Private Antitrust Enforcement of Resale Price Maintenance in
China: What Lessons Can China Learn from the United States?
Jingmeng Cai*
I. INTRODUCTION ..................................................................................... 2
II. PROFILE OF PRIVATE ANTITRUST ENFORCEMENT IN CHINA .................. 5
A. Definition ...................................................................................... 5
B. Roles of Private Antitrust Enforcement ........................................ 6
C. Status Quo of Private Antitrust Enforcement ............................... 8
D. Typical Cases of Resale Price Maintenance (RPM) ................... 10
1. Rainbow v. Johnson & Johnson .......................................... 10
2. Infant Formula Milk “Follow-on” Case .............................. 13
III. RAISING QUESTIONS – REASONS FOR THE PROBLEMS......................... 15
A. Reform of Civil Process in China ............................................... 17
B. Regulations of Civil Procedure Law ........................................... 18
1. Plaintiff’s Difficulties of Discovering and Obtaining
Evidence .............................................................................. 19
2. Limitations of Court-Conducted Investigations .................. 20
C. Lack Support from Public Antitrust Enforcement—Conflict
and Ambiguity ............................................................................. 22
1. Prima Facie Evidence ......................................................... 23
2. Commitment and Leniency ................................................. 24
IV. FINDING SOLUTIONS—WHAT CHINA CAN LEARN FROM THE U.S. ..... 26
A. Fundamental Issues—Roles and Purposes ................................. 26
1. The U.S. Law ...................................................................... 27
2. Lessons from the U.S. Law ................................................. 29
B. Specific Rules and Mechanisms—Effects on the Plaintiffs’
Burden of Proof .......................................................................... 31
1. Standing Test of Antitrust Injury ......................................... 31
2. The Indirect Purchaser and “Passing-on” Doctrines ........... 32
3. Class Action......................................................................... 34
C. Seek Support from and Resolve Conflicts with Public Antitrust
Enforcement ................................................................................ 39
1. The U.S. Laws ..................................................................... 40
2. Lessons from the U.S. ......................................................... 41
V. CONNECTIONS WITH ON-GOING PUBLIC ENFORCEMENT .................... 44
VI. CONCLUSION ...................................................................................... 45
*
J.S.D., IIT Chicago-Kent College of Law. For helpful comments and discussions, I
thank Professor David J. Gerber. Any errors or omissions are my own. Contact
information: [email protected]/[email protected].
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Vol. 18:2
The reception of foreign legal institutions is not a matter of
nationality, but of usefulness and need. No one bothers to
fetch a thing from afar when he has one as good or better at
home, but only a fool would refuse quinine just because it
didn't grow in his back garden.1
— Rudolf von Jhering, 1818–1892
I.
INTRODUCTION
Many countries are following the U.S. model to expand private
antitrust enforcement or are actively discussing this model; 2 however,
American academics and legal practitioners are beginning to review their
model with considerable skepticism.3 Professor Daniel Crane even warns
developing antitrust law jurisdictions to avoid the “pitfalls” of the U.S.
system, and encourages these jurisdictions to conduct “robust
experimentation,” which may be hard to carry out in the United States.4
1
RUDOLF VON JHERING, GEIST DES RÖMISCHEN RECHTS (9th ed. 1955), in
KONRAD ZWEIGERT & HEIN KÖTZ, INTRODUCTION TO COMPARATIVE LAW 17 (Tony Weir
trans., Clarendon 3d ed. 1998).
2
For example, the European Union released a Green Paper in 2005 and a White Paper in
2008 successively to clarify some issues of private antitrust enforcement in order to
promote private litigations within the European Union, see Claire Korenblit, Quantifying
Antitrust Damages—Convergence of Methods Recognized by U.S. Courts and the
European
Commission,
CPI
ANTITRUST
CHRONICLE
(2012),
https://www.competitionpolicyinternational.com/assets/Uploads/KorenblitMAR-121.pdf.
Also, in 2000, Japan has modified its antitrust law and expanded private enforcement as
well. See Toshiaki Takigawa, The Prospect of Antitrust Law and Policy in the TwentyFirst Century: In Reference to the Japanese Antimonopoly Law and Japan Fair Trade
Commission, 1 WASH. U. GLOBAL STUD. L. REV. 275, 298-299 (2002).
3
See Edward D. Cavanagh, The Private Antitrust Remedy: Lessons from the American
Experience, 41 LOY. U. CHI. L. J. 629 (2010) (this article states that private antitrust
remedy is not effective in the United States, and analyzes under such a circumstance what
other countries could learn from the U.S. experience); see also Daniel A. Crane,
Optimizing Private Antitrust Enforcement, 63 VAND. L. REV. 675 (2010) (this article
argues that private enforcement is not very effective at advancing either of the antitrust
law’s purposes—competition and deterrence.); see also Harry First, Is Antitrust “Law”?,
10 ANTITRUST 9 (1995) (this article points out that in recent years, antitrust has come to
be seen more as policy and less as law, the enforcement of which increasingly relies on
bureaucratic regulatory; and the author thinks that this shift will be detrimental to U.S.
antitrust enforcement eventually).
4
Crane argued that, although there are several problems of the US private antitrust
enforcement, it “is not so obviously broken,” so the US system may need a “modest,
incremental reforms.” However, Crane suggested that “more robust experimentation”
could be taken place in the developing antitrust world. For example, these jurisdictions
can “start with a different set of premises about what private enforcement is and why it
should exist.” Moreover, these jurisdictions can also adopt a “problem-solving approach
to implement in jurisdictions that do not generally regulate commercial behavior through
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Cai
3
In China, movements and discussions about private antitrust
enforcement reflect ambivalence toward the U.S. model.5 When China
considers expanding private antitrust enforcement, it may be wise to
neither blindly follow nor to completely reject the U.S. model. Only a
clear analysis of predicaments faced by China and a comprehensive
understanding of both the merits and the defects of private antitrust
enforcement in the U.S. can help China avoid the “pitfalls” and find the
“Midas touch” from the U.S. experience.
This article focuses on China’s private enforcement of resale price
maintenance (RPM), but discussions and conclusions can also be generally
applicable to larger issues concerning private antitrust enforcement.
Through discussing the status quo of private antitrust enforcement and
typical RPM lawsuits in China, this article argues that the most serious
problem that has hindered the development of private antitrust
enforcement is the plaintiffs’ heavy burden of proof, because it greatly
discourages people from filing lawsuits in courts. Thereafter, this article
raises a question: what has caused the antitrust plaintiffs’ heavy burden of
proof? In order to answer this question, this article identifies three reasons:
the reform of civil process (a background reason), current provisions of
the Civil Procedure Law (a primary reason), and a lack of support from
public antitrust enforcement (a subordinate reason).
First, China’s reform of civil process is a background reason,
which has transformed the traditional “extreme interrogation” model6 to
an adversarial, rights-based system as the United States does.” See Crane, id., at 720-22.
5
In Chinese academic community, scholars hold divergent attitudes toward the American
experience. For example, a professor at Fudan University suggests that China should
adopt the U.S. antitrust class action mechanism. See Zhang Wusheng (章武生), Lun
Quntixing Jiufen de Jiejue Jizhi, Meiguo Jituan Susong de Fenxi He Jiejian (论群体性纠
纷 的 解 决 机 制——美 国 集 团 诉 讼 的 分 析 和 借 鉴) [The Mechanism for Collective
Disputes, the Analysis and Reference of the U.S. Class Action], 3 ZHONGGUO FAXUE (中
国法学) [CHINA LEGAL SCI.] 20 (2007). In contrast, other scholars argue that the U.S.
experience may be of little help to China, and China should rely on public antitrust
enforcement, rather than expending private enforcement. See Li Jian (李 剑),
Fanlongduan Siren Susong Kunjing yu Fanlongduan Zhifa de Guanzhihua Fazhang (反
垄断私人诉讼困境与反垄断执法的管制化发展) [Predicaments of Private Antitrust
Enforcement and the Development of Administrative Regulatory of Antitrust
Enforcement], 5 FAXUE YANJIU (法学研究) [CHINESE J. L.] 70 (2011). Moreover, in
practice, the analyzing approaches between antitrust agencies and courts are divergent.
For example, the judicial system seems prefer the U.S. rule of reason for analyzing RPM,
but the antitrust agency follows the E.U. pattern to analyze RPM to treat RPM as per se
illegal. See Jingmeng Cai, Antitrust Public Enforcement of Resale Price Maintenance in
China: A Crusade or Discrimination?, 42:1 BROOK J. INT’L L.1, 50-52 (2016).
6
After the People’s Republic of China was founded in 1949, a model of civil trial named
as the “Ma Xiwu Model” was widely accepted, which was created by a judge (Ma Xiwu)
in the 1940s. Under this model, judges played an active role of interveners, who dealt
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an adversarial litigation model. This reform has changed the role of judge
from an active intervener to a neutral arbiter. The litigant parties are
responsible for presenting evidence to prove their claims, which sounds
reasonable for normal civil litigation. However, without the evidence
discovery system, Chinese antitrust plaintiffs’ burden of proof seems very
heavy. In many Chinese antitrust cases, especially RPM lawsuits, plaintiffs
generally have inferior economic position to gain information and
evidence regarding defendants’ monopolistic behaviors.
Second, current regulations of the Civil Procedure Law are the
primary reason. The antitrust litigation operates within the system of civil
process. However, few regulations are designed to guarantee plaintiffs’
rights of discovery and evidence collection. Moreover, under the current
system of civil process, judges are expected to restrain their authority of
initiating court-conducted investigations. Therefore, it further increases the
difficulty of plaintiffs’ efforts to obtain evidence.
Third, the influence of public enforcement is a subordinate reason,
which aggravates the problem of the plaintiffs’ burden of proof. China is a
country with strong administrative power,7 in which antitrust agencies
normally have stronger power and superior position than private plaintiffs
to discover and obtain evidence. 8 Unfortunately, because of the
with issues even beyond parties’ claimants, and judges investigated and collected
evidence by themselves. Moreover, such a model valued “coordination,” rather than
“judgment,” to solve disputes. Such a trial model is regarded as a “super-inquisitorial
judicial model.” See Liu Sida, The Shape of Chinese Law, 1 PEKING U. L. J. 416, 418-419
(2014).
7
Wang Xianlin (王先林), Lun Fanlongduan Minshi Susong Yu Xingzheng Zhifa de
Xianjie Yu Xietiao (论反垄断民事诉讼与行政执法的衔接与协调) [Connection and
Coordination between Private and Public Antitrust Enforcement], 3 JIANGXI CAIJING
DAXUE XUEBAO（江西财经大学学报） [J. JIANGXI U. OF FIN. & ECON.] 87, 87 (2010).
8
Chinese antitrust agencies normally have strong administrative powers to launch
investigations on antitrust violations, which have also drawn criticism from foreign
companies and observers alike. A Reuters’s report once described the investigations of
National Development and Reform Commission (NDRC), one of three antitrust agencies
in China, as “interrogations,” which included intimidation, insinuation, and “widespread
behind-the-scenes tactics” to push companies to “confess.” See Michael Martina &
Matthew Miller, “Mr. Confession” and His Boss Drive China’s Antitrust Crusade,
REUTERS (Sep. 15, 2014), http://www.reuters.com/article/us-china-antitrust-ndrc-insightidUSKBN0HA27X20140915. For example, in July 2014, the NDRC launched an
investigation of Mercedes-Benz after implementing RPM in China. See Wang Yipeng &
Wang Junqing(王毅鹏&王君擎), Benchi Shanghai Bangongshi Zao Fanlongduan Tuji
Jiancha (奔驰上海办公室遭反垄断突击检查) [Antitrust Agency Raids Mercedes-Benz
Shanghai
Offices],
SINA.COM
(Aug.
5,
2014),
http://finance.sina.com.cn/chanjing/gsnews/20140805/085419915156.shtml.
After
launching the investigation, Mercedes-Benz speedily responded and claimed that it would
reduce prices of some spare parts. Even though Mercedes-Benz reduced prices in order to
“beg” a suspension of the investigation, the NDRC still raided its office in Shanghai,
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Cai
5
administrative agencies’ large discretion and the non-transparent decisionmaking process, public enforcement does not provide sufficient support
for private litigations, especially in “follow-on” civil lawsuits, which
further suppresses people’s motivations for filing private litigation.9
After identifying these reasons that have caused the predicaments
of China’s private antitrust enforcement, this article attempts to seek
solutions from U.S. antitrust law to determine whether certain rules and
mechanisms can solve China’s problems. The discussion includes three
aspects. First, this article argues that China’s private antitrust enforcement
should strengthen the purpose of deterrence, but the mandatory trebling on
all antitrust violations—as the U.S. law provides—is not recommended to
China. Second, this article examines certain rules and mechanisms under
the U.S. antitrust system, including the standing test, the indirect purchaser
rule, the “pass-on” doctrine, and the class action. A major standard the
article adopts to evaluate a mechanism or a rule is its effects on the
plaintiffs’ burden of proof. Third, regarding the relationship with public
antitrust enforcement, this article suggests that administrative agencies’
decisions should be used as prima facie evidence in subsequent private
lawsuits and antitrust agencies should offer more support for private
litigation through improving transparency of decision-making process and
limiting the scope of non-disclosed materials.
II. PROFILE OF PRIVATE ANTITRUST ENFORCEMENT IN CHINA
A. Definition
Under China’s legal system, if individuals or/and entities violate
laws, at least one of the three legal liabilities will be imposed upon them:
criminal liability, civil liability, or/and administrative liability. China’s
Antimonopoly Law (AML), 10 however, does not stipulate criminal
“forcibly” checked some computers, and interrogated senior managers. See Jingmeng
Cai, supra note 5, at 30-31.
9
Today, in China, the information disclosed by the antitrust agencies is insufficient.
