(By You Yunting) The fifth anniversary of enforcement of Chinese Anti Monopoly Law fell on August 1, 2008. Just on this day, Shanghai Higher People’s Courts first supported plaintiff’s claim in anti-monopoly civil case. The court determined that Johnson & Johnson Medical Co. Ltd constitutes a vertical monopoly for restricting on the minimum sales price and shall make civil compensation on plaintiff’s loss. Past essays on this website have introduced the first instance judgment on this case made by Shanghai No.2 Intermediate Court; the summary of the judgment is as followed: Do All Minimum Price Limits Violate the Anti-trust Law in China? The plaintiff, Beijing Rui Bang Yong He Science and Trading Co., Ltd. (the “plaintiff”) used to be the dealer of Johnson & Johnson Medical (Shanghai) Ltd. and Johnson & Johnson Medical (China) Ltd. (the “defendants”). Cooperation between the parties lasted for nearly fifteen years, and the distribution contract was renewed each year. On January 2, 2008, the defendants entered into a distribution contract with the plaintiff stipulating that the plaintiff could not sell the product below the price set by the defendants. On July 1, 2008, the defendants sent a letter to the plaintiff, saying that they would deduct the RMB 20,000 yuan deposit paid by the plaintiff due to the plaintiff’s unlicensed markdown sale. In the meantime, the defendants ordered plaintiff to stop its lower priced sales and stated that the plaintiff’s product supply would be cancelled and that the plaintiff would no longer be the defendants’ dealer. The plaintiff believed that the defendants’ limit on the minimum sales price has constituted the floor price setting as prohibited in Paragraph 2 of Article 14 in the Anti Monopoly Law, and thereby caused damages to the plaintiff. Basing on these, the plaintiff filed a lawsuit in the court, claiming the compensation. After the hearing, the Shanghai No.1 Intermediate People’s Court held that the decision on the existence of monopoly agreements as regulated by Article 14 of the Anti Monopoly Law could not only consider whether the undertakings have concluded a monopoly agreement with their trading counterparts that would fix or limit sales prices, but also consider Paragraph 2 of Article 13. This means it is necessary to further check whether the agreement excludes or limits competition. Considering the evidence presented by the plaintiff could not prove the above issues, the court refused all the claims of the plaintiff. Shanghai Higher Court held after the trial that Anti Monopoly Law shall be applied in the case, since the distribution contract between the plaintiff and the defendants containing clauses restricting the plaintiff to sell the product at a minimum price constitutes such effects of eliminating or restricting competition without clearly sufficient promotion for competition. For these reasons, the higher court determined the distribution contract constituted a monopoly agreement as regulated by Article 14 of the Anti Monopoly Law. Concerning the fact that the defendant took such actions that could be involved in the monopoly as provided in the Anti Monopoly Law, the court determined that those actions concluded a monopoly agreement prohibited by the Anti Monopoly Law and accordingly the defendant shall make compensation for loss to the plaintiff. On these grounds, the higher court reversed the original judgment and decided that the defendant shall make compensation in the amount of RMB 530, 000 yuan to the plaintiff in 10 days. In addition, the higher court refused the other claims made by the plaintiff. Our lawyers have already obtained the second instance judgment. We would interpret it in the next week’s post.
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