Exploration

Lexology GTDT Private Antitrust Litigation 2022 - China

2021-06-29


LEGISLATION AND JURISDICTION


Development of antitrust litigation


1. How would you summarise the development of private antitrust litigation in your jurisdiction?

Since the implementation of the Anti-Monopoly Law of China (AML) in 2008, the People's Courts have had two main tasks:

  • To formulate the AML judicial interpretations. In May 2012, the Supreme People's Court promulgated the 'Regulations on Several Issues Concerning the Application of Law in the Trial of Civil Disputes Caused by Monopoly Behaviours', which clarified the basic framework of anti-monopoly civil litigation in China, and provided guidance to the People's Courts in the correct application of the AML.

  • To try anti-monopoly cases. As of the end of 2020, courts across the country have accepted 897 first-instance monopolistic civil cases and concluded 854 cases. Among them, 61 new monopolistic firstinstance cases were accepted in 2020, and 107 cases were concluded.

      

According to the 'Annual Report of the Intellectual Property Tribunal of the Supreme People's Court (2020)', in 2020, the tribunal accepted 30 monopoly disputes, including eight abuses of market dominance disputes, six monopoly agreement disputes, and 16 other cases where monopoly disputes were given as the cause of the case.


In general, abuse of dominance disputes account for about 68 per cent of antitrust litigation in China. The share of monopoly agreement disputes is about 31 per cent, and the proportion of horizontal agreement disputes and vertical agreement disputes is 50:50. However, for antitrust public enforcement, about 61 per cent of cases are monopoly agreement cases and 39 per cent of cases are against abusive conduct. The above statistics show that undertakings are more likely to challenge abusive conduct through antitrust litigation, but they challenge cartels and resale price maintenance (RPM) in antitrust investigations.


Refusal to deal is still the most commonly challenged abusive conduct in China, accounting for about 57 per cent of the total antitrust litigation. Exclusive dealing and tying, ranking second and third, account, respectively, for 17 per cent and 15 per cent of the total antitrust litigation. However, for antitrust public enforcement, refusal to deal only ranks fifth. The top three abusive conducts are attaching unreasonable conditions, tying and exclusive dealing.


Applicable legislation

2. Are private antitrust actions mandated by statute? If not, on what basis are they possible? Is standing to bring a claim limited to those directly affected or may indirect purchasers bring claims?


An undertaking could be sued under the Anti-Monopoly Law (AML) if its monopolistic conduct has resulted in losses to others. If an undertaking has been sanctioned by the State Administration for Market Regulation or the Provincial Market Regulation Department under the AML, and it is dissatisfied with the decision made by the authority, it may file an antitrust administrative litigation against the authority.


Pursuant to the Civil Procedure Law, the plaintiff should have a direct interest in the case to have standing to file a lawsuit. An indirect purchaser who has suffered losses from monopolistic conduct may file a lawsuit under the AML.


In Junwei Tian v Beijing Carrefour Shuangjing Store and Abbott Shanghai, a consumer or indirect purchaser who purchased a tin of Abbott's infant formula at a Carrefour supermarket in Shuangjing Beijing filed a lawsuit against Carrefour Shuangjing Store and Abbott Shanghai for the resale price maintenance imposed by Abbott upon Carrefour Shuangjing Store (direct purchaser). The plaintiff was challenged that he did not have standing to file the lawsuit. The court held that Junwei Tian, as an indirect purchaser, had the right to bring an antitrust litigation in court.


3. If based on statute, what is the relevant legislation and which are the relevant courts and tribunals?

Commonly used articles in antitrust litigation in China


The following articles of the AML are commonly used in antitrust litigation in China.


In an abuse of dominance case under article 17 of the AML, the plaintiff bears the burden of proof that the defendant has dominance in the relevant market and has committed abusive conduct. Where the defendant defends the case by arguing justifiable reasons, the defendant bears the burden of proof (article 8 of the Judicial Interpretation of the AML).

Undertakings that hold a dominant market position must not abuse their position to engage in the following activities (article 17 of the AML):

  • selling at unfairly high prices or purchasing at unfairly low prices; or

  • without justifiable reason:

    • selling at below-cost prices;

    • refusing to deal;

    • exclusive dealing;

    • tying;

    • imposing unreasonable terms; or

    • implement differential treatment.


Under the AML, 'dominant market position' means that an undertaking is able to control the prices, quantities or any other terms of a transaction in the relevant market or is able to obstruct and affect the entry of other undertakings into the relevant market (article 17 of the AML).


The term 'relevant market' refers to the product scope and geographical scope within which the undertakings compete with each other in respect of a specific product or service during a particular period (article 3 of the Guidelines of the Definition of Relevant Markets).

  • The term 'relevant product market' refers to the market constituted by a group or category of products that the demanders deem to be close substitutes for each other according to their characteristics, purpose, price and other factors.

  • The term 'relevant geographic market' refers to the geographic region where the demanders acquire products that are relatively close substitutes for one another.

  • When the production cycle, service life, seasonality, fashion trends or the protection period for intellectual property rights constitute important characteristics of products, timeliness must also be taken into consideration in defining the relevant market.

         

The AML defines 'undertakings' as the natural persons, legal persons or other organisations that produce or sell commodities or provide services. 'Relevant market' refers to the product scope and geographical scope within which the undertakings compete with each other in respect of a specific product or service during a particular period (article 12 of the AML).


The dominant market position of an undertaking is determined based on the following factors (article 18 of the AML):

  • the undertaking's market share in the relevant market, as well as the competition situation of the relevant market;

  • the ability of the undertaking to control the sales market or the material purchase market;

  • the financial and technical ability of the undertaking;

  • the degree of reliance of other undertakings on the undertaking in question in terms of trading;

  • the degree of difficulty for market entry by other undertakings; and

  • other factors relevant to the determination of a dominant market position of the undertaking.


Judges must comprehensively examine and assess all the evidence, based on the relevance of each item to the facts of the case and the relationships between the various items of evidence submitted (article 88 of the Several Provisions of the Supreme People's Court on Evidence for Civil Actions (Amended in 2019)).


For evidence provided by a litigant who has the burden of proof, where the People's Court, upon examination and taking into account the relevant facts, confirms that it is highly probable that the facts sought to be proved exist, the People's Court will deem that the facts exist (article 108 of the Interpretations of the Supreme People's Court on Application of the Civil Procedural Law).


The relevant courts and tribunals

These are:

  • the Intermediate People's Courts: the Intermediate People's Courts of cities where the governments of the provinces, autonomous regions and municipalities directly under the central government are located, those of cities separately designated in the state plan and those designated by the Supreme People's Court have jurisdiction over private antitrust lawsuits as courts of first instance;

  • the Higher People's Courts: a first-instance civil case that involves a subject matter valued at 5 billion yuan or more or creates a huge impact within the jurisdiction falls under the jurisdiction of the Higher People's Courts;

  • the Intellectual Property Courts in Beijing, Shanghai and Guangzhou: a first-instance monopoly civil dispute case within the municipal jurisdiction of Beijing and Shanghai falls under the jurisdiction of the Intellectual Property Courts of Beijing and Shanghai. The Guangzhou Intellectual Property Court exercises cross-regional jurisdiction over the first-instance antitrust litigation in Guangdong province; and

  • the Supreme People's Court: from 2019, the Intellectual Property Tribunal of the Supreme People's Court can bypass the Higher people's Courts and directly hear appeals against the rulings and judgments of first-instance monopoly civil and administrative cases made by the Intellectual Property Courts and the Intermediate People's Courts (the Provisions on Several Issues Relating to the Intellectual Property Tribunal). In practice, this rule is called the 'leapfrog' appeal.


The Basic People's Courts and arbitral institutions have no jurisdiction over antitrust litigation. The Basic People's Courts that have been approved by the Supreme People's Court to accept first-instance monopoly civil cases no longer have that authority according to the Provisions on Several Issues Relating to the Intellectual Property Tribunal of 2018.


