Under The Same Blue Sky

Foreign companies in China should pay close attention to pioneering court cases involving Chinese groups accused of monopolistic behaviour, international law firms have warned.

Freshfields told the Financial Times that since the introduction of a new antitrust regime in 2008, cases had been filed against big Chinese companies including China Mobile, China Netcom, Baidu, Shanda Interactive Entertainment and Sinopec.

While non-Chinese groups are unlikely to have monopolies in China, the laws could affect them because of measures targeting practices such as discriminatory pricing.

Freshfields learned of the cases, which have received little or no publicity, through discussions with Chinese law firms.

While it is unclear what stage the cases have reached, legal experts said they were significant as the first examples of suits brought under the new anti-monopoly regime.

Experts said the cases could radically alter corporate behaviour on the mainland.

The new regime, which is largely based on western competition practices, took effect in August 2008. It covers merger controls, monopolistic and cartel behaviour, and discriminatory pricing.

So far, enforcement has focused on merger provisions, with the most notable case being the commerce ministry’s rejection in March of Coca-Cola’s attempted $2.4bn takeover of China Huiyuan Juice.

But mainland lawyers now appear to be testing article 50 of the anti-monopoly law, which allows individuals to claim compensation for suffering loss due to proscribed behaviour.

The cases are regarded as a breakthrough. It is the first time Chinese courts have accepted such filings.

“Although no judgments have yet been rendered, the fact that the Chinese courts have allowed a number of these complaints to be filed indicates that the plaintiffs have at least established a prima facie case,” said Peter Yuen, a dispute resolution partner in Freshfield’s Hong Kong office.

“This is an entirely new domain for all involved.”

Mr Yuen said that multinational companies were “clearly in the spotlight and should take enforcement seriously”, adding that the number of private suits would rise.

He said the case against China Mobile, which has 500m customers, involved accusations that the company was discriminating against existing subscribers by offering a lower pricing band for new customers.

Ninette Dodoo, a lawyer at Clifford Chance in Beijing, said her firm’s intelligence also suggested that individuals across China were seeking to test article 50.

But she cautioned that it was “too early to say whether any of these reported cases are sufficiently credible for the courts to take them further”.

 

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