In 2021, there were significant developments in the legal and regulatory system on which antitrust litigation is based, with updates in all aspects of the law, departmental rules and guidelines.

Law

Following the release of the Draft Amendment of the Anti-monopoly Law (Draft for Comments) by the State Administration for Market Regulation (SAMR) in January 2020 and the release of the Anti-monopoly Law (Draft Amendment) by the Standing Committee of the National People's Congress (NPCSC) after initial deliberation in October 2021, the NPCSC finally adopted the Decision on Amending the Anti-monopoly Law of the People's Republic of China (hereinafter referred to as the “Decision on the Amendment to the Anti-monopoly Law”) on 24 June 2022, which came into force 1 August 2022. This amendment retains the basic structure but extends the total number of articles from 57 to 70. The major changes include the following.

Monopoly agreements

It provides an independent article stipulating the concept of a monopoly agreement that clearly applies to both horizontal and vertical agreements, which optimises the logic of the articles.

It clarifies the applicability of the “rule of reason” to vertical monopoly agreements. Analysis of the actual effect of excluding or restricting competition is required. It also adds that business operators may make the defences on the ground that there are no such anti-competitive effects.

It introduces the rule of “safe harbour”, which specifies that vertical agreements reached between business operators whose market share is lower than a certain level may be allowed, and the specific applicable standards and conditions will be separately stipulated by the SAMR.

It introduces the regime regulating “Hub-and-Spoke collusion”, according to which the conduct of concluding a monopoly agreement through “organising” and providing “substantive assistance” is also illegal.

Digital economy

It introduces a new principle on the use of data and algorithms, technology and platform rules to exclude or restrict competition, bringing the digital economy into the scope of anti-monopoly regulation at the legislative level.

Concentrations of undertakings

It improves the procedural rules for concentration review. For example, it proposes to improve the classified and graded system for concentration review, to provide a legal basis for delegating the authority to provincial agencies.

Legal liabilities

Punishments for violations are intensified, and the costs incurred by operators in violation of anti-monopoly laws are substantially increased; for example, the fine imposed on those who have devised but have not implemented a monopoly agreement is increased from less than CNY500,000 to CNY3 million.

The legal liability system of anti-monopoly is optimised and improved by increasing the personal liability of and punishments for legal representatives and persons-in-charge, such as a fine of up to CNY1 million for legal representatives, persons-in-charge and the directly responsible persons of an operator, who are personally liable for entering into a monopoly agreement.

The public interest litigation system is introduced at the legislative level. It stipulates that the people's procuratorate at or above the level of cities with district division may file public interest lawsuits.

It establishes a dishonesty restraint mechanism. Where a business operator is subject to an administrative penalty due to monopolistic behaviour, the penalty shall be included in the business operator’s credit records and will be disclosed to the public.

Departmental Rules

To implement the amended Anti-monopoly Law, the SAMR has revised six departmental rules correspondingly and formed drafts for public comments. Taking the Provisions on Prohibition of Abuse of Intellectual Property Rights to Exclude or Restrict Competition (Draft for Comments) as an example, the core revisions in the Draft for Comments include the following:

• It implements the latest provisions of the Decision on the Amendment to the Anti-monopoly Law, including adding new provisions on Hub-and-Spoke collusion in the field of intellectual property, and adding a provision that “a business operator shall not, by means of exercising the intellectual property rights, organise other business operators to enter into a monopoly agreement, or provide substantive assistance for other business operators to enter into a monopoly agreement”.

• It strengthens anti-monopoly rules in the field of intellectual property rights, including refining the rules on the abuse of dominant market position in the field of intellectual property rights, adding new factors for identifying the dominant market position such as “substitutability of the intellectual property concerned, the degree of dependence of downstream markets on the commodities provided by the use of the intellectual property concerned, and the transaction counterpart's capability to counter the said operator, and other factors”, and adding new forms of “tie-in sales” such as compulsory package licensing “in violation of trade practice, consumption habit, etc, or in disregard of the product function”.

• It improves anti-monopoly rules in key areas such as standard essential patents and refines the identification of the monopoly agreement and the abuse of dominant market position related to patent pools and licensing of the standard essential patents. For example, in the licensing process of standard essential patents (SEPs), the holder of a dominant market position's breach of its commitment to fair, reasonable and non-discriminatory licensing, improper applications for injunctions and forcing the licensee to accept an unfairly high price or other unreasonable restrictions without good-faith negotiation procedures are considered as typical acts of abuse of rights.

Guidelines

The Anti-monopoly Commission of the State Council has issued the Anti-monopoly Guide for the Platform Economy Sector and the Anti-monopoly Guide for the Active Pharmaceutical Ingredients Field, providing more detailed regulations on special issues in their respective fields, the highlights of which include that in the field of internet platform economy, special provisions have been made with respect to issues such as “either-or choice” (ie, internet platforms require operators within the platform to make an “either-or choice” among competing platforms) and “big data-enabled price discrimination against existing customers” (ie, platforms charge users with more stable consumption habits a higher fee than other users), widely reflected by all social sectors in recent years, specifying the standards for whether relevant conduct constitutes monopolistic conduct. Other highlights include responding to hot spots and difficult issues in practice.

The above amendments to the law and the promulgation of the guides not only further standardise the anti-monopoly regulatory system and strengthen the anti-monopoly regulatory capability, but also sound the alarm for the establishment of anti-monopoly compliance systems by business operators who should raise the awareness of anti-monopoly compliance to prevent and prohibit monopolistic conduct.

Antitrust Litigations

According to public information, in the field of antitrust litigation in 2021, the cases adjudicated before the Intellectual Property Tribunal of the Supreme Court in 2021 reflect the following characteristics compared with 2020.

