On April 24, 2012, TV.SOHU.COM, v.QQ.COM,and iQIYI.COM (the
specialized video website of Baidu)jointly announced the
establishment of an alliance called "Video Content
Cooperation" (VCC) for vedio copyright joint
purchasing. The VCC is viewed as another "faction" after
the recent combination of Youku and Tudou. It is reported that the
main purpose of the VCC is to jointly purchasing the copy right for
their own each website.1
TV.SOHU.COM, v.QQ.COM, and iQIYI.COM are all internet video
websites and are close competitors. Their cooperation may affect
the competition status in the market. This article will analyze
under the Anti-Monopoly Law (AML) whether joint
purchase arrangement could constitute "horizontal monopoly
Typical horizontal monopoly Agreement
Article 13 of the AML clearly lists five types of horizontal
monopoly agreements between competitors that are prohibited,
including price fixing, production quantity or sale quantity
restriction, dividing sales market or procurement market of raw
materials, restricting the procurement of new technologies or new
equipment or restricting the development of new technologies or new
products, and jointly boycott. The National Development and Reform
Commission ("NDRC"), responsible for
price-related monopoly agreements and the State Administration for
Industry and Commerce ("SAIC"),
responsible for non-price-related monopoly agreements both enacted
implementing rules for prohibition of the monopoly agreements.
These implementing rules list some conducts that shall be deemed as
horizontal monopoly agreement:
Authority in charge
Fixing or changing price level of products.
Fixing or changing the magnitude of price changes.
Fixing or changing fees or discounts that influence the
Applying an appointed price as the basis for transacting with a
Agreeing to apply a standard formula as a basis to calculate
Agreeing that a price shall not be changed without consent of
Production and Sales restriction
Restricting the production volume of products, or restricting
the production volume of specific kinds or types of products by
means such as limiting, fixing production volume, stopping
Restricting the sales volume of products or restricting the
sales volume of specific kinds or types of products by means such
as refusing to supply, limiting the launch volume of products,
Dividing the sales regions, sales targets or categories and
volume of products.
Dividing the procurement regions, categories and volume of raw
materials such as (basic) raw materials, semi-finished goods, parts
and components and related equipment, etc.
Dividing the suppliers of raw materials such as the (basic) raw
materials, semi-finished goods, parts and components and related
Restriction on New Technology
Restricting the purchase or use of new technologies or new
Restricting the purchase, lease or use of new equipments;
Restricting the investment in, the R&D of new technologies,
new process or new products;
Refusing to use new technologies, new process or new
Refusing to adopt new technical standards.
Jointly refusing to supply or sell products to particular
Jointly refusing to procure or sell the products of particular
Jointly restricting particular undertakings to conduct business
with undertakings competing against them.
Joint purchasing and price fixing
The AML does not clearly list joint purchasing as one of the
horizontal monopoly agreements. However, it is possible that
parties to a joint purchasing arrangement jointly fix the
purchasing prices paying to their supplier. Price fixing usually
refers to competitors in the upstream market fixing their selling
prices. It is not clear under the AML whether fixing the purchasing
price by the competitors in the downstream market could constitute
price fixing. Joint purchasing arrangements usually aim at creating
countervailing buying power against upstream industry suppliers, in
order to obtain raw materials at lower price. It may ultimately
benefits consumers through the decrease of the final product's
price. While fixing selling price would usually lead to higher
prices and harm the interest of consumers.
EU regulation for joint purchasing
The EU rules may shed some light in this regard. The Guidelines
on the horizontal co-operation agreements specifically analyzed
joint purchasing arrangement. Under the EU rules, to see whether a
joint purchasing arrangement violate the Article 101(1), it must be
assessed whether it would give rise to competition concerns. To
this end, two markets, i.e. relevant purchasing markets and selling
market, need to be analyzed at the same time. The agreement related
to fixing purchase prices will not be assessed separately, but in
the light of the overall effects of the purchasing agreement on the
market. It is recognized that, in general, joint purchasing
arrangements are less likely to give rise to competition concerns
when the parties do not have strong market powers on the selling
It is not clear under the AML whether the three internet video
websites' joint purchasing arrangement can be deemed as
conclusion of horizontal monopoly agreement. Whether the
establishment of VCC will cause competition concerns could be
essential for the analysis. But such question may only be solved
after observing the actual operation of the VCC.
1 On March 12, two Chinese Internet video
giants Youku and Tudou announced that the two companies have signed
a final agreement on March 11 to combine their services in a 100%
stock-for-stock transaction to create a new service provider, Youku
Tudou Inc. To read more, please refer to our article, titled
Lauch of Youku Tudou Inc."
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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As reported in the market updates section of this newsletter, the UAE Ministry of Economy recently reviewed the fees charged by its various departments, including the Trade Mark, Patent and Copyright Office.
As the technology industry is highly competitive and grows rapidly, organizations focus on reducing costs in a bid to strive to retain and/or gain the competitive advantage.
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