Private antitrust litigation in China: overview
A Q&A guide to private antitrust litigation in China.
The Q&A provides a high level overview of the legal basis for bringing private antitrust litigation actions; parties to an action; limitation periods and forum; standard of proof and liability; costs and timing; pre-trial applications and hearings; alternative dispute resolution; settlement or discontinuance of an action; proceedings at trial; available defences; available remedies; appeals and proposed legislative reform.
This Q&A is part of the Private Antitrust Litigation Global Guide.
The private antitrust litigation global guide serves as a single, essential, starting point of practical reference for both clients and practitioners in considering the various merits of commencing, defending or settling antitrust claims.
Legal basis for bringing private antitrust litigation actions
It is possible to bring stand-alone antitrust actions in China without a prior finding of infringement from a competent court or authority. Both stand-alone and follow-on civil actions can be filed with a competent court or authority for alleged anti-monopoly violations. An undertaking has civil liability for monopolistic conduct that causes damages to others (Article 50, Anti-monopoly Law (AML)). There is a specific provision that courts must accept civil actions for alleged anti-monopoly violations with or without a prior decision by the anti-monopoly enforcement authorities (Article 2, Provisions of Supreme People's Court on Several Issues Concerning the Application of Law in the Trial of Civil Dispute Cases Arising from Monopolistic Conduct (Supreme People's Court Provisions on Monopolistic Conduct)). These two provisions provide individuals and entities with the right to bring both stand-alone and follow-on civil actions.
Follow-on and stand-alone antitrust actions can be filed for any of the following:
Unilateral antitrust infringement.
Bi-lateral antitrust infringement.
Multi-lateral antitrust infringement.
The legislation under which stand-alone actions can be brought is:
Article 50 of the AML.
Articles 1 and 2 of the Supreme People's Court Provisions on Monopolistic Conduct.
Adversarial or inquisitorial
While China has a civil law legal system, in Chinese civil litigation, such as stand-alone or follow-on anti-monopoly litigation, actions have both adversarial and inquisitorial features. The parties bear the burden of proving each element of their claims unless specifically provided by law. However, the court can be involved in investigation, for example by:
Ordering litigants or a third party to produce documents.
Investigating the circumstances of the claim.
Questioning litigants and witnesses at a hearing.
In China, a claimant can bring a follow-on action. Article 50 of the AML allows litigants to file follow-on actions. This is further clarified by the Supreme Court in Article 2 of the Provisions of Supreme People's Court on Several Issues concerning the Application of Law in the Trial of Civil Dispute Cases Arising from Monopolistic Conduct.
The same provisions permit stand-alone and follow-on actions for multi-lateral infringements (such as a cartel) and unilateral infringements (such as abuse of market power).
There is no requirement for a judgment or decision that is relied on as a basis for an action to be final or conclusive. A follow-on action can be filed during an appeal of the earlier judgment/decision or after the appeal has concluded.
Even if a follow-on action is filed when the earlier action is final, the earlier judgment or decision is not of conclusive effect as a matter of law.
Legislation does not state what effect an earlier regulatory decision will have on later court cases concerning the same issue. The general academic consensus is that the later court should respect the earlier decision, but it can still review the case on its own merits. Very few follow-on actions have been filed in practice.
There is a rebuttable presumption that any finding of facts in the earlier case should be adopted in the subsequent litigation. The fact-finding from an earlier court judgment can be used in later actions, unless proved otherwise (Article 9, Provisions of Supreme People's Court on Civil Litigation Evidence (SPC Provisions on Evidence)). There is no requirement that the law applied in the earlier judgment must be applied in the same way in the later case. However, it would be considered and respected by the court handling the later case.
The legislation under which follow-on antitrust claims are brought is the same as for stand-alone claims.
Parties to an action
To file a civil case the following four conditions must be satisfied (Article 119, Civil Procedure Law):
The claimant is an interested party to the action.
There is a specified defendant.
There are specific claims, facts and reasons.
The court has jurisdiction to hear the case.
This applies to both stand-alone and follow-on actions.
Under the Anti-monopoly Law (AML) and Supreme People's Court Provisions on Monopolistic Conduct, any individual or entity that is harmed by alleged monopolistic conduct can bring an action for anti-monopoly violations. This can include a:
A direct purchaser can bring an antitrust action. There is no law prohibiting an indirect purchaser or other third party that has no direct interaction with the alleged monopolist from filing private antitrust actions. Overall, if they can provide prima facie evidence that they are harmed by the alleged monopolistic conduct, they may have standing to sue under the current legal framework.
A party to an infringing agreement can bring an action against another infringing party, provided the party wishing to bring the action can show that it is harmed by the monopoly agreement. In Rainbow Medical v Johnson & Johnson, Rainbow successfully sued Johnson for AML violation for having incorporated a resale price maintenance clause in its distribution agreement with Rainbow.
To bring a follow-on action a claimant must meet the same conditions as for a stand-alone action. A claimant can evidence its claim for a follow-on action by referring to a decision from an anti-monopoly enforcement agency.
