Can Court Challenge Leviathan with New Anti-monopoly Judicial Interpretation?

By Frank Yu

China anti-monopoly law, judicial jurisdiction, burden of proof, liability scope, anti-monopoly judicial interpretation, administrative monopoly, the industries which exercise monopoly over the production and sale of certain commodities, price supervision, public company, operator with monopolic position, abuse dominant position in the market, market structure, competition condition, market dominant position determination, regulation on monopolic conduct, sell with price lower than cost, refuse to transact, different treatment of price, fairness, justice, independence of courts, large scale state-owned enterprise, fair competition, economy operation efficiency, consumer interests, social public interests, administrative level, anti-monopoly lawsuit social effect, state secret, business secret, personal privacy, opened hearing, showed to the agent, confidentiality commitment, expert witness, cross inquiry

On 8^th May of 2012, the Supreme People’s Court of China issued Regulations on Several Issues concerning the Law Application in Hearing the Civil Disputes Arisen from the Monopolic Conduct (the “Judicial Interpretation”), which makes a detailed provision on the jurisdiction, distribution of the proof burden, liability scope and other aspects in the civil cases from the monopolic conducts. With the enforcement of the new regulation, many media has expressed their hope on it, however to our opinion, though cautiously optimistic, we would rather to say and doubt that could there only be a smooth future ahead of the new regulation?

I. Not optimistic for the judicial interpretation to challenge the administrative monopoly

As provided in Article 7 of Anti-monopoly Law,“With respect to the industries which are under the control of by the State-owned economic sector and have a bearing on the lifeline of the national economy or national security and the industries which exercise monopoly over the production and sale of certain commodities according to law, the State shall protect the lawful business operations of undertakings in these industries, and shall, in accordance with law, supervise and regulate their business operations and the prices of the commodities and services provided by them, in order to protect the consumers’ interests and facilitate technological advance.”

Furthermore, Article 9 of the Judicial Interpretation issued this time regulates that“Where the alleged monopolistic conduct is found the abuse of the dominant position in the market by the public enterprise or other operators with monopolistic position, the people’s court may preliminarily determine the dominant market positions of the alleged conductor with the reference to the market structure and competition conditions unless the conductor has sufficient evidence to prove otherwise.” But, to my view, such regulations are not adequate enough to be the judicial reference by which to combat the administrative monopoly. Because by Article 8 of the Judicial Interpretation, the plaintiff shall take the burden of proof to the monopolic conduct of abusing ones dominant position in the market, which shall include the “the dominant market positions of the alleged conductor” and “the alleged abuse of dominant market positions”. That is to say in addition to the dominant position of the defendant in the market, the key question shall lay in the proof to its abusing such positions. Then, here comes another question, what is “abuse” adopted in the regulation? The answer could be found in Article 17 of Anti-monopoly Law, which include

(1) selling commodities at unfairly high prices or buying commodities at unfairly low prices;

(2) without justifiable reasons, selling commodities at prices below cost;

(3) without justifiable reasons, refusing to enter into transactions with their trading counterparts; (4) without justifiable reasons, allowing their trading counterparts to make transactions exclusively with themselves or with the undertakings designated by them;

(5) without justifiable reasons, conducting tie-in sale of commodities or adding other unreasonable trading conditions to transactions;

(6) without justifiable reasons, applying differential prices and other transaction terms among their trading counterparts who are on an equal footing; or

(7) other acts of abuse of dominant market positions confirmed as such by the authority for enforcement of the Anti-monopoly Law under the State Council.

Equally, what’s the definition of the “fair price” and “justifiable reasons”? For the above regulation has authorize the administration to supervise and regulate the price of the products or services provided by the public enterprise or other operators with monopolistic position, it’s a big concern whether the administration of justice could challenge the so-called “fairness” and “justifiability” of the administrative supervision and regulation in practices or could it determine the conduct of abusing dominant position on its own discretion.

II. The independent role of judiciary in hearing the monopoly civil disputes with large state-owned enterprise or central company will be put into test

The company with highest monopoly degree is no doubt the large state-owned enterprises. To some extent, the main target of anti-monopoly work shall be the prevention of over monopoly conducted by the state-owned company to leave more space for the bigger and stronger private sectors in China and thereby the legislature purpose advocated in Article 1 of the Anti-monopoly Law that “preventing and restraining monopolistic conducts, protecting fair market competition, enhancing economic efficiency, safeguarding the interests of consumers and the interests of the society as a whole” could be fulfilled. (see the article of my associate Mr. Bai Lituan posted on issue 71 of DeBund Newsletter)

However, in practices in China, the large scale state-owned enterprises are with administrative level, like ministry status or deputy ministry status. Also the head officers of such companies have administrative post level. On the other same, the administrative level are also adopted in China courts, and the courts, also their chief judges are labeled the administrative posts, like division level or department level. Therefore, it’s not strange to worry the independence and neutrality of the judiciary when the legal representative with a higher administrative level sitting on the court presiding by a judge of a lower level.

III. The social effect of anti-monopoly lawsuit will be limited by confidence regulations in law

Article 11 of Judicial Interpretation says that when the content involving nation secret, trade secret, individual privacy or other information demanded for the confidential measure, the people’s court may according to its power or by the party’s application to hear the case not in public, restrict or prohibit to copy the evidences, present evidence only the counsel and ordering for submitting confidential promises and other effective methods to protect the evidences.

In practices, the public interests could also be involved in addition to the interests of the plaintiff and the defendant, and the monopolic enterprise could only restrict its monopolic conducts when dreading of the influence in the market and the social effect. In reality, we also see a vague definition of “nation secret”, “trade secret”, “other information demanded for confidential measures”, and over control over the supposedly open and transparent hearing may jeopardized the fairness of the case settlement. Especially when there is a large number of the victims of the monopoly, the over confidentiality measures may arise the public doubt to the fairness of the court instead.

IV. Unclear regulation on the appearance of persons with professional knowledge on the court

By Article 12 of the Judicial Interpretation, the parties may apply to the people’s court for the appearance of persons with professional knowledge to illustrate the professional issues involved in this case.

The “expert witness” is regulated in the Article, but it does not specify whether they shall be inquired by the parties, especially the party filing the application, in the lawsuit when illustrating the professional issues involved in this case. Besides, we also have seen no clauses saying that when the professional opinions from the experts entrusted by each party are different, shall the expert argument or cross inquiry be arranged. On account of the opinions or interpretations made by the experts are not the only or the correct answer, therefore, it such answers could not be regulated by law, who could guarantee the attendance of the expert on the court or the effect of their attendance.

Just like the prospects of other judicial system, the judicial interpretation could only solve part surface problems. The real effect of the anti-monopoly civil lawsuit depends on the overall development of civil lawsuit system as well as the advance of anti-monopoly law. What’s more important, also the core of the question, is what attitude shall China take to the monopoly, especially the state monopoly.

Lawyer Contacts

For further information, please contact the lawyer as listed below or through the methods in our CONTACTS.

You Yunting

86-21-52134918
youyunting@debund.com, yytbest@gmail.com

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