Arbitral institutions do not have jurisdiction over monopoly disputes. In Huili v Shell, the Supreme People's Court stated that owing to the obvious public law nature of the AML, monopoly disputes are not within the scope of arbitration. Given that the current laws do not explicitly allow antitrust litigation to be settled via arbitration, the arbitration clauses as agreed by the parties are not a valid reason for excluding the court's jurisdiction over antitrust litigation.


PRIVATE ACTIONS


Availability

4. In what types of antitrust matters are private actions available? Is a finding of infringement by a competition authority required to initiate a private antitrust action in your jurisdiction? What is the effect of a finding of infringement by a competition authority on national courts?


Causes of action

According to the Regulations on Causes of Action for Civil Cases promulgated by the Supreme People's Court, with a view to correctly applying laws and determining the causes of action for civil cases in a unified manner, the causes of action for antitrust litigation are organised as follows:

  • disputes over monopoly agreements:

    • disputes over horizontal monopoly agreements; and

    • disputes over vertical monopoly agreements;

  • disputes over abuse of dominant market position:

    • disputes over monopoly pricing;

    • disputes over predatory pricing;

    • disputes over refusal to deal;

    • disputes over exclusive dealing;

    • disputes over bundling trade; and

    • disputes over differential treatments; and

  • disputes over concentration of undertakings.


Initiation of private antitrust litigation

Neither the Anti-Monopoly Law (AML) nor the Judicial Interpretation of the AML requires a finding of infringement by the competition authority as a precondition to initiate private antitrust litigation. Pursuant to article 2 of the Judicial Interpretation of the AML, private antitrust litigation can be brought directly before the court by a private party.


A finding of infringement by a competition authority has almost no effect on the People's Courts

The finding of an AML violation by the State Administration for Market Regulation or the Provincial Market Regulation Department can be submitted as evidence in private antitrust litigation. In theory, the decision of a competition authority is helpful in follow-on litigation; in practice, however, the People's Court will conduct de novo review, even if the decision of the competition authority has been given.


In Junwei Tian v Beijing Carrefour Shuangjing Store and Abbott Shanghai, the Beijing Higher People's Court found that the competition authority's decision alone was insufficient evidence that Abbott and Carrefour had allegedly concluded an anticompetitive agreement. It also concluded that the plaintiff had failed to adduce sufficient evidence to prove the existence of an illicit agreement by other means.


The decisions of the competition authority have so little effect on the People's Courts for the following reasons:

  • the decisions are not detailed enough to show the facts. In the Junwei Tian case, the competition authority's decision did not identify the distributors and retailers to whom the resale price maintenance clauses allegedly applied;

  • the People's Courts cannot request the competition authority to release the evidence collected because of the confidentiality requirement under the AML; and

  • the facts discovered in antitrust litigation may not be the same as those identified by the competition authority. In the Junwei Tian case, the plaintiff purchased a tin of Abbott's infant formula in February 2013 at Carrefour, and the competition authority fined Abbott in August 2013. Both Abbott and Carrefour then produced a contract that was signed in November 2013 with effect from January 2013. The contract only included non-binding price recommendations and no clauses that amounted to resale price maintenance. The Beijing Higher People's Court specifically noted that this approach did not breach the Contract Law.


Required nexus

5. What nexus with the jurisdiction is required to found a private action? To what extent can the parties influence in which jurisdiction a claim will be heard?


Under the provisions of the Civil Procedure Law, the jurisdiction of the People's Courts is divided generally into four categories: tier jurisdiction, transferred jurisdiction, designated jurisdiction and territorial jurisdiction.


Tier jurisdiction

Only the Supreme People's Court, the Higher People's Courts, the Intellectual Property Courts and the Intermediate People's Courts of cities where the governments of the provinces, autonomous regions and municipalities directly under the central government are located have jurisdiction over antitrust litigation.


In Dongguan Guochang Electrical Appliance Store v Dongguan Shengshi Company and Dongguan Heshi Company, the plaintiff filed an antitrust lawsuit with the Guangzhou Intellectual Property Court. The defendant, Shengshi Company, filed a jurisdictional objection and believed that the case should be under the jurisdiction of the Dongguan Intermediate People's Court. After the objection was rejected by the court of first instance, Shengshi Company appealed to the Guangdong Higher People's Court. The Guangdong Higher People's Court ruled to dismiss the appeal on the grounds that the case is a monopoly civil dispute, and the two defendants' domiciles are located in Dongguan, Guangdong province. According to article 3 of the Judicial Interpretation of the AML, the Guangzhou Intellectual Property Court exercises crossregional jurisdiction over the first-instance monopoly civil dispute cases in Guangdong Province. The court of first instance has jurisdiction over this case.


In Huazhou Chenyawang Breeding and Cooperative Society v Huazhou Food Corporation and Huazhou Yangmei Food Company, the plaintiff filed an antitrust lawsuit in the Maoming Intermediate People's Court. The court of the original trial found that the case was a dispute of abuse of market dominance. The court of first instance had no jurisdiction and ruled that the case was inadmissible. The plaintiff refused to accept the ruling and appealed to the Guangdong Higher People's Court. After examination, the Guangdong Higher People's Court held that, based on the plaintiff's claims and the facts and reasons on which it was based, the case was a dispute over abuse of market dominance. According to the provisions of article 3 of the Judicial Interpretation of the AML, the court of the original trial is neither an Intermediate People's Court in the city where the people's government of the province, autonomous region or municipality directly under the central government, nor is it designated by the Supreme People's Court to govern such disputes. The Intermediate People's Court has no jurisdiction over this case. Therefore, the appeal was rejected, and the original ruling was upheld.


Territorial jurisdiction

lIn general, the court may exercise jurisdiction over a defendant who resides or conducts business within the territory of that court, regardless of the defendant's nationality. For contract disputes, parallel jurisdictions exist between the places where the defendant is domiciled and where the contract is performed. For tort disputes, they come under the jurisdiction of the court of the place where the tort was committed, where the tortious consequence takes place or where the defendant is domiciled.


In Shenzhen Datong Company et al v General Motors China, General Motors Warehousing Shanghai Company, Tangren Company and Bao Yilai Company, the plaintiff filed an antitrust lawsuit with the Shenzhen Intermediate People's Court, and the defendant General Motors China and other parties filed jurisdictional objections, arguing that the case should be transferred to the Shanghai Intellectual Property Court. The Shenzhen Intermediate Court ruled that the plaintiff filed a lawsuit in the case of the joint infringement of the four defendants. As the residence of the two defendants, Tangren Company and Bao Yilai Company, is Shenzhen, the Shenzhen Intermediate Court has jurisdiction over the case in accordance with the law.


In the appeal, General Motors China argued that based on the content of the complaint, it can be made clear that the infringements alleged by Tangren Company and Bao Yilai Company have no relevance to the alleged abusive conduct and should not determine the jurisdiction over this case based on the non-existent connection point of jurisdiction. The Guangdong Higher People's Court found that the plaintiff's claims mainly targeted General Motors China's abusive conduct. The four defendants are alleged to jointly abuse General Motors China's market dominance, restricting the counterparty of the transaction to only deal with it or only with its designated undertaking, resulting in the plaintiff's inability to normally operate in the general motors aftermarket. 


The Guangdong Higher People's Court held that the residences of Tangren Company and Bao Yilai Company are both located in Shenzhen. The Shenzhen Intermediate People's Court has jurisdiction over the case in accordance with the law. As to whether Tangren Company and Bao Yilai Company actually carried out the alleged infringement in this case, it is within the scope of substantive trial. The appeal was rejected, and the original ruling was upheld.


Extraterritorial jurisdiction

According to article 2 of the AML, where monopolistic practices outside China have the effect of eliminating or restricting competition in the Chinese market, the AML applies. This provision provides the State Administration for Market Regulation and the Provincial Market Regulation Department the legal basis to exercise extraterritorial jurisdiction. However, in antitrust litigation, the jurisdiction of the court must be determined in accordance with the relevant provisions of the Civil Procedure Law.


In Huawei v Interdigital, the plaintiff filed an antitrust lawsuit with the Shenzhen Intermediate People's Court, and the defendant, Interdigital, filed jurisdictional objections, arguing that the People' Courts of China do not have jurisdiction. The court of first instance held that the court where the alleged tortious consequence took place had jurisdiction over the case and dismissed the defendant's jurisdictional objection.


In the appeal, Interdigital argued that:

  • all the defendants in this case had no domicile in China, and according to the Judicial Interpretation of the Civil Procedural Law, 'where the tortious consequence takes place' is not applicable to an undertaking that has no domicile in China;

  • the negotiations between Huawei and Interdigital cover a package of patents in many countries around the world; and

  • the 20 million yuan damages claimed by the plaintiff was mainly for the attorneys' fees incurred in the litigation in the United States.


           

Therefore, the place of infringement in this case should be in the United States; the Chinese People's Courts, including the court of first instance, do not have jurisdiction. The Guangdong Higher People's Court held that Huawei's domicile is located in Shenzhen. According to the Civil Procedure Law and the Judicial Interpretation of the Civil Procedure Law, the original trial court, as the court where the tortious consequence takes place, has jurisdiction over the case. The People's Court did not cite article 2 of the AML as the legal basis to determine the jurisdiction.


Restrictions


6. Can private actions be brought against both corporations and individuals, including those from other jurisdictions?


   

Yes. A private action can be brought by or be brought against any corporations and individuals, regardless of nationality, place of domicile or habitual residence. About 61 per cent of litigants are legal persons or other organisations, and about 39 per cent of litigants are individuals. The majority of individuals are plaintiffs in abuse of dominance cases.    


PRIVATE ACTION PROCEDURE    


Third-party funding    

7. May litigation be funded by third parties? Are contingency fees available?    


Champerty and maintenance    

In China, although more and more commercial institutions have started to engage in the third-party funded litigation business, on the whole, the market lacks relatively uniform practices and regulations. There are no standards for market entry of third-party litigation investors, no standards for the content of third-party funding litigation agreements and no uniform industry supervision measures.     

   

In practice, commercial institutions engaged in third-party funded litigation basically adopt the mode of prepaying litigation fees for the parties in advance, and no dividends if they do not win the lawsuit or part of the lawsuit.    


Contingency fee    

Except for collective litigation cases, a contingency fee in a monopoly civil dispute is permitted under the Administrative Measures on Fees for Lawyer Services. However, the contingency fee must not exceed 30 per cent of the total amount of the subject matter in the fee contract.    


In addition, if an undertaking challenges the decision issued by the competition authority in an administrative litigation, the contingency fee is not allowed.    


Jury trials    

8. Are jury trials available?    


There is no jury system in China; however, China is applying and developing the people's juror system. According to the Law on People's Jurors 2018, any citizen is entitled to and obliged to serve as a people's juror. People's jurors enjoy equal rights with judges unless otherwise provided by the law; for instance, during the trial, the people's jurors have the right to question the participants in the lawsuit.


The people's jurors participate in the deliberations of the bench. In respect of the issue of fact determination, the people's jurors and judge vote on the basis of joint evaluation. As for the application of the law, the people's jurors do not participate in the voting, but they can express their opinions.


To serve as a people's juror, a citizen must have reached the age of 28 and have an educational background level of senior high school or above. The term of office for a people's juror is five years, and a people's juror is not allowed to serve for a second term of office in general.


The Intermediate People's Courts, Intellectual Property Courts and Higher People's Courts do not have their own name list of people's jurors. Where the trial of a case by an Intermediate People's Court or a Higher People's Court needs to be conducted by a bench with the participation of people's jurors, the people's jurors are selected at random from the name list of people's jurors applicable to the Basic People's Court within its jurisdiction.


Discovery procedures    

9. What pretrial discovery procedures are available?    


Pretrial discovery procedures in China    

As a general rule, litigants are responsible for providing evidence for their assertions. It is rare for a litigant in China to produce evidence to support the other litigant's claim or defence. A third party, in general, has no obligation to provide any evidence for the litigation.


Where a litigant is unable to gather evidence on its own owing to an objective reason, it may apply for investigation and evidence collection by the People's Court. The application form must state the description or contents of the documentary evidence to be submitted, the facts to be proven by the evidence and the significance of the facts, the basis for control of the evidence by the other party to the lawsuit and the reason for submission of the evidence. Under any of the following circumstances, any party in control of the relevant documentary evidence must submit:

  • evidence that has been cited by the litigant controlling the evidence in the litigation;

  • evidence prepared for the interests of the other litigant;

  • evidence that the other litigant is entitled to consult or obtain in accordance with the law;

  • account books and original vouchers for bookkeeping; and

  • other circumstances under which the People's Court deems that documentary evidence must be submitted.


Although judges may order the production of evidence, in practice, it is very difficult to obtain evidence to support the other litigant's claim or defence. If a litigant has evidence but refuses to submit it without any justifiable reason, and the litigant that bears the burden of proof for the fact on which evidence is to be given argues that the evidence is unfavourable to the litigant in control of the evidence, the People's Court may affirm that argument.

A People's Court may, where it deems necessary, require litigants to be present personally to be questioned on the relevant facts of the lawsuit.


Economists and economic reports    

The litigants may apply to the People's Court for one to two experts with the requisite expertise to appear in court and provide explanations on technical issues pertaining to the case. Experts may make a market survey or an economic analysis report in respect of the technical issues of the case.


Judges may question experts with expertise. Upon approval by the court, litigants may question the experts, and experts of both parties may confront the relevant issues in the lawsuit.


Cross-examination    

The cross-examination can be conducted at the pretrial stage or in the investigation or questioning process of the People's Court. In the cross-examination of documentary evidence, physical evidence and audiovisual reference materials, the parties must produce the original document or item of evidence.


A People's Court requires witnesses to appear in court and testify and answer questions raised by judges and parties to an action. The testimony can be done at the pretrial stage or in the investigation or questioning process of the People's Court. A testimony provided in writing by a witness who fails to appear in court without justifiable reasons will not be taken as the basis for ascertaining the facts in a case.


Admissible evidence    

10. What evidence is admissible?    


In practice, not all evidence is admissible; it is subject to the verification of judges. Judges must verify evidence under applicable legal procedures in a comprehensive and objective manner, and they must adhere to the professional ethics of judges, use logical reasoning and their experience of daily life to reach independent judgments concerning whether the evidence has probative force and the probative value of the evidence according to law, and disclose the reasons for and conclusions reached in their judgments.


Judges may examine and assess any single piece of evidence on the basis of whether:

  • the evidence is the original version and whether the photocopies and reproductions are consistent with the original;

  • the evidence is relevant to the facts of the case;

  • the evidence conforms to the law in terms of form or source;

  • the content of the evidence is authentic; and

  • the witness or the person providing the evidence has an interest in the party.

        

The following evidence alone may not serve as the basis for ascertaining the facts in a case:

  • statements of the litigant;

  • the testimony of any person without capacity for civil conduct or the testimony of any person with limited capacity for civil conduct that is not appropriate to his or her age, intelligence or mental health;

  • the testimony of a witness that has any interest connected to a party or any agent thereof;

  • potentially unreliable audiovisual materials and electronic data; and

  • photocopies and reproductions that are impossible to verify with the original.



Legal privilege protection    

11. What evidence is protected by legal privilege?    


No privilege rule    

Under Chinese law, there is no such concept as attorney–client privilege. In other words, confidential communications between attorneys and clients are not privileged.