• The amount of foreign-related civil anti-monopoly cases increased. There have been civil litigations filed by parties for monopolistic conduct taking place outside China but that has restricted competition in the Chinese domestic market.
• The proportion of horizontal monopoly agreement cases accepted by the Supreme Court increased, some of which were eventually found to constitute horizontal monopoly agreements;
• Claims regarding antitrust are becoming more frequent in IP disputes.
• In 2021, two administrative monopoly disputes were accepted in total, the issues of which respectively involved application of Article 46 of the Anti-monopoly Law (ie, administrative liability for entering into and implementing a monopoly agreement) and the determination of the statutory limitation for suing an administrative omission. The defendants were local law enforcement authorities and the SAMR respectively.

The 2021, topical anti-monopoly litigation cases in different industry sectors in China included the following.

Digital/platform economy

In April 2021, the Supreme Court clarified in the Plan for the Judicial Protection of Intellectual Property by the People's Courts (2021-25) that monopoly disputes in the internet sector shall be properly handled, anti-monopoly judgment rules for the platform economy shall be improved, the disorderly expansion of capital shall be prevented, and the standardised, healthy and sustainable development of the platform economy shall be promoted. With the amendment of China's Anti-monopoly Law, the operators in the internet platform sector and also all the entities that eliminate or restrict competition by use of data, algorithms, technology and platform rules will be subject to the Anti-monopoly Law. Currently, topical litigation cases in this area include the following.

• JD sued Alibaba seeking CNY1 billion in damages for Alibaba’s abuse of its dominant market position by coercing merchants to make an “either-or choice”. The first instance case is currently pending before the Beijing High People's Court. During the trial of this case, on 10 April 2021, the SAMR imposed administrative penalties and a fine of CNY18.228 billion on Alibaba for its monopolistic conduct in the online retail platform service market in China. It is worth paying attention to how this civil litigation on monopoly will be ruled.
• ByteDance sued Tencent for abuse of dominant market position by restricting users from sharing content on TikTok through WeChat and QQ. The case is currently pending before the Beijing Intellectual Property Court. After this case was accepted, another group of Tiktok users filed a lawsuit in the Shanghai Intellectual Property Court against Tencent and its affiliates for the same reason (hereinafter “Tiktok users v Tencent”). Since this case involves the same monopolistic conduct, the Shanghai Intellectual Property Court has decided to transfer this case to the Beijing Intellectual Property Court for trial.
• Multiple consumers and merchants within the Meituan platform sued Beijing Sankuai Technology Co, Ltd (the operator of Meituan) separately for its abuse of dominant market position, including cancellation of Alipay's payment channel, imposition of unreasonable conditions to set barriers for exiting the platform and compulsory implementation of bundling sales. These cases are currently pending before the Beijing Intellectual Property Court, the Shanghai Intellectual Property Court and the Guiyang Intermediate People's Court in the first instance.
• Hunan Eefung Software Co, Ltd sued Beijing Weimeng Chuangke Network Technology Co, Ltd (the operator of Sina Weibo) for abuse of dominant market position by refusing to license use of data on Sina Weibo. The case is currently pending before the Changsha Intermediate People's Court of Hunan Province in the first instance.

Information and communications

In the information and communications sector, civil anti-monopoly litigations related to SEPs have continued to attract attention.

For example, in Apple Inc. v China Iwncomm Co, Ltd, which both sued each other for abuse of dominant market position, the licensee, Apple, first sued the SEP right holder, China Iwncomm, for abusing its dominant market position by conduct such as over-pricing, discriminatory pricing, tie-in sales and seeking injunctions during the licence negotiation. China Iwncomm filed a counterclaim against Apple for its abuse of dominant buyer’s market position, for conduct such as under-pricing, reverse hijacking and discriminatory treatment during the licence negotiation, and claimed for damages. The action in chief of the case is still pending. The counterclaim was rejected by the Beijing Intellectual Property Court at first instance and by the Beijing High People's Court at second instance, as it fails to meet the conditions for joint hearing with the action in chief of the case.

Pharmaceutical industry

The pharmaceutical industry has been a key area of anti-monopoly enforcement and judicial attention, as it concerns public interest and national livelihood and has features of a commercial, technology-intensive and government-controlled market.

For example, AstraZeneca sued Jiangsu Aosaikang Pharmaceutical Co, Ltd for infringement of an invention patent. The court, for the first time, made an anti-monopoly preliminary review of the “Reverse Payment Agreement for Medicine Patent” in a non-monopoly cause of action case. The parties reached a settlement during the second instance and intended to withdraw the appeal. The Supreme Court held that the settlement agreement was in conformity with the appearance of the “Reverse Payment Agreement for Medicine Patent” and that it shall conduct anti-monopoly review on the settlement agreement. Considering the high level of specialisation and complexity of anti-monopoly review, the court made it clear that such review in non-monopoly cause of action cases is generally limited to a preliminary review. The Supreme Court determined that the settlement agreement did not violate the Anti-monopoly Law and finally granted the withdrawal of appeal.

In 2021, the number of administrative penalty cases regarding monopoly and the amount of penalties settled in China increased dramatically. A total of 175 cases were handled (up 61.5% year-on-year), and the amount of fines imposed was CNY23.592 billion (up 51.4 times year-on-year). Among them:

• 11 cases involving monopoly agreements saw fines imposed of CNY1.673 billion in total;
• 11 cases involving abuse of dominant market positions saw fines imposed of CNY21.847 billion in total; and
• 107 cases involving illegal concentration of operators were penalised publicly with fines of CNY72.35 million in total.

In 2021, administrative law enforcement was characterised by a large number of cases with high penalties, such as:

• the “either-or choice” cases of Alibaba Group and Meituan, for which the fines imposed reached CNY18.228 billion and CNY3.442 billion respectively;
• the decision imposing upon the Yangtze Pharmaceutical Group Co, Ltd a penalty of CNY764 million for its conclusion and implementation of a monopoly agreement; and
• decisions imposing upon the calcium gluconate active pharmaceutical ingredient enterprises penalties totalling CNY325.5 million.