The same parties that can bring a stand-alone action can bring a follow-on action. Similar to a stand-alone action, a follow-on action can be brought by any party that can show that it is harmed by the monopoly agreement.
As with stand-alone action, a party to an infringing agreement can bring a follow-on action against another infringing party, provided the party wishing to bring the action can show that it is harmed by the monopoly agreement.
Direct purchasers can bring follow-on actions. Indirect purchasers can bring follow-on actions if they can demonstrate harm.
The Civil Procedure Law provides that multiple claimants can bring a collective action if all the claims involve the same subject matter.
All claimants in a collective action are required to opt in if they would like the judgments or decisions in a case to apply to them.
The court will issue a public notice and invite interested parties to register with the court for the collective action within a specific time period of at least 30 days (Article 54, Civil Procedure Law).
No certification is necessary for a collective action.
If two to five claimants can be selected as representatives by all the claimants, there is no need for approval or certification of those representatives by the court. However, if the claimants cannot agree among themselves on their representatives, or do not agree on the candidates proposed by the court, then the court may appoint the representatives from the claimants.
The same rules as for stand-alone actions apply to follow-on actions (see above, Stand-alone actions).
Under Article 21 of the Civil Procedure Law, the court of the place where the corporate entity is domiciled has jurisdiction over any civil dispute against the corporate entity. If there are multiple defendants domiciled in difference places, the court at any of the places has jurisdiction over the case. The place of domicile refers to the place where the corporate entity's principal office is located. If the place of the principal office cannot be ascertained, the place where the corporate entity is registered is the place of domicile.
Not all courts in China have jurisdiction over anti-monopoly lawsuits. Therefore, a claimant also needs to consider the subject matter jurisdiction of the court. In practice, claimants tend to avoid filing lawsuits at the defendants' home court. While forum shopping, claimants need to consider the experience and competence of the court in adjudicating anti-monopoly lawsuits.
A claimant can also bring an action at the court of the place where the infringement occurs (Article 28, Civil Procedure Law). The place where the infringement occurs includes the place where the:
Infringement is committed.
Result of the infringement occurs.
Specifically for anti-monopoly disputes, some courts have held that the place where the claimant is domiciled can be the place where the monopolistic conduct or result occurs. In Huawei v InterDigital, the Guangdong High People's Court ruled that the Shenzhen Intermediate People's Court had jurisdiction over the anti-monopoly dispute brought by Huawei, which is domiciled in Shenzhen, based on the principle of the place of infringement.
According to judicial practice, a Chinese court will directly serve legal documents on corporate entities located both within and outside its jurisdiction. This applies in either stand-alone or follow-on lawsuits. There is no need for the claimants to apply for leave to serve defendants.
The same rules and service apply to both stand-alone and follow-on actions.
The Anti-monopoly Law (AML) permits a claimant to bring an action against an individual for alleged AML violation. In Liu Taoshan v Zhang Jinlong, the claimant Liu claimed that Zhang and another individual abused their market dominance by refusing to deal with him.
There has been no reported legal action against a director or officer of a corporate entity personally for alleged AML infringement committed by the corporate entity. Theoretically, the corporate veil can be pierced and AML actions can be filed against the shareholders of a corporate entity. Article 20 of the Company Law allows a claimant to pursue damages against shareholders that abuse the limited liability of a corporate entity. However, piercing the corporate veil does not extend to directors or officers of the corporate entity.
The same rules on actions against individuals apply to both stand-alone and follow-on actions (see above, Stand-alone actions).
Limitation periods and forum
There is a two-year limitation period for various types of civil litigation, including Anti-monopoly Law (AML) actions (General Principles of the Civil Law). Article 16 of the Supreme People's Court (SPC) Provisions on Monopolistic Conduct and the Provisions of the SPC on Several Issues Concerning the Application of Statute of limitations during the Trial of Civil Cases (SPC Provisions on Statutory Limitation) provide detailed guidelines on how the two year limitation period is applied.
Under Article 16 of the SPC Provisions on Monopolistic Conduct, the statute of limitations starts from the day that the claimant knows or should have known that it has been harmed by the alleged monopolistic conducts. The maximum period in which a legal action can be brought is 20 years from the infringement. If the monopolistic infringement is a continuing conduct, the claimant can bring an AML action at any time during the period of infringement, even if this is more than two years after they knew or should have known about the infringement. However, they will only be able to claim damages for the two years before the filing of the claim.
The two-year limitation period can, under certain circumstances, be either:
Tolled during the last six months of a two-year period.
Reset at any time.
If tolling occurs, the two-year period will resume on the day that the ground for tolling terminates. If the limitation period is reset, a new two-year period will start to run.
The grounds for tolling include:
Other obstacles that prevent the infringed party from exercising its rights, such as loss of civil capacity.
The grounds for reset include the following:
The infringed party brings a legal action.
The infringed party makes a claim.
The infringer agrees to fulfil its obligation. For example:
if the claimant reports the monopolistic conduct to the anti-monopoly enforcement agencies, the limitation period will restart from the claimant's filing of the report; or
if the anti-monopoly enforcement agencies find monopolistic infringement, the limitation period will restart from the day the claimant knows or should have known the decision has come into effect.