Article 38 of the Lawyer's Law forbids lawyers from revealing information that the client or others decline to reveal to third parties, including trade secrets and privacy. However, this article does not relieve attorneys from the obligation to disclose this information in a judicial action. According to the Civil Procedure Law, a court may order an attorney to give testimony about their knowledge of the pending case, including in relation to a client's privacy or trade secrets.


In addition, information that would otherwise be protected by attorney–client privilege in foreign jurisdictions is still under this disclosure obligation.


Confidentiality    

The Judicial Interpretation of the Anti-Monopoly Law provides that if the evidence involves state secrets, trade secrets, personal privacy or other content that must be kept confidential pursuant to the law, the court may, at its own discretion or upon the application of the parties, take protective measures, such as having a private trial, restricting or prohibiting from copying, only disclosing to the lawyers involved and ordering the parties to sign an undertaking.


Criminal conviction    

12. Are private actions available where there has been a criminal conviction in respect of the same matter?    

   

Monopolistic conduct cannot give rise to criminal liability under the Criminal Law. However, bid-rigging may be punished with a term of imprisonment of up to three years or a criminal fine, or both. In addition, any victim harmed by the bid-rigging may file a civil case concurrently with the criminal charge or file a separate civil case.


Utilising of criminal evidence    

13. Can the evidence or findings in criminal proceedings be relied on by plaintiffs in parallel private actions? Are leniency applicants protected from follow-on litigation? Do the competition authorities routinely disclose documents obtained in their investigations to private claimants?    


Findings in criminal proceedings     

The general rule is that a litigant does not need to bear the burden of proof for the basic facts confirmed in the judgment of the People's Court that has taken effect. The basic facts mean the facts for ascertainment of the litigants' entity status, nature of the case, civil rights and obligations, etc, that have a substantive impact on the outcome of the original judgment or ruling.


Since there is no criminal liability against the monopolistic conduct, we cannot find a parallel antitrust litigation and criminal proceedings.


Leniency applicants    

The State Administration for Market Regulation or the Provincial Market Regulation Department applies leniency rules for reducing administrative penalties to those who confess first and provide substantial evidence to prove the antitrust cases. However, there are no rules protecting leniency applicants from follow-on litigation brought against them.


Documents obtained in the antitrust investigation    

The State Administration for Market Regulation and the Provincial Market Regulation Department do not disclose documents obtained in their antitrust investigations to a private party. However, for administrative decisions, the facts and findings of the antitrust investigation will be released to the public, which could be used by a private party in the follow-on private antitrust litigation.


Stay of proceedings    

14.In which circumstances can a defendant petition the court for a stay of proceedings in a private antitrust action?    


In general, an action shall be stayed in any of the following circumstances:

  • one of the parties dies, and it is necessary to wait for his or her successor to state whether he or she wishes to participate in the action;

  • one of the parties has lost the capacity to engage in litigation, and his or her statutory agent has not yet been determined;

  • the legal person or other organisation acting as one of the parties has terminated, and the successor to its rights and obligations has not yet been determined;

  • one of the parties is unable to participate in the action owing to an event of force majeure;

  • the case in question is dependent upon the outcome of the trial of another case that has not been concluded; or

  • other circumstances require the stay of proceedings.

      

Standard of proof    

15. What is the applicable standard of proof for claimants? Is passing on a matter for the claimant or defendant to prove? What is the applicable standard of proof?    


At present, a high degree of probability is the general rule of the standard of proof that is applicable in a specific situation. Beyond reasonable doubt and a comparatively high degree of probability are supplementary standards of proof.


High degree of probability    

According to article 108 of the Judicial Interpretation of the Civil Procedural Law: 'for evidence provided by a litigant who has the burden of proof, where the People's Court, upon examination and taking into account the relevant facts, confirms that it is highly probable that the facts sought to be proved exist, the People's Court shall deem that the facts exist'. This is the foundation of the general standard of proof of high degree of probability.


Beyond reasonable doubt    

For evidence provided by litigation to prove the facts of fraud, duress or malicious collusion, or to prove the facts of a verbal will or gift, where the People's Court concludes that the possibility of existence of the facts sought to be proved is beyond reasonable doubt, the People's Court will deem that the facts exist.


Comparatively high degree of probability    

For the facts relating to procedural matters, such as litigation preservation or abstention, where the People's Court takes into account the litigant's statement and the relevant evidence to conclude that the relevant facts are comparatively highly probable, the People's Court may deem that the facts exist.


Burden of proof    

The general rule is that a litigant must provide evidence to prove the facts on which its claims are based or the facts on which its rebuttal of the counterparty's claims are based, except where otherwise stipulated by the law. Prior to the making of a judgment, where a litigant is unable to provide evidence or adequate evidence to prove its assertions, the litigant who has the burden of proof bears the adverse consequences.


In antitrust litigation, if the alleged monopolistic conduct is entry into a horizontal agreement of price-fixing, division of the market, a restriction on output, a restriction on research and development or a joint boycott, the defendant has the burden to prove that those agreements do not have the effects of eliminating or restricting the competition. If the alleged monopolistic conduct is entering into a vertical agreement of resale price maintenance, the plaintiff has the burden to prove the resale price maintenance and the effects of eliminating or restricting the competition.


For the abusive conduct of unfair high pricing, predatory pricing, refusal to deal, exclusive dealing, tying, attaching unreasonable conduction or discrimination, the plaintiff has the burden to prove that the defendant is dominant in the relevant market and abuses that dominance. The defendant defending on grounds of the legitimacy of its activities bears the burden to prove this.


The passing-on defence    

According to the general rules relating to the burden of proof, if the plaintiff is an indirect purchaser challenging price-fixing, it has the burden to prove that a horizontal agreement has been reached by the defendant and its competitors, and that the direct purchaser has passed on the damages caused by higher pricing to the indirect purchaser. The defendant (direct purchaser) then has the burden to prove that the passing on has not occurred, and it bears the cost.


If the plaintiff is a direct purchaser challenging price-fixing, it has the burden to prove the horizontal agreement of price-fixing. The defendant (supplier) then has the burden to prove that passing on has occurred, and the direct purchaser does not suffer any losses.


Time frame    

16. What is the typical timetable for collective and single party proceedings? Is it possible to accelerate proceedings?    


Generally, the People's Court will conclude a first-instance case within six months from the date of the filing of the case. This includes the following stages.


Initiation of a monopoly civil dispute case    

The proceedings of a monopoly civil dispute case are initiated after the complaint is accepted and filed by the People's Court. Normally, the case will be filed within seven days after the complaint is accepted by the People's Court. If the litigation criteria are not satisfied, the People's Court may issue a ruling on the non-acceptance of the lawsuit within seven days. If the plaintiff disagrees with the ruling, it may file an appeal.


Notice of complaint and defence    

The People's Court sends a copy of the complaint to the defendant within five days from the date of the filing of the case. The defendant can submit the defence within 15 days from the date of receipt of the complaint. The People's Court sends a copy of the defence to the plaintiff within five days from the date of receipt of the defence. Failure of a defendant to submit a defence does not affect the trial of the lawsuit by the People's Court. Where a litigant objects to the jurisdiction, the objection will be raised during the time frame for submission of the defence.


Upon confirmation of the members of the bench, the litigants will be notified within three days.    


Discovery    

The period for submission of evidence may be negotiated by the litigants and is subject to approval by the People's Court. Where the court stipulates the period for submission of evidence, the period must not be less than 15 days for the first-instance trial; in respect of the period for a case of second instance, the duration for submission of evidence must not be less than 10 days.


The period for the submission of evidence may be redetermined under any of the following circumstances:

  • upon expiry of the period for submission of evidence, where a litigant provides counter-evidence or supplementary evidence, the People's Court may exercise its discretion to redetermine the period for the submission of evidence;

  • where a litigant raises an objection to jurisdiction, the period for the submission of evidence will be suspended, and it will resume from the date when the ruling rejecting the objection to jurisdiction takes effect;

  • where a new litigant is added, the People's Court redetermine the period for the submission of evidence for the new litigant to the case, and the period will apply to the other parties; or

  • where the party concerned adds or changes the claims or lodges a counterclaim, the People's Court will redetermine the period for the submission of evidence according to the specific circumstances of the case.