Article 50 of the Anti-monopoly Law of China stipulates that if a business operator carries out monopoly actions and causes losses to others, the operator shall bear civil liability according to law, which remains unchanged in the Decision on the Amendment to the Anti-monopoly Law. Article 14(1) of the Judicial Interpretation of the Supreme Court on Monopolistic Disputes (Judicial Interpretation of Monopolistic Disputes) clearly stipulates that where a defendant's monopolistic conduct has caused any losses to the plaintiff, the court may, in light of the plaintiff's claims and the finding of facts, order the defendant to cease infringement, compensate for losses, and otherwise assume civil liability in accordance with law. These two forms of civil liability are in line with the forms of bearing civil liability stipulated in Article 179 of the Civil Code of China.

Article 2 of the Judicial Interpretation of Monopolistic Disputes clearly stipulates that where a plaintiff directly files a civil lawsuit with the people's court or files a civil lawsuit with the people's court after a decision of the Anti-monopoly Enforcement Authority affirming the existence of monopolistic conduct comes into force, if that lawsuit satisfies other conditions for lawsuit acceptance as prescribed by law, it will be accepted by the people's court in question. In this regard, civil anti-monopoly litigation does not rely on administrative identification as a prerequisite. In China, monopoly damages can be claimed by means of follow-on and standalone claims. For instance, in a case where Shandong Xinjufeng Technology Packaging Co, Ltd sued Tetra Pak International Co, Ltd for abuse of dominant market position by way of conducing tie-in sales, restricting transaction and limiting competition by loyalty rebate, the plaintiff requested Tetra Pak to compensate the claimant for the economic losses and reasonable expenses in the amount of CNY125 million. This case was a follow-on claim after the Anti-monopoly Law enforcement authority imposed an administrative penalty on Tetra Pak.

There are no competition courts or competition tribunals in China. As monopoly disputes are highly specialised and complex and have a significant impact, the Supreme Court issued the Judicial Interpretation of Monopolistic Disputes and the Several Provisions of the Supreme Court on Jurisdiction of First-Instance Civil and Administrative Intellectual Property Case, according to which the intermediate people's court of a city where the people's government of a province, autonomous region, or municipality directly under the central government is located, or of a city under separate state planning, or an intermediate people's court designated by the Supreme Court shall have jurisdiction over civil and administrative monopoly dispute cases as the court of first instance. For appeals against civil and administrative anti-monopoly decisions, all second instance cases will be heard directly by the Intellectual Property Court of the Supreme Court.

It is noteworthy that the public has also been aware of the importance of having specialised tribunals to hear monopoly disputes. Chinese anti-monopoly law experts and scholars have put forward academic proposals to establish competition tribunals, and local Chinese People's Political Consultative Conference (CPPCC) members have also made proposals for the establishment of the competition tribunal in the Wuhan Intermediate People's Court. In response to the practical needs of China's judicial system reform and to strengthen anti-monopoly and anti-unfair competition judicial practice, the Beijing Intellectual Property Court actively acts as the first court in China to establish a commission and a professional trial team for competition and monopoly disputes.

Case Transfer

Anti-monopoly disputes may be transferred between courts in China, as follows.

• If the court accepting the case filing finds that it has no jurisdiction over civil anti-monopoly disputes, it shall transfer the case to the court with jurisdiction usually in the following specific situations:

1. the case has an anti-monopoly cause of action;
2. the defendant raises an anti-monopoly defence or countersuit; or
3. where the case requires the application of the antitrust law.

• Where two or more plaintiffs file lawsuits for the same monopolistic conduct in different courts with jurisdiction, the second court shall transfer the case to the court that has filed the case first. As in the TikTok users v Tencent case, the Shanghai Intellectual Property Court transferred the case to the Beijing Intellectual Property Court, which had previously accepted and filed the other case involving the same monopolistic conduct.

If the forwarded court considers that the case does not fall within its jurisdiction in accordance with the provisions, it shall report this to a higher court for the appointment of jurisdiction and shall not transfer the case unilaterally.

On Whether the Decisions of the National Competition Authority (NCA) are Binding on the Court

The Anti-monopoly Law and the Judicial Interpretation of Monopolistic Disputes do not specify whether the administrative decision of the NCA has any binding force or effect on the court. The Judicial Interpretation of Monopolistic Disputes (Draft for Comments) formerly stipulated (in 2011) that “where a fact that has been determined to constitute a monopoly by the decision of an anti-monopoly administrative authority has been established by a party in a relevant civil monopoly dispute case, the party is not required to prove such fact, unless the opposing party has evidence to the contrary sufficient to disprove it”. However, this article was deleted when the interpretation was formally introduced. According to Article 114 of the Interpretation of the Supreme Court on the Application of the Civil Procedure Law of China (Interpretation of the Civil Procedure Law), the court presumes that matters recorded in documents produced by state authorities within its purview are true, unless there is sufficient evidence to the contrary to disprove it.

As a result, the administrative penalty decisions issued by the Chinese anti-monopoly enforcement authorities have only evidential but no direct binding effect on the courts. There is no doubt that the facts recorded in Chinese administrative penalty decisions are highly influential in the courts' factual determinations. It is also noteworthy that, in the case of HANTAI Tyre Vertical Monopoly Agreement and Abuse of Dominant Market Position, the court made the opposite determination of the nature of the agreement involved in the lawsuit and the administrative penalty decision, which again indicates the above conclusion, namely, that the determination of the administrative authority has only the effect of evidence and the court may make its determinations independently upon the evidence.

There are no publicly available substantive decisions in which Chinese courts have determined the validity of administrative decisions made by competition authorities in other countries. In the case of Shanghai Electric Power Company v VISCAS regarding a horizontal monopoly agreement, based on the European Commission's decision to penalise a cartel agreement for high-voltage cable producers, the plaintiff brought a lawsuit against VISCAS in the Shanghai Intellectual Property Court. The case was elevated by the Shanghai High People's Court and is still under trial. It is worth paying attention to the court's findings of fact and the final outcome of the case.