The same rules on limitation periods apply to both stand-alone and follow-on actions (see above, Stand-alone actions).
China adopts a four-level court system, in ascending order:
District people's court.
Intermediate people's court.
High people's court.
Supreme People's Court (SPC).
In practice, the SPC handles mostly retrial cases and cases appealed from the high court. There are special intellectual property courts at the intermediate level that handle intellectual property and Anti-monopoly Law (AML) disputes, based in the cities of:
The three special intellectual property courts have jurisdiction over first instance AML disputes within their respective jurisdiction for both stand-alone and follow-on actions. In other parts of the country, designated intermediate courts have jurisdiction over first instance AML disputes, unless the amount claimed exceeds RMB200 million for disputes between litigants within its jurisdiction, and RMB100 million for disputes involving litigants outside the court's jurisdiction, in which case the provincial high court has jurisdiction. Some district courts may also have jurisdiction over first instance AML disputes if they are specifically designated by the SPC.
The same rules on jurisdiction apply to both stand-alone and follow-on actions (see above, Stand-alone actions).
As a general rule, intermediate and high court judges are more experienced and competent in anti-monopoly cases than district court judges.
A claimant can bring an anti-monopoly case directly in a provincial high court outside the jurisdiction of the three special intellectual property courts, if the damages claimed are sufficient. It is usually recommended that the claimant bring the claim before courts in a major metropolitan area.
As there have been few anti-monopoly cases overall, many courts have little experience dealing with Anti-monopoly Law (AML) disputes. Local protection can be another concern if a case is filed in the defendant's home jurisdiction in a less-developed area.
The same considerations apply to both stand-alone and follow-on actions.
There have been very few reported follow-on actions in China overall. However, as the anti-monopoly enforcement agencies have been more active, we expect more follow-on actions in the future.
Standard of proof and liability
Standard of proof
A litigant can meet the required standard of proof if the probability of the existence or nonexistence of the facts proved by evidence produced by the litigant is clearly higher than the probability of the existence or nonexistence of facts proved by evidence produced by the other party (Article 73, Provisions of the Supreme People' s Court on Civil Litigation Evidence (SPC Provisions on Evidence)).
Burden of proof
In general, a party bears the burden of proof for each element of its own claims/affirmative defences. For example, the claimant must prove that the defendant has:
A dominant position in the relevant market.
Abused its market dominance.
A defendant has the burden to prove that there are justifiable grounds for its actions under the Anti-monopoly Law (AML).
The burden of proof can be shifted to the opposing side if it is specifically provided by legislation or the SPC rules. For example:
The defendant bears the burden to prove that its anti-monopoly agreements do not create anti-competitive effects. The relevant agreements are defined by Article 13(1) to (5) of the AML.
Subject to below, an undertaking is presumed to have market dominance if:
one undertaking's market share is over 50%;
two undertakings' joint market share is over two thirds; and
three undertakings' market share is over three quarters.
Public utility or other undertakings with delegated power under the law are presumed to have market dominance in light of the state of market structure and competition.
The following facts do not need to be proved by supporting evidence, unless the opposing party can present sufficient rebuttal evidence:
facts commonly known to the public;
facts deduced from legal provisions;
facts established on the basis of known facts and daily life experience;
facts confirmed by effective rulings issued by people's courts;
facts confirmed by effective awards rendered by arbitration agencies; or
facts proven by effective notarisation documents.
The SPC has called into doubt the presumptions about an undertaking's dominance based on market share. In Qihoo v Tencent, it held that Qihoo had the burden to prove Tencent's market dominance despite Tencent's market share of more than 80%.
There is no rebuttable presumption of loss in respect of antitrust breaches resulting from cartels, so a claimant must prove its loss.
In the case of joint infringement, all joint-tortfeasors are liable on a joint and several basis. For example, the defendants in a cartel are jointly and severally liable for the damages suffered by the claimant.
The compensation payable by a joint tortfeasor is determined by its share of overall liability for the infringing act (Article 14, Chinese Tort Liability Law). In practice, courts rely on various factors to apportion liability. Factors include:
Level of fault.
Where the share of each tortfeasor's liability is difficult to determine, the courts may assign the liability equally among the parties. In practice, most courts do not address how the liabilities are apportioned in the judgment against joint tortfeasors.
Any individual or entity that has suffered loss from the alleged monopolistic conduct can bring an action under the Anti-monopoly Law (AML) and the Supreme People's Court Provisions on Monopolistic Conduct (see Question 2). While there are no reported anti-monopoly cases about damages for purchases made from non-cartel members, a claimant can claim for compensation if it can link the inflated prices of the non-cartel member to the monopolistic conduct of the cartel.
A defendant can commence a contribution claim against other infringing parties in the same action or through a separate action.
An infringing defendant can recover from a joint-infringing defendant any contributions it has paid to a claimant before the same court without a separate legal action if the:
Infringer and joint infringer are co-defendants.