            

Hearing    

The People's Court will notify the litigants and the other participants in the proceedings three days before the hearing.


Issuing judgment    

Where a judgment is issued in court, the judgment will be served within 10 days; where a judgment is issued on a fixed date, the judgment will be served forthwith upon issuance of the judgment.


Appeal    

Where a litigant disagrees with a judgment of first instance of a People's Court, the litigant has the right to file an appeal with a higher-level People's Court within 15 days from the date of service of the judgment.


Where a litigant disagrees with a ruling of first instance of a People's Court, the litigant has the right to file an appeal with a higherlevel People's Court within 10 days from the date of service of the ruling. 


Upon receipt of the petition for appeal, the People's Court that originally heard the case will serve a copy of the petition for appeal to the counterparty litigant within five days. The counterparty litigant can submit a defence within 15 days from the date of receipt of the petition. The People's Court will serve a copy of the defence to the appellant within five days from the date of receipt of the defence. Non-submission of a defence by the counterparty litigant will not affect the trial of the petition by the People's Court.


Where a litigant without residence in China disagrees with the judgment or ruling of the People's Court of first instance, the litigant shall have the right to file an appeal within 30 days from the date of service of the judgment or ruling. Upon receipt of the duplicate copy of the petition for appeal, the appellee shall submit a pleading within 30 days. Where the litigant is unable to file an appeal or submit a pleading within the statutory period and applies for an extension of time, the People's Court shall decide whether to grant an extension of time.


Limitation periods    

17. What are the relevant limitation periods?    


In general, the period of limitation of actions for claiming the damages arising from monopolistic conduct is three years, commencing from the date on which the plaintiff knows or should have known that its rights and interests were infringed.


If the plaintiff reports the alleged monopolistic conduct to the antitrust authority, the limitation period will be suspended from the date of the report. If the antitrust authority decides not to institute a case, to cancel the case or to terminate the investigation, the limitation period will recommence from the date on which the claimant knows or should have known of the non-filing or cancellation of the case or the termination of the investigation. Upon investigation, if the antitrust authority concludes that the conduct constitutes monopolistic conduct, the limitation period will recommence from the date on which the plaintiff knows or should have known that the decision of the antitrust authority became effective.


If the monopolistic practice has been continuing for more than two years by the time the plaintiff files an action in court, and the defendant raises the limitation period in the defence, the damages will be calculated two years from the date the plaintiff files the lawsuit in the court.


Appeals    

1.8 What appeals are available? Is appeal available on the facts or on the law?    


Appeal and the leapfrog appeal for monopoly civil disputes    

Within statutory appeal time limits, any party who disagrees with the first-instance judgment may appeal to a higher-level court with an appeal petition on the grounds that the first-instance decision applied the law incorrectly, identified the facts inaccurately or unclearly, lacked sufficient evidence or violated statutory procedure.


The second-instance judgment or ruling is final and becomes effective after the issuance. However, any party that disagrees with the second-instance judgment may apply to a higher-level court for retrial. The enforcement of the effective judgment or ruling is not suspended after the filing of the application for retrial. The People's Court conducts a retrial if there is adequate new evidence to overthrow the original judgment or ruling, the application of laws by the original judgment or ruling is wrong, or the judgment or ruling is not formed on the basis of due process, etc.


Because of the leapfrog appeal introduced by the Regulation of the Supreme People's Court on Several Issues Concerning Intellectual Property Tribunal, the Supreme People's Court established an Intellectual Property Tribunal, which, jumping over the Higher People's Courts, directly accepts antitrust cases for appeals of judgments or rulings rendered by the Intellectual Property Courts and the Intermediate People's Courts of first instance.


If the parties apply for a retrial of the judgment, ruling or mediation letter made by the intellectual property tribunal of the Supreme People's Court, the parties should submit the retrial application and other materials to the case filing tribunal of the Supreme People's Court, and submit the case to the Trial Supervision Tribunal of the Supreme People's Court for retrial.


The scope of review in appeal    

In an appeal, a bench of adjudicators will review the facts and the law of the case. The People's Court of second instance must, upon trial of an appeal case, uphold the original judgment or ruling where the facts ascertained in the original judgment or ruling are clear and the application of the law is correct. However, where:

  • the facts ascertained in the original judgment or ruling are wrong or the application of the law is wrong, the original judgment must be amended, revoked or modified by way of a judgment or ruling;

  • the basic facts ascertained in the original judgment are unclear, the original judgment must be revoked, the case must be remanded or the original judgment must be amended upon ascertainment of the facts; and

  • the original judgment or ruling violates the due process or statutory procedures seriously, the People's Court of second instance must rule that the original judgment be revoked, and the case must be remanded.



COLLECTIVE ACTIONS    


Availability

19. Are collective proceedings available in respect of antitrust claims?    


Joint action

Ordinary joint action    

Where a party or both parties to a lawsuit comprises two or more persons, the subject matters of litigation are the same type, and the People's Court has deemed that the lawsuit may be tried as a joint action, the court may try the lawsuit as a joint action upon obtaining consent by the litigants. This is an ordinary joint action; there are no common rights and obligations pertaining to the subject matter of litigation.


In an ordinary joint action, the confession made by one or several of the joint litigants is binding on the party that makes the confession. The litigation actions of one litigant are not binding on the other joint litigants.


Necessary joint action    

Where a party to a joint action has common rights and obligations pertaining to the subject matter of litigation, where the litigation actions of one litigant are acknowledged by the other joint litigants, the actions will be binding upon the other joint litigants.


For instance, in a necessary joint action, if one or several of the joint litigants makes a confession but the other joint litigants deny the confession, the confession will not take effect. Where the other co-litigants do not acknowledge or deny, and do not state their opinions clearly upon explanation and enquiry of the confession by the judge, it will be deemed as a confession by all the co-litigants.


Representative action

Multiple litigants can be confirmed at the time of filing of lawsuit    

In the case of a joint action where there are multiple persons (more than 10) comprising one party to the lawsuit, the litigants may elect a representative to participate in the proceedings. The litigation actions of the representative will be binding upon the litigants that he or she represents; for changes of representative, waivers of the claims of the action or confirmation of the claims of the counterparty litigants or settlement, consent by the litigants that he or she represents is required.    


If the litigants cannot elect a representative, in a necessary joint action, they can participate by themselves, and in an ordinary joint action they may file a separate lawsuit.


Multiple litigants cannot be confirmed at the time of filing of lawsuit    

If multiple litigants cannot be confirmed at the time of the filing of the lawsuit, the relevant People's Court may issue a public announcement, stating the facts of the case and the claims, and notify the rights holders to register with the People's Court within a stipulated period.


Applicable legislation    

20. Are collective proceedings mandated by legislation?    


If two or more plaintiffs file the lawsuits separately in the same competent court for the same monopolistic practice, the People's Court may consolidate the cases.    


If two or more plaintiffs file the lawsuits with different competent courts separately for the same monopolistic practice, the court with which the subsequent case was filed will, within seven days after knowing the other case that was filed earlier, order the transfer of the case to the court that accepted the case at an earlier date, and the court to which the case has been transferred may consolidate the cases. During the defence stage, the defendant must take the initiative to provide the People's Court accepting the lawsuit with the relevant information concerning the same cause of action for which the lawsuits are filed against it in other courts.


Certification process    

21. If collective proceedings are allowed, is there a certification process? What is the test?    


Rights holders registered with the People's Court in a representative action must prove their legal relationship with the counterparty litigants and the damages suffered thereby. Persons who are unable to prove so will not be registered; rights holders may file a separate lawsuit. The ruling of the People's Court must be enforced within the scope of registration.    


