Provisions on Issues Concerning the Application of Law in the Hearing of Civil Monopoly Dispute Cases (Draft for Comment)

Issuing Body: Supreme People's Court
Issuing Date: April 25, 2011

The Supreme People's Court has issued a draft version of rules designed to make it easier for plaintiffs to meet evidentiary requirements in court cases relating to China's three-year-old Anti-Monopoly Law (AML). Released in draft form on April 25, 2011, the Provisions on Issues Concerning the Application of Law in the Hearing of Civil Monopoly Dispute Cases (Draft Civil Monopoly Dispute Provisions) are, in the court's words, intended to "ensure the proper trial of civil monopoly dispute cases, prevent monopolistic conduct, protect fair market competition and safeguard the consumer's interests and social public interest." The draft provisions were open for public comment until June 1, 2011.

Since China's AML took effect in August 2008, the handling of AML-related disputes has become an important responsibility of the nation's people's courts, which according to government figures had accepted 43 civil monopoly cases by the end of 2010. But antitrust plaintiffs in China have encountered difficulties in court, and not one has actually prevailed at trial; most cases have been dismissed because of insufficient evidence.

Plaintiff in Civil Monopoly Dispute Cases

The Draft Civil Monopoly Dispute Provisions provide that any individual, legal person, or organization which has been negatively affected by monopolistic activity, including businesses and consumers, may initiate a civil lawsuit in accordance with the AML, either alone or together with other plaintiffs. This interpretation gives legal standing to consumers and other end users who ultimately suffer, albeit indirectly, from monopolistic behavior when intermediate businesses pass on higher costs. (The purchaser of a car, for example, may sue tire manufacturers that collude to increase tire prices because the manufacturers' actions indirectly increased the price of a new car.) If enacted in this form, the new provisions would thus enable consumers and other end-users to seek relief directly from the parties that engaged in monopolistic behavior, even though their actual loss resulted from the actions of or decisions made by an intermediate business.

Burden of Proof

Chinese law generally assigns to plaintiffs the burden of proof in connection with alleged monopolistic activity in civil monopoly cases: If the plaintiff claims compensation for damages, it must prove not only the existence of monopolistic conduct but also damages, as well as a causal relationship between the conduct itself and the financial harm to the plaintiff. And in cases that involve monopolistic agreements, the plaintiff would likewise bear the burden of proving the effect of an alleged monopolistic agreement that excludes or restricts competition.

There are, however, partial exceptions to that principle. Among them, the Draft Civil Monopoly Dispute Provisions say a plaintiff will not bear the burden of proof in connection with the effect of excluding or restricting competition, unless the defendant provides sufficient evidence of innocence to shift the burden of proving the effect of excluding or restricting competition to the plaintiff, in situations envisioned by Paragraph 1 of AML Article 13, Items 1-5:

1. Fixing or changing prices of commodities;
2. Limiting the output or sales of commodities;
3. Dividing the sales market or the raw material procurement market;
4. Restricting the purchase of new technology or new facilities or the development of new technology or new products;
5. Making boycott transactions.

Similarly, the Draft Civil Monopoly Dispute Provisions shift the burden in situations described by AML Article 14 Items 1 and 2: those which involve fixing the price of commodities for resale to a third party or restricting the minimum price of commodities for resale to a third party.

In those situations anticipated by Articles 13 and 14, the defendant will bear the burden to prove that the alleged monopolistic agreement qualifies for one of the exclusions specified under Article 15 of the AML (for example, that the agreement advanced technology, conserved resources, or alleviated problems related to a serious drop in sales or overproduction during an economic downturn).

In cases that involve allegations of the abuse of dominant market position, the Draft Civil Monopoly Dispute Provisions say plaintiffs will bear the burden to prove the existence of the relevant market, the defendant's dominant position within the market, and that the alleged monopolistic activity falls within the umbrella of activities proscribed by the AML. Once a plaintiff fulfills the aforementioned burden of proof, the defendant must prove the legitimacy of its activity.

Where the evidence provided by the plaintiff proves that the defendant falls under any of the following circumstances, the people's court may presume the defendant possesses a dominant position, unless the defendant provides evidence to prove otherwise:

• The defendant is a public utility enterprise that supplies water, electricity, heat, or gas;
• The defendant is a business operator, other than a public utility, that has been granted an exclusive operating qualification to provide specific commodities or services by applicable laws, regulations, or other regulatory documents; or
• The defendant is a business operator in a market that lacks effective competition but the defendant's transaction counterparty is highly dependent on the commodities or services provided by the business operator.

As preliminary evidence for the situations described in the preceding paragraph, plaintiffs may rely on disclosed information of a listed company, information acknowledged by the defendant, or the findings of a market investigation, economic analysis, project research, and statistical results from a qualified independent third party.

If the following requirements are met, the plaintiff and its agent may apply to the competent people's court to order the defendant to submit relevant evidence:

• Evidence already submitted by the plaintiff is sufficient to prove the damages that it may suffer due to the alleged monopolistic activity;
• The plaintiff is unable to obtain the evidence required for its claims despite having made reasonable efforts to do so;
• The evidence required is relevant to the case and is necessary to prove the claims or allegations of the plaintiff; and
• There is evidence proving the defendant possesses the evidence that is required to prove the plaintiff's allegations.

If the defendant refuses to submit the aforementioned evidence without justifiable reason and the plaintiff alleges that the evidence is unfavorable to the defendant, the people's court may, in light of the specific circumstances, presume that the evidence supports the plaintiff's allegations.

Statute of Limitations

The statute of limitations for a civil monopoly dispute is two years, calculated from the date on which the victim knew or should have known about the damages as a result of the monopolistic activities. If the alleged monopolistic activity is investigated by any anti-monopoly law enforcement authority and is deemed to constitute monopolistic activity, the statute of limitations will be calculated from the date on which the victim knew or should have known of the decision by the enforcement authority concerning the monopolistic activity.

Conclusion

The Supreme People's Court's Draft Civil Monopoly Dispute Provisions should prove helpful to plaintiffs in court cases relating to the AML, particularly in connection with issues concerning allocation of the burden of proof. With these new rules, it should become easier for plaintiffs to meet evidentiary requirements, and it is thus expected that there will be more court cases relating to the AML in the future.