Overall, the disclosed decisions of the NDRC are brief and only include penalties
imposed on companies and conclusory reasoning. Since limited information disclosed to
the public, it is difficult for private plaintiffs to determine what and how much benefits
they can have from public enforcement. See Jingmeng Cai, supra note 5, at 55.
10
Zhonghua Renmin Gongheguo Fan Longduan Fa (中华人民共和国反垄断法) [AntiMonopoly Law of the People’s Republic of China] (promulgated by the Standing Comm.
Nat’l People’s Cong., Aug. 30, 2007, effective Aug. 1, 2008) CLI.1.96789(EN)
(Lawinfochina) [hereinafter the AML]. The term used to refer to the antitrust law varies
in different countries. In the U.S., this area of law is referred to as the “antitrust law.” In
China, the term is the “antimonopoly law.” In this article, I use the terms “antimonopoly
law,” “competition law,” and “antitrust law” to refer to a set of laws whose aim is to fight
with restraints on the competition and markets. In this article, the terms “competition
law,” “antimonopoly law,” and “antitrust law” are used interchangeably.
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liability, so only civil and administrative liabilities are involved in antitrust
cases.
First, it is necessary to clarify the scope of private antitrust
enforcement. Antitrust violations may harm interests of other individuals
and companies. For example, consumers paying monopoly prices are
victims of defendants’ price restricting behaviors. If these consumers
choose to file lawsuits against defendants’ behaviors directly in courts,
rather than request agencies to launch investigations, such lawsuits are
private antitrust litigations and governed by the Civil Procedure Law. In
sum, China’s private antitrust enforcement can be defined as litigation in
which private parties have independent civil claims and/or counter-claims
based on the AML’s provisions and governed by the Civil Procedure Law.
This type of litigation is defined as private antitrust enforcement.
When antitrust violations are investigated and punished by
administrative agencies, liability imposed on defendants are administrative
liability, rather than civil liability.11 If defendants believe antitrust agencies
have harmed their legitimate interests and/or agencies have misused their
administrative power, they can file appeals in courts to seek administrative
redresses.12 Such litigation is governed by administrative procedural laws
and categorized as administrative lawsuits, separate from the private
antitrust enforcement discussed in this article.
B. Roles of Private Antitrust Enforcement
Generally speaking, when the AML was drafted, lawmakers
designed public enforcement as the center of the antitrust enforcement
system, and put private enforcement in a subordinate position.13
Due to the civil law tradition, Chinese laws generally are divided
into two groups: private laws and public laws. Private laws regulate
behaviors and disputes among equal individuals and companies, such as
contract and torts disputes. Civil law, labor law, and corporation law, for
example, belong to the group of private laws. Public laws govern legal
relations between unequal parties, such as relations between
individuals/companies and governments. Administrative law and criminal
law are typical examples of public laws.
11
See id. art. 46-48.
12
China’s general courts have jurisdictions over administrative lawsuits. Most courts set
up administrative tribunals to hear administrative litigation separately. See Zhonghua
Renmin Gongheguo Xingzheng Susong Fa (2014 Xiuzheng) (中华人民共和国行政诉讼
法（2014 修正）)[Administrative Litigation Law of the People's Republic of China
(2014 Amendment)], (promulgated by the Standing Comm. Nat’l People’s Cong., Dec.1,
2014, effective Dec.1, 2014) CLI.1.239820 (Lawinfochina), arts. 4, 14, 15, 16 &17.
13
Wang Xianlin, supra note 7, at 87.
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7
Unlike western civil law countries, China’s legal system has a third
group of laws, named economic laws, 14 which is considered to stand
between private laws and public laws, 15 but closer to public laws.
Economic laws in China can be defined as laws regulating private
transactions based on public concerns. 16 The AML is grouped with
economic laws. 17 It regulates competitive relations and behaviors of
private parties; meanwhile, it functions like public laws to regulate
competition and market on behalf of the State. Moreover, because China is
a country with strong administrative power, more emphasis has been put
on the AML’s feature of public laws.
Therefore, public antitrust enforcement is naturally considered as
the dominating way of enforcing the AML. 18 The view that antitrust
enforcement should be administration-oriented has been generally
accepted by Chinese scholars.19
Compared to public enforcement, the role of private antitrust
enforcement is subordinate. When the AML was drafted, most of clauses
were designed for public enforcement. For example, other than behaviors
listed in Articles 13 (1) (f), 14 (3), and 17(1) (g), the AML grants antitrust
agencies discretion to determine other forms of horizontal agreements,
vertical agreements, and abuse of dominant market position to discern
14
The term “economic laws” has different meanings in different legal systems. In
Germany, some scholars define economic laws, “Wirtschaftsrecht”, as a set of laws
restricting and regulating economic activities from the State’s perspective. Then, the
Soviet Union transplanted the German term, which was defined as laws regulating all
economic relations emerging in the process of the State regulating and organizing the
economy. The Soviet Union’s definition has significantly affected Chinese legislators’
concept of “economic laws.” In contrast, in common law countries, “economic laws”
refers to all laws and regulations related to economic activities, without ideological
meaning. Although the term “economic laws” is not an official usage in common law
countries, laws related to economics are well developed. See Li Shuguang (李曙光),
Jingjifa Ciyi Jieshi yu Lilun Yanjiu de Zhongxin (经济法词义解释与理论研究的重心)
[Interpretation and Researching Focus of Term of Economic Laws], 23 ZHENGFA LUNTAN
(政法论坛) [TRIBUNE OF POLITICAL SCIENCE & LAW] 3 (2005).
15
Masanobu Kato, Civil and Economics Law in the People’s Republic of China, 30 AM. J.
COMP. L. 429, 437(1982).
16
Id. at 439.
17
See Wang Xianlin (王先林), Fanlongduan Fa de Jiben Xingzhi He Tezheng (反垄断法
的基本性质和特征) [The Nature and Characteristic of the Anti-monopoly Law], 1
FAXUE ZAZHI（法学杂志） [JURID. SCI. J.] 16, 17 (2002).
18
19
Id. at 87.
See Wang Xiaoye (王晓晔), Guangyu Woguo Fanlongduan Zhifa Jigou de Jige Wenti
(关于我国反垄断执法机构的几个问题) [Several Issues about China’s Antimonopoly
Law’s Enforcement Organs], 28 DONGYUE LUNCONG (东岳论丛) [DONGYUE TRIB.] 30
(2007); see also Li Jian, supra note 5.
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whether they violate the AML. In addition, the entire Section VI of the
AML provides procedural process of public enforcement, and most of the
articles in Section VII regulate how antitrust agencies impose penalties on
violators. In stark contrast, only Article 50 of the AML addresses private
enforcement. It merely states that, “The business operators that carry out
the monopolistic conducts and cause damages to others shall bear the civil
liability according to law.”20
On May 3, 2012, the Supreme Court issued the first Judicial
Interpretation about private enforcement of the AML (“Judicial
Interpretation”).21 The Judicial Interpretation specifies Article 50 of the
AML, which includes private antitrust litigation’s jurisdiction, burden of
proof, statute of limitations, and so on. It is the predominant guideline for
private antitrust enforcement so far.
According to the Judicial Interpretation, a person can file a private
antitrust lawsuit without obtaining agencies’ decisions or approvals. Any
individuals, legal person, or other organizations who suffer loss arising
from any monopolistic conduct or disputes about contracts or business
associations’ by-laws can file civil lawsuits directly in courts.22
C. Status Quo of Private Antitrust Enforcement
In recent years, many countries that rely mainly on administrationoriented enforcement (namely public enforcement) have extended private
enforcement for antitrust damages because of the impact of the U.S.
experience.23
China follows this trend. Private antitrust enforcement is a hot
topic in the Chinese legal community.24 Since the enactment of the AML
20
The AML, supra note 10, art. 50.
21
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 (promulgated by Sup. People’s Ct. May 3, 2012, effective Jun. 1, 2012)
CLI.3.173345(EN) (Lawinfochina) [hereinafter Judicial Interpretation on AML
Lawsuits]. It is the first judicial interpretation of the AML issued by the Supreme Court.
22
Id. art. 1.
23
Crane, supra note 3, at 676.
24
Many Chinese academic literatures introduce the U.S. experience, discuss the merits of
private enforcement, and encourage China to expand private antitrust enforcement. See
Shi Jianzhong (时建中), Siren Susong Yu Woguo Fanlongduan Fa Mubiao de Shixian (私
人诉讼与我国反垄断法目标的实现) [Private Enforcement and the Realization of the
Purpose of China’s Antimonopoly Law], 6 ZHONGGUO FAZHAN GUANCHA（中国发展观
察） [CHINA DEVELOPMENT OBSERVATION] 10 (2006); see also Wang Jian (王健),
Fanlongduan Siren Zhixing Zhidu Chutan (反 垄 断 私 人 执 行 制 度 初 探) [Study of
Antimonopoly Private Enforcement], 2 FASHANG YANJIU （法商研究）[STUDIES IN LAW
AND BUSINESS] 104 (2007); see also Huang Yong (黄勇), Zhongguo Fanlongduan Minshi
Susong Ruogan Wenti de Sikao (中国反垄断民事诉讼若干问题的思考) [Research on
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Cai
9
in 2008, however, the pace of the development of private antitrust
enforcement is still slow. According to public data, the number of private
antitrust cases heard by courts gradually grew from 10 in 2008 to 141 in
2015.25 By contrast, China’s Ministry of Commerce (the MOFCOM)—one
of three antitrust agencies—has decided 1,313 cases as of December 31,
2015. 26 Moreover, very few plaintiffs of private antitrust lawsuits are
successful. For example, until June 2010, no antitrust plaintiff had won a
case.27 Moreover, “a great majority of the actions are either dismissed by
courts or settled for [a] relatively insignificant amount of money.”28 A
speaker of the Supreme Court has also admitted that the prominent
difficulty for private antitrust litigation is the plaintiffs’ heavy burden of
proof.29
Aug. 2008- 2010 2011 2012
2009
Docket 10
33
48
55
Closed 6
23
24
49
2013 2014 Jan.-Oct.
2015
72
86
141
N/A N/A N/A
Figure 1: Number of private antitrust lawsuits filed in courts.30
Several Issues of China’s Antimonopoly Private Litigations], 19 RENMIN SIFA (人民司法)
[PEOPLE’S JUDICATURE] 20 (2008).
25
Dacheng Law Office, 2015 Intellectual Property and Antitrust Forum: Comprehensive
Disclosure of Antitrust Enforcement Figures, CHINA MONTHLY ANTITRUST UPDATE:
OCTOBER
2015
11,
11-12
(2015),
http://www.dachengnet.com/service/rest/tk.File/756b8458029643349c7704581c480763.
26
As of Dec. 31, 2015, the MOFCOM has closed 1,308 cases regarding business
concentration, and 5 cases related to failure of reporting the concentration. See LIN
WEN(林文), ZHONGGUO FANLONG XINGZHENG ZHIFA BAOGAO 2008-2015（中国反垄
断行政执法报告 2008-2015）[REPORT ON THE ADMINISTRATIVE ENFORCEMENT OF
ANTI-MONOPOLY LAW IN CHINA 2008-2015], 3 (2016).
27
Li Jian, supra note 5, at 71.
28
Jiangxiao Athena Hou, Is Chinese Private Antitrust Litigation Ready to Take Off?
COMPETITION
POLICY
INTERNATIONAL
1,
2
(June
2015),
https://www.competitionpolicyinternational.com/assets/Asia-Column-June-Full.pdf.
29
Press Release, Zuigao Renmin Fayuan Tongbao “Longduan Sifa Jieshi” Xiwen
Fabuhui (最高人民法院通报《垄断司法解释》新闻发布会) [The Supreme Court Held
the Press Conference Regarding Judicial Interpretation of Antimonopoly Law] (May 9,
2012), http://www.scio.gov.cn/ztk/xwfb/jjfyr/24/tt/Document/1154851/1154851.htm.
30
Id.; see also Dacheng Law Office, supra note 25, at 11; Zhongguo Fanlongduan Fa
Fazhan Qushi (中 国 反 垄 断 法 发 展 趋 势) [Trends of the Development of China’s
Antimonopoly Law], KING & WOOD MALLESONS LAW FIRM, 1,26 (May 2015),
https://www.acc.com/chapters/china/upload/20150529_Program_PDF.pdf.
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D. Typical Cases of Resale Price Maintenance (RPM)
First of all, I will give a very brief introduction to RPM. Firms
always look for the most cost-effective way to distribute their products in
order to maximize profits. 31 In practice, manufacturers may sell their
products directly to end consumers through their own employees32 or by
signing distribution contracts with independent distributors to reach
ultimate consumers, depending on the cost of distribution.33 When firms
choose independent distributors rather than self-distribution, the
relationships between them are vertical. The agreements and contractual
provisions signed by those vertically related and independent firms to
impose restraints on products’ distribution are vertical restraints. When
such restraints involve prices, theses restraints are RPM. For example,
manufacturers may restrict a retail price and only sell products to retailers
who agree to adhere to the price. RPM includes three types: restricting the
minimum resale price, restricting the maximum resale price, and fixing the
resale price.34 Therefore, by implementing a RPM agreement, resellers are
required to adhere to certain price requirements.
1.
Rainbow v. Johnson & Johnson
Beijing Ruibang Yonghe Equipment Technology & Trading Co.,
Ltd. (“Rainbow”), a medical equipment distributor, filed a lawsuit in the
Shanghai Intermediate Court (“Intermediate Court”) in August 2010,
claiming that its 15-year cooperative partner—Johnson & Johnson
(Shanghai) Medical Equipment Co., Ltd. and Johnson & Johnson (China)
Medical Equipment Co., Ltd. (collectively referred as “Johnson &
Johnson”)—enforced RPM with its distributors, which had violated
Article 14 of the AML.35
In January 2008, Johnson & Johnson entered into a distribution
agreement with Rainbow. According to the agreement, Rainbow could sell
products neither outside the designated territory nor at a lower price than
31
HERBERT HOVENKAMP, ANTITRUST ENTERPRISE: PRINCIPLE AND EXECUTION 181(2005).
