China's largest Internet search engine, Baidu.com Inc, stands accused of abusing its dominant market position in the Internet industry's first test of the nation's Anti-Monopoly Law

Tangshan Renren Information Service Company (TRISC), claimed that the Web giant had monopolized China's search engine market and blacklisted its subsidiary website after TRISC cut back spending on advertising on Baidu.

The case, which opened at Beijing First Intermediate People's Court on April 22, is the first in China's Internet industry to deal with an alleged breach of the Anti-Monopoly Law, which came into effect in August last year.

"According to statistics released by Baidu itself, the firm's market share of China's search engine sector in the third quarter of 2008 accounts for as much as 70 percent," said Li Changqing, a lawyer from Beijing Bangdao Law Office, representing TRISC, which is seeking 1.1 million yuan in compensation.

Baidu questioned the figures. "The market share in one quarter does not reflect Baidu's overall market share. The increase in usage was only a seasonal phenomenon," asserted Zhang Yongyi, a lawyer from Beijing Dali Law Firm, representing Baidu.

Competition between China's search engines remains intense, with users often switching between them, Zhang explained.

Claiming that the legal basis of TRISC's challenge was rather flimsy, Zhang noted that "companies engaged in alleged monopolistic behavior are normally investigated for at least two years in Western countries".

According to China's Anti-Monopoly Law, a company is deemed to have a "dominant" position if its market share exceeds 50 percent.

Baidu took advantage of its supposed dominant position to block TRISC's subsidiary website qmyy.com, the country's first online information platform linking medicine manufacturers with distributors and users, claimed the Tangshan-based firm.

According to TRISC, it signed a bid ranking agreement with Baidu to increase the click rates of qmyy.com in March 2008.

Bid ranking is a service launched by search engine providers. When users input some key words, the names of firms that have paid fees will be the first to appear in the search results.

Search engine providers charge these firms a fee every time users click the search results and enter their homepages.

The service offered by Baidu offers firms the chance to gain more prominence in search results if they are prepared to fork out for it.

The website paid for the bid ranking service on Baidu from March last year, with cooperation between the two proceeding smoothly for the first few months.

But things turned sour when, to cut costs, qmyy.com began to gradually reduce its bid ranking fees from June last year.

"After we lowered the amount we paid for Baidu's bid ranking service, Baidu blacklisted our website," said Wang Guanjue, a legal representative of TRISC.

In July 2008, qmyy.com found the number of visits to its website dropped sharply from 2,961 to 701 a day.

There were only four searches for the company on the website of Baidu on Sept 25, 2008, Li said. However, on the same day, there were 6,690 search results for the company on Google.com, Li said.

On Oct 31, 2008, Wang submitted an application to the State Administration for Industry and Commerce to initiate an anti-monopoly investigation against Baidu, which replied on Nov 10 that its blockage of qmyy.com was because the website carried "junk information".

On Dec 26, 2008, TRISC brought a lawsuit against Baidu to Beijing First Intermediate People's Court, which started hearing it on April 22.

TRISC, which has called on Baidu to stop blocking its Web pages from appearing on its search results, made the decision to file a lawsuit after it failed to reach an out-of-court settlement with Baidu, according to Li from Beijing Bangdao Law Office.

Baidu denied the monopoly allegations. It said it had blocked TRISC's site because the company created links to junk information in order to increase the number of hits on its website. It also said that it was normal in the search engine industry to crack down on such sites.

The case continues.

China Intellectual Property News contributed to the story.

(China Daily 06/01/2009 page9)