China Anti-Monopoly Law - Finalised Judicial Interpretation May Lead to More Civil Cases and Provide More Assistance to Plaintiffs
On 8 May 2012, China's Supreme People's Court (SPC) released a new Judicial Interpretation relating to the country's Anti-Monopoly Law (AML) - the Provisions of the Supreme People's Court on Several Issues Concerning the Application of Law in Civil Dispute Cases Arising out of Monopolistic Conduct (the "Provisions").
The Provisions, which take effect on 1 June 2012, explain how China's courts will handle civil cases brought by persons or companies that claim to have suffered loss as a result of a violation of the AML.
Release of the finalised Provisions is a welcome development given that China's courts have been hearing AML-related civil actions since the law commenced in August 2008, notwithstanding that there has been some significant uncertainty during this time regarding how such cases should be processed. Perhaps because of this uncertainty, it is understood that many case applications have been rejected on technical grounds (just 61 cases had been accepted until the end of 2011), and there is also a view that the courts have been focusing only on those cases in relation to which there is a relatively settled view amongst the Anti-Monopoly Enforcement Authorities (AMEAs) and related government organs about how enforcement should occur. With the new Provisions in effect, the scope of AML-related cases coming before China's courts, and the speed of progress of such cases, may therefore increase.
- the confirmation that plaintiffs can bring both stand-alone or follow-on civil cases relating to alleged infringements of the AML (i.e. there is no requirement of a prior investigation or finding of infringement by the AMEAs);
- the specification that certain Intermediate People's Courts will be the courts of first instance for such cases (unless the Supreme People's Court approves the lower-level Primary People's Courts to hear such cases), although the finalised Provisions do expand the number of Intermediate People's Courts who may be involved; and
- the provision for a two year statute of limitations period for the commencement of AML-related civil actions, with the limitations period beginning on the day the plaintiff knows - or should have known - about the relevant violation (or alternatively, if an AMEAs investigates the alleged violation behaviour, the limitations period will commence on the date of their decision).
Perhaps the most notable aspects of the Provisions relate to allocation of the burden of proof.
Article 7 relates to the AML's prohibition of restrictive (or what the AML terms "monopoly") agreements such as horizontal price-fixing agreements or other 'cartel' conduct, and effectively provides that once a plaintiff proves that such an agreement exists, that agreement will be presumed to have the effect of eliminating or restricting competition unless the defendant can provide evidence rebutting this presumption.
Regarding 'abuse of dominance' claims, the default position is that the plaintiff bears the burden of proof when it comes to proving that the defendant possesses a dominant market position in a relevant market and has engaged in abuse of such position. This is in keeping with the usual situation in other jurisdictions. However, a stated exception (newly inserted since circulation of the April 2011 Draft) is that if the defendant is a public utility or some other business operator that is granted monopoly status under the law (which may include Chinese enterprises dealing in such products as railways, petroleum, tobacco, salt and power ) then the courts may (having regard to the relevant market structure and related matters) apply a presumption of market dominance unless sufficient evidence is present to prove otherwise. The reference in the Provisions to the courts needing to have regard to issues such as market structure before applying the presumption indicates that consideration will still be given as to whether products or services in relation to which public utilities or other relevant enterprises in China have an exclusive position or exclusive rights constitute a distinct market (which will strongly support applying the presumption of dominance), or are more properly considered to compete with other substitutable products or services.
The new treatment of public utilities and legal monopolies under the Provisions may help to reverse the trend of unsuccessful AML-related civil actions since China's courts began hearing such cases. Many civil actions alleging abuse of dominance by public utilities and other industry giants that have appeared to be 'dominant' in their markets have not been sustained as the courts have deemed that insufficient evidence was presented by the plaintiffs to prove such dominance. That hurdle will now be more easily cleared in many cases.
It is also interesting to note that many of the potential 'defendants' who will be impacted by this new approach to abuse of dominance cases will be state-owned enterprises (SOEs). This development, combined with the fact that AMEAs have already recently begun to taken action against large SOEs in China for alleged violations of the AML (such as in the enforcement action reported in our legal update China Antitrust Moves Up a Gear in November 2011), underlines that SOEs are not, contrary to some expectations when the AML commenced, getting a 'free ride' under the law.
It is also worth pointing out that draft versions of the Provisions that were circulated prior to April 2011 provided for a 'double damages' regime, however the relevant Articles were omitted from the April 2011 Draft and are also not included in the finalised Provisions. However, a plaintiff can claim for the ‘reasonable expenses’ occurred in investigating and bringing an action in respect of a violation, including expenses related to retaining experts for their depositions in the civil hearings.
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