32
PHILLIP AREEDA, LOUIS KAPLOW, and ARRON EDLIN, ANTITRUST ANALYSIS:
PROBLEMS, TEXT, AND CASES 534 (6th ed., 2004).
33
Id., at 534.
34
See ERNEST GELLHORN, WILLIAM E. KOVACIC AND STEPHEN CALKINS, ANTITRUST
LAW AND ECONOMICS IN A NUTSHELL 340-352 (5th ed. 2004).
35
Shanghai Shi Diyi Zhongji Renmin Fayuan Minshi Panjueshu (2010) Huyi Zhongmin
Wu(Zhi) Chuzi Di 169 Hao (上海市第一中级人民法院民事判决书 （2010）沪一中民
五（知）初字第 169 号)） [No. 169 Civil Judgment of Shanghai No.1 Intermediate
Court(2010)]
(Shanghai
Interm.
People’s
Ct.,
May
18,
2012),
http://www.hshfy.sh.cn:8081/flws/text.jsp?pa=ad3N4aD0xJnRhaD2jqDIwMTCjqbum0rv
W0MPxzuUo1qops/XX1rXaMTY5usUmd3o9z.
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the retail price set by Johnson & Johnson.36 In March 2008, Rainbow bid
for a project outside the designated territory with a lower price. Johnson &
Johnson terminated Rainbow’s distributorship, stopped supplying all
products (not only the suturing products involved in the alleged RPM
agreement, but also other products, like surgical staplers), and confiscated
the bond Rainbow had deposited. 37
The Intermediate Court held in favor of the defendant (Johnson &
Johnson) with the reasoning that the plaintiff (Rainbow) could not prove
that the agreement was a “monopoly agreement” with effects of
eliminating or restricting competition.38 The case was appealed before the
Shanghai High People’s Court (“High Court”). The High Court reversed
the Intermediate Court’s judgment. 39 As the final judgment, the High
Court upheld parts of Rainbow’s claims and ordered Johnson & Johnson
to compensate Rainbow with 530,000 yuan ($85,483 USD).40
Compared to the analyzing approach for RPM adopted by the
National Development and Reform Commission (one of the antitrust
agencies, referred as NDRC),41 the High Court used an analyzing method
36
Id.
37
Id.
38
Id.
39
Beijing Ruibang Yonghe Kemao Youxian Gongsi Su Qiangsheng (Shanghai) Yiliao
Qicai Youxian Gongsi Deng Zongxiang Longduan Xieyi Jiufen An (北京锐邦涌和科贸
有 限 公 司 诉 强 生 （ 上 海 ） 医 疗 器 材 有 限 公 司 等 纵 向 垄 断 协 议 纠 纷 案) [Beijing
Ruibang Yonghe Equipment Technology & Trading Co. Ltd. (“Rainbow”) v. Johnson &
Johnson (Shanghai) Medical Equipment Co. Ltd. et Al.] (Shanghai High People’s Ct.
Aug. 1, 2013) CLI.C.6234448 (Lawinfochina) [hereinafter Rainbow v. Johnson &
Johnson].
40
41
Id.
Xu Kunlin, the former leader of the Antitrust Bureau of the NDRC, summarized the
approach toward RPM as “Prohibition + Exemption.” Xu explained that, under the AML,
RPM agreements are generally prohibited but may be exempted if listed conditions are
satisfied in accordance with Article 15. See Xu Kunlin(许昆林), Kuanda Zhengce
Shiyong Yu Zongxiang Longduan Xieyi (宽大政策适用与纵向垄断协议) [Leniency
Policy Applying to Vertical Monopoly Agreements], ZHONGGUO JINGJI DAOBAO（中国经
济导报） [CHINA ECON. HERALD] Oct. 31, 2013, at A3. For example, the NDRC, the
antitrust agency having authority to investigate RPM, has adopted an approach similar to
the “per se rule” to analyze RPM when it investigated and penalized several automakers.
See Hubei Province Price Bureau, Yiqi Dazhong Xiaoshou Youxian Zeren Gongsi Bufen
Aodi Jingxiaoshang Zai Huibeisheng Shishi Jiage Longduan Bei Chufa (一汽大众销售
有 限 责 任 公 司 部 分 奥 迪 经 销 商 在 湖 北 实 施 价 格 垄 断 被 处 罚) [Penalty FAWVolkswagen and Part Audi Distributors in Hubei Province for the Price Monopoly],
http://www.hbpic.gov.cn/zwgk/gfwj/xzxkhcf/201701/t20170110_23774.html; also see
Shanghai DRC, Kelaisile Ji Shanghai Diqu Bufen Jingxiaoshang Shishi Jiage Longduan
Bei Yifa Chachu (克 莱 斯 勒 及 上 海 地 区 部 分 经 销 商 实 施 价 格 垄 断 被 依 法 查 处)
[Penalty on Chrysler and Part Distributors in Shanghai District for the Price Monopoly],
12
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Vol. 18:2
like the rule of reason in U.S. antitrust law. The High Court argued that
RPM was not “per se illegal” according to Article 14 of the AML but
stated that the AML defines monopoly agreements as agreements with
effects of eliminating or restricting competition. Therefore, the plaintiff
had to provide prima facie evidence to prove that the alleged agreement
was a monopoly agreement. As to this point, the High Court affirmed the
lower court’s holding. However, compared to the Intermediate Court’s
reasoning, the High Court conducted a relatively comprehensive analysis
to draw a conclusion that the plaintiff had already satisfied its burden of
proof.
First, the High Court rejected Johnson & Johnson’s argument that
Rainbow was not eligible to bring a private antitrust lawsuit because
Rainbow was a party of the agreement. According to Article 50 of the
AML, any party who suffered loss arisen from a monopoly agreement was
a qualified plaintiff. Furthermore, the High Court stated that a party
involved in an alleged agreement could access more evidence and
information about this monopoly agreement than consumers and
outsiders.42
Second, the High Court held that the plaintiff had to prove that the
alleged RPM agreement was a “monopoly agreement” with effects of
eliminating or restricting competition. The High Court stated that Article 7
of the Judicial Interpretation provided that “if a conduct is alleged to
violate Article 13 of the AML (regulations about horizontal monopoly
agreements), a defendant bears the burden of proof to prove that her
conduct does not have effects of eliminating or restricting competition in
order to avoid a penalty.”43 Therefore, the High Court stated that the
Judicial Interpretation provided that such a reversed burden of proof can
only be applied to horizontal monopoly agreements, rather than vertical
monopoly agreements, such as RPM. Since such a reversed burden of
proof should be explicitly provided by laws, regulations, or judicial
interpretations, plaintiffs of RPM litigations cannot be exempted from the
responsibility of proving the alleged RPM as a monopoly agreement.
Third, the highlight of the High Court’s judgment was that the
Court summarized four factors to evaluate RPM’s economic effects on
competition: (a) whether the relevant market was highly competitive; (b)
whether the defendant had strong market power; (c) the motivation of the
defendant to conduct RPM; and (d) whether anti-competitive effects of the
RPM can be offset by its pro-competitive effects.
(Sept. 11, 2014), http://www.shdrc.gov.cn/fzgggz/jggl/jgjgdt/12463.htm.
42
Rainbow v. Johnson & Johnson, supra note 39.
43
Judicial Interpretation on AML Lawsuits, supra note 21, art. 7.
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In sum, the High Court found that the demand elasticity of the
relevant market was low; Johnson & Johnson had a strong market power
to control prices and had the motivation to restrict resale prices; and
Johnson & Johnson could not prove that anti-competitive effects of the
RPM could be offset by its pro-competitive effects. Therefore, the High
Court held that the RPM agreement implemented by Johnson & Johnson
had effects of eliminating and restricting competition, and was therefore a
monopoly agreement prohibited by Article 14 of the AML.
Although Rainbow v. Johnson & Johnson is thus far the first and
only RPM private lawsuit that the plaintiff (Rainbow) won, even the
attorney of Rainbow expressed his concerns about the heavy burden of
proof which may easily let RPMs with anticompetitive effects escape
penalties.44
2.
Infant Formula Milk “Follow-on” Case
As of June 2016, there has only been one antitrust “follow-on”
private lawsuit related to RPM in China. It is a “follow-on” litigation of
the NDRC’s administrative decision on the infant formula milk industry.
In August 2013, the NDRC imposed fines on six manufacturers of
infant formula milk (Abbott was one of manufacturers) for restricting the
minimum resale price with distributors.45 After the NDRC imposed the
penalty on Abbott, a consumer sued the manufacturer, Abbott, and a
branch store of Carrefour in Beijing, where he had purchased the infant
formula. The plaintiff claimed that the defendants conspired to raise prices
on Abbott infant formula milk that he purchased and he demanded
compensation for his damages under the antitrust claim.
When the case was filed in the Beijing Intellectual Property Court
(“Beijing IP Court”)46, the defendants filed a demurrer to assert that the
44
Dai Bin & Zeng Fanyu (戴宾&曾凡宇), Zongxiang Jiage Longduan Xieyi Minshi
Susong FalÜ Wenti Yanjiu—Yi Qiangsheng An Wei Shijiao Zhankai (纵向价格垄断协议
民事诉讼法律问题研究——以强生案为视角展开) [Research on Private Enforcement
of Vertical Price Restraints—From the Perspective of Rainbow v. Johnson & Johnson], 3
FALÜ SHIYONG (法律适用) [J. L. APPLICATION] 97, 101 (2016).
45
Heshengyuan Deng Rufen Shengchan Qiye Weifan Fanlongduan Fa Xianzhi Jingzheng
Xingwei Bei Chufa 6.6873 Yiyuan (合生元等乳粉生产企业违反《反垄断法》限制竞
争行为共被处罚 6.6873 亿元) [Penalty on Milk Powder Producers of Restricting
Competition
and
Fined
668.73
Million
Yuan],
http://www.ndrc.gov.cn/xwzx/xwfb/201308/t20130807_552991.html [hereinafter NDRC
Decision on Infant Formula Milk Producers].
46
On Aug. 31, 2014, the Standing Committee of National People’s Congress passed a
decision to set up IP courts in three cities—Beijing, Shanghai and Guangzhou. The level
of the IP courts is as same as courts of appeal, intermediate courts. See Guanyu Zai
Beijing, Shanghai, Guangzhou Sheli Zhishi Chanquan Fayuan de Jueding (关于在北京、
上海、广州设立知识产权法院的决定) [The Decision of Setting IP Courts in Beijing,
14
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Beijing IP Court had no jurisdiction. In June 2015, the High People’s
Court of Beijing (Beijing High Court) issued a final verdict to affirm the
IP Court’s jurisdiction over the first-instance of antitrust private
litigations.47
On December 31, 2015, the Beijing IP Court issued the judgment
in favor of the defendants. 48 The Court acknowledged that the
administrative penalty imposed by the NDRC on Abbott was evidence to
prove that the RPM agreements implemented by Abbott violated the AML,
as long as there was no contrary evidence against it.49 The Beijing IP Court
stated that the NDRC’s penalty decision, however, only could prove that
the penalty was imposed on Abbott, but did not identify its distributors. 50
Namely, merely the NDRC’s decision cannot prove that the branch store
of Carrefour, as a distributor, had singed the illegal RPM agreement with
Abbott. 51 Abbott and Carrefour admitted that they had entered into a
commodity contract, but the contract did not include any provisions
related to price restriction. 52 Although the date of signature of the
commodity contract is on November 30, 2013, later than the date the
Shanghai and Guangzhou] (promulgated by the Standing Comm. Nat’l People’s Cong.,
Aug.31, 2014, effective Aug.31, 2014), http://npc.people.com.cn/n/2014/0901/c1457625574846.html. On Oct. 31, 2014, the Supreme People’s Court issued a regulation about
the jurisdiction of the three IP courts. See Provisions of the Supreme People’s Court on
the Jurisdiction of Intellectual Property Courts of Beijing, Shanghai and Guangzhou over
Cases (promulgated by the Sup. People’s Ct., Oct. 31, 2014, effective Nov. 3, 2014)
CLI.3.237583(EN) (Lawinfochina). the Beijing Intellectual Property Court is the first
Intellectual Property Court in China, founded on November 6, 2014.
47
Beijing Jialefu Shangye Youxian Gongsi Shuangjingdian Deng Yu Tian Junwei
Longduan Jiufen Ersheng Minshi Caiding Shu (北京家乐福商业有限公司双井店等与
田军伟垄断纠纷二审民事裁定书) [Beijing Carrefour Ltd. Co. (Shuangjing Store) &
Abbott Trade Co. v. Tian Junwei (Civil Verdict for Appeal Trial)] (Beijing High Ct. Jun.
18, 2015), http://wenshu.court.gov.cn/content/content?DocID=eb0ba701-ece3-440890c3-954c5e5b45f3.
48
Tian Junwei Su Beijing Jialefu Shangye Youxian Gongsi Shuangjingdian Deng
Longduan Jiufen Yian（田军伟诉北京家乐福商业有限公司双井店等垄断纠纷一案）
[Tian Junwen v. Beijing Carrefour Ltd. Co. etc., re Antimonopoly Disputes](Beijing IP
People’s Ct. Dec. 31, 2015), (2014) Jingzhi Minchu Zidi 146 Hao ((2014)京知民初字第
146
号 )
[(2014)
Beijing
IP
Court
First
Trial
No.
146],
http://wenshu.court.gov.cn/content/content?DocID=d1cf3c53-6ba1-4192-a8e19bcfcb1c96e4&KeyWord=%E7%94%B0%E5%86%9B%E4%BC%9F.
49
Id.
50
Id.
51
Id.
52
Id.
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NDRC issued the penalty decision, the contract stipulated that the
effective date was traced back to January 1, 2013.53
Therefore, the Beijing IP Court ruled that because the NDRC’s
decision did not disclose relevant evidence involved in the investigation, it
could only assume that the penalty was imposed merely on Abbott, but not
on the distributor, such as Carrefour.54 Therefore, there was not sufficient
evidence to prove that an illegal RPM agreement existed between the
defendants.
