Inspiring the Law

The Provisions make it clear that intermediate courts located in provincial capitals, listed planning cities and those designated by the SPC have first instance jurisdiction for civil anti-monopoly cases. Alongside these anti-monopoly competent intermediate courts, local courts can also hear civil anti-monopoly cases if the SPC approves them to do so. This is a clear distinction between the Draft Provisions, as local courts were not allowed to hear civil anti-monopoly cases. Under the new Provisions, it will be interesting to see how and under what circumstances the SPC will approve local courts to hear such disputes.

The design of limited anti-monopoly-competent courts improves judicial competency and efficiency. Specially designated courts handling civil anti-monopoly cases guarantees better judicial quality and a uniform application of the Law. It will be interesting to see how such an aim can be realised in practice given the specialised nature and complexity of civil anti-monopoly disputes. In addition, most Chinese courts lack sufficient understanding of the relevant procedures and the Anti-monopoly Law itself.

The SPC considers all civil disputes that rely on the Anti-monopoly Law, even if only raised as a counterclaim, as civil anti-monopoly disputes. Article 5 of the Provisions stipulate that during civil disputes, where the original matter does not relate to the Anti-monopoly Law and if the court determines the defence or counterclaim relies upon the Anti-monopoly Law, and the court does not have jurisdiction for anti-monopoly cases, the case must be transferred to a court with this jurisdiction.

Eligible plaintiffs

The Provisions confirm a broad approach to eligibility to bring claims under the Law. Under Article 1, any natural person, legal person or other entities harmed by anti-competitive conduct may bring civil lawsuits. In addition, any natural person, legal person or other entities that have disputes due to the violation of the contents of contracts and association articles may bring civil lawsuits before the court.

There is further clarity under Article 6 for several lawsuits brought by different plaintiffs against the same defendant. As long as all the lawsuits represent the same conduct, the same court or if brought before a different court, a competent court may combine these cases together for hearing. While this is not the first time such actions have been seen under the Chinese litigation system, Article 6 does not require the consent of the parties. Under the PRC Civil Procedure Law (中华人民共和国民事诉讼法), all parties must consent in order to proceed in a collective action. This lowers the threshold for combining trials and makes lawsuits easier.

In addition, allowing a competent court to combine cases together is not permitted under the Procedure Law. This provision is important because Article 6 will make it much easier for the courts to combine the trials based on the Anti-monopoly Law. While this will make lawsuits easier, it will make civil anti-monopoly litigations more complex because of the increase in plaintiffs.

Lowering the burden

Under certain circumstances, the Provisions make it easier for plaintiffs to discharge their burden of proof. For monopoly agreements, defendants shall prove that their conduct does not have anti-competitive effects, according to Article 13.1-5 of the Anti-monopoly Law. However, the Provisions fail to mention whether defendants have to prove that their conduct does not have anti-competitive effects (Article 14.1-2). Essentially, the Law prohibits horizontal monopoly agreements, while the Provisions prohibit vertical monopoly agreements. Given that Article 7 of the Provisions states the defendant shall prove that their conduct does not have anti-competitive effects if the alleged monopolistic conduct falls within Article 13.1-5 of the Law, the Provisions fail to mention what is the burden of proof for the defendant if the alleged monopolistic conduct falls into the scope of Article 14.1-2 of the Provisions.

A dramatic reduction in the burden of proof for abuse of dominance makes it easier for a plaintiff in a civil lawsuit to prove that an industry giant has a monopoly or dominant market position (Article 9). According to this Article, a plaintiff does not have to prove that public utility enterprises or other undertakings with legally granted monopoly positions have dominant market positions.

Article 10 of the Provisions allows plaintiffs to use information issued by the defendant to prove that they have a dominant market position. This Article is a game changer for civil anti-monopoly litigation as it is common for Chinese companies to claim their dominant market position in various materials. This reduces the burden of proof for plaintiffs as this information can be admitted as evidence. The Provisions mean companies need to pay close attention to their promotional materials and websites in order to avoid any wording that indicates their dominant position.

Expert witnesses

Article 12 empowers parties to use expert witnesses to help investigate and prove their case. Compared with the Draft, the new Provisions expand the scope of the expert witnesses. Previously, parties could only use experts with economics and industry backgrounds, while the new Provisions do not emphasise experts with these backgrounds. By expanding the scope, the SPC has intentionally reduced the parties' difficulty in discharging their burden of proof. In the Qihoo and Tencent case (see case study), an English expert with an economics background was used.

Statute of limitations

The statute of limitations for civil anti-monopoly disputes is two years, starting from when the plaintiffs knew or should have known of monopolistic conduct. The two-year limitation period is consistent with most tort and contract claims under the Civil Procedure Law. This two-year period can be suspended under certain circumstances. Under Article 16, where a plaintiff reports potential monopolistic conduct to the anti-monopoly enforcement authorities, the statute of limitations shall be suspended from the date of the report.

In practice

Since the Anti-monopoly Law (反垄断法)came into effect in 2008, plaintiffs engaged in civil proceedings have increasingly encountered obstacles in effectively proving their case. The Provisions provide guidance for the collection of evidence and reduce the burden of proof. This lowers barriers that previously limited private civil anti-monopoly actions in China. For example, In the Renren v Baidu case in 2008, Renren accused internet search giant Baidu of tampering with its search results ranking. The court stated that the plaintiff had not submitted sufficient evidence to prove that the defendant was dominant.

The Provisions change the litigation landscape, as corporate risk to anti-monopoly claims will increase. Once the Provisions become effective on June 1, implementing an effective anti-monopoly compliance programme to mitigate these risks will become even more necessary. An effective anti-monopoly compliance programme enables staff to understand the Anti-monopoly law and adjust their behaviours accordingly. With multinationals in China the exception, most domestic companies have yet to implement an anti-monopoly compliance programme. They still have to recognise the severe punishments for violating the Law and the importance of an effective compliance programme. This should include experienced anti-monopoly lawyers who prepare compliance manuals and training, and regular audits.

By Dr. Zhaofeng Zhou, Chance & Bridge Partners, Beijing

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Full translations (free access):

PRC Anti-monopoly Law (中华人民共和国反垄断法)

Provisions on Several Issues Concerning the Application of the Law in Trials of Civil Dispute Cases Arising from Monopolistic Acts
(关于审理因垄断行为引发的民事纠纷案件应用法律若干问题的规定)