Anti-monopoly Warm-up, A Hard Journey

Issue 26, By Harry Yang, China IP,[Anti-Monopoly]

Since the implementation of the Anti-monopoly Law on August 1, Attorney Dong Zhengwei has become unusually busy receiving journalists daily. Dong was the first person who submitted applications for anti-monopoly investigations in China. Thus, as the anti-monopoly topic continues to heat up, the media has paid more attention to him. Dong does not remember exactly how many times he has been interviewed. “Maybe dozens,” he said. When asked about the anti-monopoly investigation, Dong responded confidently, “it is progressing smoothly.”

The day before the anti-monopoly law went into effect, he submitted the “Request for Protection of Citizens’ Property Rights” to the Ministry of Commerce (MOFCOM), National Development and Reform Commission (NDRC) and State Administration for Industry and Commerce (SAIC), asking for anti-monopoly investigations of Microsoft and other companies.

Attorney Dong instituted independent anti-monopoly actions last year. This time, he has submitted a total of six applications. In addition to the closely watched case of Microsoft’s abuse of market domination in creating and monopolizing a technological market, he also mentioned that the alleged monopolies of state-owned enterprises were of public interest, concerning the monthly fees for mobile and landline phones, railway ticket cancellation fee, airport construction fee, surcharge for oil, electricity and fuel, as well as fees in commercial banks.

Dong submitted the six applications to the three ministries simultaneously. “According to the State Council’s institution setting scheme, all of the three ministries are enforcement agencies for the Anti-monopoly Law,” he said. Prior to the official implementation of the Anti-monopoly Law, SAIC took the lead in setting up an Anti-monopoly and Anti-unfair Competition Law Enforcement Bureau on July 25, which was also the first time the 3 anti-monopoly law enforcement agencies were disclosed. The functions of the three agencies are divided as follows: Anti-monopoly and Anti-unfair Competition Law Enforcement Bureau under SAIC is in charge of monopoly agreements, abuse of market dominant positions and abuse of administrative power to restrain competition; the Price Supervision and Inspection Department under NDRC is responsible for investigations on price control, and MOFCOM conducts anti-monopoly examinations on trusts.

Shortly after the introduction of the institution a scheme, at a time when people were still confused by the responsibilities of the three coexisting agencies, the State Council established the Anti-monopoly Committee to coordinate the anti-monopoly work of the three. However, the operating mode of the Committee was not revealed until August 23 when MOFCOM set up the Anti-monopoly Bureau. It is responsible for implementing specific tasks by the Anti-monopoly Committee.

The three law enforcement agencies are parallel, but carry out their duties separately. However, Huang Yong, a member of the drafting team of the Anti-monopoly Law, stated his concern, “it is indeed difficult for the three law enforcement agencies to keep consistent data standards, to divide responsibilities and to resolve overlapping jurisdictions.” He further continued to say that, “Though the three law enforcement agencies have separate responsibilities, it is still possible that there will be overlapping areas in executing their duties.”

It is likely that  the three ministries have not had enough time to consider in-depth the problems mentioned by Huang Yong. Presently, they are now facing the six applications for anti-monopoly investigations submitted by Dong. Two weeks after the submission, Dong received a reply from MOFCOM, saying that the applications had been transferred to the Department of Legal affairs (at that time, the Anti-Monopoly Bureau had not yet been established). However, the Department of  Legal affairs replied to Dong on August 21 saying that the cases raised by Dong were not caused by acts of centralization, and therefore do not fall into the scope of MOFCOM’s anti-monopoly examination. Also, MOFCOM advised Dong to contact the National Development and Reform Commission or State Administration for Industry and Commerce.

Nearly a month after the reply from MOFCOM, Dong received feedback from the NDRC, which stated that it would seriously consider the abolishment of monthly telephone fees or would conduct a hearing in light of the telecommunication reform. It would also seriously consider the cancellation of fuel surcharges or hold a hearing on this issue. With regards to the airport construction fee and railway ticket cancellation fee, the NDRC did not think it was the appropriate agency to address these matters and advised Dong to try other agencies.