In addition, from the Beijing IP Court’ judgment, we can conclude
that the court upheld that indirect purchasers, such as consumers, have
standing to sue in antitrust private litigation. 55
The plaintiff appealed to the Beijing High Court and argued that the
signing date of the commodity contract was later than the date of the
NDRC’s decision, so it was possible that the defendants concealed a real
contract which included price restrictions.56 The Beijing High Court stated
that the Contract Law permits individuals or business entities to sign a
contract to regulate their previous behaviors; namely, the effective date of
a contract prior to the signing date is permitted.57 The Beijing High Court
ruled that the plaintiff failed to prove that the commodity contract was
false or there was an illegal RPM agreement between the defendants, so it
upheld the judgment of the Beijing IP Court.58 The judgment of Beijing
High Court is final.
III. RAISING QUESTIONS – REASONS FOR THE PROBLEMS
From the discussion of the status quo of China’s private antitrust
enforcement, it shows that private enforcement is underdeveloped in
China. The difficulty of plaintiffs to prove an antitrust violation greatly
suppresses people’s motivation to file an antitrust litigation in courts.
This article identifies three reasons that have caused the plaintiffs’
heavy burden of proof. The reform of civil process, started at the end of
53
Id.
54
Id.
55
Id.
56
Tian Junwei Shangsu Beijing Jialefu Shangye Youxian Gongsi Shuangjingdian Deng
Longduan Jiufen Yian (田军伟上诉北京家乐福商业有限公司双井店等垄断纠纷一案)
[Tian Junwen v. Beijing Carrefour Ltd. Co. et Al., re Antimonopoly Disputes] (Beijing
High People’s Ct., Aug. 22, 2016), (2016) Jingmin Zhong 214 Hao ((2016)京民终 214 号)
[(2016)
Beijing
High
Court
No.
214]
3,
http://wenshu.court.gov.cn/content/content?DocID=7ad234f9-cfdc-453a-ae0aa8f22dc22004&KeyWord=%E7%94%B0%E5%86%9B%E4%BC%9F.
57
Id.
58
Id.
16
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the 1980s, is a background reason. This reform has changed the role of
judges from an active fact finder to a relatively neutral arbitrator, and
litigant parties have the burden of proving what they claim. China’s effort
to establish a modern civil process should be applauded. When we put the
antitrust litigation into this system, however, problems emerge. Moreover,
the area of civil process is one of the most complicated and changeable
legal areas in China,59 which may cause the antitrust litigation to become
more complicated than necessary.
The current provisions of the Civil Procedure Law are the primary
reason for plaintiffs’ heavy burden of proof. The law does not grant
sufficient support to antitrust plaintiffs of investigating and collecting
evidence. It further aggravates antitrust plaintiffs’ burden of proof.
The last reason is that public antitrust enforcement does not offer
appropriate support for private litigants. Chinese administrative agencies
normally have stronger power and superior ability than private litigants to
discover potential antitrust violations and collect evidence. However, in
practice, antitrust agencies’ enforcement activities do not give adequate
assistance to private enforcement as they are supposed to do. For example,
because of the less transparent decision-making process of public
enforcement, it is hard for private litigants to know about the progress of
the agencies’ investigation, what evidence they can rely on to sue, and
how to take advantages of administrative enforcement to win a case.
59
China enacted the Civil Procedure Law (For Trial Implementation) in 1982. After nine
years of trial implementation, the final version of the Civil Procedure Law was enacted in
1991. it has been amended twice, once in 2007, and again in 2012. Nowadays, along with
the judicial reform, the development of China’s Civil Procedure Law is still in a
transitional period. Although the achievement of 20 years of judicial reform should be
applauded, the development of civil process still faces great challenges. First, China has a
vast territory and a large population, and the “opening-up” of the economy has caused
significant imbalances between different regions. China requires a more delicate and
complicated design of civil procedure law. Second, China is in a transition period from a
highly-controlled planned economy to a market-oriented economy. The State is gradually
reducing its interference with people’s private life; however, after more than 40 years of
centralization, people have not gotten used to (or do not know how to) utilize private
enforcement mechanisms to solve private disputes. Therefore, the mechanism of “social
autonomy,” such as private litigation, has not matured yet. Third, groups of professionals,
such as judges and lawyers, are not mature enough to support the development of civil
process. See Fu Yulin (傅郁林), Maixiang Xiandaihua de Zhongguo Minshi Susong Fa
(迈 向 现 代 化 的 中 国 民 事 诉 讼 法) [China’s Civil Procedure Law, Towards
Modernization], 1 DANGDAI FAXUE (Chinese chars.) [CONTEMPORARY L. REV.] 8, 12-13
(2011).
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A. Reform of Civil Process in China
The term, “civil process,” is not a Chinese phrase; instead, it was
transplanted from western countries a hundred years ago. 60 After the
People’s Republic of China was founded in 1949, the civil process did not
make any significant progress until the economic reform and opening-up
policies at the end of the 1970s. The Congress issued the Civil Procedure
Law in 1982.61 Since then, China has engaged in comprehensive reform of
market-oriented economy, which released individuals from restrictions of
organizations (“Dan Wei, 位”) of the planned economy.62 Since then,
people, as independent individuals, were allowed to participate into
private economic activities, such as setting up private companies, selling
or purchasing private properties, and hiring employees, or being hired.
Because people have been released from the highly-planned
economy system, a large number of private disputes arise, resulting in a
surge of private lawsuits filed in courts.63 Facing a significant caseload,
courts asked for an urgent reform to change the traditional trial model to
achieve juridical effectiveness and alleviate the courts’ workload. Thus, an
“unprecedented revolution in China’s judicial system”64 was igniting, and
this revolution is still in process today. At first, this revolution was
launched by lower court judges, which was a bottom-to-up reform without
60
China’s traditional law did not distinguish between civil and criminal process until
western laws were introduced into China in the 1890s. In 1911, the Qing Dynasty
completed a draft of civil procedure law based on western and Japanese law. It included
several concepts and institutions of modern civil process, such as lawyers, an adversarial
system, collateral estoppel, judicial independence, etc. Unfortunately, due to the collapse
of the Qing Dynasty, this law was not enacted. See Xiao Jianhua & Liao Hao（肖建华&
廖浩）, Qingmo Minshi Susong Fa de Yanjing （清末民事诉讼法的演进）[ Revolution
of Civil Procedure Law in Late Qing Dynasty], 6 BEIFANG FAXUE（北方法学） [N.
L. SCI.] 118, 123-24 (2015).
61
Zhonghua Renmin Gongheguo Minshi Susong Fa (Shi Xing) (中华人民共和国民事诉
讼 法 （ 试 行 ）) [Civil Procedure Law of People’s Republic of China (For Trial
Implementation) (promulgated by the Standing Comm. Nat’l People’s Cong., Mar. 8,
1982, effective Oct. 1, 1982, expired), http://www.npc.gov.cn/wxzl/gongbao/200012/06/content_5004411.htm.
62
Xiao Jianhua（肖建华）, Shenpanquan Quewei He Shifan Zhi Jiantao—Zhongguo
Minshi Susong Fazhan Luxiang de Sikao (审判权缺位和失范之检讨——中国民事诉讼
法发展路向的思考) [Examination of the Absence and Abuse of Judicial Authority—
Thoughts on the Development of China’s Civil Process], 23 ZHENGFA LUNTAN (政法论
坛) [POL. SCI & L. TRIB.] 44, 45 (2005).
63
Id. at 45.
64
Id. at 48.
18
Asian-Pacific Law & Policy Journal
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nationwide guidelines or a comprehensive plan. 65 A more systematic
reform started at the end of the 1980s.66
The Civil Procedure Law (for Trial Implementation) was issued in
1982, and was enacted as a law in 1991. The law has been amended twice.
The latest amendment was issued in August 2012, and the Supreme Court
made corresponding judicial interpretation of the law in February 2015.
The reform has three features: first, the general rule is that the
burden of proof lies upon a party who claims, rather than who denies. In
other words, civil litigants have to prove their claims and bear adverse
consequences of failing to prove their propositions.67 Second, the role of
judges has been changed from an active intervener to a relatively neutral
arbitrator, and the courts’ authority to initiate investigations and collect
evidence has been limited.68 Third, the scope of courts’ trial has been
limited to the disputes litigants have claimed, rather than issues identified
by the courts.69
I will not evaluate the reform of civil process, which is beyond the
scope of this article. This article will only focus on the influence of this
reform on private antitrust litigation. This reform provides a background
for enacting the Civil Procedure Law, which has directly affected antitrust
plaintiffs’ motivation to file a lawsuit.
B. Regulations of Civil Procedure Law
After the reform of civil process, parties became responsible for
presenting evidence to prove their claims; otherwise they would lose cases
or bear any adverse consequence of failing to prove. While this system
may sound reasonable to American readers, without the evidentiary
discovery system that the U.S. legal system has, Chinese antitrust
plaintiffs’ burden of proof is overly heavy. Furthermore, in many antitrust
cases, especially RPM lawsuits, plaintiffs have inferior economic power
65
Id. at 45.
66
In 1988, the Supreme Court held the 14th trial working meeting, which decided to
launch civil judicial reforms. See Jiang Huiling & Yang Xiaoli (蒋惠岭&杨小利),
Chongti Minshi Susong de “Tingsheng Zhongxin Zhuyi” (重提民事诉讼的“庭审中心主
义”) [Reiterate the “Center of Trial” in Civil Process], 12 FALÜ SHIYONG (法律适用) [J.
L. APPLICATION] 2, 3 (2015).
67
Zuigao Renming Fayuan Guanyu Shiyong Zhonghua Renmin Gongheguo Minshi
Susong Fa de Jieshi (最高人民法院关于适用《中华人民共和国民事诉讼法》的解释)
[The Supreme Court’s Interpretation of Civil Procedure Law of People’s Republic of
China] (promulgated by Sup. People’s Ct., Jan. 30, 2015, effective Feb. 4, 2015), art. 90,
CLI.3.242703(EN) (Lawinfochina) [hereinafter Judicial Interpretation on Civil Procedure
Law].
68
Id. art. 94, 96.
69
Id. art. 228.
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than defendants to access information and are unlikely to uncover
evidence of monopolistic behavior.70
1.
Plaintiff’s Difficulties of Discovering and Obtaining Evidence
According to the Civil Procedure Law, litigants’ lawyers have the
right to investigate, collect evidence, and review case files recorded by
courts.71 Lawyers, by showing their license and certificates of their law
firms, can investigate and interview persons involved in disputes.72 Also,
the Supreme Court further provides what and how lawyers can review
case files kept by courts.73
However, although lawyers are entitled to investigate and obtain
evidence according to laws, such rights in practice lack teeth. There is no
civil or criminal penalty for individuals or/and companies if they do not
cooperate with lawyers’ investigation or they refuse to provide relevant
evidence and information.74 As to lawyers’ right of reviewing cases’ files
recorded by courts, it has been criticized that there lacks transparent
procedure and clear redress to guarantee lawyers’ such right.75 Besides,
considering judges’ heavy caseload, 76 it is impractical for judges to
respond to each request of records review.
70
The NDRC’s investigations found that most RPM agreements are carried out by large
multinational and state-owned companies—such as Mercedes-Benz, Nikon, Moutai, a
Chinese state-owned liquor producer —and involve a range of industries, such as
automobiles, infant formula milk, pharmaceuticals, technology, and food packaging.
Compared to the NDRC’s powerful administrative authority, it seems difficult for
individual consumers and independent distributors to file private lawsuits against these
big companies. See Jingmeng Cai, supra note 5, at 13-33.
71
Civil Procedure Law of the People’s Republic of China (2012 Amendment)
(promulgated by the Standing Comm. Nat’l People’s Cong., Aug. 31, 2012, effective Jan.
1, 2013), art. 61, CLI.1.183386(EN) (Lawinfochina) [hereinafter Civil Procedure Law of
2012].
72
Lawyers Law of the People’s Republic of China (2012 Amendment) (promulgated by
the Standing Comm. Nat’l People’s Cong., Oct. 26, 2012, effective Oct. 26, 2012), art.
35, CLI.1.188538 (EN) (Lawinfochina).
73
The Supreme People’s Court provides that a litigant’s lawyer can review materials of
the civil cases he/she represents, but records of judicial committee and materials related
to other cases cannot be reviewed. In addition, a request of reviewing courts’ records
should not affect a case at trial. See Provisions of the Supreme People's Court on Law
Agents' Consulting of Civil Case Materials (promulgated by Sup. People’s Ct., Nov. 15,
2002, effective Dec. 7, 2002) CLI.3.43937(EN) (Lawinfochina).
74
Hou, supra note 28, at 3.
75
See Xia Juan & Zeng Jiuping (夏娟 & 曾就萍), Zaitan Lüshi Quanli Xingshi: Yi Lüshi
Yuejuan Quan He Huijian Quan Wei Shijiao (再谈律师权利行使——以律师阅卷权和
会见权为视角) [Lawyers’ Right: From the Perspective of Reviewing Records Right and
Meeting Right], 12 FAZHI YU SHEHUI (法制与社会) [L. SYS. & SOC’Y.] 290, 290 (2010).
76
For example, I talked with a judge (who asked to remain anonymous), who is
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2.