Where a rights holder who has not been registered files a lawsuit, and the People's Court rules that his or her claim is valid, the People's Court will rule that the judgment or ruling made by the People's Court will apply.    


22. Have courts certified collective proceedings in antitrust matters?    


There is no representative action regarding antitrust issues in China as at the time of writing.    


Opting in or out    

23. Can plaintiffs opt out or opt in?    


Opting out    

Where a co-litigant, who is required to participate in a necessary joint action, does not do so, the People's Court will notify him or her to participate in the lawsuit. A litigant may also apply to the People's Court to list additional co-litigants. The People's Court will examine the application submitted by the litigant and reject the application if the reason is not valid. Where the reason is valid, the People's Court will notify the additional litigants in writing to participate in the lawsuit.    


Where a co-plaintiff, who is required to participate in a necessary joint action, has explicitly waived his or her substantive rights, the People's Court may decide not to list him or her as a co-plaintiff; where a co-plaintiff, who should be listed, is unwilling to participate in the lawsuit and does not waive his or her substantive rights, he or she will be listed as a co-plaintiff, and his or her non-participation in the lawsuit will not affect the People's Court's trial of the case or the judgment made pursuant to the law.    


Opting in    

China applies the opt-in principle for representative proceedings. The individuals concerned may choose to register with the court within a certain period of time to become a member of the litigants.    


Judicial authorisation    

24. Do collective settlements require judicial authorisation?    


As a general principle, both parties to a lawsuit may settle on their own. In a representative action, to settle the case, the representative shall obtain consent from the litigants he or she represents. There is no requirement of judicial authorisation.    


Where the litigants conclude a settlement agreement during the procedures of second instance, the People's Court may examine the settlement agreement based on the request of a litigant and prepare and serve a mediation letter on the litigants; where the litigant applies for withdrawal of appeal due to the settlement, the People's Court shall approve the application if it is examined and found to satisfy the criteria for withdrawal of appeal.


National collective proceedings    

25. If the country is divided into multiple jurisdictions, is a national collective proceeding possible? Can private actions be brought simultaneously in respect of the same matter in more than one jurisdiction?    


National representative proceeding    

A national representative proceeding is possible. Following the announcement of the court, individuals concerned from other provinces may register to be a member of the plaintiff group.    


Simultaneous private actions    

As a general principle, in the case of a lawsuit for which two or more People's Courts have jurisdiction, the plaintiff may file a lawsuit with any one of the People's Courts. Where the plaintiff has filed a lawsuit with two or more People's Courts that have jurisdiction, the People's Court that filed the case first will have jurisdiction.    


Collective-proceeding bar    

26. Has a plaintiffs' collective-proceeding bar developed?    


There is no representative action bar regulated under the AntiMonopoly Law. However, investor protection organisations that represent investors in representative actions are regulated under the Securities Law.    


When an investor files a securities civil compensation lawsuit pertaining to misrepresentation, etc, if the litigation subject matter is the same type and there are multiple persons in one party, a representative may be appointed for the lawsuit pursuant to the law. In the lawsuit, where there may be many other investors who have the same litigation request, the People's Court may make an announcement, state the information of the case of the litigation request and notify the investors to register with the People's Court within a certain period. The judgment or ruling of the People's Court is binding on the investors who participate in the registration.    


An investor protection organisation entrusted by more than 50 investors may participate in the lawsuit as a representative and register with a People's Court pursuant to the relevant procedure for all rights holders who are confirmed by a securities registration and settlement organisation (there is no need for investors to volunteer to join), except where the investors clearly state that they are unwilling to participate in the lawsuit. This rule creates an implied opt-in and an express opt-out model for representative actions in China. In the securities civil lawsuit filed by the investor protection organisation on behalf of all the investors concerned, the securities registration and the settlement organisation play the role of confirming whether the investor is the right holder.    


REMEDIES    


Compensation    

27. What forms of compensation are available and on what basis are they allowed?    


Forms of compensation    

Pursuant to the Anti-Monopoly Law (AML) and the Judicial Interpretation of the AML, a plaintiff may seek damages for the losses resulting from the monopolistic conduct in question and may seek compensation for reasonable expenses incurred for investigation, attorneys and other measures necessary to stop the monopolistic conduct.    


Damages    

The damages allowed in the antitrust litigations are limited to actual loss, and multiple damages are not available under the AML.    

 

In Rainbow v Johnson & Johnson, the plaintiff was a distributor selling Johnson & Johnson's Ethicon brand staplers and surgical sutures. It challenged Johnson & Johnson for resale price maintenance. In the appeal, the Shanghai Higher People's Court found that the resale price maintenance practice violated the AML and held that Rainbow had grounds under the AML to claim compensation of profit damages for their suture products. The profit damages in respect of suture products claimed by Rainbow was based on the available profit under the condition that the distribution agreement was performed normally. The Shanghai Higher People's Court held that the damage compensation cannot be calculated based on the rules of the Contract Law since that calculation method conflicts with the jurisprudence of the AML. If the resale price maintenance agreement constitutes a monopoly agreement, that means the agreement eliminates or restricts competition and resulted in a loss to consumers. Therefore, when claiming compensation, the loss should not be calculated in accordance with the available profit of performing the resale price maintenance agreement but should be calculated by referring to the normal profit of the relevant market. Otherwise, it will fall into the logical conflict of pursuing monopoly profits through an antitrust lawsuit.    


According to the specific circumstances of this case, the Shanghai Higher People's Court stated the following:

  • The price of the suture products of Johnson & Johnson is generally higher than other brands' products; more specifically, the price of the suture product in suit is 15 per cent higher than that of other brands. The sale price and profit of Rainbow should be adjusted according to the price and profit of other brands' products.            

  • Rainbow should pay tax in accordance with the law. The Court determined that Rainbow could gain a normal profit roughly equivalent to 16 per cent of the sale value before tax. Accordingly, the Court's discretionary decision was that the sale loss of the normal profit of suture products caused by Johnson & Johnson's resale price maintenance conduct amount to 530,000 yuan. Other compensation claimed by Rainbow is not sustainable.          

Other remedies    

28. What other forms of remedy are available? What must a claimant prove to obtain an interim remedy?    


Injunction for standard essential patents    

Injunction is a statutory right of standard essential patent (SEP) holders, but the frequent use of this right by SEP holders in judicial practice may result in anticompetitive effects in the market, which in turn damages the public interest. However, the AML and the Judicial Interpretation of the AML have not yet made a clear response to the issue of injunctive relief for SEPs.    


Taking into account the strong market power of SEP holders based on their SEPs, when SEP holders cannot reach an agreement with the patent user, they can threaten their counterpart by means of injunctive relief. This 'patent hold-up' gives SEP holders great bargaining power, which can easily lead to licence fees exceeding the normal benchmark range and create anticompetitive effects. However, if the SEP holders are prohibited from seeking injunctive relief, the patent user may resist SEP holders' demands for reasonable licence fees and cause the patent hold-out.    


A balanced approach is introduced by the Trial of Patent Infringement Disputes Judicial Interpretation II; where a SEP holder and the accused infringer negotiate the licensing criteria for the SEP; the patentee intentionally violates the fair, reasonable and non-discriminatory (FRAND) licensing obligations undertaken in formulating the standards, resulting in the failure to conclude the patent licensing contract; and the accused infringer has no evident fault in the negotiation, the People's Court will generally not support the claim of the rights holder to stop the implementation of the standards.


