By: Susan Ning, Shan Lining and Angie Ng.

On 12 November 2010, Professor Huang Yong (University of International Business and Economics) gave some comments to the media1 on the QQ-360 disputes (see our previous article entitled “The QQ/360 disputes”).

Professor Huang made the point that industries like the technology and internet services industries develop and change so quickly that by the time either party (i.e. QQ or 360) or a third party brings a claim (pursuant to the Anti Unfair Competition Law (AUCL)) to the courts and receives remedies (e.g. damages), the industry might have changed so much that either one or both of these parties might have been “driven” out of the industry. By contrast, in his comments, Professor Huang spoke about “public enforcement” being a more “efficient” route of enforcing the AUCL.

 Specifically, Professor Huang spoke about the “dual” enforcement track pursuant to the AUCL – the first track is where the involved parties (or third parties) may bring actions for alleged breaches of this law to the courts (i.e. “private actions”); the second track is where the enforcement authority (the State Administration for Industry and Commerce (SAIC)) may themselves investigate and adjudicate (including ordering remedies) on alleged beaches (i.e. “public actions”). This “dual” enforcement track also applies to the Anti-Monopoly Law (AML).

The following outlines some issues to note in respect of private and public enforcement pursuant to both the AUCL and the AML.

Public actions: The AUCL (just like AML) has in place a “civil administration regime”. That is, that the enforcement authorities (the SAIC in respect of the AUCL and the Ministry of Commerce (MOFCOM), SAIC and the National Development Reform Commission (NDRC) in respect of the AML) possess the power to investigate and adjudicate (including ordering remedies such as fines) on entities.

Pursuant to both the AUCL and the AML (abbreviated as “the Laws” for ease of reference), the enforcement authorities may either investigate alleged breaches of the Laws of their own accord, or upon receipt of a complaint from a third party.

The AUCL and AML enforcement authorities also possess substantial investigation powers. For instance, the enforcement authorities pursuant to the AML have the power to search and enter business premises to carry out investigations (Article 39(1), AML). The SAIC, pursuant to the AUCL possesses the power to compel evidence from businesses which have been alleged to have breached the AUCL and even third parties who the SAIC believes to have information about the alleged breach (Article 17(1), AUCL). If a breach has been established by the enforcement authorities pursuant to the Laws, these authorities have the power to impose remedies (including fines and injunctions) directly on the offending businesses.

Private actions: Entities or persons who wish to commence an action in court (re an alleged breach of the Laws) must first satisfy the standing requirements pursuant to the Laws. These persons or entities must have suffered “loss or damage” as a result of the alleged breach (see Article 51 of the AML and Article 20 of the AUCL).

Pursuant to Article 51 of the AML, “persons” who have suffered loss or damage as a result of a breach of the AML may commence an action in court. From the AML private action cases that we have seen so far, we know that the term “persons” may include consumers. Pursuant to Article 20 of the AUCL, only “business operators” who have suffered loss or damage as a result of a breach of the AUCL may commence an action in court. It appears that consumers may not be eligible to sue pursuant to the AUCL.

From the manner in which Articles 51 and 20 of the AML and the AUCL are phrased, persons or entities may commence a “stand alone action” (i.e. bring an action in court independently of any adjudication or decision on the part of the enforcement authority); or a “follow-on action” (that is, bringing an action in court after an adjudication or decision on the part of the enforcement authority).

Thus far (at least pursuant to the AML), we have not yet seen a “follow-on action”. It will be interesting to see how the courts would treat and determine “follow-on actions” – i.e. whether the authorities’ findings would be presented as a prima facie breach of the law; and whether the persons or entities would merely need to prove “loss or damage” and link this to the “prima facie” breach.

In fact, while there have been many public actions pursuant to the AUCL, there have not been any public actions pursuant to the AML yet. This is expected, given that the AUCL was enacted in 1993; whereas the AML was enacted only in 2008.

Overall, both private actions and public actions work hand-in-hand to aid in the enforcement of the Laws. Businesses should be aware of the options to enforce the Laws and seek remedies, including:

  • complain to the enforcement authorities and wait for the authorities to investigate and adjudicate on whether there has been a breach (and thereafter, bring the matter to court as a “follow-on” action to see damages); or
  • commence an action in court independently of any investigation and adjudication on the part of the enforcement authorities.