Court judgment has apportioned the liability borne by each infringer.
If the joint infringers are not co-defendants then an infringer that pays full compensation to a claimant must bring a separate action to prove joint infringement and the proportions of liability to be borne by those joint infringers that are not co-defendants in the first action.
There have not been reported anti-monopoly cases involving contribution claims.
In other types of dispute, such as joint guarantee or traffic accident claims involving multiple parties, the handling court may apportion the liability among the co-defendants in its judgment. But the civil procedure rules do not clearly provide the right for contribution claims to be brought among co-defendants in parallel to the main claim brought by the claimant. In practice, a separate contribution claim is generally brought after the main claim has been resolved.
The limitations period for contribution claims is two years, starting from when the paying party fulfils its liability to the claimants.
Costs and timing
The costs of bringing an Anti-monopoly Law (AML) action generally include the following:
Docketing fee charged by the court.
Expenses for evidence collection, preparation and presentation, such as investigation fees, notarisation fees, expert fees, and such like.
The docketing fee is calculated based on the amount of claimed damages with the formula provided by the Measures on the Payment of Litigation Costs. The claimant pays a higher docketing fee the higher the value of its claim. Anti-monopoly disputes usually require all litigants to present a substantial amount of evidence, resulting in relatively high cost for litigants. The overall cost depends on the specifics of the case.
The court's docketing fee is the same in follow-on action as it is for stand-alone actions. But the expenses for evidence collection and preparation can be lower because of the prior finding of infringement by a competent court or authority.
The losing side should pay the litigation costs (Measures on the Payment of Litigation Costs). The costs include the court issuing fee and reasonable expenses for bringing the action. The reasonable expenses are determined by the court. If the claimant only succeeds in part of its claim or the claim fails altogether, the court will apportion the litigation costs among the parties, taking into consideration factors including the:
Amount of the litigation costs.
Amount and type of claims supported by court.
Relative success of each litigant.
Economic status of the parties.
The same rules apply to both stand-alone and follow-on actions.
No general insurance policies for costs relating to antimonopoly actions are available in China at present. Some media outlets reported during 2014 that the People's Insurance Company of China were working to developed litigation insurance products and to make them available in a few cities, but there have been no follow-up reports. Insurance business is strictly regulated, and greatly influenced by government policies. It may take some time for insurance companies to come up with policies covering costs associated with antimonopoly litigation.
See above, Stand-alone actions.
Theoretically, a claimant is free to negotiate a litigation funding agreement with a third party funder and can then share with them the proceeds of the action. But there is uncertainty about the recognition and enforcement of such an agreement in a legal action. While funding a claimant's costs of bringing an action is generally acceptable, especially in situations where a claimant lacks sufficient resources to protect its rights, the Chinese culture is not supportive of the idea of encouraging or profiting from litigation. It is therefore possible that a litigation funding agreement may be void or rendered unenforceable under the Chinese Contract Law.
See above, Stand-alone actions.
A claim in an anti-monopoly action cannot be assigned to a third party funder with no interest in the claim other than funding the lawsuit. Under Chinese civil procedure rules, a claimant must be an interested party to the claim. While some contract claims can be assigned to a third party when the rights and obligations under a contract are transferred, there is no legal basis for transfer of claims to an anti-monopoly action to a third party funder. Without specific laws to permit such assignment, Chinese courts are not likely to accept anti-monopoly claims brought by a third party funder.
The fees for legal representation are regulated by Measures for the Administration of Lawyers' Fees. The rules allow contingency fee arrangements for legal representation.
A contingency fee arrangement in China can include both a:
Damages-based fee arrangement, in which the legal fees charged must be no more than 30% of the damages claimed or awarded.
Conditional fee arrangement, in which the legal fee charges are only payable to a legal representative if a certain specified outcome is achieved from the litigation.
Contingency fee arrangements must not be used for collective actions.
See above, Stand-alone actions.
A defendant can not apply for security for the cost of litigation.
In 1984, on a trial basis, the Supreme People's Court (SPC) issued its Measures on Civil Litigation Costs. Article 14 of the measure provided that foreign entities and entities without nationality needed to post security before bringing an action in a Chinese court. But this provision was abolished by the SPC in 1989.
There were attempts to include security for costs provisions in Chinese company law but draft provisions were not finalised. Therefore, there is no basis for defendants in anti-monopoly disputes to request security for costs.
Time limits depend on whether the action:
Is between domestic parties.
Involves a foreign party.
For an action between domestic parties, the Civil Procedure Law requires the first instance court to conclude the case within six months from docketing of the case. This time period can be:
Extended by six months with approval from the president of the court.
Further extended with approval from the higher level court.
These periods do not include the time for:
Trial extension filed by the parties.
For actions involving a foreign party, there is no statutory time period for conclusion of a case.