On Whether the NCA Can Participate in Civil Actions for Damages

In Chinese anti-monopoly follow-on litigation, the administrative anti-monopoly authorities cannot directly intervene in civil litigations as either a plaintiff or a defendant. However, as the issuing body of a public document submitted by a party to litigation, if necessary, the administrative enforcement agency that produced the administrative penalty decision may be requested by the court to clarify the authenticity of the document. In addition, the court may access evidence obtained by the anti-monopoly enforcement agency during the administrative investigation phase through the application of the parties' or the court’s authority.

Burden of Proof

In China, monopoly liability is a liability without fault. According to this principle of liability imputation, the plaintiff bears the burden of proof for demonstrating that:

• the defendant has carried out monopolistic conduct;
• the plaintiff has suffered an actual loss; and
• there is a causal relationship between the monopolistic conduct and the losses suffered.

In the case of monopoly agreements, the plaintiff is required to prove that the agreement reached by the defendant satisfies the statutory conditions for monopoly agreements and that the agreement has the effect of “excluding or restricting competition” when proving the establishment of the monopoly agreement.

For horizontal monopoly agreements, Article 7 of the Judicial Interpretation of Monopolistic Disputes clarifies that it is usually presumed that they have the effect of excluding or restricting competition, and the burden of proof is shifted to the defendant to prove that its conduct does not have the effect of excluding or restricting competition. For example, in a transformer-related monopoly agreement dispute heard by the Supreme People's Court, the Court ruled that a horizontal monopoly agreement is presumed to have the effect of excluding or restricting competition as long as it meets the prescribed form requirements, and the defendant shall bear the burden of proving that the agreement does not have the effect of excluding or restricting competition.

For vertical agreements, in previous judicial practice, the general rules on the allocation of the burden of proof should still apply, and the plaintiff should bear the burden of proof that the vertical agreement has the effect of excluding or restricting competition. The Decision on the Amendment to the Anti-Monopoly Law adds a new provision for horizontal agreements, providing that a vertical agreement shall not be prohibited if a business operator can prove that the agreement with prescribed forms does not have the effect of excluding or restricting competition. It is argued that this new provision would reduce the plaintiff's burden of proof, namely, that the plaintiff only needs to prove that the vertical agreement meets the prescribed form requirements, after which the burden of proof will shift to the defendant to show that the agreement does not have the effect of excluding or restricting competition.

In cases of abuse of dominant market position, the plaintiff shall bear the burden of proof in respect of:

• the definition of the relevant market;
• the fact that the defendant has a dominant market position;
• the defendant's act of abuse of dominant market position; and
• demonstrating that the conduct has the effect of excluding or restricting competition.

As to the reasonable justification (grounds for defence) for the act subject to complaint, according to Article 8(2) of the Judicial Interpretation of Monopolistic Disputes, such reasonable justification must be raised, and the burden of proof shall be on the defendant.

Relevant Standards of Proof

China's standard of proof in anti-monopoly cases in principle adopts the general standard of proof in civil litigation, which is a high degree of probability (at least 75%).

The judges of the Supreme Court held that the plaintiff’s standard of proof can be lowered for the core element of “excluding or restricting competition” – ie, it can be presumed that an act has the effect of excluding or restricting competition if it can be inferred that there is a substantial likelihood that an act will have that effect on the basis of the available evidence, combined with basic economic experience and common sense. The burden of proof will be shifted to the defendant in due course, and the defendant will provide counter evidence that its conduct does not have the effect of excluding or restricting competition.

With respect to the standard of proof for exemptions of horizontal monopoly agreements, the Supreme Court has made it clear in the judicial case that the party that implements an alleged monopoly agreement may not rely on general conjecture or abstract assumptions to prove the positive effects on competition and economic society; instead, concrete evidence shall be provided to prove that such effects are concrete and realistic.

As for the burden of proof regarding passing-on defences, it is understood that the passing-on defence means that when the direct purchaser (such as a wholesaler or retailer), as the plaintiff, brings a civil anti-monopoly damage compensation lawsuit against the defendant's monopoly practitioner (such as the manufacturer), the defendant will argue that the plaintiff has already transferred all or part of its monopoly price loss to the indirect purchasers, who are typically represented by general consumers. Such claims have not been clarified in Chinese legislation or in judicial practice but may be clarified in the future.

The plaintiff may bring civil anti-monopoly litigation on the basis of meeting the conditions for prosecution stipulated in Article 122 of the Civil Procedure Law and the conditions for eligible plaintiffs in civil anti-monopoly disputes stipulated in Article 1 of the Judicial Interpretation of Monopolistic Disputes. Both direct and indirect purchasers can make claims as long as they can prove that they have suffered actual losses as a result of the monopolistic conduct subject to the complaint, and there are no restrictions on this under China's Anti-monopoly Law and judicial interpretations.

Chinese civil lawsuits operate on a “final-after-two-trials” system: six months for the substantive hearing in civil lawsuits of first instance and three months for second instance hearings. If there are special circumstances that require an extension, this period may be extended by statutory procedures. Civil lawsuits involving foreign elements shall not be subject to the aforementioned trial periods. Anti-monopoly litigation is no exception, and it follows the above-mentioned statutory trial period system and rules.

Based on the average trial period disclosed by the intellectual property tribunal of the Supreme People's Court, the average trial period of substantive intellectual property-related civil cases at the second instance takes 129.4 calendar days. Considering that anti-monopoly litigations involve professional and technical issues and a large number of cases involve foreign elements, the average trial period will increase accordingly.

As discussed in 1.1 Recent Developments in Antitrust Litigation, the Anti-monopoly Law of China implements the dual-track law enforcement system and does not regard administrative law enforcement procedure as the precondition of a civil lawsuit. In 2011, the Judicial Interpretation of Monopolistic Disputes (Draft for Comments) provided that “if the anti-monopoly enforcement agency conducts an investigation into the monopoly being sued, the people's court may, when necessary, decide to suspend the proceedings in accordance with the specific circumstances of the case”. However, this provision was deleted in the official published version. A litigant may attempt to apply to the court for a stay of proceedings under Article 153(5) of the Civil Procedure Law on the grounds that the outcome of the “administrative investigation” must be the basis for the trial of the civil proceedings and that the administrative investigation has not yet been completed.

