By Susan Ning, Kate Peng, Jia Liu and Rui Li    King & Wood Mallesons’ Antitrust & Competition Group

After more than ten years of deliberation and discussion, Anti-monopoly Law of China (AML) finally came into effect on August 1, 2008. This is not only a periodic achievement in the development of Chinese legal system but also a milestone event since the establishment of Chinese market economy. AML contains eight chapters and fifty-seven articles and sets up a brand new mechanism against economic and administrative monopoly with both domestic and international reaches and private and public enforcement. Public enforcement refers to administrative investigation and enforcement activities initiated by anti-monopoly agencies duly authorized by the nation. Private action refers to anti-monopoly civil action filed at the court by the legal or natural person injured by the anticompetitive conducts. In the past five years, the public and private enforcement have worked in tandem to promote the enforcement of AML. The two enforcement methods complement each other to prevent the anticompetitive conducts violating AML, protect fair market competition, enhance market efficiency, and safeguard consumers’ interest and the public interest.   

The dual system of anti-monopoly civil action and anti-monopoly administrative enforcement created by the AML reflect the practices and the trend of antitrust law of other jurisdictions and are able to better achieve the goals and purposes of the AML. However, the dual system may give rise to some issues in practice. As both anti-monopoly civil action and administrative review may arise from the same underlying conduct, the dual system requires coordination. Although the current legislation has dealt with some of the issues, many issues are left unresolved. This article tries to comb through these issues and elicit more attention to them. We also hope that the people’s courts and the administrative agencies will solve these issues in practice soon.

1 The Interplay between Administrative Investigation and Civil Action

AML does not require administrative enforcement as a prerequisite to civil action. Provisions of the Supreme People’s Court on Several Issues concerning the Application of Law in the Trial of Civil Dispute Cases Arising from Monopolistic Conduct (SPC Rules1 ) further clarifies that anti-monopoly administrative enforcement is not a prerequisite to anti-monopoly civil action. The relevant laws and regulations fail to provide guidance when anti-monopoly administrative investigation and civil action proceed at the same time. What should the administrative agencies and the judiciary do when a party reports the conducts suspicious of violation to the administrative agencies and at the same time brings a civil action? Should the AML enforcement agencies and the people’s courts accept the case when the threshold requirement is met, or wait until the other acts, or the first one accepts the case proceeds while the second one suspends action?

Article 2 of the SPC Rules provides “[w]here a plaintiff directly files a civil lawsuit with the people’s court or files a civil lawsuit with the people’s court after a decision of the AML enforcement agencies affirming the existence of monopolistic conduct comes into force, if the lawsuit satisfies other conditions for lawsuit acceptance as prescribed by law, the people’s court shall accept the lawsuit.” This Article implies that even if the administrative agency has not made a binding administrative decision, the people’s court will still accept the case. However, if the two proceedings proceed at the same time (no matter which proceeding starts first), does it mean that one proceeding needs to be suspended until the other proceeding concludes?

As to the abovementioned questions, the current AML and relevant regulations fail to provide clear guidance and in the practice this issue has not been encountered. Article 16 of the draft SPC Rules provide, “[t]he people’s court could suspend the trial if it deems necessary based on the circumstances of the case while the administrative agency is investigating the alleged anti-monopoly conducts.” However, this article was not included in the effective final version of the SPC Rules. Based on our understanding, if the two proceedings are started at the same time or one immediately follows the other, the AML enforcement agencies and the people’s courts both have the power to investigate and review.

Obviously, if the two proceedings proceed at the same time, the decisions made by the AML enforcement agencies and the people’s courts may be different. To avoid this type of situation, the AML enforcement agencies and the people’s courts may make relevant rules or adopt certain measures in practice. For example, under special circumstance, the people’s courts may invoke the catch-all provision of Article 150 of the Civil Procedure Law of People’s Republic of China to suspend the trial while waiting for the AML enforcement agencies’ decision. 2

2 The Impact of Administrative Investigation on Statute of Limitations

When a party seeks both public and private enforcement, the preceding administrative proceeding may affect the statute of limitations of the follow-up civil action.

