The Chinese Supreme People's Court ("SPC") has
promulgated final Rules on Civil Litigation under the Anti-Monopoly
Law ("AML") (the "Rules"), which will become
effective on June 1, 2012. These Rules set out the framework
for civil antitrust litigation in China. The implementation
of these new rules and the advantages they give plaintiffs will
accelerate the growth of private antitrust litigation in
China.
The final Rules come more than a year after publication by the SPC
of a draft for comments. (see our May 2011 Alert,
China's Supreme Court to Set Framework for Antitrust
Litigation.) It appears that the SPC considered many of the
comments submitted on the draft, as well as other significant
developments in the anti-monopoly area over the past year, such as
some noteworthy civil AML lawsuits and high-profile non-merger
investigations by Chinese antitrust regulators. However, many of
the provisions in the final Rules remain essentially unchanged from
the 2011 draft, including those related to jurisdiction, statute of
limitations, and the scope of the possible compensation for victims
of monopoly conduct.
It is noteworthy that provisions in the draft relating to a
"passing on" defense and providing special rules for
(limited) discovery in AML cases were deleted from the final
Rules. Moreover, the final Rules make provision for
lower-level (i.e., basic) people's courts to hear AML civil
suits upon the SPC's approval, rather than limiting
jurisdiction only to the intermediate courts. These changes
may make AML cases more accessible to smaller plaintiffs, but at
the same time have removed specialized procedures for obtaining
information in AML cases that might have alleviated some of the
usual difficulties involved in evidence-gathering in PRC civil
litigation.
Some other important changes compared to the April 2011 draft are
summarized below:
Eligible plaintiff. The final
version may expand who may bring antimonopoly actions.
The 2011 draft allowed only persons "injured by the alleged
monopoly conduct" to lodge antimonopoly suits in the courts,
while the final Rules also contemplate suits based on
"violation of the AML arising out of contract or articles of
associations of industry associations." The latter
categories, AML suits arising from contracts or industry
association rules, possibly may lack an independent requirement of
antitrust injury, thus permitting plaintiffs to sue when they have
not suffered injury and thus cannot recover damages.
Horizontal agreements. The burdens
of proof in horizontal monopoly agreements cases are more difficult
for defendants than in other jurisdictions.
For most categories of prohibited horizontal monopoly agreements,
set forth in articles 13(1) to 13(5) of the AML, the final Rules
make clear that defendants bear the burden to prove that any such
agreements – once proven to exist, presumably by
plaintiffs – will not have anticompetitive effects.
In contrast, the 2011 draft provided for burden-shifting (with
regard to anticompetitive effects) from defendants to plaintiffs in
cases involving such prohibited horizontal agreements. There
remains some concern that placing this burden squarely on
defendants in all article 13 horizontal agreement cases may be
overbroad. Although most of these agreements are "hard
core" cartel behavior that would be per se illegal (i.e., not
requiring proof of anticompetitive effects) in most other
jurisdictions, article 13 also covers some potentially
non-hard-core agreements – "restricting the purchase
of new technology or new equipment, or restricting the development
of new technology or new products" – that likely
would be treated under the rule of reason in the United States and
elsewhere. Finally, for suits involving other violations of
the AML, the final Rules omit language from the 2011 draft that
"plaintiffs shall bear the burden of proof that the
agreement in suit has the effect of eliminating or restricting
competition," instead leaving the burden of proof unspecified
although presumably remaining with the plaintiffs.
Abuse of
dominance. Although plaintiffs
alleging abuse of dominant market position bear the burden to prove
both the existence of a dominant position and its abuse by a
defendant, the final Rules also provide that "information
published by the defendant may be used as evidence of dominance
unless otherwise proved." This replaces a more
complicated provision in the draft 2011 rules providing that
information published by defendants, along with other public
information, could constitute prima facie evidence sufficient to
shift the burden of proof from plaintiffs to defendants.
Companies therefore will need to be careful about their public
statements about market position, understanding that stray comments
about their competitive strength, although perhaps useful from a
commercial point of view, may be held against them in court.
The final Rules also have omitted many details relating to
presumptions of dominance of public utility companies and other
entities with legally supported monopolies, although they still
appear to provide that such companies may be found to be dominant
simply based upon market structure and/or competitive dynamics, if
the defendants cannot prove otherwise.
It is also important to note that the AML presumes that a company
with a market share greater than 50 percent is dominant, subject to
rebuttal by defendants.
Conclusion
Private antitrust litigation is on the rise in China. According to the SPC's press release, 61 antitrust cases have been filed since the AML took effect, 53 of which have been concluded. These have covered a wide spectrum of industries, including transportation, pharmaceutical, food, home electric application, and IT. The new Rules are likely to have the effect of accelerating the pace of antitrust litigation, as courts now have a framework to accept and adjudicate anti-monopoly lawsuits.
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