Under China's litigation system, there is no class action/collective action that directly corresponds to the one under, for example, the American litigation system. However, the rules on joint litigation, representative litigation, and public interest litigation under the Civil Procedure Law and the Consumer Protection Law could be seen as forming the basis of litigation for anti-monopoly “class actions”.

Joint Litigation

Article 6 of the Judicial Interpretation of Monopolistic Disputes stipulates that if there are multiple plaintiffs who file litigations to the same court for the same monopolistic behaviour, then the litigations can be consolidated for trial, and if lawsuits are filed before different courts, the courts that receive the cases at a later time shall transfer the cases to the court that received the first case. This article further stipulates that the defendant shall take the initiative to disclose to the court any information related to the same monopolistic behaviour during the response stage so that the transfer and consolidation of the above cases can be completed.

Representative Litigation

Articles 56 and 57 of the Civil Procedure Law provide the basis for the representative litigation system in China:

• for the joint lawsuit with a large number of parties on one side (generally ten entities or more), the parties may select a representative to attend the litigation; and
• when the subject matter of the lawsuit is of the same kind, the court may issue a notice to notify the right-holders to register with the court within a certain period of time and have the lawsuit be attended by the representative.

The judgment or ruling made by the court shall be effective for all right-holders who participate in the registration. If a right-holder who did not participate in the registration files a lawsuit during the period of limitation of action, the existing judgment or ruling shall apply. This representative litigation system is also applicable to anti-monopoly litigation, such as cases in which many consumers claim damages because of monopolistic behaviour.

Public Interest Litigation

The Decision on the Amendment to the Anti-Monopoly Law adds provisions for anti-monopoly public interest litigation, which makes it clear that where a monopolistic conduct of undertakings infringes the public interest of society, the people's procuratorate at or above the level of city-governed district may file a civil public interest lawsuit. Previously in Chinese law, Article 58 of the Civil Procedure Law provided the general provision, not limited to anti-monopoly, which stipulates that public interest litigation on acts that infringe the legitimate rights and interests of many consumers and other acts that harm the public interest of society may be brought before the people's courts by the procuratorial organ, as well as by the authorities and relevant organisations that are provided by law. In judicial practice, the Consumers Association of Jiangsu Province filed an anti-monopoly public interest lawsuit against the water company for unilaterally determining an excessive amount of liquidated damages for late payment of water bills, requesting the invalidation of the liquidated damages clause. The Consumers Association withdrew the lawsuit after the water company took the initiative to adjust the relevant terms.

As to whether a lawsuit can be filed on behalf of indirect purchasers and direct purchasers, there is no doubt under Chinese Anti-monopoly Law. Both direct and indirect purchasers have the right to file civil monopoly lawsuits, and therefore both shall have the possibility of being represented.

As discussed in 3.1 Availability, it is important to clarify the relevant procedural issues bases of the representative litigation and public interest litigation systems under Chinese law.

In representative actions, there is a process for a right-holder to apply to the court for registration. According to Article 57 of the Civil Procedure Law and Article 80 of the Interpretation of the Civil Procedure Law, the right-holder who applies to a people's court for registration in a representative action shall prove the legal relationship with the other party and the damage it suffered. If the above cannot be proved, the litigation cannot be registered, and the right-holder may file a separate lawsuit on their own. The ruling of the court should be enforced within the scope of registration. If a right-holder who has not participated in the registration files a lawsuit and the court finds that their request is established, it could rule that the judgment or ruling already made by the court shall apply.

In public interest litigation, if the procuratorial organ discovers acts that harm the public interest of society when performing its duties, and intends to initiate public interest litigation, it shall provide 30 days' notice of this in accordance with the law, and the procuratorial organ may initiate litigation in the court only if the relevant organisations provided by the law do not initiate litigation after the expiration of the notice period.

In representative litigation, the action is conducted by the representative, but the settlement by a representative must be agreed to by the represented party. The parties may settle on their own, after which the plaintiff withdraws the lawsuit; the parties may also engage in mediation under the direction by the court, and the court will issue a mediation letter after the mediation is done.

In public interest litigation, after the parties reach an agreement, the court shall make a public announcement of the agreement for a period of no less than 30 days. After the expiration of the notice period, the court shall issue a mediation letter; if the court considers that the agreement between the parties is against the public interest, it shall not issue a mediation letter and will continue to hear and decide on the case.

Chinese civil litigation has rulings of dismissal of lawsuits, but it is not entirely consistent with the strike out system available in common law jurisdictions. The dismissal of lawsuits in China refers to the judicial act of rejecting a plaintiff's lawsuit when the court finds that the plaintiff's lawsuit does not meet the legal requirements. The statutory circumstances for dismissal of a lawsuit include:

• failure to meet the conditions for filing a lawsuit under Article 122 of the Civil Procedure Law;
• agreement between the parties on an arbitration clause, which does not fall within the competence of the court; and
• repeated lawsuits.

There is no system of summary judgment in China's civil procedure system. An analogous system is the simplified procedure. The primary people’s courts can apply simplified procedures to civil cases with clear facts, definite rights and obligations and minor disputes. As previously mentioned in 2.2 Specialist Courts, all civil anti-monopoly cases in China are under the jurisdiction of designated intermediate courts, and there is no room for the application of simplified procedures in civil anti-monopoly cases. At the same time, anti-monopoly cases are usually of a complex nature in terms of merits and rights and obligations and are highly contested by the parties, and, thus, they do not meet the substantive conditions for simplified procedure.

Jurisdiction

Civil anti-monopoly litigation is subject to centralised jurisdiction, as set out in 2.2 Specialist Courts.