Article 16 of the SPC Rules state, where the plaintiff reports the alleged monopolistic conduct to the AML enforcement agency, the statute of limitations is interrupted from the date of such a report; if the AML enforcement agency decides not to open a case, decides to revoke a case or decides to terminate investigation, the statute of limitations shall be re-calculated from the day when the plaintiff knows or should have known the decision not to open a case, decision to revoke a case, or decision to terminate investigation; if the AML enforcement agency determines after investigation that the alleged monopolistic conduct exists, the statute of limitations shall be re-calculated from the day when the plaintiff knows or should have known that the decision of the AML enforcement agency affirming the existence of monopolistic conduct has come into force.

Although the Article quoted above is unequivocal in its expression, in practice, it is hard to interpret “know or should have known.”3  For example, the statute of limitations should start to run at the time when the plaintiff knows or should have known that the AML enforcement agency makes the decision. However, in practice, except under Article 30 of the AML where MOFCOM should publicize a decision on prohibiting or attaching restrictive conditions to the concentration of business operators, the other AML enforcement agencies are not obligated to make public their decisions. Does it constitute “know or should have known” if the media reports the decision made by National Development and Reform Commission (NDRC) and State Administration for Industry & Commerce (SAIC) while the decision-making agencies do not? In addition, it remains a question how to calculate statute of limitations in anti-monopoly civil action when no one reports the anti-monopoly conducts or no enforcement agency starts the investigation.

To our best knowledge, of all the concluded anti-monopoly civil actions, the statute of limitations has not become an issue. However, with the increasing diversification of anti-monopoly civil actions, how to determine the start, interruption and the re-start of statute of limitations may become a hotly contested issue in the court.

3 Plaintiff’s Burden of Proof in Anti-monopoly Civil Action and the Standard of Determination in Administrative Investigation

The current judicial practice shows that the plaintiff seeking redress bears a heavy burden of proof because of the complexity of anti-monopoly civil action. In addition, because of the inadequate evidence discovery system and the limited information and data available, the plaintiff is faced with the difficulties in obtaining and presenting evidence, which makes it rare for a plaintiff to prevail in anti-monopoly civil action.

In order to address this problem, SPC Rules made certain breakthroughs regarding the principle “whoever asserts shall bear the burden of proof” established in the Civil Procedure Law. The SPC Rules made changes to the plaintiff’s burden of proof based on the types of monopolistic conducts involved. In particular, the defendants shall bear the burden to prove the lack of anticompetitive effects regarding the horizontal monopoly agreements prohibited by Article 13 of AML because this type of agreements usually are presumed to have the effects of excluding and restricting competition. This is called reversal of burden of proof.  However, with respect to vertical monopoly agreements, the usual principle of burden of proof still applies, because, in the opinion of the people’s courts, the anticompetitive effects of vertical agreement is uncertain, which means the plaintiff needs to prove that the vertical agreements have the effects of excluding and restricting competition.4   In the opinion of the people’s courts, competition concerns will only arise when the inter-brand competition is not sufficient.5

Shanghai Higher People’s Court (Shanghai Higher Court) applied the abovementioned principle in the recently decided Rainbow v. Johnson case on August 1, 2013.6  In the appeal, Shanghai Higher Court affirmed the two approaches of the court of first instance (Shanghai No.1 Intermediate People’s Court): first, the illegality of vertical monopoly agreement needs to be based on the effects of excluding and restricting competition; second, the plaintiff must prove the effects of excluding and restricting competition regarding minimum resale price maintenance (RPM) agreement. In determining whether RPM agreement has the effects of excluding and restricting competition, Shanghai Higher Court required the consideration of the following factors in its judgment: (i) whether there is sufficient competition in the relevant market; (ii) whether the defendant’s market power is strong; (iii) the motive for the defendant to impose RPM; and (iv) the competitive effects of the RPM—both the anti-competitive and the pro-competitive effects shall be taken into account.

However, another school of thought believes, the anti-competitive effects of the RPM agreement prohibited by Article 14 of the AML is self-evident. There is no difference between the five types of horizontal agreement under Article 13 of the AML and the abovementioned agreement. Therefore, the plaintiff should not bear the burden to prove the anti-competitive effects. The defendant should bear the burden to prove the lack of anti-competitive effects. In other words, the reversal of burden of proof should be applied to both horizontal and vertical agreements categorized by Article 13 and Article 14.

