"Alternative" under Anti monopoly Law and Anti Unfair Competition Law: From "360 Case" to "Meituan Case"

2021 05/25

On April 26, the State Administration of Market Supervision released a news release, which filed a case for investigation of suspected monopolistic practices such as "one out of two" against Meituan in accordance with the law. Meituan is the second large internet platform company to be officially announced for antitrust investigation after Alibaba.

"Two options": from "360 case" to "Meituan case"

（1） "One out of two" in the "360 case"

"Choosing one from two" is not a new topic. In 2011, Beijing Qihu Technology Co., Ltd. (hereinafter referred to as Qihu Company) acted as the plaintiff, citing the fact that the defendants Tencent Technology (Shenzhen) Co., Ltd. and Shenzhen Tencent Computer Systems Co., Ltd. (hereinafter referred to as Tencent Company) prohibited their users from using the plaintiff's 360 software, or the "one out of two" behavior such as stopping QQ software services constituted an abuse of market dominance, Bring a lawsuit to the Higher People's Court of Guangdong Province (hereinafter referred to as "360 Case"). In this case, both the courts of first and second instance held that Tencent did not have a dominant position in the relevant markets, and therefore did not constitute an abuse of market dominance. They rejected all the litigation claims of the plaintiff Qihu Company.

In the "360 case", regarding Tencent's "one out of two" behavior, although both courts of first instance held that because Tencent did not have a dominant market position, regardless of the nature of its "one out of two" behavior, it did not affect the determination that Tencent did not constitute an abuse of market dominance, they still analyzed the "one out of two" behavior, in which: the court of first instance held that "one out of two" was still essentially a transaction restriction behavior; However, the court of second instance held that although "choosing one from two" has caused inconvenience to users, it has not led to significant effects of eliminating or restricting competition, and does not constitute an abuse of market dominance prohibited by the antitrust law.

（2） Determination of "One out of Two" in Anti monopoly Law Enforcement

In addition to the RMB 18.228 billion fine case caused by "one out of two" and Meituan being filed for investigation due to "one out of two", Shanghai Shipaishi Commerce and Trade Development Co., Ltd. (hereinafter referred to as "Shipaishi") proposed a "one out of two" request for cooperative restaurant merchants on the platform, which was suspected of abusing market dominance, and was filed for investigation by the Shanghai Market Supervision Bureau in 2019 and ultimately fined 1.1686 million yuan (3% of sales in 2018). Specifically:

1. In the 18.228 billion case, based on the investigation conducted by the State Administration of Market Supervision, it was determined that the Group has a dominant market position, and by imposing a "one out of two" requirement on merchants on the platform, it was prohibited for merchants on the platform to open stores or participate in promotional activities on other competitive platforms, and by using market forces, platform rules, data, algorithms, and other technical means, it took various reward and punishment measures to ensure the implementation of the "one out of two" requirement, This constitutes an abuse of market dominance that is prohibited under Article 17, Paragraph 1 (4) of the Anti monopoly Law from "restricting trading counterparties to only conduct transactions with them without justifiable reasons.".

2. In the Shipaishi case, the Shanghai Municipal Market Supervision Bureau determined that Shipaishi has a dominant position in the relevant market, and through signing cooperation agreements with all cooperative restaurant merchants that contain "exclusive delivery rights clauses", through WeChat communication, production of weekly reports, and other forms, required cooperative restaurant merchants that did not implement the "exclusive delivery rights clauses" to be removed from the shelves of competitor platforms, and developed and implemented "exclusive delivery rights plans", Requiring cooperative restaurant merchants not to cooperate with other companies that provide similar services to the parties is an act that restricts the counterparty to the transaction from only conducting transactions with the parties (hereinafter referred to as "restricted transaction behavior"). Violation of Article 17, Paragraph 1 (4) of the Anti monopoly Law by a party who has a dominant market position without justifiable reasons constitutes an act of abusing the dominant market position to restrict transactions.

（3） Thinking

From the "360 case" to the case of Meituan being investigated, based on the differences in individual cases, it is difficult to say whether it is appropriate to compare the "360 case" with recent antitrust law enforcement cases, and whether the ideas therein are fundamentally different. However, at least, it seems that there are some differences in the judgment of "relevant markets" and "two choice" behavior.