According to the Guidelines for Patent Infringement Determination issued by the Beijing Higher People's Court, one of the following actions may be taken to mean that the patentee has wilfully violated its obligation for licensing on FRAND terms:    

  • failing to notify the accused infringer of the infringement in written form and failing to specify the scope and the way of infringement;            

  • failing to provide the patent information or the specific conditions of the licence to the accused infringer in written form in accordance with business practices and trading practices, after the accused party has explicitly expressed a willingness to accept a licence negotiation;            

  • failing to provide the accused infringer a period to reply in accordance with business practices and trading customs;            

  • obstructing or interrupting the negotiation without adequate reasons during the negotiation;            

  • proposing a clearly unreasonable condition during negotiation that results in failure to reach a licence agreement; and            

  • any other serious faults of the patentee in the negotiation.            

       

If any of the following acts are committed, it may be found that the accused infringer has evident fault in the necessary patent licensing negotiation process:    

  • failing to diligently respond within a reasonable time after receiving written notification of infringement from the patentee;            

  • failing to diligently respond within a reasonable time on whether to accept the licence conditions of the patentee, or refusing to accept specific conditions proposed by the patentee but failing to propose new conditions after receiving the specific conditions of the licence from the patentee;            

  • obstructing, delaying or refusing to participate in the licence negotiation without adequate reason;            

  • proposing an apparently unreasonable condition during negotiation, which results in failure to reach a licence agreement; and            

  • any other serious fault of the accused infringer in the negotiation.            

        

Interim remedies    

The interim remedies available for litigants in a civil dispute are preservation of property, behaviour, evidence and preliminary enforcement.    


Preservation of property    

In cases where the relevant property may be transferred, concealed, destroyed, etc, which may cause damages to the interests of interested parties or may make future judgments difficult or impossible to enforce, the parties may apply for pre-action preservation to seal up, distain or freeze the relevant property. Once initiated successfully, any transfer, removal or alteration of the property without the prior approval of a People's Court will be restrained. Where a litigant applies for preservation of property to restrict the use and transfer of the property, the People's Court will order the applicant to provide an appropriate guarantee.    


Preservation of behaviour    

Preservation of behaviour is to order one party to act or not to act in a particular way.    


In January 2018, Huawei Technology Co, Ltd, Huawei Terminal Co, Ltd and Huawei Software Technology Co, Ltd (collectively referred to as Huawei) filed a lawsuit with the Nanjing Intermediate People's Court of Jiangsu Province, requesting confirmation that they did not infringe three Chinese patent rights of Conversant Wireless Licensing S. à r. 1. (Conversant) and requesting confirmation of the licensing rate of standard essential patents in China. In April 2018, to counteract Huawei's lawsuit, Conversant filed a patent infringement lawsuit in the court of Düsseldorf, Germany, requesting an order for Huawei to stop the infringement and compensate for the losses.


On 16 September 2019, the court of first instance decided to determine the licence fee rate for the SEPs of Conversant for Huawei and its Chinese affiliates. Conversant refused to accept the judgment of the first instance and appealed to the Supreme People's Court. During the second instance of the Supreme People's Court, on 27 August 2020, the German court made a first-instance verdict that Huawei and its German affiliates infringed Conversant's European patents, and ordered Huawei and its German affiliates not to provide, sell, import and use the mobile terminals, destroy and recall infringing products, etc. The judgment can be temporarily enforced after Conversant provides a bond of €2.4 million. The judgment found that Conversant's offer of standard essential patent licence rates to Huawei did not violate the FRAND principle. The SEP licence rate of the 2G/3G/4G mobile terminal products in the aforementioned offer of Conversant is approximately 18.3 times the Chinese SEP licence rate determined in the first-instance judgment.    


On the same day, Huawei filed a behaviour preservation application to the Supreme People's Court, requesting that Conversant be prohibited from applying for enforcement of the German court's judgment before the Supreme People's Court final judgment. The Supreme People's Court made a behaviour preservation ruling on the basis of requiring Huawei to provide guarantees, that is, Conversant shall not apply for the execution of the above-mentioned German judgment before the final judgment of the Supreme People's Court. In case of violation of this ruling, a daily fine of 1 million yuan shall be imposed from the date of violation, which shall be accumulated on a daily basis. The ruling was served on the same day. Conversant filed a review application. After the Supreme People's Court organised a hearing for both parties, it ruled to reject Conversant's request for review.    


Preservation of evidence    

Where the evidence may be lost or it may be difficult to obtain the evidence in future, a litigant may apply to a People's Court for preservation of evidence during the proceedings. The People's Court may also voluntarily adopt preservation measures.    


Under urgent circumstances where the evidence may be lost or it may be difficult to obtain the evidence in future, a stakeholder may apply to the People's Court at the location of the evidence or the respondent's domicile or the People's Court that has jurisdiction for the case for the preservation of evidence prior to the filing of a lawsuit or application.    


Preliminary enforcement    

If there is a need for prior enforcement under urgent circumstances, a People's Court may rule on prior enforcement pursuant to an application from a litigant. Where the patentee or the interested party institutes proceedings against patent infringement, while simultaneously requesting for the stopping of the act of patent infringement in advance, the People's Court may first make a ruling on the request if the following conditions are met:    

  • the facts of the infringement are clear, and if the infringement is not stopped in advance, it will seriously affect the plaintiff's operation; and            

  • the respondent has the ability to perform.            


The People's Court may order the applicant to provide a guarantee. If the applicant does not provide a guarantee, the application will be rejected. If the applicant loses the lawsuit, it will compensate the respondent for the property loss suffered owing to the preliminary enforcement.    


Punitive damages    

29. Are punitive or exemplary damages available?    


There are no punitive or exemplary damages available under the AML.    


Interest    

30. Is there provision for interest on damages awards and from when does it accrue?    


If a party subject to do so fails to perform the payment obligation within the time limit specified in a judgment, ruling or other legal document, the party must pay twice the amount of interest on the debt for the period during which the performance is deferred. If a party fails to perform other obligations, the party must pay a fine for delayed performance. 


The interest incurred for failure to pay, and the fine incurred for delayed performance, accrue from the expiry date of the time limit specified in a judgment, ruling or other legal instrument.    


Consideration of fines    

31. Are the fines imposed by competition authorities taken into account when setting damages?    


The purposes of the fines imposed by the competition authority are to sanction the AML violations and to deter others from violating the AML. However, the purpose of the damages in private antitrust litigation is to compensate the losses caused by the monopolistic conduct. Since the nature of the fines and the damages are different, the court may not take into account the fines imposed by the competition authority.    


According to the AML, the competition authority may confiscate illegal earnings. If all illegal earnings are confiscated by the competition authority, and a party affected by the monopolistic conduct files a civil lawsuit, the People's Court can rule in favour of the plaintiff and ask the defendant to pay the damages.    


Legal costs    

32. Who bears the legal costs? Can legal costs be recovered, and if so, on what basis?    


Generally, legal costs generated in private antitrust litigation include a litigation fee and reasonable expenses to investigate the alleged conduct (eg, attorneys' fees).    


The litigation fee, which should be paid to the court, comprises the following three categories:    

  • case acceptance fee;            

  • application fee; and            

  • the travel expenses, accommodation expenses, living expenses and subsidy for missed work incurred by the witnesses, authenticators, interpreters and adjusters for appearing before the People's Court on the date designated by the court.            


The amount of the litigation fee depends on the monetary value of the claim, the number of issues applied and the complexity of the case. The plaintiff pays a case acceptance fee in advance when instituting a civil proceeding. The losing party is ordered to undertake all the legal costs. However, where each party succeeds on some matters and fails on others, the court may order that the litigation fee be shared or that each party bear its own costs.    


At the plaintiff's request, the People's Court may include the reasonable expenses incurred by the plaintiff for market research and curbing the monopolistic practice in the damages.    


Joint and several liability    

33. Is liability imposed on a joint and several basis?    


Under the Tort Law, two or more tortfeasors whose infringement causes the damages to others will be jointly and severally liable. On the other hand, if the breach of contract by several parties infringes upon the personal or property interests of the non-default party, the breaching parties are also jointly and severally liable.    


