties provide preliminary evidence about the dominant market positions of the conductor and the conductor doesn t deny or denies without providing sufficient evidence for his allegation. The disclosed information of list companies, the confession information of the conductor and the market investigation, economic analysis, project research and statistic results made by the qualified independent third party, can all be regarded as the aforementioned preliminary evidence. Article 10 (Defence of Transfer) The conductor for the alleged monopolistic conduct shall bear the burden of proof, where the conductor alleges the aggrieved parties have transferred all the damages or part of the damages to the other parties. Article 11 (Facts with No Need to Prove) The parties alleging the validity of facts confirmed by valid decision of the people s courts bears no burden of proof, unless the counter parties have sufficient evidence to prove otherwise. The facts that the anti-monopoly authorities find in its decision that a conduct constitutes monopolistic conduct, shall have similar effects in accordance with the 3

50 former paragraph. If the antimonopoly authorities cease the investigation because of business operators promises, the existence of a monopolistic conduct cannot be presumed directly according to the promises. Article 12 (Application for Order Instructing the Defendant to Provide Evidences) The aggrieved parties of the alleged monopoly conduct and theirs counsels may apply for a court decision instructing the alleged conductor to submit relevant evidences, if the following are satisfied: 1. the evidences provided by the applicants are sufficient to prove the probable existence of their damages due to the alleged monopolistic conduct; 2. the evidences which the applicants applied for may not be obtained after reasonable efforts of the applicants 3. the evidences which the applicants applied for are relevant with the case, and are necessary to prove the applicant s claims or allegations; 4. it can be proved that the respondent obtain the evidence which the applicants apply for. Where the respondent refuse to submit the aforementioned evidences without proper reasons and the applicants allege that evidence to be of disadvantage for respondent, the people s court may presume the applicants allegation stands in accordance the specific facts in the cases. Whereas the respondent refuses to perform the decision made by the people s court in last paragraph, the people s court may handle it in accordance with Article 102 of Civil Procedural Law. Article 13 (Expert Evidence) The parties may apply to the people s court for the presenting of persons with professional knowledge in economics and relevant profession to present the professional issues involved in this case. The parties may apply to the people s court for market investigation or economic analysis report made by entrusted independent professional organizations or persons; the parties may also entrust independent professional organizations or persons to make market investigation or economic analysis report; the people s court may judge the reports and investigations in accordance with the conditions in Civil Procedural Law and relevant judicial explanation concerning expert conclusions. Article 14 (Protecting Evidence) The parties and their counsels and other participants in the proceedings bear confidentiality obligations on the state secrets or other s business secrets. The evidences of the cases concerning state secrets, business secrets and personal privacies and other contents which may infringe the public interest or the legitimate interest of others, the parties may apply the people s court not to hear the case in public, restrict or prohibit to copy the evidences, present evidence only the counsel 4

51 and ordering for submitting confidential promises and other effective methods to protect the evidences. The conditions about the monopolistic agreements and significant evidences submitted voluntarily by the business operators in accordance with Article 46 paragraph 2 to the anti-monopoly authorities, which is not yet public but is necessary to be examined in the present case as evidences, the people s court may adopt the relevant measures stipulated in the former paragraph. Article 15 (Comprehensive Review) Whereas the alleged monopolistic conducts have been investigated by the anti-monopoly authorities without any monopoly determination, the people s courts shall still make judgments based on a comprehensive review over the parties claims. Article 16 (Suspending of Lawsuits) The people s court may decide to suspend the lawsuit according to the specific condition in the cases, if the anti-monopoly authorities are conducting investigation over the alleged monopolistic conduct. Section 4 Civil Responsibilities Article 17 (Infringement Responsibilities) Where the business operators committed monopolistic conducts and infringed other s legitimate rights, the people s court shall determine that the business operator committing monopolistic conducts bear civil responsibilities, in according to the claims of the parties, pursuant to General Principles of Civil Law, Tort Liability Law and Anti-monopoly Law. According to the claims of the parties and the specific conditions of the cases, the people s courts may decide that the conductor to stop the monopolistic conducts, if the conduct still exists when the judgments are made; the people s courts may decide that the conductor eliminate the dangers if danger of damages to others exists; the people s courts may decide that the conductor indemnify others if damages have been caused. Article 18 (Invalid Actions) The validity of contracts and the clauses, decisions and other concerted conducts in violating the mandatory regulations in Anti-monopoly Law, shall be deemed in accordance with Article 58 paragraph 1 (5) of General Principles of Civil Law and Article 52 (5) of Contract Law. Even if the content of a technology contract violate no mandatory regulations in Anti-monopoly Law, the people s courts may still deem that contract and relevant clauses to be invalidity when the condition of illegally monopolizes technology, impairs technological advancement stipulated in Article 329 of Contract Law is met. 5