The "two choice" model under anti monopoly law and anti unfair competition law

（1） The Application of "Two or One" Anti monopoly Law

1. "360 Cases"

As mentioned earlier, when analyzing the essence of the defendant's "product incompatibility" behavior (user's choice of two), the court of first instance in the "360 case" cited Article 17 (4) of the Anti monopoly Law, which states that "without justifiable reasons, the counterparty can only trade with it or only with its designated operator", and considered that the defendant forced the user to "choose one", ostensibly granting the user the right of choice, However, if the defendant is a dominant operator in the market, the user is highly likely to give up 360 and choose QQ. The purpose of the defendant's "one out of two" approach is not to refuse to trade with the user, but to force the user to only trade with the user instead of 360. The defendant's behavior is still essentially a restrictive transaction. However, the court of second instance held that although "choosing one from two" has caused inconvenience to users, it has not led to significant effects of eliminating or restricting competition, and does not constitute an abuse of market dominance prohibited by the antitrust law. Therefore, in the case of "360", there are differences in the court's determination of "one out of two". However, from the perspective of the judgment thinking of the court of first instance, there is room for citing Article 17 of the Anti monopoly Law to analyze and reason for "one out of two".

2. "18.228 billion case", "Shipaishi case"

In the 18.228 billion case and the Shipaishi case, administrative law enforcement cited the provisions of Article 17, paragraph 4, of the Anti Monopoly Law in its analysis and determination of the "one out of two" behavior involved, that is, without justifiable reasons, limiting the trading counterpart to only conduct transactions with it or only with its designated operators.

（2） "One out of two" and anti unfair competition law

1. "360 Case" and the Anti Unfair Competition Act of 1993

In 2014, the Supreme Court issued a second instance judgment in the "360 case". At this time, it has been about 6 years since the implementation of the anti monopoly law in 2008; It has been about 20 years since the implementation of the Anti Unfair Competition Law in 1993, and there are still about 3 years left before the revision of the Anti Unfair Competition Law.

The concept of "one out of two" or similar concepts to "one out of two" was not specifically stipulated in the Anti Unfair Competition Law of 1993. However, Article 2 of the Anti Unfair Competition Law of 1993 stipulates that "In market transactions, business operators shall abide by the principles of voluntariness, equality, fairness, honesty and credibility, and abide by recognized business ethics. The term" unfair competition "as used in this Law refers to acts by business operators that violate the provisions of this Law, harm the legitimate rights and interests of other business operators, and disrupt social and economic order.". This is the definition and general provisions on unfair competition. Although Articles 5 to 15 of the Law list 11 specific unfair competition behaviors, unfair competition behaviors are not limited to the specific behaviors listed in Articles 5 to 15. When the relevant behaviors of operators, especially the new type of unfair competition behaviors in the Internet environment, do not fall within the scope of adjustment specified in the above provisions of the Law, Article 2 of the Anti Unfair Competition Law should generally be applied to evaluate the sued behavior.

Although Qihoo has not filed a lawsuit on the grounds of unfair competition for Tencent's "one out of two" behavior, according to the anti unfair competition law of 1993, at least Tencent's "one out of two" behavior in that year can be evaluated by the anti unfair competition law at that time.

2. Article 12 of the Anti Unfair Competition Law of 2018

Article 12 of the 2018 Anti Unfair Competition Law stipulates that operators use the network to engage in production and business activities. The 12 articles were cited in the judgment of the Huai'an Intermediate People's Court of Jiangsu Province on Meituan's unfair competition behavior (forcing merchants to "choose between two" behavior).

3. Applicable options for "one out of two"

"Anti monopoly law and anti unfair competition law can evaluate the general sense of" two choices ".". However, there are differences between the two:

(1) The application of the anti monopoly law requires (affirms) that the operator has a dominant market position, but the anti unfair competition law does not have such a premise.

(2) According to the Anti monopoly Law, if a business operator violates the provisions of this Law and abuses its dominant market position, the anti monopoly law enforcement agency shall order it to stop the illegal act, confiscate its illegal income, and impose a fine ranging from 1% to 10% of the sales volume of the previous year. According to the current Anti Unfair Competition Law, if an operator violates Article 12 of this Law by impeding or disrupting the normal operation of network products or services legally provided by other operators, the supervision and inspection department shall order it to stop the illegal act and impose a fine of not less than 100000 yuan but not more than 500000 yuan; If the circumstances are serious, a fine of not less than 500000 yuan but not more than 3 million yuan shall be imposed.

From the "360 case" to Meituan's antitrust investigation, it remains to be confirmed whether the results of the "one out of two" antitrust enforcement will provide a new perspective for subsequent related litigation.

(This article is translated by software translator for reference only.)