Shanghai court dismisses Shanda anti-monopoly lawsuit
November 02, 2009 | BY
clpstaff &clp articles &A Shanghai court has dismissed an abuse of dominance case against two Chinese online entertainment companies, providing encouragement for dominant companies…
A Shanghai court has dismissed an abuse of dominance case against two Chinese online entertainment companies, providing encouragement for dominant companies wishing to legitimately protect their IP rights.
The case had been filed by Beijing Sursen Electronic Technology Co against Shanda Interactive Entertainment and Shanghai Xuanting Entertainment Information Technology under Article 50 of the PRC Anti-monopoly Law (AML). The Shanghai No.1 Intermediate People's Court rejected the claim on October 23 on evidentiary grounds, also finding that the defendants had been justified in attempting to protect their IP rights.
“The Shanghai Court's judgment should … be welcomed as an early indication that courts will be reluctant to uphold AML claims which do not meet the necessary evidential standards,” said Michael Han, partner and co-head of Freshfields Bruckhaus Deringer's China competition practice.
The case arose after the defendants attempted to enforce their IP rights when the plaintiff commissioned two authors to write a sequel to a popular novel series originally published by the defendants. The plaintiff company alleged the defendants had threatened the authors and had abused its dominant position in the online literature market.
The case resembled an IP case more than an AML case, said Han. The court apparently rejected the claims for three main reasons: the companies were in different online markets; Beijing Sursen was unable to bring evidence that Shanda's market share was 80% (despite such claims on Shanda's own website); and Beijing Sursen company had itself claimed to be the world's biggest e-book portal.
Han said also that some customers or consumers, long unhappy with the business conduct of certain large state-owned companies, were using the AML as a fresh means of taking action.
“I think people see the AML as a new opportunity to bring up cases,” he said. “Laymen use the word dominance too loosely and any time business conduct could potentially fall within the scope of the AML they want to take action.”
No cases have so far been brought against foreign companies, but Han warns against complacency.
“Foreign companies were not in the first batch of cases because most cases were brought by individuals as consumers or customers … This doesn't mean foreign companies can be immune,” he told CLP.
Assuming foreign companies are dominant in the relevant market, there is a risk that a domestic competitor or even customers or distributors will bring a claim. The Chinese courts are willing to accept these kinds of cases as they want to develop their expertise and allow companies and individuals to enforce the AML in court to supplement the work carried out by the official anti-monopoly enforcement agencies.
For that reason, Han said, it is vital that foreign companies take steps such as setting up an internal China-specific compliance programme, review their current practices and revisit their relationships with customers more frequently.
“If they see they have unhappy customers who are ready to knock on the door of the courts or regulators, they should be careful about their dealings with such customers,” he said.
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