52 Article 19 (Attribution of Reasonable Costs) According to the claims of the parties and the facts of the cases, the people s courts may take the reasonable costs paid for investigation and stop monopolistic conducts in the scope of indemnification. When applications of the parties for the presenting of persons of professional knowledge to present professional issues involved in the cased is approved by the people s courts, the relevant costs may be taken into scope of the reasonable costs paid for investigation and stop monopolistic conducts. Section 5 (Limitation of Action) Article 20 (Limitation of Action) The limitation of actions for civil monopoly disputes is 2 years, starting from the day when the aggrieved parties know or should have known the detriment caused by the alleged monopolistic conducts. Whereas the anti-monopoly authorities convey investigation over alleged monopolistic conducts and decide the existence of monopolistic conducts, the 2-year limitation shall be calculated from the day when the aggrieved parties know or should have known the validity of the aforementioned decision is ascertained. The limitation of actions shall be interrupted when the aggrieved parties reported the alleged monopolistic conducts to the anti-monopoly authorities. Whereas the anti-monopoly authorities decide that the cases are inadmissible, should be dismissed or to stop investigation, the 2-year limitation shall be calculated anew from the day when the aggrieved parties know or should have know the decision of the anti-monopoly authorities. Whereas the aggrieved parties filed lawsuits after the 2-year limitation, if the monopolistic conducts are still carrying on, the people s court shall decide that the conductor stop such conducts and indemnify the aggrieved parties. If the conductor raises the defense that the lawsuit exceeds the 2-year limitation, the indemnification shall be calculated from 2 years earlier than the date when the lawsuits are filed. 6

53 Responses to Reporters Requests re the Draft for Comments of the Judicial Interpretations of the Anti-monopoly Law from a Superintendent of Intellectual Property Tribunal of Supreme People s Court On April 25, the Supreme People s Court publicized the Provisions of the Supreme People s Court on Several Issues Concerning the Application of Law in Hearing Monopoly Civil Cases (Draft for Comments) to solicit comments from the society, and a superintendent of the Intellectual Property Tribunal of Supreme Court received an exclusive interview from a reporter of People Court Daily and shared some thoughts during the drafting process. Background of the Draft for Comments The Anti-monopoly Law, known as the Economic Constitution, is the fundamental law of restraining monopoly activities, protecting market competition and maintaining market order. It is also an important law that plays the basic role of maturing market structure, guaranteeing economic security and ensuring the allocation of market resources. Furthermore, the Anti-monopoly Law possesses the extremely important function of protecting the legitimate interests of undertakings and consumers and the public interests of the society, as well as enhancing the competitiveness of enterprises and promoting the healthy development of the socialistic market economy. Ever since the implementation of the Antimonopoly Law, the antimonopoly civil cases have turned into an important judicial field of people s court. According to the statistics, from August 1, 2008 to the end of 2010, the number of first instance antimonopoly civil cases accepted and heard by local court nationwide is 43 in total, among them, 29 cases have been concluded. The antimonopoly civil trial has become one of the critical challenges faced by people s court, due to the high difficulty and complexity of the antimonopoly case, crossing economic and legal issues, strong specialization, significant impact on both enterprise and industry, rather strong generality and abstractness nature of some provisions in the Anti-monopoly Law, and the operation clauses related to people s court is relatively simple. Therefore, it is an urgent work task to issue relevant judicial interpretations and establish the rules of accepting and hearing an antimonopoly civil dispute case at the earliest time, as well as provide guidance to the people s court for its full conduction of trial function and appropriate application of law. For this purpose, the Supreme People s Court officially started the drafting of judicial interpretations on antimonopoly civil cases in This Draft for Comments was formed based on two years effort, repeated investigations, researches and modifications. Soliciting comments from the public is an important approach to collect all people s wisdom, improve the scientificity of the judicial interpretations, and enhance the judicial transparency we are always consistent with. Legal Basis of the Draft for Comments Article 50 of the Anti-monopoly Law prescribes that: The undertakings that violate

