Typical Case One: Dispute concerning abuse of market dominance, Yangtze River Pharmaceutical Group Guangzhou Hairui Pharmaceutical Co., Ltd, Yangtze River Pharmaceutical Group Co., Ltd. (“Yangtze River Group”) v Hefei Medical and Pharmaceutical Co., Ltd., Hefei Enruite Pharmaceutical Co., Ltd., Nanjing Haichen Pharmaceutical Co., Ltd. (“Hefei Medical and Industrial”), the SPC, (2020) SPC IP Civil Judgment of Final Instance No. 1140
This typical case clarified the consideration of indirect competition constraints from the downstream market when judging the market dominance of intermediate product operators, the correlation and judgment method between the market blocking effect of the accused restricted transaction and the exercise of patent rights, and basic considerations for identifying and regulating abuses such as unfair high prices and additional unreasonable trading conditions. It properly handles the relationship between intellectual property protection and antitrust.
Yangtze River Group is a manufacturer of a kind of desloratadine citrate tablet under the brand of Beixue (“Beixue Tablet”). The Beixue Tablet is an anti-allergy drug and desloratadine citrate is the raw material necessary for the production of the Beixue Tablet. Hefei Medical and Industrial is the patentee of the patent related to desloratadine citrate. For a long time, Hefei Medical and Industrial has been the only supplier of the active pharmaceutical ingredient (“API”), namely desloratadine citrate, for the Beixue Tablet. In addition to producing the desloratadine citrate API, Hefei Medical and Industrial also produces desloratadine citrate capsules. Therefore, the relationship between Hefei Medical and Industrial and Yangtze River Group is not only the supplier and buyer of desloratadine citrate API but also competitors in the pharmaceutical field of desloratadine citrate. Yangtze River Group claimed that Hefei Medical and Industrial used its dominant position in the market for the desloratadine citrate API to restrict Yangtze River Group to only purchase the desloratadine citrate API from Hefei Medical and Industrial, to significantly raise the price of the desloratadine citrate API, and to force Yangtze River Group to accept other business arrangements unrelated to the transaction of the desloratadine citrate API by using the threat of stopping the supply of the desloratadine citrate API. It caused huge losses to Yangtze River Group. Yangtze River Group believes that these behaviours of Hefei Medical and Industrial constitute the abuses of market dominance such as restricted transactions, unfair high prices, tying, and additional unreasonable conditions.
The SPC rejected Yangtze River Group’s request. The SPC held that although Hefei Medical and Industrial had a dominant position in the desloratadine citrate API market in China, its market dominance is weakened by the strong indirect competitive constraints from the downstream second-generation antihistamine preparation market. In addition, the SPC held that the existing evidence was insufficient to prove that Hefei Medical and Industrial had committed an abuse of market dominance based on the following considerations:1. Desloratadine citrate falls within the protection scope of Hefei Medical and Industrial’s patent. Restricting Yangtze River Group to only purchase the desloratadine citrate API from Hefei Medical and Industrial within a certain period and scope is a legitimate exercise of its patent rights. The resulting market-blocking effect does not exceed the scope of the patent’s statutory exclusive effect. Therefore, it does not constitute an abuse of restricting transactions.2. Taking into account the internal rate of return after the price increase and the matching between price and economic value, it is more likely that the initial price of the desloratadine citrate API is a promotional price, and subsequent price increases are likely to be a reasonable adjustment from the promotional price to the normal price. It cannot be determined that it constitutes an abuse of unfair high pricing simply because the price increase is significantly higher than the cost increase.3. The existing evidence is not enough to prove that Hefei Medical and Industrial has expressly or implicitly bundled transactions outside the case with the sales of the desloratadine citrate API. Therefore, it is difficult to determine that there is an abuse of attaching unreasonable trading conditions.
Typical Case Two: Dispute over refusal to deal, Quanzhou Licheng Lisheng Funeral Service Co., Ltd. (“Lisheng”) v Quanzhou Jiying Funeral Service Co., Ltd. (“Jiying”), the SPC, (2021) SPC IP Civil Judgment of Final Instance No. 242
This typical case clarified that it is necessary to comprehensively evaluate the impact on upstream and downstream market competition and whether it harms the interests of consumers when judging the anti-competitive effect of refusal to deal by a public utility enterprise with a monopoly position and the only provider of specific services that are indispensable for the counterparty to carry out production and business activities.