The abovementioned school of thought seems to match the opinions of the AML enforcement agencies. In the recent AML administrative decisions against RPM agreements, although some officials of the NDRC once claimed they adopt a rule of reason analysis towards RPM agreement, it seems that the anti-competitive effects of the RPM agreement is presumed in the publicized decisions without a detailed analysis as found in the Johnson decision.7  Therefore, a great number of people believe that NDRC holds RPM as per se illegal and there is no need for further competitive analysis to find RPM constitutes the vertical monopolistic agreement having anti-competitive effect.8

If the people’s courts and the AML enforcement agencies adopt different standards of determination and analytical approaches regarding the competitive effects of the same conduct, it might create confusion among business operators and consumers. In this situation, the undertakings should follow a higher standard of conduct and avoid administrative penalty. The undertakings and the consumers should be prepared and carefully assess whether they can meet the burden of proof when filing a civil action.

4 Anti-monopoly Investigation and the Evidence in Follow-on Civil Litigation

In AML civil litigation, a party could apply to the people’s court to obtain evidence.9  However, it remains to be seen whether successful leniency applicants10 or successful suspension applicants11 can apply to keep confidential the evidence they disclose during the leniency application or suspension application and to prevent such evidence from being used in subsequent legal proceedings.  This actually involves policy balancing in the enforcement of the AML. On one hand, if evidence obtained from leniency or suspension procedures can be withheld from anti-monopoly civil litigation, in some cases the plaintiff may not have other means to collect evidence; on the other hand, the leniency and the application to suspend the investigation were established to encourage the perpetrators to stop the illegal conducts as early as possible to minimize the negative impact, increase enforcement efficiency and save administrative resources. If the people’s court could easily collect the evidence obtained during suspension or leniency procedures, the parties may have less incentive to file for suspension or leniency, which may undermine the AML administrative enforcement to some extent.

In addition, in AML follow-on litigation12 , can the court forgive the plaintiff’s burden of proof for facts found and conclusions determined by the AML enforcement agencies and directly adopt the factual and legal conclusions made by the AML enforcement agencies? The draft SPC rules covered this issue. Article 11 of the second Draft SPC rules provide that plaintiff should not need to prove facts established in the decisions of AML administrative enforcement unless the opposite parties have sufficient evidence to prove otherwise. In addition, the people’s court cannot find the business operators engaging in monopolistic conducts based on the business operators’ commitments made to the AML enforcement agencies to secure the suspension of investigation. However, this provision is removed from the final SPC Rules.

The opinions on this issue diverged. Some voices are in the view that, the court should recognize the effects of the decisions made by the AML enforcement agencies and refrain from asking the plaintiff to prove facts already established by the administrative decision.  This is because, firstly, the investigated party has the right to request administrative review and bring administrative action if they do not agree with the administrative decisions; secondly, such provision may save administrative resources, and protect the authority of the AML enforcement agencies.13  Whereas other voices believe that, the administrative decisions should not be binding on the people’s courts because the decision is made according to administrative procedures. Despite the controversy, the decisions made by the AML enforcement agencies have important impact on the follow-on litigation. According to Article 77 of Some Provisions of the Supreme People’s Court on Evidence in Civil Procedures, the documents formulated by state organs or social bodies according to their respective functions are, as a general rule, more forceful than other written evidences.14  Therefore, if the AML enforcement agencies determined that the investigated party engaged in illegal conducts in administrative decisions, the people’s courts are more likely to adopt the findings in the decisions compared with other documented evidence.

Although the AML enforcement agencies have concluded multiple AML investigations, there has been no follow-on litigation. Therefore, it remains to be seen how much influence does the administrative decision play in the civil action.

5 The Impact of the Administrative Penalty Decision on the Calculation of Damages in the Follow-on Civil Action

Another issue related to follow-on civil litigation is whether the people’s courts should consider and if yes to what extent the penalties imposed by the AML enforcement agencies as a mitigating factor in awarding civil damages.