Therefore, if antitrust litigation is brought against two or more defendants for their monopolistic conduct, each defendant may be held jointly and severally liable for the full amount of the plaintiff's damages.    


The compensation should be allocated in accordance with their apportioned shares of the responsibility. Where it is impossible to find their respective shares, all defendants should be held liable for an equal amount of compensation.    


Contribution and indemnity    

34. Is there a possibility for contribution and indemnity among defendants? How must such claims be asserted?    


Where a defendant that is jointly and severally liable pays compensation of more than its liability for the damages, the defendant is entitled to claim a contribution or indemnification from the other defendants. The claims can be asserted in a different suit (ie, after the judgment or settlement).    


Passing on    

35. Is the 'passing-on' defence allowed?    


Since, in antitrust litigation, the plaintiff may only claim for the actual losses or damages, the defendant may argue that by passing on the overcharge to an indirect customer, the plaintiff suffers no losses or lower losses.    


Other defences    

36. Do any other defences exist that permit companies or individuals to defend themselves against competition law liability?    


Defences available in an abuse of dominance dispute    

The most frequently used defences in a private enforcement case against abusive conduct are:    

  • the market definition is incorrect;            

  • the market share data is inaccurate;            

  • there is no dominant market position of the undertaking, because:            

    • the market share is less than 50 per cent;                    

    • the undertaking has no ability to control the retail market or procurement market for raw materials;

    • there is no substantial difference between the undertaking and other competitors in respect of financial status and technical capabilities;                    

    • the trading partners are not dependent on the undertaking; and                    

    • there is no barrier for other undertakings to enter into the relevant market;                    

  • there is no abusive conduct under article 17 of the AML;            

  • there is no anticompetitive effect derived from the abusive conduct;            

  • there are justifiable reasons to justify the conduct;            

  • the plaintiff has no standing to file the lawsuit;            

  • there is no damage to the plaintiff by the alleged conduct; and            

  • there is no causation between the conduct and the alleged damage.            


Defences available in a horizontal agreement dispute    

Defences available in a horizontal agreement dispute include the following:    

  • there is no agreement that has been entered into by competitors;            

  • the content of the agreement does not fall into any type of prohibited horizontal agreement; and            

  • the horizontal agreement is exempted under the rules of the AML.            

              

Defences available in a vertical agreement dispute    

Defences available in a vertical agreement dispute include the following:    

  • the 'vertical agreement' is an agent–principal arrangement in which an undertaking agrees to perform certain services on a supplier's behalf for a sales-based commission payment;            

  • there is no anticompetitive effect because:            

    • the relevant market competition is sufficient;                    

    • the defendant does not have a very strong market position;                    

    • there is a legitimate motive of the defendant to impose the resale price maintenance; and                    

    • the anticompetitive effect of the resale price maintenance is not significant; and                    

  • the resale price maintenance is exempted under the rules of the AML.            


Alternative dispute resolution    

37. Is alternative dispute resolution available?    


Mediation    

In civil proceedings, the parties may settle the dispute during the mediation process held by the court or reach a settlement agreement on their own.    


Arbitration    

Arbitral institutions do not have jurisdiction over monopoly disputes.    


In Songsue v Samsung, the distributor Songsue filed an antitrust complaint at the Nanjing Intermediate People's Courts in 2014, alleging unfairly high pricing and bundling practices of Samsung. Samsung filed a petition challenging the jurisdiction of the Nanjing Intermediate People's Courts because both parties signed sales agreements in 2012 and 2013 that stipulated they would resolve disputes through arbitration. The Nanjing Intermediate People's Courts rejected the request, and, in August 2016, the Jiangsu Higher People's Court issued the final decision confirming the ruling. The Jiangsu Higher People's Court ruled that there are no rules to arbitrate antitrust disputes and because antitrust disputes involve the public interest, they should be heard in court.    


In Huili v Shell (2019), the Supreme People's Court stated that owing to the obvious public law nature of the AML, monopoly disputes are not within the scope of arbitration. Given that the current laws do not explicitly allow antitrust litigation to be settled via arbitration, the arbitration clauses as agreed by the parties are not a valid reason for excluding the court's jurisdiction over antitrust litigation.


   

UPDATE AND TRENDS    


Recent developments    

38. Are there any emerging trends or hot topics in the law of private antitrust litigation in your country?    


The hot topic of private antitrust litigation is the anti-suit injunction and anti-anti-suit injunction.    


OPPO Guangdong Mobile Communications Co, Ltd and OPPO Guangdong Mobile Communications Co, Ltd Shenzhen Branch (collectively referred to as OPPO) conducted SEP licensing negotiations at the request of Sharp Corporation. During the negotiation process, Sharp Corporation filed a patent infringement lawsuit against OPPO in another jurisdiction. OPPO believes that Sharp unilaterally filed a lawsuit against a patent within the scope of the negotiation and requested an injunction in violation of FRAND obligations, so it filed a lawsuit with the Shenzhen Intermediate People's Court of Guangdong Province, requesting the court to determine the global licensing rate to OPPO for the SEPs owned by Sharp. At the same time, in view of the possibility that Sharp may coerce it to negotiate with an extraterritorial injunction, OPPO filed an application for behaviour preservation.


The court of first instance ruled that, before the final judgment of this case is made, Sharp shall not file a new lawsuit or judicial injunction againstOPPOinothercountriesandregionsregardingthepatentsinvolved in this case, and shall impose a daily fine of 1 million yuan for violations. Seven hours after the first-instance court issued the anti-suit injunction, the First District Court of Munich, Germany issued an anti-anti-suit injunction to OPPO, requesting OPPO to apply to the Chinese court to withdraw the anti-suit injunction.    


The court of first instance conducted a court investigation around the anti-suit injunction and anti-anti-suit injunction, identifying the facts and evidence of Sharp's violation of the preservation ruling, and explained to it the serious legal consequences of violating the judgment of the Chinese court. In the end, Sharp unconditionally withdrew the review application and the anti-anti-suit injunction applied to the German court, and at the same time stated that it would fully respect and strictly abide by the effective ruling of the Chinese court.    


Coronavirus    

39. What emergency legislation, relief programmes and other initiatives specific to your practice area has your state implemented to address the pandemic? Have any existing government programmes, laws or regulations been amended to address these concerns? What best practices are advisable for clients?    


Before the outbreak of the pandemic, the People's Court had explored the establishment of online litigation service mechanisms in different procedures. On 1 August 2019, the Supreme People's Court issued the Opinions on Building a One-Stop Multiple Dispute Resolution Mechanism and One-Stop Litigation Service Center, proposing the construction of smart litigation services to realise whole-process online litigation services. In terms of specific objectives, the Supreme People's Court stated:

  • for online case filing: from 2019 to the end of 2020, courts across the country will generally open the online case filing function; and        

  • for electronic service: all four-level courts across the country are required to open a unified service platform before the end of 2019.        

           


On 16 January 2020, the Supreme People's Court issued the Pilot Program for the Reform of the Separation of Complex and Simplified Civil Litigation Procedures and the Implementation Measures for the Pilot Reform of the Separation of Complex and Simplified Civil Procedures. One of the reforms is to improve electronic litigation rules, encourage courts to submit materials, hear trial and service electronically, so as to improve the efficiency of litigation and encourage the use of online video methods to hold court hearings.


After the outbreak of the pandemic, the Supreme People's Court issued the Notice on Strengthening and Standardising Online Litigation Work during the Prevention and Control of the New Corona Virus Pandemic (Fa [2020] No. 49), which clearly put forward the requirements for strengthening online litigation during the pandemic. It is foreseeable that after the pandemic is over, the role of online litigation services will become increasingly prominent, becoming an important form for courts to handle simple cases and improve the efficiency of case handling.

Relevant Lawyer

  • Liang DING

    Partner

    Tel:+86 10 5268 2977

    E-mail:dingliang@dehenglaw.com

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