The territorial jurisdiction of civil anti-monopoly litigation is determined by the nature of the case, whether it is a tort dispute (eg, where the plaintiff claims that the conduct complained of constitutes an abuse of a dominant market position) or a contractual dispute (eg, where the parties to a monopoly agreement sue for the invalidation of the contract). Anti-monopoly tort disputes fall under the jurisdiction of the court of the place of tort and the place of the defendant's domicile; monopoly contract disputes fall under the jurisdiction of the court of the place of performance of the contract and the place of the defendant's domicile.

The level of jurisdiction of civil anti-monopoly litigation is determined by the amount of claimed compensation. The Higher People's Court has jurisdiction over civil IP rights cases at first instance when the subject matter of the action has a value of more than CNY200 million, and more than CNY100 million where the domicile of a party concerned is outside the court's territorial jurisdiction or a foreign country or region, Hong Kong, Macao or Taiwan is involved. The rest of the cases are under the jurisdiction of the intermediate courts of first instance. According to the latest cases concluded by the Supreme Court, it is known that for special types of cases (including civil anti-monopoly litigation) that are directly heard by the Intellectual Property Court of the Supreme Court on appeal, the new rules on the level of jurisdiction of the intermediate people's courts, over cases involving less than CNY5 billion, which were introduced by the Supreme Court in 2019, do not apply.

Appeals of civil and administrative monopoly litigation are heard directly by the Intellectual Property Court of the Supreme Court.

Applicable Law

China’s Anti-monopoly Law applies to monopolistic conduct occurring in domestic economic activities and monopoly acts that, although occurring abroad, have exclusive and restrictive competition effects on the domestic market.

China's Anti-monopoly Law only applies to conduct that restricts competition and has an impact on the Chinese market, regardless of the nationality or domicile of the perpetrator or the place of origin of the restrictive conduct. The basis for the extra-territorial application of China's Anti-monopoly Law is the “effects principle”. This principle is reflected in several abuse of market dominant position cases, such as Huawei v IDC, TCL v Ericsson and OPPO v Sisvel. In the case of Qualcomm's administrative penalty for abuse of dominant market position, China's National Development Reform and Commission applied the same principles but made a negative finding (finding that the licensing of wireless SEPs by the patentee Qualcomm outside of China did not have a significant effect of excluding or restricting competition in the domestic market and should not lead to a penalty based on China's Anti-monopoly Law).

In civil anti-monopoly litigations, the Civil Code of China provides for a limitation period of three years to require the people's courts to protect civil rights. The Judicial Interpretation of Monopolistic Disputes has also been amended accordingly, and the statute of limitations is three years from the date when the plaintiff knew or should have known of the infringement upon its rights and interests. No protection shall be granted for more than 20 years from the date when the rights have been infringed. In special circumstances, the court may decide to extend the period upon the application of the right-holder.

In anti-monopoly administrative litigations, the Administrative Procedure Law of China stipulates that the time for litigation against the administrative act shall be within six months from the date on which the plaintiff knew or should have known of the performance of the administrative act in question.

The Civil Procedure Law of China does not provide a system of evidence disclosure or discovery that corresponds to that of the common law system. Chinese law stipulates that the parties have the burden of proof for their claims, and if the burden of proof is not discharged, they will bear the negative legal consequences.

There is a pre-trial evidence exchange system in civil litigation in China. When the court accepts a case that needs to be heard in court, it will clarify the focus of the dispute in the case by requiring the parties to exchange evidence before the trial hearing. The exchange of evidence shall be conducted under the supervision of the judge. Due to the fact that both parties will submit a large amount of evidence in civil anti-monopoly litigation, the court will normally organise multiple rounds of evidence exchange. The procedure of evidence exchange has no effect on a party's compulsory disclosure, so it cannot fulfil the same function as that under the evidence discovery system in common law systems.

However, the Civil Procedure Law of China, in accordance with the principle of good faith, provides for a system of “evidence submittal” and “obstruction of proof”, whereby the party bearing the burden of proof may apply to the court to order the other party to submit the necessary evidence. If a party refuses to submit evidence without reasonable justifications, submits false evidence, destroys evidence or commits other acts that render the evidence unusable, the court may presume that the other party's claim regarding the matter to be proved by the evidence is established. The problem of dishonesty of proof induced by the absence of the procedure for compulsory evidence disclosure is thus regulated.

In China, there is no system directly corresponding to the system of legal professional privilege. Lawyers are obliged to keep the following information confidential: national secrets, trade secrets, private information of the parties and information that clients are unwilling to disclose.

However, this does not constitute a reason for refusing to provide evidence to the court. The Civil Procedure Law of China operates a system of evidence collection based on application to the court/the court’s authority, evidence submittal and the obstruction of proof. Once the court agrees to a party's application to collect evidence, or based on the court's own authority, the party or individual concerned cannot refuse to provide such evidence.

In China, leniency/settlement agreements aimed at achieving lenient treatment from anti-monopoly law enforcement agencies refers specifically to the “operator’s commitment” system.

According to Article 45 of the Anti-monopoly Law, if the operator under investigation promises to eliminate the effects of the conduct through the use of concrete measures within the time limit accepted by the enforcement agency, the enforcement agency may decide to suspend the investigation. The decision to suspend the investigation shall set out the specific content of the commitment of the operator under investigation. If the operator fulfils the commitment, the enforcement agency may terminate the investigation. The Decision on the Amendment to the Anti-monopoly Law makes no adjustment thereto.

In addition, according to the “Guidelines of the Anti-monopoly Committee of the State Council to the Commitments Made by Undertakers in Monopoly Cases”, the enforcement agency may publicly consult the public on the measures the operator undertakes if it considers that the operator's suspected monopoly conduct has affected the legitimate rights and interests of an unspecified majority of other operators, consumers or the public at large. The consultation period shall normally be no less than 30 days. The enforcement agency may, based on the public opinion, suggest the operator amend the promised measures or re-propose the promised measures. If the operator does not agree without reasonable justification or is unable to propose a feasible alternative, the enforcement authority may terminate the review and communication procedures related to the operator's commitment and continue the investigation of the suspected monopolistic conduct.