For example, in NDRC’s investigation into horizontal monopolistic agreement between LCD manufacturers at the start of 2013, NDRC’s penalty15  can be broken down into three parts: restitution of the past overcharge of RMB 172 million (approximately USD 27 million) to domestic TV makers, confiscation of unlawful gains of RMB 36.75 million (approximately USD 5.8 million) and a fine in the amount of RMB 144 million (approximately USD 23 million). In other words, the penalty includes the illegal gains made by charging TV manufacturers excessive price. Although the decision is made based on Article 14 of the Price Law, AML also gives the enforcement agencies the power to confiscate illegal gains.

The Civil Procedure Law of China adopts the “principle of restitution” which gives rise to a question: if the administrative decisions has determined the amount of illegal gains and ordered the violates to return the illegal gains to the TV manufacturers, does it mean the TV manufacturers are no longer injured and have no injury as required by the law? If the LCD manufacturers return the illegal gains to the TV manufacturers which are the direct purchaser, does it mean the indirect purchaser (meaning the ultimate consumers) can still sue LCD manufacturers or should instead sue the TV manufacturers which pass on the overcharges to the ultimate consumer?

Generally speaking, the purposes of administrative penalty and that of civil compensation are different. Therefore, if a party is injured by the anti-competitive conduct, it is entitled to receive civil compensation and its right to be compensated should not be affected by the administrative penalty. However, if the people’s court does not take into account the fact that TV manufactures are already compensated, it seems a direct violation of the principle of restitution and the injury requirement in the civil action.  It remains to be seen how to resolve and interpret the abovementioned issue under the current AML structure. Only future administrative and judicial practice shall tell.

6 The Administrative Enforcement and Civil Action Against Uncategorized Monopolistic Conducts

In addition to the monopolistic conducts listed in the AML, the last clause of Article 13, Article 14 and Article 17 of AML sets forth a catch-all provision, stating that the AML enforcement agency can determine other types of monopolistic agreements and abuses of market dominance.

It seems that the abovementioned provisions literally provide that as to the uncategorized monopolistic conducts in the AML, unless the AML enforcement agencies already found such conducts and agreements as illegal, the people’s courts has no right to review. In other words, for monopolistic agreement such as exclusive distribution which may be found as illegal in other jurisdictions, unless the AML enforcement agency announces regulations proclaiming them as illegal or finds them as illegal in administrative decisions, the business operators and the consumers cannot file a stand-alone litigation based on Article 50 of AML.

Of course, the people’s courts may not agree with this interpretation based on the power to conduct trial. If a party files a suit based on the catch-all provision of AML, the court is likely to rule on the basis whether the challenged conduct falls into the types of monopolistic conduct prohibited by the AML and whether the challenged conduct excludes and restricts competition. It remains to be seen whether the trial conducted in this manner complies with AML.

7 Concluding Remarks

This year marks the fifth anniversary of the AML. Some quintessential cases have surfaced in the area of public16  and private enforcement17  which contribute to accumulation of experiences.  However, many issues are still waiting to be resolved by legislation and practice. We hope to see more universal and smooth coordination between administrative enforcement and judicial practice, which will offer more guidance for the day-to-day compliance of business operators and protection for consumers’ interest.