The NDRC responded to only three of the six applications. Moreover, the NDRC’s reply mentioned a price hearing, and not anti-monopoly investigations. Furthermore, they shed off responsibilities for the railway cancellation fee and airport construction fee, on which Huang Yong commented, “Prior to the enactment of the Anti-monopoly Law, some industry regulatory departments were endowed with supervisory duties on competition order in accordance with industrial regulatory laws and regulations, such as the Ministry of Railway, China Banking Regulatory Commission, China Insurance Regulatory Commission and State Electricity Regulatory Commission. The problems should be addressed urgently, such as how to coordinate the industrial regulations and Anti-monopoly Law as well as how to link up Anti-monopoly Law, Anti-unfair Competition Law and Price Law. ”

SAIC was the last to respond. On September 22, exactly one day after the broadcast of his CCTV interview regarding the “Microsoft monopoly,” Dong received a letter from the State Administration for Industry and Commerce, which he believed was no coincidence. However, Dong’s belief may not be exact, according to the date, September 12, in SAIC’s reply, which was officially stamped by the Bureau for Letters and Calls of Public Security Office, if the posting time of the reply was concerned. In this reply, they confirmed that the six applications “have been received. SAIC has attached great importance and the departments concerned will seriously work over the applications.”

In light of the fact that reply contained very few words and no substantive content, Dong thought it was extremely important. “This shows that SAIC has started to take actions to enforce the Anti-monopoly Law.” he stated. His expectations with regards to SAIC are high, believing that this response introduces the six applications into the enforcement arena.

However, media and experts are not as optimistic. The Legal Daily revealed on July 27, that during the discussion of the Draft Anti-monopoly Law, legislative administrations had contemplated more than forty implementing regulations, but so far none of these rules have materialized. The Anti-monopoly Law, with 8 chapters and 57 articles, is so general that elaboration with explanation for each concept is necessary.

“Western countries not only have a wealth of experiences on anti-monopoly, but also tons of legislations and case law, in addition to a plethora of guidelines as basis for anti-monopoly law enforcement.” Huang said, “Professionalism and complexity will bring enormous challenges to the law enforcement agencies.”

Thus far, there are several separate anti-monopoly law enforcement agencies, and enforcement procedures are not yet clear. Thus, it has become troublesome for the general public to report acts of monopoly. Li Fangping, also a lawyer, chose a path that was quite different from that of Dong Zhengwei. On the day the Anti-monopoly Law went into force, he brought a lawsuit in the Court of Beijing Chaoyang District against the Beijing Branch of China Netcom for abusing its market power and discriminatory pricing treatment.

Li Fangping has been working in Beijing for more than 10 years, but still has no Beijing Hukou (registered permanent residence). When applying for a fixed-line installation from Beijing Netcom, he learned that the service contract had a provision that without permanent residence in Beijing, the users can only choose between assurance and prepaid business. Li chose the “prepaid business.” Soon, he found that he could not enjoy the same services as the prepaid users who have a Beijing Hukou, such as zero monthly rent, increased call duration, value-added services and co-payment accounts. Li believed that Beijing Netcom, with an absolute monopoly in Beijing, had given different treatment for prepaid users. According to Article 17, Paragraph 6 of the Anti-monopoly Law, i.e. “applying discriminatory treatments on trading prices or other trading conditions to their trading parties with equal standing without any justifiable causes,” the act of Beijing Netcom falls into the scope of a monopoly.

Li lodged the lawsuit on the basis of the Regulations on Causes of Actions in Civil Cases promulgated by the Supreme People’s Court in April of this year. It clearly provides that citizens can file anti-monopoly proceedings directly with the court. This provision soon ignited public’s enthusiasm. On the same day that Li initiated his proceedings, several anti-monopoly lawsuits were launched: Beijing Zhaoxin Information Technology Co., Ltd. and three other anti-counterfeiting technology companies indicted the General Administration of Quality Supervision, Inspection and Quarantine (GAQSIQ) for monopoly, because the Administration promoted the electronic monitoring network developed by CITIC Guojian Information Co., Ltd. and constituted the monopoly act of restricting, excluding other network companies from competition; the Mingbang Tax Office of Yuyao City in Zhejiang prosecuted Yuyao Government for administrative monopoly; Liu Fangrong, lawyer from Chongqing sued Chongqing Municipal Insurance Association for monopolizing market price, restricting free competition, resulting in the loss of insurance fees.