Witness testimony is one of the eight types of legal evidence in China’s Civil Procedure Law. Witnesses of fact are frequently used in civil anti-monopoly cases, and they often testify relating to business mode, business operation conduct, and content of the agreement.

In principle, witnesses should testify in court and be questioned by the trial judge and the parties. However, with the permission of the court, those who cannot appear in court for legitimate reasons, such as health reasons, long distances and inconvenient traffic, can testify by means of written testimony, audio-visual transmission technology or audiovisual materials.

All legal evidence, including witness testimony, shall be presented in court and cross-examined by the parties concerned. Evidence without cross-examination by the parties shall not be used as the basis for ascertaining the facts of the case. For witnesses who do not appear in court without a valid reason to provide testimony in writing and other means, the court shall not use the written testimony as the basis for determining the facts of the case.

Since the identification of a monopoly often requires the application of complex economic analysis methods, and judges are usually not economic experts, expert witnesses with economic expertise play a very important role in civil anti-monopoly cases. In this regard, the Judicial Interpretation of Monopolistic Disputes clearly stipulates that the parties may apply to the court for the appearance of one or two persons with corresponding professional knowledge to explain the specialised issues of the case. With the permission of the court, the parties may question the expert witness. In practice, more and more civil anti-monopoly cases adopt expert witnesses and use economic analyses on specialised issues.

In addition to expert witnesses, written economic analysis is often involved in civil anti-monopoly litigation, and also plays an important role in solving key economic issues in cases. Article 13(1) of Judicial Interpretation of Monopolistic Disputes stipulates that “a party may apply to the people's court to employ a professional institution or professionals to produce market investigation or economic analysis reports on special issues of a case”. The court will still judge the probative validity of such reports, focusing on issues including:

• whether the report has sufficient basis in fact or data;
• whether reasonable and reliable market investigation or economic analysis has been used, considering the characteristics of the market investigation or economic analysis report itself;
• whether relevant facts that could change the results of the market research or economic analysis are taken into account; and
• whether the experts have met the prudence and diligence requirements of professionals.

During the evidence exchange proceedings, the court usually organises the exchange of expert opinions/reports issued by each of the parties' expert witnesses. If requested by the litigant, the court will usually allow the expert to appear in court to explain the report and to analyse and evaluate the other party's report.

Civil monopoly damages adopt the principle of compensating the loss only, not punitive damages. The scope of civil compensable damages is limited to the actual loss caused by the illegality of the monopolistic act, which in principle is the difference between the economic situation of the victim during the period of infringement and the economic situation that it would have obtained had there been no monopolistic infringement. The scope of civil litigation damages also includes the reasonable expenses paid for investigating and stopping monopolistic acts.

The determination of actual damages resulting from the illegality of the monopolistic act may be quantified by economics or at the discretion of the court.

Frequently used economic calculation methods include the front-and-back method, the benchmark method, the market share method and the regression analysis method. One of the important roles of the aforementioned economic analysis is to prove the existence and amount of damages.

When the plaintiff has evidence that the monopoly has caused actual damages, but the amount is difficult to determine, the court may also have discretion to determine the amount of compensation based on factors such as the nature, extent and duration of the monopolistic act.

The passing-on defence refers to a defendant who is prosecuted by the direct purchaser for engaging in monopolistic acts. If the defendant can prove that the direct purchaser has transferred the loss caused by the excessively high price to the follow-up consumer through onward sales, then the defendant will not be liable for the losses passed on.

The current Chinese Anti-monopoly Law does not explicitly provide for the passing-on defence system, but it was mentioned in the discussion of the preliminary stage of China’s civil anti-monopoly litigation system. The Judicial Interpretation of Monopolistic Disputes (Draft for Comments) in 2011 provided for the allocation of the burden of proof for the passing-on defence, but this was deleted in the effective version. In current judicial practice, there are no examples of defendants claiming the passing-on defence. In view of the fact that the Supreme Court has granted standing to sue to both direct purchasers and other indirect purchasers (including consumers), and that the scope of civil tort damages under China’s Anti-monopoly Law is the actual loss caused by the illegality of the monopolistic acts, the passing-on defence has room for application and may be supported in specific cases.

China’s Anti-monopoly Law and regulations do not explicitly provide that damages include interest, but damages are based on the principle of equalisation and are compensated for actual losses caused by the illegality of the monopolistic act. In general infringement cases, the Supreme Court has upheld the position that the infringer should be liable for the interest incurred during the period from the occurrence of the damage to the compensation, with the interest rate calculated at the same annual rate as that of the People's Bank of China. In practice, there are civil anti-monopoly cases in which the court supported the plaintiff's claims regarding the interest on damages.

In addition, if the obligation to pay money is not fulfilled within the specified period, the interest on the debt of the delayed period of performance shall be doubled.

According to the provisions of the Civil Code of China, two or more persons shall be jointly and severally liable if they jointly commit infringing acts and cause damage. Therefore, operators who jointly commit monopolistic conduct (such as jointly abusing the dominant market position or entering into/implementing a monopolistic agreement) causing damage to others shall be jointly and severally liable for civil liability in accordance with the law. In civil anti-monopoly litigation, there are cases in which the plaintiff claims that multiple defendants jointly committed monopolistic conduct, requesting joint and several liability.

The leniency system is an anti-monopoly enforcement system, which refers to the fact that at any stage before being given prior notice of an administrative penalty, if a member of a monopoly proactively reports to the competent authority and actively co-operates with them by, for example, providing sufficient evidence, the authority may, as a consequence, mitigate or exempt that member from being punished. The Anti-monopoly Committee of the State Council has issued specially applicable “Guidelines for the Application of the Leniency System in Horizontal Monopoly Agreement Cases” to clarify the forgiveness system for cases related to horizontal monopoly agreements.

