360 vs Tencent: The Summary of Anti-Monopoly Court Hearing

On 18th April, 2012, Guangdong Higher People’s Court heard the case of monopolized status dispute filed by Qihoo 360 (NYSE: QIHU) against Tencent (HKEX: 700), with the claim of 150 million yuan. For the background information of the case, please refer to Wiki and a letter from Zhou Hongyi, the CEO of Qihoo 360 to his employees.

The information disclosed from the indictment of Qihoo 360:

I. The request of Qihoo 360

Demanding Tencent to cease the infringement of abusing its market monopoly status, including but not limited to cease the limitation on the transaction between QQ user and Qihoo 360, selling the safeguard software in QQ; demanding the joint compensation by the defendants to the losses of RMB 150 million yuan and the apology to Qihoo 360, also the expenses of reasonable costs and lawsuit fee paid by Qihoo 360 shall also be borne by Tencent.

II. Qihoo 360 holds Tencent is equipped with monopolized status in the market

Tencent has the monopolized status in the market of instant messenger and service related, and the product market related to the case is the instant messenger software market and its service market, and its geographic market is the mainland of China.

III. Qihoo 360 holds Tencent has abused its monopolized status in the market

The limitation on the transaction by the plaintiff is kind of abusing of monopolized status in the market.

First, there’s direct proof that the plaintiff publicized “A Letter to QQ users” on 3rd November, 2010, to prohibit using 360 software, otherwise the user shall face a ceasing of QQ service. After that, the plaintiff refused to provide the service to any user installed 360 software and force the user to uninstall the 360 software. What’s more, the plaintiff also adopted technological measures to prohibit the visit of 360 explore user to QQ zone, and during that period many 360 users chose to uninstall the software of the plaintiff.

Second, the defendant bundled the QQ safeguard with its instant messenger and to force the installment of such safeguard software when updating the QQ, all these have constituted the abuse of its monopolized status in the market, damaged competition and violated the anti-trust law.

The case has aroused wide attention, and many media have reported the hearing of the day. According to the Microblog live for the hearing, the main defenses of Tencent are:

I. The instant messenger function of its software has been integrated by its email, SNS and microblog, therefore, the related market in the case shall not limit the IM market, and after the extension, Tencent is obviously not complying with the regulated monopoly share of half market share in anti-trust law.

II. Even in the IM market, only in 2011, there were more than 10 similar softwares, like Kouxin of Qihoo 360, iMessege of Apple introduced to the market, not with the existing Fetion of China Mobile, Ali of Alibaba, Hi of Baidu and YY counted in, therefore Tencent’s QQ has no monopolized status in the market.

III. The IM service is easy to be replaced and its users are sensitive to the price who have been adaptive to the free service, therefore, when there appear any problem in the software, the user could turn to other equivalent softwares, and from this aspect no possibility of user kidnap could be determined on Tencent.

IV. For the problem of bundled sales, to Tencent’ s opinion, it shall be a rule in the industry, with Qihoo 360 also follows it. When users download the 360 Safeguad, they will necessarily be recommended the 360 Antivirus, and moreover, 360 Explore is usually contained in the installation package of 360 software.

In the hearing, the court concluded the focus of the dispute on the dispute as follows: 1) How to determine the market related? 2) Does the defendant have the status of a monopoly? 3) Has the plaintiff abused its monopolized status and thereby the competition is limited? 4) What liability shall be taken by the plaintiff when the monopolized status and limitation on market competition is determined? Till the post of this essay, the hearing of the dispute was still going on, and our website will keep the report on the case.

To our opinion, by Anti-trust Law of China, the monopoly from the natural competition is not against the law, while to use such status to bundled sell a different product is illegal. It’s common for big companies to take unfair competition measures when battling with small ones in China. Whatever the result is, the lawsuit itself will no doubt help to promote the competition and be helpful to the survival and development of the small company.

Editor: Mr. You Yunting
Founder & Editor-in-Chief of Bridge IP Law Commentary
Partner & Attorney-at-law of Shanghai DeBund Law Offices
Email: Bridge@chinaiplawyer.com, Tel: 8621-5213-4900,
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Bridge IP Law Commentary is a website focus on the introduction of commercial laws in China, especially the intellectual property laws. All the posts here are our original works. And all news or cases referred here are from public reports, and our comments or analysis are of due diligence, neutrality and impartiality, representing our own opinions only and are our original works. You may contact us shall you have any opinions or suggestions.

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