1The SPC Rules were promulgated on May 3, 2012 and went into effect on June 1, 2012. The SPC Rules were the first judicial interpretation made by the Supreme People’s Court on anti-monopoly civil action and were significant in guiding the people’s court as to how to apply the AML and detailing the private enforcement mechanism.
2Pursuant to Article 150 of Civil Procedure Law of China, under any of the following circumstances, an action shall be suspended: (1) A party dies and it is necessary to wait for his or her successors to indicate whether they will participate in the action. (2) A party loses his or her litigation competency and his or her legal representative has not been determined. (3) A party which is a legal person or any other organization is terminated and the successors to the rights and obligations of the party have not been determined. (4) A party is unable to participate in the action for reasons beyond the party’s control. (5) The action must depend on the results of the trial of another case which has not been concluded. (6) Other circumstances requiring suspension.
3Article 137 of the PRC General Principles of the Civil Law provides, a limitation of action shall begin when the entitled person knows or should know that his rights have been infringed upon.
4Understanding and Applying the Judicial Interpretation of Intellectual Property Rights by the Supreme People’s Court, Kong Xiangjun, China Legal Publishing House, 2012, Page 268-270.
5In answering the questions raised by the journalist regarding anti-monopoly civil action, the Chief Judge of the IP Division of the Supreme People’s Court states, AML distinguishes between two different types of monopolistic agreement: the horizontal monopolistic agreement and the vertical monopolistic agreement. The anticompetitive potential of the two types of agreements are different. The anticompetitive harm of the horizontal agreement is usually greater. Regarding vertical agreements, competition concerns will only arise when the inter-brand competition is not sufficient. In other words, the negative effect only arises when certain competitive status exists at the distribution level or at the purchasing level or at both levels. http://www.law-lib.com/fzdt/newshtml/21/20120509090301.htm
6For a description of the case, please refer to article entitled “Chinese Court Rendered Final Judgment on Rainbow v. Johnson & Johnson – the First Antitrust Private Action of Vertical Monopolistic Agreement
7In the Moutai and Wuliangye investigation, the Price Bureau of Guizhou Province and Sichuang Development and Reform Commission made an public announcement accusing the two companies of restricting and excluding competition and injuring the consumers’ interest. In the recent public announcement regarding the baby formula investigation, NDRC pointed out that the infant formula companies unjustifiably maintained high sales price of the baby milk powder and seriously restricted, excluded the intra-brand competition, decreased the price competition between different infant formula companies, undermined the fair market competition, and injured the consumers’ interest. However, in these two cases, NDRC failed to provide further competition analysis of its findings and decisions.
8Although the Shanghai Higher Court’s reversal decision can be easily read as the unification between administrative enforcement the judicial determination, as a matter of fact the AML enforcement agencies would not bear as substantial burden of proof in vertical monopolistic agreements as the plaintiff in a civil action against vertical agreements.
9Paragraph 2 of Article 64 of Civil Procedure Law provides that a people’s court shall investigate and collect evidence which a party and its litigation representative are unable to collect for some objective reasons and evidence which the people’s court deems necessary for trying a case.
10Article 45 of AML provides for the suspension application, which stipulates that as for a suspicious monopolistic conduct that the AML enforcement agency is investigating, if the business operators under investigation promise to eliminate the effects of the conduct through the use of concrete measures within the time limit accepted by the AML enforcement agency, the AML enforcement agency may decide to suspend the investigation. The decision of suspending the investigation shall state the concrete measures promised by the business operators under investigation.
11he leniency application means confessing the illegal conducts to the AML enforcement agencies in exchange for mitigated penalty or exemption from penalty. Paragraph 2 of Article 46 of AML provides, where a business operator who is engaged in a monopolistic agreement voluntarily confesses the information about the monopolistic agreement and provides the important evidence to the AML enforcement agency, the business operator may be given a mitigated punishment or be exempt from punishment at the discretion of the AML enforcement agency.
12Follow-on litigation means an anti-monopoly civil action for compensatory damages filed by victims of monopolistic conducts on the basis of the administrative decisions after the enforcement agencies finds the illegal monopolistic conducts and imposes a penalty.
13Huang Rao, A Brief Analysis of the Coordination Between the Judiciary and the Enforcement Agencies in Anti-monopoly Civil Action, Fa Xue Lun Cong, Issue 461.
14Article 77 of Some Provisions of the Supreme People’s Court on Evidence in Civil Procedures states, the documents formulated by state organs or social bodies according to their respective functions are, as a general rules, more forceful than other written evidences.
15This decision is made based on Price Law.
16It is reported that, till the end of 2012, NDRC has opened 49 price-related anti-monopoly investigations and among of which, 20 cases have been made made penalty decisions; SAIC has opened investigation into 24 cases involving monopoly, 23 of which were conducted by the provincial AIC under the authorization of SAIC. 12 decisions were made public. http://www.saic.gov.cn/zwgk/gggs/jzzf/
17Till the end of 2012, 116 antitrust private actions were accepted by the people’s courts over the country and 102 of them were closed disclosed by Judge Zhu Li of the Intellectual Property Division of the Supreme People’s Court at the International Competition Policy and Law Annual Conference 2013 held by University of Chinese Academy of Sciences on May 31, 2013 in Beijing.