In practice, a first instance anti-monopoly case usually takes more than one year to conclude. For example, Qihoo v Tencent is a case about abuse of market dominance between two domestic entities. The case was filed on 15 November 2011 and the first instance decision was issued on 20 March 2013, over 16 months later. Rainbow Medical v Johnson & Johnson, was a case involving a resale price maintenance dispute between domestic parties. The first instance case took about 17 months to conclude. The foreign-related case HW v IDC, concerning claims of abuse of market dominance, took 14 months to conclude at first instance. There are no reported anti-monopoly cases concerning contribution claims or collective actions.
In practice, the following factors are likely to increase the length of an anti-monopoly case:
Existence of parallel proceedings, the outcome of which may impact on the action.
Involvement of foreign parties.
Large amount of evidence and involvement of multiple witnesses.
Complex or novel legal issues.
Public attention to the lawsuit.
While the same rule applies to both stand-alone and follow-on actions, the time that it takes for a court to handle a follow-on action is likely to be shorter as the legal and factual issues have been reviewed in the earlier proceedings.
Pre-trial applications and hearings
Only the parties and their representatives can review and make copies of the case files including the:
Third parties will have access to the court judgment if it is made public afterwards.
See above, Stand-alone actions.
The Civil Procedure Law allows a claimant to apply for three types of interim measure before full trial:
Evidence preservation (Article 81).
Property preservation (Article 100 and 101).
Act preservation (Article 100 and 101).
Evidence preservation. A party to proceedings can request and evidence preservation order or an order can be made by the court on its own initiative. A court will consider whether:
There are objective reasons why the parties cannot collect the evidence on their own.
The evidence may be destroyed or hard to obtain at a later stage.
The petitioner has provided security in situations where evidence preservation could result in damage to other parties.
Property preservation. A court will consider whether the:
Conduct of a party makes it difficult to enforce a judgment against that party, or otherwise causes harm to the winning party.
Petitioner has provided security as determined by the handling court.
Act preservation (including preliminary injunction). A court will consider whether the:
Applicant will suffer irreparable harm if act preservation is not granted.
Likelihood of finding an on-going or imminent infringement.
Applicant has provided security as determined by the handling court.
Injunction will harm the public interest.
The presence of imminent harm is a factor that the court will consider when deciding on interim relief. This is particularly relevant in a petition for act preservation.
Current trends in granting interim relief in anti-monopoly action are hard to assess as there have been no reported Anti-monopoly Law (AML) cases in which interim reliefs were granted. Based on judicial practice in other areas, Chinese courts are generally reluctant to grant interim measures, especially for act preservation. Evidence preservation and property preservation are relatively more common in non-AML disputes. Courts appear to be increasingly willing to consider interim measures in civil litigation in recent years.
In theory, a claimant's chance of obtaining interim measures may be higher in follow-on actions if there is already a finding of infringement.
There have been no reported cases where the issues of interim relief are addressed. However, the court appears to be increasingly willing to consider interim measures in civil litigation in general.
A defendant can apply to have a lawsuit dismissed in its entirety on the procedural ground that the claimant fails to meet the pleading standard with its complaint (Civil Procedure Law). This could include the claimant's failure to:
Establish its interest in the claim.
Identify basic facts and reasons for the claim.
However, the handling court is not obliged to rule on the motion to dismiss before the full trial. Instead, the court may address this issue as part of the final judgment.
A defendant cannot apply to have all or part of a stand-alone or follow-on action dismissed based on the merits of any legal issue in dispute.
There is no summary judgment procedure in China.
Staying a claim
A court can stay a lawsuit if it depends on the results of a parallel action (Article 150, Civil Procedure Law). While there are very few precedents, a court is likely to review this issue on a case-by-case basis.
If a decision or judgment is under appeal, it is not enforceable. A defendant can petition the court to stay the action on the basis of Article 150 of the Civil Procedure Law, on the ground that the present case depends on the result of the appeal. The court is likely to review any such application on a case-by-case basis. The factors that the court is likely to consider include:
The length of time that the appeal process will take.
How the appellate court's decision could impact the outcome of the current case.
The Chinese anti-monopoly enforcement agencies have become more active in recent years. It is expected that there will be more regulatory investigations in the future and that some of them may be in parallel with court proceedings. In these situations, defendants may seek to stay the civil action to wait for the regulatory decisions.
Because of the lack of precedents it is difficult to predict whether a court will stay an anti-monopoly action. The court may believe that the outcome of the parallel regulatory proceedings can help it adjudicate the case (for example by avoiding duplication of fact finding). However, the court has no legal obligation to wait for the outcome of the parallel proceedings, and may feel under pressure to conclude the case within a certain time frame. Therefore a court is likely to determine applications for a stay of proceedings pending regulatory proceedings on a case by case basis.
A defendant can seek to stay an action as part of its overall litigation strategy, for example, by pursuing a court-led settlement discussion with the claimant.
In situations when the court finds that some factual issues are clear, it can issue a partial judgment on these issues (Article 153, Civil Procedure Law). The partial judgment is subject to appeal to the higher court.
In practice, the court rarely rules on any preliminary issue before the final judgment. Instead, courts tend to hear all the relevant facts and legal arguments and then issue a single judgment on the merits of a case.