The almost simultaneous lawsuits made the judges fully realize the anti-monopoly boom. However, the judges still need to learn by trial and error. A principal of the IP Division of the Supreme People’s Court said to the Peopel’s Court News: “In the future, it will become a challenging task for the court to try anti-monopoly cases.” The unnamed principal believed that anti-monopoly cases are complicated and highly professional. With economic and legal issues intertwined, some cases will have great impact on enterprises and industries, or even on the country’s economic security. The whole society including the courts still need more time and practices to better understand and apply Anti-monopoly Law.

These anti-monopoly lawsuits have quite different fate: Li Fangping v. Beijing Netcom case, after nearly one and half month’s study, was formally filed in Beijing Chaoyang District Court on September 16; On the same day, Mingbang Tax Office v. Yuyao City case, which was originally scheduled for a court session on September 24, reached a mediated settlement and Mingbang Tax Office withdrew the case from Ningbo Intermediate People’s Court. So far, there is no news on the file of Liu Fangrong v. Chongqing Municipal Insurance Association.

The four enterprises v. GAQSIQ case was the least successful. On September 4, Beijing No.1 Intermediate People’s Court dismissed the case on the basis of “Statute of Limitation.” However, the attorneys of the four enterprises believed that the GAQSIQ activities promoting the e-monitoring network has been continuing, and no the Statute has not started to run against them. With this understanding, the four enterprises has appealed the case to Beijing High People’s Court.

Although Li Fangping’s case has been filed in court, the process is by no means smooth. “I had been to the court five times before the case was filed,” he said, “The cause of action is the most difficult part. My case is based on anti-monopoly, but so far the Supreme People’s Court has no relevant judicial interpretation on the cause of actions. The court also worried about it and inquired about the cause specially. The case was finally filed as a dispute over telecommunication service contract.” As a contract dispute, the case should be handled by the Civil Division. However, the case was later transferred to the IP Division, which indicated that the court finally took it as an anti-monopoly litigation, since the Supreme People’s Court assigned anti-monopoly jurisdiction of intellectual property divisions this April and all to the anti-monopoly cases would be tried by the IP Division.

Despite the twists and turns, Li’s case has finally begun its proceeding. The public is looking forward to the trial of the first anti-monopoly case and the media are also fully prepared—the anti-monopoly battle has just begun. Despite of the social enthusiasm, IPR judges appear to be more cautious. The principal of IP Division of the Supreme People’s Court enumerated a number of specific problems, such as jurisdiction, definition of plaintiff’s eligibility, calculation of damages, coordination and convergence between anti-monopoly administrative law enforcement and civil litigation and so on. Anti-monopoly lawsuits will make new challenges that judges will have to face.

 Dong Zhengwei was obviously not satisfied with the reply from MOFCOM. He chose to take the initiative. On September 4, Dong filed a request for administrative reconsideration to MOFCOM, asking it to fulfill the responsibilities of Anti-monopoly Committee and “coordinate with SAIC and NDRC to settle the six applications for anti-monopoly investigations.” However, MOFCOM denied the request on September 19 on the basis that its previous “reply” was not a reviewable administrative act. Two days later, Dong filed a final application for administrative reconsideration with the State Council. It appears that he still has cards in his hand. When questioned about his persistence, Dong explained that he did so “to advance the anti-monopoly law enforcement.”

(Translated by Li Yu)

Member Message


Only our members can leave a message,so please register or login.

International IP Firms
Inquiry and Assessment

Article Search

Keywords:

People watch

—Interview with Dr. James Zhu, partner of Perkins Coie LLP

Online Survey

In your opinion, which is the most important factor that influences IP pledge loan evaluation?

Control over several core technologies for one product by different right owners
Stability of ownership of the pledge
Ownership and effectiveness of the pledge

-