Vol. 18:2
Limitations of Court-Conducted Investigations
According to China’s Civil Procedure Law, courts have the
authority to investigate and collect evidence. Compared to private
litigants’ discovery capabilities, the court-conducted investigation is much
more powerful. Courts can impose fines, detain parties who refuse to
cooperate with investigations, and make judicial suggestions to an entity’s
supervisory institutions or other relevant organs on imposing a
disciplinary sanction on the entity which refuses to cooperate with
investigations.77
Courts can investigate and collect evidence on their own initiative
under two circumstances. First, courts can conduct investigations in either
of the five “necessary” situations: (1) evidence involving injury to the
State and the public’s interests; (2) evidence involving identity relations,
such as divorce and adoption lawsuits when one party is absent from the
trial; (3) lawsuits involving environmental pollutions, harms of
consumers’ interests and rights, and other acts undermining the public’s
interest; (4) litigations in which parties conspire to harm any third-parties’
legitimate interests; and (5) other procedural issues.78
The second circumstance where courts can investigate and gather
evidence is upon a litigant party’s request if she cannot investigate and
collect evidence due to “objective reasons.”79 However, the “objective
reasons” referred to very limited situations: (1) the evidence is in the
procession of governmental agencies, which is not accessible to private
parties; (2) the evidence involves the State’s confidential information,
business secrets, or personal privacy.80
A scholar conducted a survey on an anonymous court about the
court-conducted investigations.81 Based on his survey, in practice, because
responsible for hearing civil lawsuits at a local court in Beijing. She said from January to
June of this year (2016) she by herself had already closed 272 cases, and had 600
unclosed cases. Interview with anonymous Judge, Chaoyang Dist., Beijing, People’s Ct,
(Jul.31, 2016).
77
Civil Procedure Law of 2012, supra note 71, art. 114.
78
Judicial Interpretation on Civil Procedure Law, supra note 67, art. 96.
79
Id. art. 94.
80
Id.
81
Wu Aibing (毋爱斌), Dangshiren Shenqing Diaocha Quzheng Zhidu Yunxing de Yihua
Yu Huigui—Jiyu S Fayuan Minshangshi Sifa Shijian de Shizheng Fenxi (当事人申请调
查 取 证 制 度 运 行 的 异 化 与 回 归——基 于 S 法 院 民 商 事 司 法 实 践 的 市 政 分 析)
[Divergence and Return of the Mechanism of Court-conducted Investigation upon
Parties’ Requests—An Empirical Study of S. Court’s Practices in Civil Lawsuits], 16
XINAN ZHENGFA DAUXUE XUEBAO (西南政法大学学报) [J. Sw. U. POL. SCI. & L.] 81
(2014) (China).
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21
the legislative language is abstract and unclear, courts’ attitudes about
standards of launching court-conducted investigations vary. Some courts
adopted looser standards to decide whether they would launch an
investigation or collect evidence while others used stricter ones.82 For
example, when parties filed requests beyond the deadline of application,
some courts still approved the requests, but other courts denied. 83
Moreover, judges are inclined to decline parties’ requests since courtconducted investigations would increase judges’ workload and may make
judicial proceedings more complicated. 84 Considering that the heavy
caseload of courts—the survey showed that the target court had more than
50,000 cases a year, and each individual judge dealt with 400-500 cases a
year85—it is no surprise that most private plaintiffs cannot rely on courts
to conduct investigation and collect evidence.
As discussed above, China’s Civil Procedure Law states that a
party can apply for a court-conducted investigation only if she cannot
investigate and obtain evidence due to “objective reasons.”86 However, in
many antitrust lawsuits, plaintiffs’ inability to gather evidence is not
because of “objective reasons.”87 By lacking comprehensive economic and
legal knowledge, antitrust plaintiffs, who normally are individuals or small
to medium-size companies, cannot understand clearly and accurately what
kinds of evidence should be collected, where and how to obtain them. For
example, in the Baidu (百 度) case, 88 the plaintiff (a less known
information services company) alleged that Baidu (the largest provider of
internet search services in China) abused its dominant market position to
block the plaintiff’s website in defendant’s internet search results.89 Facing
the internet tycoon in the Chinese market, the plaintiff, who lacked the
ability to prove Baidu’s anticompetitive behaviors, provided merely two
82
Id. at 83.
83
Id. at 83.
84
Id. at 83.
85
Id. at 84.
86
Civil Procedure Law of 2012, supra note 71, art. 64.
87
Jiang Yanbo & Yuling (蒋岩波& 喻玲), Woguo Fanlongduan Minshi Susong Zhidu
Mianlin de Tiaozhan Jiqi Biange (我国反垄断民事诉讼制度面临的挑战及其变革)
[Challenges and Reform Faced by China’s Antimonopoly Law Private Enforcement], 4
JIANGXI SHEHUI KEXUE (江西社会科学) [JIANGXI SOC. SCI.] 161, 163 (2011) (China).
88
Tangshanshi Renren Xinxi Fuwu Youxian Gongsi Su Beijing Baidu Wangxun Keji
Youxian Gongsi Longduan Jiufen An (唐山人人信息服务有限公司诉北京百度网讯科
技有限公司垄断纠纷案) [Tangshang Renren Information Service Ltd. Co. v. Beijing
Baidu Wangxun Technology Ltd., Co.], (Beijing High People’s Ct. July 9, 2010)
CLI.C.516272 (Lawinfochina).
89
Id.
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papers from the internet as evidence of the defendant’s dominant market
position, and, unsurprisingly, lost the case.90
In sum, since the civil process reform, judges tend to play a more
neutral and passive role in civil litigations. In general civil lawsuits,
litigant parties normally have equal power and economic positions. A
more adversarial system indeed can improve fact-finding, grant redress,
and achieve justice. In most private antitrust lawsuits, however, litigant
parties usually have significantly unequal economic positions and
bargaining power. When antitrust parties are in unbalanced economic
positions, such ostensible justice is very likely to lead to de facto injustice.
C. Lack Support from Public Antitrust Enforcement—Conflict and
Ambiguity
As discussed in Part II, public antitrust enforcement plays a
prominent role in China’s antitrust system while private enforcement is in
a subordinate position. The relationship between public and private
enforcement, to a large extent, influences the development of private
antitrust litigation. China does not have a uniform antitrust agency. After
the AML was enacted, the State Council appointed three administrative
agencies—the NDRC, the Ministry of Commerce (MOFCOM), and the
State Administration for Industry and Commerce (SAIC) to enforce the
AML. Specifically speaking, both the NDRC and the SAIC are
responsible for investigating monopoly agreements, abuse of dominant
market positions, and abuse of administrative power. The difference
between the NDRC and SAIC’s responsibility is whether a conduct is
price-related or not. In other words, the NDRC is responsible for
investigating price-related behaviors (such as RPM), while the SAIC is in
charge of non-price-related ones. The MOFCOM is accountable for
merger review and international cooperation related to competition laws.
In this article, investigating RPM is the NDRC’s responsibility.
The NDRC, the most powerful Chinese bureaucracy, has begun a
series of proactive PRM investigations, especially since 2013. 91 The
increase of public enforcement raises the issue about the relationship
between public and private antitrust enforcement. For example, can
antitrust agencies’ decisions be used as prima facie evidence by a private
90
91
Li Jian, supra note 5, at 72.
From 2014 to 2015, the NDRC fined multinational automakers—Mercedes-Benz, Audi,
Chrysler, and Dongfeng-Nissan—for restricting resale prices of vehicles and associated
spare parts. The fines totaled $ 509 million. In February 2013, the NDRC fined two stateowned liquor producers for carrying out RPM. On August 7, 2013, the NDRC imposed
fines totaling 668.73 million yuan ($102.88 million) on six manufacturers of infant
formula. The NDRC also launched an investigation into the corrective lenses market and
imposed penalties on several multinational producers of corrective lenses in Beijing,
Shanghai, and Guangdong. See Jingmeng Cai, supra note 5, at 13-33.
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plaintiff? If antitrust agencies decided a behavior with different analyzing
methods and drew divergent conclusions with judicial decision-makers,
should courts turn down a “follow-on” case? Can defendants’
commitments and confessions made during agencies’ investigations be
used as evidence in “follow-on” private lawsuits?
Based on the legal provisions and judicial practices, in the
following sections, I will discuss difficulties and challenges to answer
these questions.
1.
Prima Facie Evidence
When China’s Supreme Court drafted the Judicial Interpretation
for private antitrust enforcement, it provided that antitrust agencies’
decisions could be used as prima facie evidence.92 Unfortunately, when the
Judicial Interpretation was formally enacted, this provision had been
deleted from the official version due to controversies. Supporters of
keeping this provision claimed that accepting antitrust agencies’ decisions
as prima facie evidence in “follow-on” cases could save judicial resources,
alleviate plaintiffs’ proof of burden, and improve consistency with
agencies’ decisions.93 In contrast, opponents argued that under China’s
legal system, administrative decisions are persuasive rather than binding
on courts, so it is not reasonable to impose on courts an obligation to
accept agencies’ decisions as evidence.
Although the Judicial Interpretation does not provide whether
agencies’ decisions should be accepted as prima facie evidence in private
litigation, the Provisions of Evidence in Civil Procedure issued by the
Supreme Court provides that, when there is more than one piece of
evidence concerning a same fact, documents produced by administrative
organs are, as a general rule, more forceful than other written evidence.94
Therefore, in “follow-on” cases, based on the general rule of
evidence, previous agencies’ decisions are likely to be accepted by courts.
For example, in Infant Formula Milk Follow-on Case, as we discussed
92
Zuigao Renmin Fayuan Guanyu Shenli Longduan Minshi Jiufen Anjian Shiyong Falü
de Guiding (Zhengqiu Yijiang Gao) (最高人民法院关于审理垄断民事纠纷案件适用法
律的规定（征求意见稿) [The Supreme Court’s Regulations about Several Issues in
Hearing Antimonopoly Private Lawsuits (Draft)] (promulgated by the Sup. People’s Ct.
Apr.26,
2011),
Chinacourt.org,
art.
11,
para.
2-3,
http://old.chinacourt.org/html/article/201104/26/449182.shtml (China).
93
Huang Yao (黄尧), Qianxi Fanlongduan Minshi Susong Zhong Zhifa Jigou Yu Sifa
Jiguan de Xietiao (浅析反垄断民事诉讼中执法机构与司法机关的协调) [Discussion
on Coordination Between Antimonopoly Private and Public Enforcement], 2 LI LUN JIE
(理论界) [THEORY HORIZON] 66, 67 (2012) (China).
94
Some Provisions of the Supreme People’s Court on Evidence in Civil Procedures
(promulgated by the Sup. People’s Ct., Dec. 21, 2001, effective Apr.1, 2002)
CLI.3.38083(EN), art. 77 (Lawinfochina).
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above, both the Beijing IP Court and the Beijing High Court
acknowledged that the NDRC’s penalty decision on Abbott could be
accepted as evidence to prove that the formula milk producer
implementing an RPM agreement, which violated the AML. However,
when courts hold different opinions or use differing analyzing approaches
with the antitrust agency, the problem arises. Taking RPM as a typical
example, in the Infant Formula Milk Case, 95 the NDRC’s analyzing
approach for RPM is much more like the per se rule under U.S antitrust
law. The NDRC ruled that RPM agreements implemented by formula
producers were in breach of Article 14 of the AML, and defendants failed
to prove that they could be exempted under Article 15.96 However, in
Rainbow v. Johnson & Johnson, the Shanghai High Court held that an
RPM agreement signed by a medical producer and its distributors was not
per se illegal, but the plaintiff had to prove that the RPM agreement had
anticompetitive effects of restricting or limiting the competition.97 The
analyzing approach adopted by the Shanghai High Court is much more
like the rule of reason under U.S. antitrust law.
The inconsistent approaches adopted by the antitrust agency and
courts is very likely to put courts in an awkward position, especially when
they hear follow-on cases. If courts follow their own analyzing approaches
to draw divergent conclusions with the NDRC, it would lead consumers
and companies to confusion on one hand, and injure the consistency and
predictability of the antitrust decision-making on the other. However, if
courts accept the agency’s decisions as evidence, it would conflict with
their precedents.
2.
Commitment and Leniency
Since 2013, the NDRC has begun to adopt a leniency program for
antitrust violators. In the Infant Formula Milk Case, three producers were
exempted from penalty because they voluntarily reported to the agency
about the RPM, submitted important evidence, and made commitments to
stop carrying out RPM and to reduce prices.98 Besides, five other formula
milk producers were given mitigated penalties.99
Applying the programs of commitment and leniency100 requires
transparent procedures and clear requirements to ensure the certainty and
95
NDRC Decision on Infant Formula Milk Producers, supra note 45.
96
Id.
97
Rainbow v. Johnson & Johnson, supra note 39.
98
NDRC Decision on Infant Formula Milk Producers, supra note 45.
99
Id.
100
The commitment program can be applied when business operators promise to take
certain measures to eliminate anticompetitive effects of its conduct within a time limit
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predictability. The NDRC’s enforcement, however, leads to certain
problems because of lacking specific guidelines and regulations. For
example, the NDRC granted more than one company exemptions in its
decisions. 101 Under the U.S. antitrust law, only the first qualifying
wrongdoer may be granted leniency no matter whether the company
reports illegal antitrust activity before or after an investigation has
begun.102 This process guarantees that the regulator can obtain evidence to
investigate a violation on the one hand, and on the other, the agencies
would not abuse of such authority. Furthermore, standards and the
procedure for the NDRC granting a leniency are unclear. More
information should be specified when the NDRC applies the leniency
program, such as detailed procedures for leniency application, the criteria
for granting leniency, conditions for granting leniency or revoking it, and
leniency applicants’ confidentiality, and so on. 103 Unfortunately, the
NDRC has not yet enacted regulations or guidelines for applying a
leniency policy to RPM.
It should be noticed that in early 2016, the NDRC drafted two
guidelines about commitment and leniency programs respectively. 104 As
of March 2017, the process of soliciting public opinions on the two drafted
guidelines has been completed, but has not yet been enacted. However, the
draft of the guideline of leniency program explicitly states that it applies
agreed by the agencies, then the agencies may decide to suspend the investigation. See
the AML, supra note 10, art. 45. The leniency program is applied when business
operators voluntarily report any violations or provide important evidence to the agencies,
the agencies may give the reporters a mitigated penalty or an exemption. See the AML,
supra note 10, art. 46, para. 2.