Evidence and legal privilege
Competition authority decisions
If a competition authority has issued an infringement decision for the same or similar facts, a court would give deference to the decision, but it could still review the civil case on its own merits.
There is a rebuttable presumption provided that the finding of the facts in the earlier case should be adopted in the subsequent litigation (Supreme People's Court (SPC) Provisions on Evidence). There is no legal requirement that a later court must follow the application of law in the earlier judgment, although it would certainly be considered and respected by the court handling the later case.
The SPC can select guideline cases. A court can cite these guideline cases to support its analysis, but the guideline cases should not form the legal basis of the court's decision.
There is no procedure for discovery in China. Each litigant bears the burden of presenting sufficient evidence to prove each element of its claims unless specifically provided by law.
For evidence that is difficult for a litigant to acquire or that may be destroyed during the litigation, the court can issue an order for preservation of evidence. An order for evidence preservation can be issued either on the:
Court's own initiative.
An order for evidence preservation can be issued either:
During a trial.
For evidence that the litigant is not able to obtain for objective reasons, the court may order evidence investigation/collection. Examples include evidence relating to:
A state or trade secret.
An order for evidence investigation or evidence collection is generally issued during a trial.
The claimant can also file a petition with the court for an order of evidence investigation or collection. The application will be reviewed and decided by the court on an individual basis. The documents that can be applied for include:
Copies of confidential versions of the decisions of competition authorities.
Copies of leniency materials prepared and submitted by the defendant to competition authorities.
Other documents or materials not in the possession or control of the defendant (for example, the index to a competition authority case file or information relating to settlement discussions with the authority).
A petition for evidence investigation or collection can be filed either:
During the trial.
In other situations, the court can ask a litigant to provide specific documents for the purpose of clarifying certain issues, if there is reason to believe that the litigant is in possession of such documents. If the litigant does not submit the requested documents without justifiable reasons, the court can draw negative inference against the litigant.
A party can object to the opposing party's petition for evidence investigation or evidence collection of documents from a third party. For example, a party can object on the ground that the requested documents are irrelevant to any issue in dispute in the case. However, the fact that certain documents are confidential is unlikely to support an argument for objection, as the court can implement procedures to protect the confidentiality of the documents during litigation.
Opposition to a petition for evidence investigation or evidence collection can be either:
Filed in writing.
Presented orally during the court hearing.
The Chinese Lawyers Law offers certain privileged protection to communications between lawyers and clients. But the scope of privilege is not clear and may not be well respected by the authorities in practice.
All lawyers must keep confidential information obtained during practice from clients and others that relates to (Article 38, Chinese Lawyers Law):
Lawyers must also keep confidential information that clients and others are not willing to disclose. Although there are exceptions relating to crimes about to be committed or that are ongoing and that endanger:
National or public security.
Property safety is not protected.
In-house lawyers' communications or the products of their work may not receive as much protection as those from outside lawyers. Withholding in-house legal documents during an anti-monopoly investigation can be viewed by the authorities as uncooperative.
Legal privilege is relevant to both:
In anti-monopoly litigation, as each party bears the burden of proving each element of its claim unless specifically provided by law, the issue of legal privilege is not as significant as it is in regulatory investigations. But legal privilege could still be raised, for example, in relation to applications for evidence preservation, evidence investigation, or evidence collection when potentially privileged documents could be affected. In practice, courts can be more receptive to arguments of legal privilege than enforcement authorities.
Alternative dispute resolution
Parties to anti-monopoly actions can request court-led mediation to resolve a claim. Once the parties reach a mediation agreement, the court will issue a consent judgment that becomes effective once it is signed by both parties.
It is not yet clear whether anti-monopoly disputes can be resolved through arbitration. While legislation (Chinese Arbitration Law) does not exclude anti-monopoly disputes, the public nature of anti-monopoly disputes makes their arbitrability questionable. There have not been any reported cases in which the effectiveness of an arbitration agreement or enforceability of an arbitration decision in an Anti-monopoly Law (AML) dispute has been challenged in court.
Parties are not required to engage in mediation. A party can choose whether to engage in mediation. There are no implications arising from a refusal to engage in mediation.
Whether to engage in mediation is a tactical decision. There are potential advantages and disadvantages to consider.
Advantages of mediation
Mediation could temporarily stay the litigation.
A successful mediation could avoid the uncertainty and time involved in legal proceedings and reduce legal expenses.
The court can issue a consent judgment based on the outcome of the mediation, which can have the same legal effect as a court judgment.
The parties can resume civil action if they cannot reach an agreement through mediation.
Disadvantages of mediation
Unsuccessful mediation can prolong a court action as the litigation is then resumed.
The court generally would not provide analysis of any factual or legal issue in dispute in the consent judgment affirming the outcome of the mediation. So these issues remain unsettled and can be subject to further litigation in the future.
A consent judgment is not subject to appeal.
Settlement or discontinuance of an action
Advantages of making an offer of settlement
The advantages of making an offer of settlement include:
A settlement offer could temporarily stay the action.
A settlement offer could show a party's good faith commitment to resolving a dispute.
