By Susan Ning, Shan Lining, Ji Kailun and Liu Jia
On 25 April 2011, the Supreme People’s Court (the Court) published draft rules which govern Anti-Monopoly Law private actions (Draft Rules). These draft rules are entitled "Provisions on Issues Concerning the Application of Law in relation to Trials of Monopoly Civil Dispute Cases".
This article outlines the salent provisions of, and points to some interesting features of, these Draft Rules.
The objective of the Draft Rules is to "to ensure the proper judgment of civil antitrust disputes, prevent monopolistic conducts, protect fair competition in the market, and safeguard the interests of consumers and social public interest"
2.Overview of the provisions
The Draft Rules has 20 provisions in total, these cover the following matters:
Articles 1 to 3 deal with jurisdiction issues;
Articles 4 deals with the issue of standing;
Articles 5 to 6 provide outline the different forms of AML civil litigation;
Articles 7 to 14 outline the rules of evidence;
Articles 15 to 16 outline the link between AML investigations and litigation;
Articles 17 to 19 deal with remedies; and
Article 20 provides for a statute of limitations.
The Draft Rules provide that first instance AML cases will be heard by:
• intermediate people’s courts located in the capital cities of the provinces and autonomous regions;
• intermediate people’s courts in municipalities which fall under the purview of the State Council or in cities listed in the State Plan1 ; and
• intermediate people’s courts which have been designated by the Supreme People’s Court.
The Court was interviewed about the draft recently2 and during this interview, a spokesperson from the Court said that only certain intermediate people’s courts were given jurisdiction to hear AML cases because their experience with AML cases are that these are highly complex and "technical" in nature. The spokesperson also said that China is still at its infancy re AML litigation and thus far the courts haven’t had the opportunity to become experienced AML courts. It was also disclosed during the interview that AML cases (along with Anti-Unfair Competition Law cases) will be heard by the Intellectual Property Rights Tribunals within the courts possessing jurisdiction.
The Draft Rules echo Article 50 of the AML. Article 50 of the AML provides that business operators which implement monopoly acts and thereby causing others to suffer losses will bear civil liability. The Draft Rules state that "natural persons, legal persons and other organisations who have suffered harm as a result of monopolistic conduct, including business operators and consumers, may file a civil suit". From the relatively broad way in which the Draft Rules are phrased, it would appear that persons who are directly or indirectly harmed by a monopoly act may sue.
During the interview mentioned above, the spokesperson from the Court explained that victims of monopoly acts often do not come into direct contact with entities who breach the AML – for instance consumers.
5.Forms of AML civil litigation
The Draft Rules provides for both stand alone and follow on rights of actions.
The Draft Rules also provide that there are only follow on rights of actions in relation to breaches of the AML by administrative agencies 3.
6.Rules of evidence
Burden of proof on plaintiff. Pursuant to PRC Civil Procedure Law, the burden of proof always lies on the plaintiff. This is also the case in the Draft Rules. Specifically, the Draft Rules state that plaintiffs will bear the burden of proof in the following respects:
•the existence of the alleged monopolistic conduct;
•the existence of damages;
•the causal link between the alleged monopolistic conduct and damages.
Cartel cases. In relation to cartel cases, the plaintiff bears the burden in relation to proving how the cartel arrangement has eliminated or restricted competition (i.e. the effects test). However, in relation to specific conduct outlined pursuant to Articles 13(1) to (5) and 14(1)-(2) of the AML, the plaintiff does not have to prove effects. Article 13 of the AML prohibits cartel agreements and arrangements and parts (1) to (5) outlines examples of cartel agreements and arrangements such as price fixing, restricting supply and dividing markets. Article 14 of the AML prohibits anti-competitive vertical agreements and arrangements including resale price maintenance. The Draft Rules make it clear that one does not need to prove "effects" in relation to these examples of cartel agreements or anticompetitive vertical agreements.
Abuse of dominance cases. In relation to abuse of dominance cases, the plaintiff bears the burden of proof in relation to proving: what the relevant market is, dominance of the defendant in the relevant market and the alleged abuse.
Defences. The defendant would bear the burden of proof to prove the legitimacy of his actions, after the plaintiffs are able to prove the above mentioned elements.
The Draft Rules also address "pass through" defences – in relation to pass through defences, the defendant would have the burden of proof that the plaintiffs have passed through all their damages or part of their damages to other entities.
Special sectors. The Draft Rules also provide that so long as there is sufficient evidence, the courts would be able to provide a "preliminary" determination that dominance exists in respect of:
•public enterprises including the suppliers of water, electricity, heat and gas;
•business operators other than public enterprises, who are entitled by the relevant laws, regulations and rules to be the dominant operator in relation to specific commodities and services;
in markets which lack efficient competition and where business operators provide commodities or services to others who place great reliance on these business operators.
Type of evidence. Evidence to prove dominance may include: economic analysis, statistical results put together by a qualified and independent third party and "confessions" by the alleged dominant entity.
Court order to provide evidence. There is also a provision within the Draft Rules which give courts the power to instruct defendants to provide evidence. Specifically the Draft Rules state that plaintiffs may apply for a court order to instruct defendants to provide further evidence, provided the a number of elements are satisfied, including: that plaintiffs are able to prove the "probable existence" of damages due to the monopolistic conduct and plaintiffs have used "reasonable means" to obtain evidence but to no avail.
Expert Evidence. The Draft Rules provide that plaintiffs and defendants may apply to the courts if they wish to submit expert evidence.
7.Link between AML investigations and litigation
The Draft Rules provide that there is a link between AML investigations and litigation. Specifically, in situations where monopolistic conduct has been investigated by but not yet determined by the antitrust authorities, the courts may still make determinations based on these investigations.
The courts may also decide to grant a stay to cases in which investigations into alleged monopolistic conduct has not been concluded by the antitrust authorities.
The Draft Rules state that business operators who commit monopolistic conduct should bear civil responsibilities pursuant to civil law, tort liability law and the AML.
These remedies include: an order to stop the infringement; an order to eliminate the “danger” of causing losses to others and damages for loss caused to others.
9.Statute of limitations
The Draft Rules provide that the statutory limitations for civil antitrust actions are:
•in relation to stand alone actions, two years commencing from the day when the aggrieved party is aware of or should be aware of the infringement;
•in relation to follow on actions, the two year limit is calculated from the day when the aggrieved party either is aware of or should be aware of the determination by the antitrust authorities.
These Draft Rules are very comprehensive and cover many aspects of AML litigation. Going forward and especially after these rules are enacted, we expect to see a rise in terms of AML litigation as plaintiffs become familiar with and confident with what they can expect and need to prove to establish a breach of the AML.
1Currently, there are 5 cities separately listed on the State Plan. These are: Shenzhen, Dalian, Qingdao, Ningbo and Xiamen.
3The AML prohibits an abuse of administrative powers by administrative agencies which result in the elimination and restriction of competition (see Chapter 5, AML).