101
In the NDRC’s investigations concerning RPM, three infant formula producers, two
eyeglass manufacturers, and two vehicle distributors have been exempted from penalties
because they have “voluntarily reported to the agency and provided important evidence
about RPM agreements.” See Jingmeng Cai, supra note 5, 41-45.
102
Scott D. Hammond & Belinda A. Barnett, Frequently Asked Questions Regarding the
Antitrust Division’s Leniency Program and Model Leniency Letters, U.S. DEPT. OF
JUSTICE,
4-6
(Nov.
19,
2008),
https://www.justice.gov/sites/default/files/atr/legacy/2014/09/18/239583.pdf.
103
104
Id. at 1.
See Hengxiang Longduan Xieyi Anjian Kuanda Zhidu Shiyong Zhinan (Zhengqiu
Yijian Gao) (横向垄断协议案件宽大制度适用指南（征求意见稿) [Guideline for the
Application of Leniency Policy on Horizontal Monopoly Agreement (Draft)]
(promulgated
by
the
NDRC,
Feb.
2,
2016),
the
NDRC,
http://www.sdpc.gov.cn/gzdt/201602/t20160203_774297.html
(China)
[hereinafter
Guideline for Leniency Policy (Draft)]; see also Fanlongduan Anjian Jingyingzhe
Chengnuo Zhinan Zhengqiu Yijian Gao (反垄断案件经营者承诺指南（征求意见稿) ）
[Guideline for Businesses’ Commitments (Draft)] (promulgated by the NDRC, Feb. 2,
2016), the NDRC, http://www.sdpc.gov.cn/gzdt/201602/t20160203_774296.html
[hereinafter Guideline for Commitments (Draft)].
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exclusively to horizontal monopoly agreements.105 It is not clear whether
the NDRC will issue another guideline for vertical monopoly agreements
(like RPM), or whether the NDRC has already realized it is inappropriate
to implement a leniency policy for vertical agreements.
According to the two guidelines drafts,106 the basic rule is that
materials, documents, or reports produced or provided by investigated
companies during the process of making commitment or applying leniency
should be excluded as evidence in subsequent private lawsuits. However,
without further limitations and clarifications, the antitrust agencies may
expand the scope of excluded materials, which would further increase the
private plaintiffs’ burden of proof.
IV. FINDING SOLUTIONS—WHAT CHINA CAN LEARN FROM THE U.S.
When we try to find possible solutions to develop China’s private
antitrust enforcement, it is important to bear in mind that a feasible and
sound solution should depend largely on carefully adapting to the local
environment. As a result, when I attempt to seek solutions from U.S.
antitrust law to solve China’s problems, it is rational to conduct
discussions within the current framework of China’s antitrust enforcement
system, rather than overturning the system completely.
Based on the previous discussion, the plaintiffs’ heavy burden of
proof is the major problem hindering the development of private antitrust
enforcement, which significantly discourages people from filing private
lawsuits in courts. However, suggestions of transplanting the whole
evidence discovery system in U.S. law to China is unrealistic, because it
would require a complete change of China’s current civil process
framework. Therefore, my analysis only focuses on specific rules and
mechanisms in U.S. antitrust law. Then, I evaluate the effect of these rules
and mechanisms on improving China’s private antitrust enforcement.
A. Fundamental Issues—Roles and Purposes
Imagine you were a judge, facing a private antitrust lawsuit. You
may have to roll out a list of questions to hear the lawsuit: Does the
105
106
Guideline for Leniency Policy (Draft), id., art. 3.
Guideline for Businesses’ Commitments (Draft) provides, “When antitrust agencies
suspend or stop investigations due to investigated companies’ commitments, private
companies and individuals are still entitled to file private lawsuits against the investigated
companies in courts. However, the agency’s decisions about suspending and stopping
investigations cannot be used as evidence in related private lawsuits to prove the
defendants’ behaviors as antitrust violations.” See Guideline for Businesses’
Commitments (Draft), supra note 104, art. 3. The Guideline for Leniency Policy (Draft)
provides that all reports, documents, and materials provided by investigated companies to
apply for leniency cannot be taken as evidence in related private litigation. See Guideline
for Leniency Policy (Draft), supra note 103, art. 16.
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plaintiff have standing to bring a lawsuit? What kinds of evidence should
the plaintiff provide? Can antitrust agencies’ previous decisions be used as
prima facie evidence to claim compensation by the plaintiff?
It seems that all these questions are about specific issues during a
litigation. However, if you think twice, you will quickly realize that in
order to answer these questions, you have to first answer two more
fundamental questions: What is the role of private antitrust enforcement in
the antitrust law system? What is the purpose of private antitrust
enforcement?
1.
The U.S. Law
i. Roles of Private Antitrust Enforcement
Private antitrust enforcement can be regarded as one of the brightest
creations of the U.S. antitrust laws. The United States is unique in the
world because private litigation is “the predominant means” of antitrust
enforcement and “it vastly outstrips public enforcement.”107 The rough
ratio between private cases and public cases brought by the federal
antitrust agencies (the DOJ and the FTC) is 10 to 1.108
When the U.S. Congress enacted the first modern antitrust law in
the world in 1890, legislators recognized that the antitrust agency—the
Department of Justice—was then a “mere fledgling”109 that did not have
enough experience and resources to enforce the law and protect
competition. As a result, Congress hoped to rely on private enforcement to
make up the deficiency of governmental resource. Furthermore, the
American people’s widespread mistrust of political institutions and
government officials is another traditional and cultural reason to explain
the predominant position of private antitrust enforcement, unlike those in
most other countries.110
ii. Purposes of Private Antitrust Enforcement
Private plaintiffs’ right of claiming treble damages serves two
major purposes of private antitrust enforcement: compensating injured
victims and deterring any future wrongdoings. The Supreme Court has
reiterated the two purposes in its rulings.111
107
Crane, supra note 3, at 675.
108
Daniel A. Crane, Technocracy and Antitrust, 86 TEX. L. REV. 1159, 1179 (2008).
109
Paul D. Carrington, The American Tradition of Private Law Enforcement, 5 GERMAN
L. J. 1413, 1414 (2004).
110
111
Id. at 1413.
See Pfizer, Inc. v. Gov’t India, 434 U.S. 308, 314 (1978) (The Court stated that “§ 4 [of
Clayton Act] has two purposes: to deter violators and deprive them of ‘the fruits of their
illegality,’ and “to compensate victims of antitrust violations for their injuries.”) See also
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First, because public enforcement generally does not grant
monetary recovery for private victims, the mandatory trebling damage
awards in private litigation provide victims incentives to detect,
investigate, sue for the violation, and finally be compensated.112
Second, deterrence has been considered as the predominant goal of
the American private antitrust enforcement, which is superior to
compensation when the two goals diverge.113 The direct purchaser rule,
established by the U.S. Supreme Court, is a typical example. The direct
purchaser rule114 provides that indirect purchasers do not have standing to
sue, even though they are actual victims, because direct purchasers may
pass on losses to them.115 In other words, under such a scenario, direct
purchasers may gain a windfall because the mandatory trebling damage
awards them, while they have already passed losses to indirect purchasers.
Such rules reflect American legislators and judges’ preference when they
strike the balance between deterrence and compensation.
Moreover, the rule of joint and several liability,116 the class action,
and the “one-way cost” rule 117 have likewise enhanced the goal of
Ill. Brick Co. v. Illinois, 431 U.S. 720, 746 (1977) (the Court stated that the trebled
damage both aided deterrence and provided the incentive of compensation). See also Blue
Shield of Va. v. McCready, 457 U.S. 465, 472 (1982) (the Court stated that “Congress
sought to create a private enforcement mechanism that would deter violators and deprive
them of the fruits of their illegal actions, and would provide ample compensation to the
victims of antitrust violations.”)
112
Cavanagh, supra note 3, at 631.
113
See Empagran S.A. v. F. Hoffman-LaRoche, 315 F. 3d 338, 335-357 (D.C. Cir. 2003),
cert. granted, 124 S. Ct. 966 (Dec. 15, 2003); see also RICHARD A. POSNER, ANTITRUST
LAW 266 (2d ed. 2001).
114
Ill. Brick Co. v. Ill., 431 U.S. 720 (1977) (The indirect purchaser rule was established
by Illinois Brick’s Court, but the Illinois Brick rule only applies at federal antitrust level.)
115
Id. at 746-748.
116
The U.S. antitrust law allows a plaintiff to identify a single participant of an antitrust
violation and to sue that participant for treble damages, even if there are many other
unnamed participants who are still involved in and benefited from the violations. This is
“joint and several liability,” which increases deterrence, because a single defendant
would be responsible for the whole violation. Joint and several liability also inspires
defendants to negotiate damage settlements, rather than litigate. See LAWRENCE A.
SULLIVAN & WARREN S. GRIMES, THE LAW OF ANTITRUST: AN INTEGRATED HANDBOOK
1007-10 (2d ed. 2006).
117
The “one-way cost” rule means that, in private antitrust litigation, a plaintiff can
recover litigation costs from the defendant upon prevailing, but a successful defendant
can recover nothing. The “one-way cost” rule is different from the normal rule, that losers
of litigation should pay winners reasonable litigation costs. The purpose of this rule is to
give extra motivation of filing private antitrust litigations. See Donald I. Baker, Revisiting
History—What Have We Learned about Private Antitrust Enforcement That We Would
Recommend to Others? 16 LOY. CONSUMER L. REV. 379, 386 (2004).
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deterrence. For example, in 2013, a New York jury awarded treble
damages ($ 162.3 million) to a plaintiff class after three Chinese vitamin C
manufacturers were found liable for fixing prices.118 In a short, facing a
trebled punishment and a large number of “private attorney generals,” any
potential violators of antitrust law would take private antitrust
enforcement as a serious deterrence.
2.
Lessons from the U.S. Law
i. Roles of Private Antitrust Enforcement
As we discussed in Chapter II, China’s AML enforcement has
primarily relied on public enforcement since the AML’s inception, and
private enforcement is in a subordinate position. Considering China’s
historically strong administrative power, such a subordinate role of private
antitrust enforcement may be a natural and necessary choice of legislators.
Therefore, although China’s private enforcement may become
much more active or prosperous in a foreseeable future, it has little
possibility to become a dominant means of enforcing the antitrust law as
that in the United States. With regard to this point, the American
experience may be of limited reference value to China.
ii. Purposes of Private Antitrust Enforcement
One predicament of China’s private antitrust enforcement is that
antitrust litigations proceed within the frame of Civil Procedure Law. The
major purpose of civil litigations is “compensation.” 119 However,
compensation is insufficient to satisfy the purpose of antitrust
enforcement.
As we know, the antitrust law operates quite differently from other
civil laws. Besides resolving civil disputes among equal parties, antitrust
law has the function of regulating the market and competition from the
State’s perspective. Therefore, the purpose of antitrust enforcement should
not only be to compensate victims’ injuries, but also to have certain public
law functions: punishing violators and deterring future wrongdoing.
If we only emphasize the purpose of “competition,” as normal
private litigation does, but ignore the purpose of “deterrence,” the function
118
Jury Verdict, In re Vitamin C Antitrust Litig., No. 06-MD-01738-BMC-JO (E.D.N.Y.
Mar. 14, 2013), Docket No. 675 (The jury awarded damages of $54 million USD and the
court tripled this amount to $162 million USD. Although the court reduced $9 million
USD because of a settling defendant's contribution (for a total of $153,3 million USD in
the end), the actual damage awarded here still is $162 million USD).
119
See Liu Yingshuang (刘迎霜), Qianxi Woguo Fanlongduanfa Zhong de Minshi Zeren
(浅 析 我 国 反 垄 断 法 中 的 民 事 责 任) [Discussion on Civil Liability in China’s
Antimonopoly Law], 1 NANJING SHEHUI KEXUE (南京社会科学) [SOCIAL SCIENCES IN
NANJING] 105, 107 (2009).
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of antitrust law would be injured. The merits of private antitrust
enforcement are generally acknowledged, such as making up the shortage
of public enforcement resource, detecting and punishing antitrust
violations that are not detected by agencies, restricting or avoiding
agencies’ abuse of authority, educating people about antitrust laws, and
developing the culture of competition. Without the purpose of deterrence,
however, all these merits can hardly be achieved. Victims lack motivation
to file lawsuits, and business operators purposefully refrain from
complying with antitrust law.
In the United States, deterrence is the primary purpose of private
antitrust enforcement, which is largely ascribed to the mandatory treble
damages and “one-way cost” rule.120 These rules offer a “bounty hunting”
in the United States,121 which has significantly boosted private antitrust
litigation and deterred antitrust violations. China’s private antitrust
enforcement currently does not put emphasis on deterrence, which, in a
large part, impedes the development of private enforcement. For instance,
in Rainbow v. Johnson & Johnson, for almost three years’ efforts, the
plaintiff finally won the case with a mere compensation of
$85,483USD. 122 Although the plaintiff, a medium-sized medical
equipment distributor, won the case, it lost its fifteen-years business
partner. Considering the defendant’s market power, the plaintiff is very
likely to lose its future business as well. However, for Johnson & Johnson
(an international enterprise with market power in the medical equipment
market), such a compensation is insignificant. In sum, I am reluctant to
conclude that private antitrust enforcement without a purpose of
deterrence will flourish in China in the coming years.
However, the U.S. private antitrust enforcement has been criticized
as over-deterrence,123 so I would not recommend the mandatory treble
damages on all antitrust violations—as the U.S. antitrust law stipulates—
to China, but I do recommend China’s legislators and judges to take
deterrence as a primary purpose for private antitrust enforcement.
120
However, some scholars criticize that U.S. private antitrust litigation is not very
effective to achieve the purpose of deterrence, since “the time lag between the planning
of the violation and the final judgment day is usually so long that the corporate managers
responsible for the planning have left their corporate employer before the employer
internalizes the cost of the violation.” See Crane, supra note 3, at 677.