A settlement offer could allow parties to focus on non-legal (for example, business) issues that can be an important strategic goal.
Disadvantages of making an offer of settlement
Some of the above advantages can be considered disadvantages as well, depending on the parties' position and goals in the litigation. For example, an unsuccessful settlement discussion can prolong the period of litigation, which may or may not serve the litigant's strategic goal depending on the specifics of the situation.
The parties to an action can initiate a settlement any time during the litigation without permission from the court.
If the parties reach settlement:
The claimant can petition to withdraw the case.
Both parties can petition the court to issue a consent judgment based on their settlement agreement.
The court must grant a settlement request made by the claimant or all the parties. However, if a proposed settlement infringes on other parties' interests, the court can reject the settlement and impose penalties on the parties that proposed the rejected settlement.
If the parties reach a settlement and withdraw a case, the court returns half of the docketing fee to the claimant. The parties can agree in a settlement agreement which of them should bear the remaining half of the fee.
The same rules apply to collective actions. The claimants selected as representatives must obtain prior consent from all the claimants before proposing or agreeing to a settlement.
Proceedings at trial
This may not be necessary. In China the public generally has no access to court documents, other than court judgments. This is regardless of whether the documents contain confidential information. If a court judgment contains any confidential information, the confidential information can be redacted from the public version.
The following are the ways in which confidential information is or can be protected during court proceedings:
Access to court documents is generally limited to the litigating parties and their counsel.
Although the public can attend open court hearings, the parties can request that hearings related to the following are closed to the public:
Some courts allow "attorney-eye only" protection for certain documents, in which lawyers are given access to a document but must not disclose the content to their litigant client.
Evidence from criminal proceedings is admissible in an anti-monopoly law civil action if it is relevant to the civil case.
An individual must testify at trial if requested by the court. However, if there are practical reasons for non-attendance at trial, such as health or location issues, and the court agrees, a witness can testify by:
If a witness testifies at trial, the witness can be cross-examined by the opposing party.
A party to an anti-monopoly case can call an expert witness to testify, or submit an expert report as evidence. If a party calls an expert witness at trial, the opposing party will have the opportunity to cross-examine the expert.
Legal scholars in China have proposed establishing a legal framework for passing-on defence in China. But currently there are no legal precedents and it is unclear how the court will view the passing-on argument if it is raised.
Theoretically, a defendant could allege that the claimant has passed its damages to its purchasers or ultimate consumers, and therefore is not entitled to the claimed damages. As there are no reported cases in which this passing-on argument has been raised, the standard for establishing the passing-on defence is unclear.
A number of defences are potentially available to a defendant. These can include defences that are:
Common to all civil cases.
Specific to Anti-monopoly Law (AML) disputes.
In an AML case in which abuse of market dominance is alleged, the defendant could potentially argue that:
It lacks market dominance.
Its conduct does not constitute abuse.
Article 17 of the AML provides justifiable grounds for undertaking to defend against abuse-of-market-dominance allegations.
Article 15 of the AML provides exemption for agreements that have benefited consumers and have not caused substantial restriction to market competition. These include agreements to:
Improve technology, further research, and develop a new product.
Upgrade product quality, reduce costs, improve efficiency, unify product specifications or standards, or carry out professional labour division.
Enhance operational efficiency and reinforce the competitiveness of small and medium-sized businesses.
Realise public interests, such as conserving energy, protecting the environment, and providing disaster relief.
Mitigate a severe decrease of sales volume or excessive production during an economic recession.
An agreement that protects justifiable interests in foreign trades or foreign economic co-operation is not considered an illegal monopoly agreement under the AML.
In a parent-subsidiary situation, a parent company can potentially argue in its defence that the alleged monopolistic conduct was committed by its subsidiary and that the parent should not be held liable for the subsidiary's conduct.
A court can award damages to compensate a claimant that has suffered loss from monopolistic conduct (Article 14, Supreme People's Court Provisions on Monopolistic Conduct). The same article provides that the compensation can cover the claimant's reasonable expenses for investigating and preventing the monopolistic conduct.
The Anti-Monopoly Law (AML) does not provide clear guidance on how private actions interact with regulatory enforcement. There is at least one company that has been subject to both a regulatory anti-monopoly investigation and private actions. The investigation was eventually settled with a ratification plan, and this appears to have had little influence on the damages awarded in the private actions.
A defendant in an AML case can be required to pay:
Compensatory damages for a claimant's actual loss. These are awarded in many AML cases.
Restitutionary damages for a claimant's loss of profit, if the claimant can prove that the monopolistic conduct caused the loss of profit.
In Rainbow Medical v Johnson & Johnson, Rainbow was awarded restitutionary damages for loss of profits on its medical suture products which resulted from Johnson's enforcement of a resale price maintenance clause. That clause was found by the Shanghai High People's Court to be an illegal monopoly agreement.
Exemplary damages are not available in private AML litigation.
A court can award interest on damages. If the court decides to award interest, it must make that explicit in its judgment.