Lisheng is mainly engaged in funeral intermediary services. Liying is a public utility enterprise providing basic funeral services including the cremation of dead bodies. Lisheng claimed that Jiying refused Lisheng’s application for cremation services on behalf of the deceased’s relatives because it reported Jiying’s illegal charges. Lisheng believed that Jiying violated China’s Anti-Monopoly Law. It requested the court to order Jiying to resume handling relevant business for Lisheng and compensate it for economic losses of RMB 80,000.
The SPC supported all of Lisheng’s claims. The SPC held that the basic funeral and interment service market in which Jiying operates belongs to the upstream market, while the funeral intermediary service market in which Lisheng operates belongs to the downstream market because the latter is derived from the former. The alleged monopoly occurred in the basic funeral service market and also had an impact on the funeral intermediary service market. Jiying is a public utility enterprise with an exclusive position in the basic funeral service market in Quanzhou City. The basic funeral services it provides are indispensable and specific services for Lisheng to carry out funeral intermediary services, and Lisheng has no alternative. Jiying refused to handle relevant business for Lisheng, which resulted in Lisheng being completely excluded from the funeral agency service market in Quanzhou City. This eliminates and limits competition in the funeral intermediary service market, harms the interests of relatives of the deceased who are consumers within the meaning of China’s Anti-Monopoly Law and constitutes an abuse of refusal to deal. Lisheng has been engaged in funeral intermediary services since its establishment and has a long-term and stable trading relationship with basic funeral service providers. Restoring the original transaction does not impose a transaction obligation.
Typical Case Three: Dispute over vertical monopoly agreement, Mr. Miao v SAIC General Motors Sales Co., Ltd. (“SAIC GM”), Shanghai Yilong Automobile Sales Service Co., Ltd. (“Yilong”), the SPC, (2020) SPC IP Civil Judgment of Final Instance No. 1137
This typical case is a civil lawsuit in which consumers claimed damages for monopolistic behaviour according to an administrative penalty imposed by an antitrust law enforcement agency. It clarified the plaintiff’s burden of proof in subsequent antitrust civil litigation and reduced its burden of proof.
Yilong is one of SAIC GM’s dealers in Shanghai. In 2014, Mr. Miao purchased a vehicle from Yilong. In 2016, Shanghai Municipal Price Bureau issued a penalty decision to SAIC GM due to a finding that in the process of distributing vehicles in 2014, SAIC GM reached and implemented a monopoly agreement with dealers in Shanghai that limited the minimum price of vehicles for resale to third parties. Mr. Miao believed that his legitimate rights and interests were infringed upon by the monopolistic behaviour of SAIC GM because it was during the period when SAIC GM was implementing the above-mentioned vertical monopoly agreement when he purchased the vehicle from Yilong in 2014, and the purchase price of the vehicle was also the monopoly price determined by the penalty decision. Therefore, Mr. Miao filed a lawsuit, requesting SAIC GM to compensate him for the loss of RMB 10,000 in purchasing the vehicle and RMB 7,500 in reasonable rights protection expenses, and Yilong shall bear supplementary compensation liability for the above losses.
The SPC supported all of Mr. Miao’s claims. The SPC considers that Mr. Miao doesn't need to provide evidence proving SAIC GM’s behaviour had constituted a monopolistic behaviour in relevant monopoly civil disputes under the situation where the penalty decision of Shanghai Municipal Price Bureau has determined SAIC GM’s monopolistic behaviour and the penalty decision has not been subject to administrative litigation within the statutory period unless there is contrary evidence that is sufficient to overturn it. After Mr. Miao submitted the legally effective penalty decision, he only needed to prove that SAIC GM and Yilong were the perpetrators of the monopolistic behaviour identified in the penalty decision and that Mr. Miao was harmed by the recognized monopolistic behaviour. According to the penalty decision and the other findings in the case, Mr. Miao purchased the vehicle at a monopoly price. Thus, it should be determined that SAIC GM and Yilong jointly infringed. In the subsequent civil compensation lawsuit filed by Mr. Miao as the victim of the monopolistic behaviour determined by the penalty decision, the amount of compensation should be the difference between the non-competitive price and the competitive price limited between operators. The difference between the monopoly price paid by Mr. Miao when he purchased the vehicle and the market price of the vehicle after the penalty decision was made was RMB 12,000. Therefore, it is reasonable for Mr. Miao to request compensation of RMB 10,000 for economic losses.
Typical Case Four: Antitrust administrative penalty case, Chongqing Jiangdu Building Materials Co., Ltd. (“Jiangdu”) v Chongqing Municipal Administration for Market Regulation (“Chongqing AMR”), the SPC, (2023) SPC IP Administrative Judgment of Final Instance No. 29
This typical case involves the identification of the implementation of a horizontal monopoly agreement. It refined the identification criteria of horizontal monopoly agreements such as fixing or changing commodity prices and dividing the sales market by analyzing the specific manifestations of horizontal monopoly agreements reached and implemented by the parties.
