Hong Kong: Joint purchasing under the AML-SOHU, QQ and Baidu launched Video Content Cooperation Alliance

Last Updated: 5 May 2012
Article by Susan Ning, Liu Jia and Huang Jing

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 agreement".

  • 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:

Category Conducts Authority in charge
Price fixing
  • Fixing or changing price level of products.
  • Fixing or changing the magnitude of price changes.
  • Fixing or changing fees or discounts that influence the price.
  • Applying an appointed price as the basis for transacting with a third party.
  • Agreeing to apply a standard formula as a basis to calculate prices.
  • Agreeing that a price shall not be changed without consent of competitors.
NDRC
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 production, etc.
  • 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, etc.
SAIC
Market division
  • 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 equipment, etc.
SAIC
Restriction on New Technology
  • Restricting the purchase or use of new technologies or new process.
  • 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 equipments;
  • Refusing to adopt new technical standards.
SAIC
Jointly Boycott
  • Jointly refusing to supply or sell products to particular undertakings;
  • Jointly refusing to procure or sell the products of particular undertakings;
  • Jointly restricting particular undertakings to conduct business with undertakings competing against them.
SAIC
  • 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 market.

  • Conclusion

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.

Footnote

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions