By: Susan Ning and Liu Jia.
On 3 November 2010, it was reported in the press1 that the Changsha Yuelu District People’s Court (in Hunan province) accepted the court’s first private antitrust claim. The antitrust claim was formally accepted by the court 1 November 2010 and is an abuse of dominance case.
The plaintiff, Mr Liu Dahua has made a claim against Dongfeng Nissan Passenger Vehicle Company (Dongfeng Nissan) & Hunan Huayuan Industry Corporation Ltd (Hunan Huayuan), alleging that the latter has abused its dominance in relation to the auto-repair and auto parts industry.
From press reports, we understand that this is an abuse of dominance case (pursuant to Article 17 of the Anti-Monopoly Law or AML). Further, from the facts presented in this press reports, we think that it is likely that Mr Liu’s claim is based on Article 17(4) (prohibiting business operators from abusing their dominance by restricting sales without a valid reason) or Article 17(6) (prohibiting business operators from abusing their dominance by implementing differential terms).
In June 2009, Mr Liu purchased an automobile vehicle manufactured by Dongfeng Nissan. On 22 October 2010, he brought his vehicle for repair at a 4S shop2 called “Hunan Huayuan”.3 The front left door of Mr Liu’s vehicle was faulty and needed repair. Employees at Hunan Huayuan told Mr Liu the total cost required to repair the front left door of his vehicle was 607RMB (307RMB for 2 parts that needed replacing; and 300RMB service fees).
Mr Liu has alleged that the price of 307RMB for the 2 parts mentioned above was excessive. He claimed that these parts were more than 3 times more expensive than their “market” price. In addition, Mr Liu also claimed that Hunan Huiyuan’s proposed service charge of 300RMB was also excessive – he claimed that this is over 7 times the “market rate”.
Mr Liu then wanted to merely purchase the 2 parts from Hunan Huayuan (and not their services). However Hunan Huayuan refused to sell the 2 parts to Mr Liu without installing the parts for Mr Liu. Hunan Huayuan explained that Dongfeng Nissan had a policy which prohibited Dongfeng Nissan’s distributors from merely selling the parts to customers (without provision of the relevant services). It was reported in the press that Mr Liu paid the total price of 607RMB for Hunan Huayuan’s parts and services.
Mr Liu has alleged that both Dongfeng Nissan and Hunan Huayuan have abused their dominance. He has claimed that Dongfeng Nissan should allow their distributors to sell parts to end-users (without having to procure services as well). He has also claimed that Hunan Huayuan should provide each of their advertised services, including sale of vehicles, sale of spare parts, service of vehicles and survey of vehicles on a mutually exclusive basis.
It is interesting that all the private antitrust cases thus far are abuse of dominance actions (as opposed to cartel actions or actions in relation to anticompetitive vertical agreements). It will be interesting to follow this case to see how and if the court will deem either Dongfeng Nissan and/or Hunan Huayuan as “dominant” entities (and the reasons for this); and whether Dongfeng Nissan’s restrictions on distributors; and Hunan Huayuan’s conduct of refusing to provide mere parts to Mr Liu would constitute an “abuse” of dominance (if any).
1. See for instance: http://www.legaldaily.com.cn/index_article/content/2010-11/03/content_2337657.htm?node=5955; and http://ip.people.com.cn/GB/13116926.htmll.
2.In China, “4S” is an abbreviation for shops which sell vehicles, sell spare parts, service vehicles and provide vehicle survey services (hence “Sale, Spare part, Service and Survey” or “4S”).
3.Hunan Huayuan appears to be a distributor of Dongfeng Nissan’s vehicles and parts.