Jiangdu and Chongqing Jiandian Concrete Co., Ltd. (“Jiandian”) are the only two commercial concrete manufacturers in Fengdu County of Chongqing Province. To avoid a price war, the two companies reached an agreement to fix commodity prices, divide the sales market, and allocate concrete volume and sales profits in April 2019. After that, both Jiangdu and Jiandian sent personnel to each other's companies to supervise on-site to ensure that the agreement was implemented.
In October 2019, Chongqing AMR launched an investigation into Jiangdu and Jiandian’s suspected monopolistic behaviour. Then, Chongqing AMR determined that their behaviour of reaching and implementing the agreement to fix sales prices and divide the concrete sales market violated China’s Anti-Monopoly Law, and made an administrative penalty decision of imposing a fine to Jiangdu. The fine is 5% of its previous year's sales, totalling RMB 12,149,260.88. Jiangdu was dissatisfied and filed an administrative lawsuit, requesting to revoke the administrative penalty decision of Chongqing AMR.
The SPC rejected Jiangdu’s lawsuit. The SPC held that fixing or changing commodity prices and dividing the sales market are typical types of horizontal monopoly agreements. Their manifestations in practice are diverse. The behaviours such as agreeing on the range of price changes, using standard formulas or algorithms to calculate prices, and not allowed to change prices without the consent of the parties shall be classified as fixing or changing commodity prices, while the behaviours such as agreeing on the division of market share, sales targets, sales revenue, or sales profits shall be classified as dividing the sales market. Jiangdu and Jiandian reached an agreement to fix commodity prices and divide the sales market and then implemented it. This directly results in no price competition in the region, which has the effect of eliminating and restricting price competition. Therefore, the accused administrative penalty decision of Chongqing AMR identified Jiangdu’s behaviour accurately, the procedure was legal, and the penalty result complied with the principle of proportionality of punishment.
Typical Case Five: Case of objection to the jurisdiction of the dispute over refusal to deal, Beijing Tobishi Pharmaceutical Co., Ltd. (“Beijing Tobishi”) v Simcere Pharmaceutical Group Limited (“Simcere”), Jiangsu Simcere Pharmaceutical Co., Ltd. (“Jiangsu Simcere”), Beijing IP Court, (2022) Beijing Civil Judgment of First Instance No. 1136
This typical case involves the determination of jurisdiction over a dispute regarding the refusal of a transaction. It determined the jurisdictional connection point of the dispute over the refusal of transaction through the place where the infringement result occurred.
Beijing Tobishi is the only company in China with the production qualification and production capacity of Batroxobin Injection. Simcere and Jiangsu Simcere hold a 100% share of the sales market of Batroxobin concentrated liquid API (“Batroxobin API”) in China. In January 2021, the State Administration for Market Regulation (“SAMR”) made a penalty decision and determined that the refusal of Simcere and Jiangsu Simcere to deal with Beijing Tobishi constituted an abuse of refusal to deal. Since then, Jiangsu Simcere signed a 2022 purchase and sale contract with Beijing Tobishi, but refused to perform it, resulting in Beijing Tobishi being unable to produce since April 2022. Beijing Tobishi filed a lawsuit with the Beijing IP Court, requesting that Simcere and Jiangsu Simcere immediately stop their monopolistic behaviour of abusing their market dominance and jointly and severally compensate Beijing Tobishi for economic losses and reasonable expenses totalling RMB 200 million. Simcere objected to the jurisdiction of this case, arguing that there was no evidence to prove that the alleged refusal to deal was carried out in Beijing, and there was no evidence to prove that Beijing Tobishi’s residence was the place where the infringement results occurred. It was considered that the Beijing IP Court had no jurisdiction over this case.
Beijing IP Court held that the place where the infringement result of the refusal to deal occurs should be the place where the direct result of refusing to deal occurs. The administrative penalty decision has determined that Simcere refused to sell Batroxobin API to downstream pharmaceutical companies, causing them to suspend production due to a lack of supply of APIs. It can be seen that the direct result of the accused refusal to deal in this case is that Beijing Tobishi being a downstream preparation company stopped production due to lack of Batroxobin API. Beijing Tobishi’s production factory is located in Beijing, so Beijing is the place where the direct infringement caused by the alleged refusal to deal occurred. Beijing IP Court ruled to reject the jurisdictional objection of Simcere. Simcere appealed. The SPC dismissed the appeal.