121
Baker, supra note 117, at 382.
122
Rainbow v. Johnson & Johnson, supra note 39.
123
The focus of criticism is that treble damages liability lets companies “forego
legitimate competitive initiatives that would increase competition and benefit
consumers,” which generates “false negatives.” Moreover, private enforcement may also
be used by antitrust plaintiffs to tactically disadvantage a rival, whose behavior may
benefit competition as well as consumers. See SULLIVAN & GRIMES, supra note 116, at
953-954.
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B. Specific Rules and Mechanisms—Effects on the Plaintiffs’ Burden of
Proof
When I examine specific rules and mechanisms under U.S.
antitrust law, a major standard to determine whether a rule or mechanism
should be adopted by China is its influence on the plaintiffs’ burden of
proof. Easing antitrust plaintiffs’ burden of proof is an efficient and
feasible way to inspire people to file lawsuits in courts, and, in turn,
improve private antitrust enforcement.
1.
Standing Test of Antitrust Injury
i. The U.S. Law
Section 4 of the Clayton Act provides that any person who has
been injured in his business or property by reason of any forbidden
behaviors under the antitrust laws may sue for treble damages and the cost
of suit.124 This provision has triggered a surge of private litigations. Under
“a backdrop of concern with the burgeoning number of private suits,”125
the Supreme Court limited plaintiffs’ standing with the test of “antitrust
injury” in Brunswick Corp v. Pueblo Bowl-O-Mat, Inc.126 In Brunswick,
the Court required that a plaintiff had standing to sue only if she
established the “injury of the type the antitrust laws were intended to
prevent and that flows from that which makes defendants’ act
unlawful.”127
Moreover, the Court also extended the “antitrust injury” test to
lawsuits for injunctive relief in Cargill Inc. v. Monfort of Colorado, Inc.128
In Cargill, the plaintiff, the nation’s fifth largest beef packer, brought an
antitrust action under Section 7 of the Clayton Act to enjoin merger
between the second and third largest beef packers. The plaintiff alleged
that after the merger, the defendants would lower prices in an attempt to
increase the market share. The Supreme Court held that “the threat of loss
of profits due to possible price competition following a merger does not
constitute a threat of antitrust injury.”129
124
15 U.S.C. § 15(a) (2006).
125
SULLIVAN & GRIMES, supra note 116, at 961.
126
Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977).
127
Id.
128
See generally Cargill Inc. v. Monfort Colo., Inc., 479 U.S. 104 (1986).
129
Id. at 109.
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ii. Lessons from the U.S. Law
The antitrust injury test raises the threshold of plaintiffs’ standing
to sue. Besides showing the traditional causation (injury-in-fact), it
requires a plaintiff to show the injury she suffers is what the antitrust law
is designed to prevent.
The antitrust injury test, however, has been criticized as ambiguous
and improper.130 In Brunswick, it was unclear whether this test was used in
determining damages or checking plaintiffs’ standing.131
After Brunswick, most courts adopted Brunswick to analyze the
standing issues.132 However, it is not reasonable to focus exclusively on
plaintiffs’ “incentive incompatibility” with the antitrust law to determine
whether the plaintiffs have standing.133 In practice, plaintiffs’ incentives
are mixed. They may fear that a rival’s RPM agreement may increase
distribution efficiency and improve service, which is inconsistent with the
purpose of antitrust law. However, a company with market power may,
meanwhile, utilize the same RPM agreement to set retail prices at a
monopoly level, to block rivals, and to punish violators. Under such a
scenario, a plaintiff suing a defendant for implementing this RPM
agreement has an incentive which is consistent with the purpose of the
antitrust law. Therefore, it is improper to require plaintiffs to prove their
“incentive compatibility” at the pleading stage. Some scholars argue that
“a better rule would be that a claim would be dismissed only if the
plaintiff could have no credible and substantial procompetitive
incentive.”134
In my view, the “antitrust injury” test should not be recommended
to China, since it would unnecessarily increase the plaintiffs’ burden of
proof.
2.
The Indirect Purchaser and “Passing-on” Doctrines
i. The U.S. Law
The doctrines of indirect purchaser and “passing-on” are two edges
of a sword. During the products’ distribution process, more than one
reseller is involved in the distribution chain. If a direct purchaser has to
pay extra-charge because of a monopoly behavior, the surcharge would be
passed on to the next purchaser until the product is paid by end130
See Clare Deffense, A Farewell to Arms: The Implementation of a Policy-Based
Standing Analysis in Antitrust Treble Damages Actions, 72 CAL. L. REV. 437, 447 (1984);
see also SULLIVAN & GRIMES, supra note 115, at 966.
131
132
Deffense, id. at 447.
Id.
133
SULLIVAN & GRIMES, supra note 115, at 966.
134
Id.
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consumers.135 If the antitrust law permits indirect purchasers to sue, it has
to allow defendants to use “passing-on” as a defense to rebut direct
purchasers’ antitrust damages, and vice versa.
In the United States, as a general rule, the federal antitrust law
neither grants indirect purchaser standing to sue, 136 nor permits
defendants to use the “passing-on” doctrine as a defense.137 The rationale
of the Supreme Court’s rejection of these two doctrines are, (1) allowing
indirect purchasers to sue but not permitting defendants to use “passingon” as a defense would create multiple liabilities on defendants;138 and (2)
prohibiting both indirect purchasers’ standing and the use of “passing-on”
would “prevent the courts from an unmanageable morass of
complexity.”139
ii. Lessons from the U.S. Law
When we consider the rules of “indirect purchaser” and “passingon,” we should strike a balance between the values of efficiency and
justice. Permitting indirect purchasers to sue would decrease judicial
efficiency; however, prohibiting them to sue would cause injustice,
because some indirect purchasers are actual victims of antitrust violations.
It seems that U.S. federal antitrust law prefers the value of
efficiency if the two values conflict. U.S. law puts more emphasis on the
effect of deterring antitrust violations and preventing courts from
unmanageable complexity. Although such provisions have been
criticized, 140 it is still a reasonable choice under the backdrop of the
American society. Within the U.S. legal system, several mechanisms are
designed to support and inspire private antitrust litigation, such as
mandatory treble damages, evidence discovery system, and the class
action. The concern of a flood of frivolous litigation leads legislators to
limit the standing of indirect purchasers.
However, such a concern may not exist in China today. Private
antitrust enforcement in China is inactive, and plaintiffs lack motivation to
file lawsuits. As a result, the reason of prohibiting indirect purchasers to
file antitrust lawsuits is not persuasive to China. However, risks of
135
Id. at 970.
136
See Ill. Brick Co. v. Ill., supra note 114.
137
See Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U.S. 481 (1968).
138
SULLIVAN & GRIMES, supra note 116, at 972-973
139
Id. at 972.
140
Nowadays, many states have enacted “Illinois Brick Repealers,” which refers to
legislation that gives indirect purchasers the right to sue for antitrust damages. See Robert
H. Lande, New Options for State Indirect Purchaser Legislation: Protecting the Real
Victims of Antitrust Violation, 61 ALA. L. REV. 447, 451-60 (2010).
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imposing multiple liabilities on defendants and bringing “unmanageable
morass of complexity” to courts if indirect purchasers are permitted to
sue—the primary concern of U.S. legislators—should be taken into
consideration by Chinese law-makers.
I have two suggestions: first, in order to avoid imposing multiple
liabilities on defendants, the law may provide that only direct purchasers
can claim a punitive damage while indirect purchasers are merely entitled
to claim actual damages.141 Second, a better designed mechanism of the
class action may help indirect purchasers to sue as well as prevent courts
from unmanageable chaos. I will discuss the class action in the following
section.
3.
Class Action
i. The U.S. Law
The class action is a potent mechanism for aggregating a large
number of people or companies who have been damaged by a same
antitrust violation in situations where it is nearly impossible (or lacking
motivation) to bring individual lawsuits. Although most of successful class
actions involve cartels,142 the class action also plays a vital role in lawsuits
related to RPM because products’ distribution process usually involves a
large number of distributors and consumers.
Chinese scholars have expressed interest in the U.S. class action,143
while the class action is facing increased scrutiny in the U.S. Today, the
U.S. federal courts impose increasingly stringent requirements for antitrust
class action and tend to narrow its application.144
141
See DAIBIN & LANLEI (戴宾&兰磊), FANLONGDUAN FA MINSHI JIUJI ZHIDU BIJIAO
YANJIU (反垄断法民事救济制度比较研究) [COMPARATIVE STUDY OF ANTITRUST CIVIL
REDRESS], 205 (2010) (China).
142
Directorate for Financial and Enterprise Affairs Competition Committee, Relationship
between Public and Private Antitrust Enforcement: United States, OECD Doc.
DAF/COMP/WP3/WD
(2015)11,
para.
5
(June
9,
2015),
http://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=DAF/COMP/W
P3/WD(2015)11&docLanguage=En [hereinafter U.S. Working Report on Co-operation
and Enforcement].
143
144
See Zhang Wusheng, supra note 5, at 24-28.
See Spencer Weber Waller & Olivia Popal, The Fall and Rise of the Antitrust Class
Action,
39
WORLD
COMPETITION
29,
1-8
(2016),
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2641867 ; see also EDMUND W.
SEARBY, United States: Private Antitrust Litigation—Class Actions, in THE ANTITRUST
REVIEW
OF
THE
AMERICAS
2015,
45,
46-47
(2015),
https://www.bakerlaw.com/files/uploads/Documents/News/Articles/LITIGATION/2014/S
earby-US-Private-Antitrust-LitigationClass%20Action.pdf.https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2641867.
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Rule 23 (a) of Federal Rules of Civil Procedure (amended in 1966)
provides four basic prerequisites for the class action:
(1) the class is so numerous that joinder of all members is
impracticable;
(2) there are questions of law or fact common to the class;
(3) the claims or defenses of the representative parties are
typical of the claims or defenses of the class; and
(4) the representative parties will fairly and adequately
protect the interests of the class. 145
Rule 23 (b) describes types of class actions. The most likely to be
relevant in antitrust litigation are (b) (2) and (b) (3). Rule 23 (b) (2) is a
type of class action to protect a class who benefit from final injunctive
relief. Rule 23 (b) (3) requires:
The court finds that the questions of law or fact common to
class members predominate over any questions affecting
only individual members, and that a class action is superior
to other available methods for fairly and efficiently
adjudicating the controversy.146
Rule 23 (b) (3) is the most controversial article regarding class action.
The majority of antitrust class actions need to pass the test of Rule 23 (b)
(3) to obtain certification.
In recent years, federal courts have adopted rigorous standards to
narrow the use of class action. In Comcast Corp. v. Behrend,147 customers
brought antitrust class action against Comcast—a cable television
company—to allege that Comcast allocated regional cable markets and
engaged in conduct that excluded and prevented competition. The
Supreme Court denied a class action certification with the holding that
plaintiffs did not satisfy the Rule 23 (b) provision to prove that “damages
were susceptible of measurement across entire class.”148 The Court stated
that certification of class action only can be satisfied “after a rigorous
analysis.” 149 After Comcast, some lower federal courts followed the
Supreme Court’s attitude. For example, in re Rail Freight, the DC Circuit
Court vacated the district court’s class certification decision and remanded
145
FED. R. CIV. P. 23(a).
146
FED. R. CIV. P. 23(b)(3).
147
Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013).
148
Id. at 1426.
149
Id. at 1429.
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to the district court to reconsider in light of the Comcast decision. 150
Similarly, in re VHS of Michigan, Inc, the Sixth Circuit remanded to the
district court to review the class certification in light of Comcast. 151
ii. Lessons from the U.S. Law
As discussed above, the U.S. class action mechanism has both
merits and defects. If China considers whether to learn this mechanism
from the U.S. law, it is necessary to evaluate whether these merits would
be equally applicable in Chinese society and how likely the defects would
occur in China.
In China’s civil process, the representative lawsuit can be regarded
as a rough analogy of the class action in the U.S. law. The Civil Procedure
Law provides two kinds of representative lawsuits: lawsuits with
identified members and lawsuits with an uncertain number of members.152
The most significant difference between the representative lawsuit
and the class action is that the former one adopts the “opt-in” system, but
the later one uses the “opt-out” one.153 In other words, in the representative
lawsuit, courts’ judgments and adjudications only have binding effect on
members enrolling in the lawsuit. However, in the class action, courts’
judgments and adjudications have automatic and binding effect on all class
members unless they expressly choose to “opt-out” of the class action.
When the representative lawsuit in Chinese legal system is used to
solve antitrust disputes, it has three drawbacks. First, Articles 53 and 54 of
the Civil Procedure Law provide that the litigant representative has to
obtain a consent from all of the parties represented when changing the
representative, relinquishing claims, acknowledging claims of the
opposing party, or negotiating a settlement.154 Obtaining a consent sounds
feasible when a lawsuit includes limited identified members; however, it is
difficult to have such a consent when a large number (or uncertain
number) of members are involved. Without a doubt, the collective
decision-making requirement has increased the difficulty of filing a
representative lawsuit to solve antitrust disputes, especially, involving a
large number of consumers.
150
See In re Rail Freight Fuel Surcharge Antitrust Litig. MDL No. 1869, 725 F.3d 244
(D.C. Cir. 2013).
151
See In re VHS Mich, Inc, No. 13-0113, 2014 U.S. App. LEXIS 4447 (6th Cir. Jan. 6,
2014).
152
In addition, the law provides that the minimum number of a representative lawsuit
should be ten people. Civil Procedure Law of 2012, supra note 71, art. 53-54.
153
Id. art. 54.
154
Id. art. 53, 54.
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Second, there is no incentive to file a representative lawsuit in
China. The AML does not provide punitive damages in civil lawsuits.
Victims—normally consumers in RPM case—generally have very small
claims, so they may have little incentive to sue. In addition, Chinese
lawyers are prohibited from charging a contingency fee in representative
lawsuits,155 so they lack motivation to participate in such lawsuits as well.