54 the provisions of this law and cause damage to others shall bear civil liability in accordance with the law, which established anti-trust civil judicial system, opened channel for private execution of Anti-monopoly Law, and was also one of the primary legal bases for the Draft for Comments. Superficially, there is only one article related to anti-trust civil procedure system; however, hearing and judging of civil litigation cases have been well developed in Civil Law and Civil Procedure Law in China s legal system. Strict legalism was not requested in civil law and civil procedure. The basic civil procedure system can be and must be the basis and guideline when hearing anti-trust civil dispute case, which are also import legal basis for preparing the Draft for Comments. Without doubt, when applying and explaining these basic civil judicial system, we should combine the basic laws and ideas of Anti-monopoly Law, and take into consideration of the particularity of monopoly civil dispute case, which calls for more wisdom of the court, takes full use of the current civil judicial system to put up a smooth, harmonious, fair and efficient orbit for anti-trust civil procedure. It should be noted that, based on the needs of trial practice, the Draft for Comments did not limit the explanation to the civil procedure issues, but made explanation to address pressing issues in the judicial practice from both substantive and procedural aspects. Therefore, besides the Anti-monopoly Law, the General Principles of the Civil Law, Contact Law and Tort Law etc. are also significant bases for the Draft for Comments. Basic Spirits and Principles behind the Specific Structure of Anti-monopoly Civil Suit Proposed by the Draft for Comments During the past over two years since the implementation of the Anti-monopoly Law, despite Chinese courts conducted preliminary explorations and trials in the aspect of antimonopoly civil suits, in general the courts are still lack of adequate judicial experience in this aspect. When drafting the Draft for Comments, we followed the principles as below: First, follow the law. On the basis of Article 50 of the Anti-monopoly Law, combined with the Civil Law, Civil Procedural Law, Contract Law and other laws, we provide comprehensive requirements for relevant issues of antimonopoly case including the jurisdiction and acceptance, qualification of the litigants, evidence burden, bearing of civil liability, and limitation of action. Second, summarize mature justice experience. In the drafting process, we not only made in-depth summary of antimonopoly cases handled after the implementation of the Anti-monopoly Law, but also did a great deal of investigation and research on disputes with monopoly issue involved which were handled by the People s Court through applying Anti-Unfair Competition Law. Some judicial experience which is more mature with higher recognition has been summarized. For those controversial issues which are still being explored, basically they are not covered by the Draft for Comments. Third, stick to the national conditions and reality. Not only the function and advantages of anti-monopoly civil justice should be in full play to and the sense