However, the law does not stipulate whether the civil liability of the operators applying for leniency should be reduced in civil proceedings, and, in principle, the operators applying for leniency in administrative penalties should bear full civil liability for the actual damages suffered by the plaintiff. How to inspire the operators’ willingness to confess and apply for leniency, however, is a question the authorities have yet to answer.

According to the provisions of the Civil Code of China, the share of liability of persons jointly and severally liable shall be determined based on the gravity of the liability of each person, or the liability shall be evenly shared if it is difficult to determine the gravity of liability of each person. If the liability actually assumed by a person jointly and severally liable exceeds the person's share of liability, the person shall be entitled to claim indemnities from other persons who are jointly and severally liable. In other words, after the joint tort subject assumes liability for tort damages to the victim, they may file a contribution proceeding against the other subjects of the joint tort. There have not yet been any judicial cases of contribution proceedings in civil anti-monopoly litigation.

Except for in maritime law, injunctions, as such, do not exist in Chinese law. In an SEP injunction case, Chinese courts tried to issue an injunction based on act preservation, but the legislative intention of the act preservation system in China is not to support injunctions.

Act preservation in China’s legal system includes act preservation before and during the litigation. Such “injunctions” in China do not include the American “permanent injunction” in the final judgment of the court; in China, a permanent injunction is generally an order to stop the tortious act in a final judgment.

Articles 103 and 104 of the Civil Procedure Law in China, which, respectively, stipulate act preservation during and before litigation, are the substantive legal basis in China. In addition, the Supreme Court's Provisions on Several Issues Concerning the Application of Law in Cases Involving the Review of Act Preservation in Intellectual Property Disputes, which came into effect in January 2019, refine the specific rules for parties to apply for act preservation in intellectual property disputes and for courts to review and enforce act preservation, and these are also applicable to civil anti-monopoly litigation.

The conduct of civil litigation in China is divided into pre-litigation act preservation and in-litigation act preservation, the basic procedures of which are the same, namely, the parties apply to the court and the court decides whether to take act preservation (injunction) measures. The central criterion for the court to judge whether to grant an injunction is its necessity, namely, whether the absence of an injunction will lead to irreparable damage to the rights and interests of the parties or make future judgments unenforceable. The court will determine this based on the specific circumstances of the case. In Chinese judicial practice, there have only been a few cases where pre-litigation injunctions have been granted and even for in-litigation injunctions; courts are very cautious.

In China, alternative dispute resolution methods include arbitration, court mediation, and out-of-court settlements between the parties.

In the anti-monopoly field, there is a judicial rule in the Supreme Court and Provincial High Courts that civil anti-monopoly disputes are not arbitrable on the grounds that they exceed the scope of arbitration law because of the public law nature of anti-monopoly disputes.

Court mediation refers to parties' voluntary and equal negotiation on civil rights and interests disputes under the auspices of the judges of the people's courts so as to reach an agreement to settle their disputes. Court mediation has a wide range of applicability and runs through the civil trial procedure, including the first instance procedure, the second instance procedure and the retrial procedure. Court mediation should always be based on the consent of the parties. Since the Anti-monopoly Law is a public law generally involving public interest, in practice, there are almost no antitrust litigation cases concluded by court mediation.

Settlement by the parties is a manifestation of the exercise of the right to dispose of the dispute through independent negotiation and agreement by the parties without the participation of the court. After reaching a settlement agreement, the lawsuit is usually terminated by the withdrawal of the plaintiff.

Chinese laws and regulations do not provide for a litigation funding system. Such a system does exist in practice but is mainly limited to environmental public interest litigation and enterprise creditors' rights cases. In the past two years, with the gradual expansion of the market demand for intellectual property rights protection in China, some litigation funds have included trade mark, patent and unfair competition infringement and other intellectual property cases in the scope of funding.

Because there are no special provisions, the scale of litigation funds is not publicly known. Due to the lack of disclosure of funding, there are no published cases of anti-monopoly litigation funding in practice.

Access to funding depends on a two-way agreement. After the plaintiff submits a case application to the fund, the litigation foundation usually evaluates the case, including the probability of winning the lawsuit and the benefit of the lawsuit. In China, the success rate of plaintiffs in anti-monopoly litigation is very low, which may reduce the willingness of ordinary litigation funders to invest. However, it is worth noting that civil monopoly litigation is becoming more active in general, which may help to attract litigation funders to invest in anti-monopoly litigation.

Expenditure on litigation mainly includes the litigation fee, the attorneys' fees, the appraisal fee, and so on. The litigation fee is paid to the court and charged according to the amount of the subject matter, which is first paid by the plaintiff and finally shared, in principle according to the proportion of the winning amount supported by the court.

In China, except for special cases such as those related to intellectual property rights, the attorneys' fees of the winning party are usually not part of the award sought in litigation. Anti-monopoly litigations are considered a category of intellectual property cases in China, and the Judicial Interpretation of Monopolistic Disputes clarifies that in civil anti-monopoly litigation, the winning party may request the other party to pay the reasonable expenses of investigation and prevention of the monopolistic conduct.

For other litigation costs such as the judicial appraisal fee, the court will determine the proportion and amount of those costs to be borne by the parties, but generally it follows the principle that the losing party shall bear the costs.

Chinese law does not have a system of security for litigation costs similar to the common law system. The Chinese Civil Procedure Law has removed the requirement for foreigners to provide security and has instead introduced a mutual exemption from providing security for litigation costs on the basis of reciprocity.

Under the Chinese legal system, appeals are available. Any party who is not satisfied with the first instance judgment can appeal (including appeals on points of law). Appeals of civil and administrative anti-monopoly litigation are heard by the Intellectual Property Court of the Supreme Court.

As mentioned in 2.6 Timetable, China has a final-after-two-trials system and the judgment rendered by the court of second instance after the appeal is final. There is still a “retrial” system in China's legal system, and this system belongs to the trial supervision procedure of the effective judgment.