If a defendant fails to satisfy a judgment by the due date, the defendant must pay interest for the delayed period at a rate of 0.0175% per day, in addition to any interest payment provided in the judgment.
In civil cases damages from monopolistic conduct are determined based on either the:
In Rainbow Medical v Johnson & Johnsonthe court considered the profit range within the industry and awarded the claimant, Rainbow, damages based on loss of its expected profit loss. It rejected Rainbow's other damages claims because they did not arise from the monopolistic conduct at issue in the case.
In Huawei v InterDigital, the court listed several factors in reaching its award of damages, but did not elaborate on its analysis of the factors. The factors included:
The loss claimed by the claimants.
The nature of the monopolistic conduct.
The subjective intent of the defendant.
Litigants have engaged economic experts in some anti-monopoly cases, but there are insufficient precedents to draw a conclusion about the type of economic analysis preferred by the court. Expert economic analysis has been used for:
The competitive nature of the relevant market.
The defendant's market share and market position.
Calculation of damages.
We expect that economic analysis will have a more important role in anti-monopoly litigation in the future.
Chinese courts have traditionally favoured factual witnesses, but expert testimony has become increasingly important in anti-monopoly disputes. Litigants can support their damages claims by using both factual witnesses and economic experts. A claimant may, for example, choose to present evidence of:
Expected volume of sales.
Price difference of alternative products.
Loss of inventory.
A first instance judgment can be appealed to the immediately higher court within a specified time limit. Grounds for appeal include:
Wrongful application of law.
Wrongful finding of fact.
Violation of procedure.
A second instance judgment is final and enforceable, subject to the possibility of a retrial.
The parties can petition for the retrial of a case after the second instance judgment. The petition for retrial can be made to either the:
Second instance court.
Court at the next level up.
Whether a retrial can be granted is at the court's discretion. If the retrial is granted, enforcement of the second instance judgment will be stayed.
In late 2015, the National Development and Reform Commission (NDRC) proposed amendments to the Anti-Monopoly Law (AML) and issued draft guidelines for AML enforcement. The main reasons for the proposals given by the NDRC include the need for greater:
Restraint on administrative monopolies by agencies with regulatory power.
The NDRC and the Administration for Industry and Commerce (AIC) have each issued its own draft antitrust guidelines on abuse of intellectual property rights. These two sets of draft guidelines provide a very specific framework for anti-monopoly enforcement in cases involving abuse of intellectual property rights. It has been reported that the Ministry of Commerce may combine the two sets of draft guidelines and issue a final version.
Description. This is the most comprehensive commercial database in China. It contains legislation, reported cases, legal journals, treaties, practice guidance, and other legal documents. The English-language part of the database (http://en.pkulaw.cn/) provides English translations for most of its collected documents.
The website is maintained by Beijing Yinghua Technology Company and the Legal Information Center at Peking University. It contains both official and unofficial legal documents, and its information is mostly up to date. Some of the documents may have been edited for the convenience of users, which will be specified on the front of the documents. English translations provided on the website are for reference only.
Description. China Judgments Online offers the largest collection of judgments and decisions from Chinese courts. It is supported by the Supreme People's Court, and mostly up to date. English translations of judgments and decisions are not available on the website.
Fang QI, Partner
Professional qualifications. Bar qualifications before SIPO and USPTO, and in the State of New York and China
Areas of practice. Antitrust; intellectual property; unfair-competition.
Non-professional qualifications. Columbia University School of Law, JD; City University of New York, PhD, Biochemistry; Peking University, BS.
- Acting for a wireless telecommunication research and development company in anti-trust civil litigation concerning the license of standard essential patents.
- Acting for Power Integrations against a leading semiconductor manufacturer concerning invention patents over power control devices.
- Acting for Sony Corporation against claims of patent infringement concerning the MP3 player technology.
- Acting for Tesla Motors Inc. to successfully recover the right to use the "Tesla" trademark in China against a trademark squatter.
- Acting for Mr Michael Jordan in litigation against Qiaodan Sports Company for its registration and use of Mr Jordan's name and image as trademarks.
- Acting for multinational chemical companies against local competitors for trade secret misappropriation.
Languages. Chinese, English
- SEP Lessons Learned From Huawei v ZTE; CLP, August, 2015, by Fan Guo and Fang Qi.
- China: Antimonopoly Litigation; The Asia-Pacific Antitrust Review, 2015.
- The Pains of Judicial Reform; CLP, Sept/Oct 2014.
- Consideration of Economic Evidence by Chinese Courts in Antitrust Litigation. Competition Policy International, Feb 2014, by Fang Qi, Marshall Yan, and Yan Luo.[
- Courts Get Tough on Resale Price Maintenance; CLP, Sept 2013, by Fang Qi and Haiyan Tao.
- Failing to Define the Relevant Market; CLP, July 2013, by Fang Qi.
- Curbing Damage Awards; CLP, March 2013.
- Microsoft v Motorola: Licensing on Standard-Essential Patent; Innovation and Intellectual Property, Vol 31, 2014, by Fang Qi and Nye Wang.