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China’s Antitrust System: Prospects for Related Judicial Developments in 2022

2022 marks the 15th anniversary of the issuance of the Anti-Monopoly Law of the People’s Republic of China.  In late November 2021, China’s solicitation of public comments on its proposed amendment to this law came to an end.  Apart from the prospect of seeing a new version of this important national law, what judicial developments related to this law will likely occur in 2022?

My take: in 2022, there will likely be (1) more judicial cases related to the Anti-Monopoly Law and (2) more “case guidance” in this area.

More Judicial Cases Related to the Anti-Monopoly Law in 2022

Since the Anti-Monopoly Law came into effect in 2008, courts of different levels in China, according to statistics reported in late 2021 by the Supreme People’s Court, have adjudicated nearly 1,000 civil cases related to this law.  Specifically, the number of such cases adjudicated per year rose from 6 in 2008 to 107 in 2020.

This upward trend is likely to continue in 2022 because a significant contributing factor to this trend that has been identified by the Supreme People’s Court—“[the law] concerns a wide range of industries and fields, and in recent years, monopoly disputes in the Internet field have arisen frequently”—does not appear to be weakening.

In addition, beginning from January 1, 2021, according to the revised Provisions of the Supreme People’s Court on Several Issues Concerning the Application of Laws in Handling Civil Disputes Arising from Monopolistic Acts, China’s Intellectual Property Courts (four in total, three of which were established in 2014 in Beijing, Shanghai, and Guangzhou, while the fourth one began to operate in 2021 at the Hainan Free Trade Port) also have jurisdiction to handle first-instance civil cases related to the area of anti-monopoly law.  These cases, if appealed, are adjudicated by the Intellectual Property Tribunal of the Supreme People’s Court.  In general, prior decisions made by the three older Intellectual Property Courts and the Intellectual Property Tribunal of the Supreme People’s Court have been quite well-received.  This past performance is likely to make parties involved in anti-monopoly disputes feel more ready to bring suit in these courts, thereby helping sustain the upward trend.

More “Case Guidance” Related to the Anti-Monopoly Law in 2022

The prospect of seeing a continuous increase in anti-monopoly civil cases, however, puts pressure on the Chinese judiciary to provide more guidance.  Why?  The Anti-Monopoly Law, no matter whether it is the current version or the proposed amended version, and the aforementioned judicial interpretation (i.e., the Provisions of the Supreme People’s Court on Several Issues Concerning the Application of Laws in Handling Civil Disputes Arising from Monopolistic Acts) provide limited guidance on the adjudication of these disputes.  While the Supreme People’s Court has announced that it has been actively formulating another judicial interpretation in this area, it may take some time before this judicial interpretation is ready for release.

As an interim measure, the Supreme People’s Court is likely to release representative cases, especially Guiding Cases (for more discussion of how Guiding Cases are considered “de facto binding precedents” in China, see SINOTALKS.COM In Brief No. 2) to provide the much-needed guidance.

In particular, the success of Guiding Case No. 78 in contributing to the formulation of rules regarding the definition of “relevant market” in Internet-related anti-monopoly cases, as stated in the Guidelines of the Anti-Monopoly Commission of the State Council on Anti-Monopoly in the Field of Platform Economy (released in February 2021), should encourage the Supreme People’s Court to release more Guiding Cases in this area.  Released in March 2017, Guiding Case No. 78 is a summary of a well-reasoned full-text judgment rendered by the Supreme People’s Court itself in October 2014 to handle a dispute involving Tencent’s alleged abuse of its market position.  The principles of Guiding Case No. 78 include:

2. The Hypothetical Monopolist Test (HMT) is an analytical approach generally applicable to defining the relevant market [in an anti-monopoly case].  When the Hypothetical Monopolist Test is actually applied, it can be carried out by the [Small but Significant and Non-transitory] Increase in Price (SSNIP) [method], the [Small but Significant and Non-transitory] Decrease in Quality (SSNDQ) [method], or other methods.  The free-of-charge feature of Internet instant messaging services makes users have higher price sensitivity [and, therefore,] applying the Increase in Price [(SSNIP)] testing method will lead to an excessively broad definition of the relevant market.  [In such a case, a people’s court] should apply the Decrease in Quality [(SSNDQ)] [method] of the Hypothetical Monopolist Test to carry out a qualitative analysis.

3. Given the low-cost and high-coverage characteristics of Internet-based instant messaging services, when the relevant geographic market [of these services] is defined, [a people’s court] should conduct a comprehensive assessment based on such factors as the actual regions [where] most people with demands [for these services] make their purchasing choices, [relevant] provisions of laws and regulations, the current status of overseas competitors, and the timeliness of entering the relevant geographic market.

In his piece titled “In Qihu v. Tencent, the Chinese Supreme People’s Court Offers Antitrust Insight for the Digital Age” (China Cases Insights, Issue No. 1, May 5, 2017), John M. Walker, Jr., Senior Circuit Judge of the United States Court of Appeals for the Second Circuit, comments on Guiding Case No. 78 and concludes:

Guiding Case No. 78 addresses emerging questions in antitrust law that are likely to become more common in the United States and other jurisdictions.  In particular, technology firms accused of antitrust violations are likely to continue to assert the types of defenses advanced by Tencent.  As internet businesses become more profitable and sophisticated, judges will be required to confront technology-based challenges to traditional antitrust doctrine, in particular those related to the pace of technological change.  How relevant markets and market power are defined in global markets characterized by free products and low barriers to entry remain open questions.  The [Supreme People’s Court’s] sophisticated approach to these questions will serve as a useful resource to jurists not just in China but elsewhere in coming years. (emphasis added)

Overall, 2022 is likely to be an interesting year for observers of China’s antitrust system and judiciary and for stakeholders around the world whose legal interests and rights may be affected.

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^† The citation of this article is: Dr. Mei Gechlik, China’s Antitrust System in 2022: Amendment to the Anti-Monopoly Law?  What Else?, SINOTALKS.COM, In Brief No. 3, Jan. 12, 2022, https://sinotalks.com/inbrief/china-anitrust-system.

The original, English version of this article was edited by Nathan Harpainter.  The information and views set out in this article are the responsibility of the author and do not necessarily reflect the work or views of SINOTALKS.COM.