55 of competition as well as healthy competition spirit should be enhanced through explicit rules and convenience for parties to participate in the litigation, but also the Courts should avoid over-deterrence or curbing market activity. In addition, the relationship between the administrative enforcement and the civil justice of the Anti-monopoly Law shall be coordinated, in order to ensure best effective implementation of the Anti-monopoly Law. Fourth, reflect a global vision and international perspective. We hope to learn from mature experience in antimonopoly civil justice in relevant countries and regions, and conduct appropriate innovation on the aforesaid basis according to China's national conditions and legislation. Of course, these are only some ideology guided our drafting the Draft for Comments. Whether we can put them into practice still depend on the help of the wisdom of the public. Provisions on Centralized Jurisdiction and Special Jurisdiction for the Monopoly-related Civil Cases in the Draft for Comments The anti-monopoly civil cases are highly specialized, complicated and have greater impact. Since the anti-monopoly related civil suit is just at the beginning, we don t have profound understanding for the regularity and characteristics for anti-monopoly civil suit. Therefore, the jurisdiction should be centralized in the courts with adequate trial capacity and trial experience, which will facilitate the increase of trial level and ensure the trial quality and unified trial standard. In fact, the Supreme People s Court has included the monopoly-related disputes and unfair competition disputes in the scope of intellectual property disputes in the Regulations on Causes of Action in Civil Cases of the Supreme People s Court implemented as of April 1, This indicates that monopoly-related civil suits shall be administered by intellectual property tribunal of people s courts and monopoly-related civil suit adopts centralized jurisdiction just like intellectual property suits. Considering that the territorial scope involved in monopolistic behaviors is limited, the effect is small, the monopoly-related civil suits will increase in the future, the trial experience and trial level for monopoly-related disputes will further improve and leave space for future reasonable jurisdiction planning, we stipulate that basic courts have jurisdiction over monopoly related civil suits referring to the jurisdiction mode for intellectual property suits. In addition, we think that any civil disputes that should be judged based on anti-monopoly law belong to monopoly-related civil disputes in nature. Monopoly-related civil disputes include tortious disputes, contractual disputes and other disputes. As for monopoly agreement, disputes arising from the monopoly agreement itself may occur. For example, if one party proposes monopoly defense or counter claims in contractual disputes, the defense or counter claim will affect the validity of the contract directly. If the court does not accept or request the party to bring other lawsuit because it has no jurisdiction on monopoly disputes, it may cause conflict for the validity of the contract in different courts, thus affect the authority and credibility of justice. Thus, by referring to the approach of other countries, we choose that the court without jurisdiction for monopoly-related civil suit should transfer the case to the court with jurisdiction.

56 Reasons why the Draft for Comments provides that the natural persons, legal persons and other organizations including undertakings and consumers who are injured by monopolistic behavior can act as plaintiff The provision on the qualification of litigants in antimonopoly civil lawsuits not only decides the scope and conditions for litigants, but also reflects the policy orientation for the antimonopoly justice chosen by a country based on its specific conditions. Pursuant to Article 50 of China s Anti-monopoly Law, any person who is injured by monopolistic behavior can ask the actor of monopolistic behavior to bear civil liability. This provision doesn t set other limitation for the qualification of plaintiff and, in theory, undertakings and consumers which are injured by monopolistic behavior, no matter directly or indirectly, are qualified for plaintiff. The aggrieved parties indirectly injured, especially the indirectly injured consumers, are always the ultimate aggrieved parties of monopolistic behavior and can more easily find and disclose monopolistic behavior. Providing that indirect aggrieved parties, especially the consumers, are qualified for plaintiff can enhance the possibility of the monopolistic behavior being disclosed, prevent monopolistic behavior in time and enable the aggrieved party to get compensation relief finally. Meanwhile, globally, more and more countries are adopting the provision that indirect aggrieved parties are qualified for plaintiff. Reasons why the Draft for Comments stipulates two forms of action subsequent action and direct action Article 50 of China s Anti-monopoly Law established the parallel law enforcement system of administrative law enforcement and civil suit. The two approaches have respective features and complement each other. In monopoly related civil actions, the plaintiffs often lack necessary professional knowledge and have difficulty in obtaining evidence. But if the suspected monopoly conduct has already been investigated and handled by the Anti-monopoly Law Enforcement Authorities and confirmed to constitute monopolistic behavior, allowing the plaintiff to file a lawsuit after the confirmation will help the plaintiff to better protect his legitimate rights and interests and eventually get compensation. Therefore, we made explicit guidance for subsequent action. For conducts that haven t been investigated and handled by the Anti-monopoly Law Enforcement Authorities, whether the party to the case can directly file a civil lawsuit to the court involves the issue of whether there need to be prepositive administrative enforcement in monopoly related civil action. According to our preliminary research, first of all, China s Anti-monopoly Law didn t stipulate prepositive procedure of administrative enforcement. In the drafting of the Anti-monopoly Law, it once stipulated prepositive procedure of administrative enforcement, but was deleted in the released final version, which further demonstrated that the Anti-monopoly Law had no intention to set a prepositive procedure of administrative enforcement. It has no legal basis to implement prepostive procedure