Third, Chinese courts are wary of using the representative lawsuit
in practice, especially when the lawsuit involves an uncertain number of
members.156 Courts worry a representative lawsuit may expand disputes
unnecessarily because of overly public attention or they may lead to large
scale mass activities.157
Based on China’s situation, I will assess whether the merits of class
action can be achieved in China, and whether the defects of class action
concerned by the U.S. are likely to emerge in Chinese society.
iii. Merits of Class Action
First, the class action can encourage people to file antitrust
lawsuits. The class action is designed on a wholesale basis to bring
litigation that are impossible to litigate by individuals. The class action is
particularly useful in RPM lawsuits since RPM disputes usually involve a
large group of consumers or distributors of low-value items, such as
consumers of baby formula milk. The “opt-out” system would let more
common people (normally consumers) get involved in antitrust lawsuits
and naturally make them get closer to the antitrust enforcement.
In addition, the class action can push lawyers and judges to pay
attention to antitrust law enforcement. In China, private antitrust lawsuits
only represent a very small portion of all private lawsuits.158 If lawyers are
permitted to charge a contingency fee to bring class actions, many lawyers
155
Notice of the National Development and Reform Commission and the Ministry of
Justice on Issuing the Measures for the Administration of Lawyers' Fees (promulgated by
the NDRC and Ministry of Justice, Apr. 13, 2006, effective Dec. 1, 2006), art. 12,
CLI.4.76093(EN) (Lawinfochina) [hereinafter Notice for the Administration of Lawyers'
Fees].
156
Chen Wenxuan (陈文煊), Fanlongduan Minshi Susong Zhong Daibiaoren Susong
Zhidu de Shiyong Yu Wanshan (反垄断民事诉讼中代表人诉讼制度的适用与完善)
[Application and Improvement of Representative Lawsuit in Antitrust Private
Enforcement], Z1 FALÜ SHIYONG (法律适用) [J. L. APPLICATION] 103, 104-05 (2010).
157
158
Id. at 105.
In 2015, there were only 141 private antitrust lawsuits filed with courts nationwide in
China. See Dacheng Law Offices, supra note 25, at 11. In stark contrast, the number of
closed civil lawsuits of all courts only in Beijing was 254,842. See Beijing Shi Gaoji
Renmin Fayuan 2015 Nian Gongzuo Baogao (北京市高级人民法院 2015 年工作报
告)[2015
Working
Report
of
Beijing
High
Court],
Beijing
Court,
http://www.bjcourt.gov.cn/article/newsDetail.htm?NId=55001802&channel=100001012.
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would be motivated to study and enforce antitrust law. Furthermore,
because the class action usually involves a large group of members, the
class action can push judges to put more emphasis on antitrust issues
because their judgments would generate great public attention and affect
the judges’ own reputation. In my view, the class action could be
considered as a way not only to let common people get familiar with the
antitrust law through participating private litigation, but also to raise legal
practitioners’ attention to the antitrust law enforcement.
Second, the class action can enhance the antitrust law’s purpose of
deterrence. In the U.S., the class action is a valuable tool for providing
deterrence for antitrust violations. 159 As I discussed earlier, China’s
antitrust law should enhance the purpose of deterrence, and the class
action can be used as a channel to achieve such a purpose.
Third, the “opt-out” system of the class action can better
compensate victims. The “opt-out” system can cover many more victims
in a defendant’s compensation scheme, even though some victims do not
know about the class lawsuit when the action is filed. Moreover, the class
action can claim an injunction. For consumers who have very small
claims, an injunction may be more effective than a small monetary
compensation.
Fourth, the “opt-out” system of the class action can make up
defects of China’s representative lawsuit. The representative lawsuit
requires that the representative must obtain a consent from all of
represented members when changing the representative, relinquishing
claims, acknowledging claims of the opposing party, or negotiating a
settlement. These provisions make the trial of a representative lawsuit
unreasonably difficult.
iv. Risks of Class Action
The U.S. courts are attempting to limit the use of the class action
because of the risk of over-enforcing antitrust law. Would China also face
such a situation?
The major concern of American legislators is the abuse of the class
action. The “opt-out” system has caused the use of the class action to
rapidly expand in several areas of U.S. law. 160 The “opt-out” system
means that if a member does not choose to opt out, the judgment or
settlement has binding effect on her.161 Because of the binding effect on a
large number of class members (under some circumstances each class
member is not able to be identified),162 there is indeed a risk of the class
159
SULLIVAN & GRIMES, supra note 116, at 998.
160
Waller & Popal, supra note 144, at 2.
161
FED. R. CIV. P. 23(b)(3)(B).
162
For example, in In re Disposable Contact Lens Antitrust Litigation, contact lens
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action over-enforcing antitrust law. Lawyers may utilize the class action
for bounty hunting rather than for compensating victims. Since the class
action generally includes many members, the amount of compensation
allocated to each member sometimes is too small to be efficiently
distributed. 163 As a result, some class actions yield little benefits to
plaintiffs, but money flows into lawyers’ pockets.164
However, at present, China needs not to worry about this risk.
First, private antitrust enforcement is inactive in China. There is no need
to worry about a flood of lawsuits at present. Second, regarding the risk of
the “lawyer-driven” bounty hunting, legislators can set a ceiling of the
percentage of lawyers’ charge. For example, a scholar suggests that
Chinese legislators could consider 20% of the claims as the maximum
contingency fee in the class action,165 which is lower than a maximum
contingency fee of 30% that attorneys can charge in normal civil lawsuits
under Chinese law.166
Another concern of the class action is that the potentially huge
amount of money made by settlements (or judgments) could cause the
bankruptcy of companies and, thus, unemployment, which may lead to
social instability. However, such concerns in China are unlikely as serious
as that in the United States. Because China’s AML does not provide a
mandatory treble damage or the “one-way cost” rule, successful class
actions may not cause catastrophic effects on defendants’ companies.
Finally, some concerns are expressed that when the class action is
used to challenge non-hardcore antitrust violations (such as RPM), a large
amount of money for settlement or compensation may deter companies’
potential pro-competitive conduct.167 This concern is the least one to be
worried about. Considering the heavy burden of proof for plaintiffs in
China, plaintiffs have to first prove that the alleged RPM is
anticompetitive, so the risk of deterring procompetitive conduct is not
substantial.
wearers brought antitrust action against contract lens producers and eye care practitioner
trade organizations. See In re Disposable Contact Lens Antitrust Litig., 170 F.R.D. 524,
528-29 (M.D. Fla. 1996). Defendants moved to dismiss, but the District Court held that
the class certification was warranted, because the class is so numerous and it is
impracticable to identify all members. Id. at 528-29.
163
SULLIVAN & GRIMES, supra note 116, at 999.
164
Id.
165
Zhang Wusheng, supra note 5, at 30.
166
Notice for the Administration of Lawyers' Fees, supra note 155, art. 13.
167
SULLIVAN & GRIMES, supra note 115, at 1000.
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C. Seek Support from and Resolve Conflicts with Public Antitrust
Enforcement
In recent years, the NDRC began a series of proactive antitrust
price investigations in many industries. Consequently, more “follow-on”
private lawsuits related to the NDRC decisions are very likely to emerge
in China. Seeking supports from and solving conflicts with public
enforcement would alleviate the plaintiffs’ burden of proof in private
litigation, especially in RPM lawsuits.
1.
The U.S. Laws
Section 5(a) of the Clayton Act allows that a plaintiff can use a
final judgment or decree in a criminal and civil proceeding brought by the
United States as prima facie evidence in a subsequent private lawsuit.168
However, this rule does not apply to cases solved by consent
judgments or decrees entered before the testimony has been taken.
Moreover, leniency applicants169 in criminal processing take advantage of
the damages limitations granted by the Antitrust Criminal Penalty
Enhancement and Reform Act of 2004,170 which protects a successful
leniency applicant from the treble civil damage and joint and several
liability in a subsequent private lawsuit.171 The rationale is to prevent civil
lawsuits from crippling the function of commitments and leniency
programs.
In practice, despite of the provision of Section 5(a) of the Clayton
Act, obtaining information and evidence controlled by agencies are still
subject to several limitations. Private parties can occasionally obtain nonpublic civil investigation materials from the Federal Trade Commission
(FTC) and the Department of Justice (DOJ) by subpoena or by requesting
the information under the Freedom of Information Act. 172 Regarding
confidential business information provided by investigative sources, the
agencies’ general policy is to assert all applicable legal exemptions and
privileges to prevent from disclosing information when they face a private
party’s request for disclosure.173
168
15 U.S.C. § 16(a).
169
The U.S. antitrust laws provide that a leniency program only be applied to criminal
antitrust behaviors, mainly to cartels. See Hammond & Barnett, supra note 101, at 6. In
contrast, China’s AML does not impose criminal liability, so the leniency program is
applied to non-criminal antitrust violations.
170
U.S. Working Report on Co-operation and Enforcement, supra note 142, para. 11.
171
Id. at 5
172
Id. at 10.
173
Id. at 10-11.
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Although there are limitations for private plaintiffs to access
certain information from public enforcement, the provision of Section 5(a)
of the Clayton Act significantly reduces the amount of resources that
plaintiffs “must commit to survive initial dispositive motions.” 174 In
addition, certain findings made by the FTC in administrative litigation can
be used as evidence in a follow-on private lawsuit against the same
defendant, which grants collateral estoppel effect in such lawsuits. 175
Moreover, the process of cases litigated by the agencies is highly
transparent, which make the public generally “access to the evidence
admitted and filed with the court in the proceedings.”176
Besides the “follow-on” civil lawsuits, there would be potential
conflicts between ongoing public enforcement and private lawsuits. With
regard to solutions, on a case-by-case basis, if the DOJ finds certain types
of private discovery may interfere with the criminal investigation, the DOJ
will seek a stay of civil discovery or limit its scope.177 The agency’s
attorney usually keeps in touch with a private lawsuit’s attorney to update
the progress of the private litigation and information of its effects on
public enforcement.178
2.
Lessons from the U.S.
In this section, I will discuss two issues. First, regarding the
“follow-on” lawsuit, should private plaintiffs be able to use decisions,
evidence, and information of public enforcement as prima facie evidence?
If the answer is yes, how could private parties apply for it, and what are
limitations for such applications? Second, regarding ongoing public
enforcement, how should judges and antitrust officers deal with conflicts
between public and private antitrust enforcement, if any?
i. Prima Facie Evidence for The “Follow-on” Lawsuit
As we discussed earlier, the Chinese Supreme Court’s Judicial
Interpretation does not provide whether the antitrust agencies’ decisions
can be taken as prima facie evidence in subsequent civil lawsuits.
However, according to laws related to evidence, decisions produced by
governments have, as a general rule, stronger weight of proof than other
written evidence.179
174
Kevin J.L. O’Connor et. Al, Interaction of Public and Private Enforcement, in
PRIVATE ENFORCEMENT OF ANTITRUST LAW IN THE UNITED STATES 280, 286 (Albert A.
Foer and Randy M. Stutz ed., 2012).
175
U.S. Working Report on Co-operation and Enforcement, supra note 142, para. 23.
176
Id., para 24.
177
Id., para 24.
178
Id., para 25.
179
Some Provisions of the Supreme People’s Court on Evidence in Civil Procedures,
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Even if the administrative decisions can be taken as prima facie
evidence, it is still unclear whether other materials, information, and
evidence obtained by antitrust agencies can be used as evidence in private
lawsuits. Most of the criticisms raised by international companies and
foreign regulators against China’s public enforcement are the lack of
transparency during the decision-making process.180 The non-transparency
has significantly hindered private plaintiffs from knowing what kinds of
and how much information and evidence is controlled by the agencies.
Moreover, the paternalistic culture of Chinese administrative officials
makes officials feel entitled to a superior status, which gives them a
prerogative to judge whether/which information can be disclosed to the
public.181 In addition, after the reform of the civil process, courts are
intended to limit to conduct investigation and collect evidence. Therefore,
when these factors function together, information and evidence controlled
by the antitrust agencies can hardly be accessed to private plaintiffs.
The Infant Formula Milk Follow-on Case, as we discussed in
Section II, just exemplifies how the non-transparency of decision-making
process of public enforcement hindered private plaintiffs to win the case.
The NDRC’s penalty decision on Abbott, the formula milk producer, was
taken as the evidence to prove Abbott had implemented an illegal RPM
agreement. However, the NDRC decision did not disclose other parties of
the RPM agreement, other than Abbott. Therefore, the plaintiff, as a
consumer, cannot prove that the distributor, whom he purchased the
formula milk from, had signed the illegal RPM agreement with Abbott.
In the United States, the agencies litigate cases with high
transparency, and the agencies’ administrative proceedings are generally
open to the public.182 Such transparency helps people learn about public
enforcement. Therefore, private plaintiffs and their attorneys can well
evaluate and predicate effects of public enforcement on their own private
lawsuits, and then make litigation strategies. More importantly, the U.S.
evidence discovery system can largely support private plaintiffs, even if
they cannot obtain evidence from the agencies.
Without the evidence discovery system, Chinese antitrust private
plaintiffs face a much heavier burden of proof. Compared to the American
counterparties, Chinese antitrust agencies should offer more support to
private plaintiffs. I urge the NDRC to disclose more detailed information
to the public, including, but not limited to, the process of enforcement,
defensive arguments of investigated companies, minutes from meetings
supra note 94, art. 77.
180
See Martina & Miller, supra note 8.
181
See Jingmeng Cai, supra note 5, at 52-55.
182
U.S. Working Report on Co-operation and Enforcement, supra note 142, para. 24.
2017
Cai
43
between the NDRC and investigated companies, transcripts of public
hearings, and other related information. As to confidential business
information that cannot be disclosed, I suggest Chinese legislators and
enforcers to issue laws or regulations to clarify the scope of non-disclosed
information in order to prevent the agencies from abusing their discretion.
Regarding evidence and information produced during the programs
of commitments and leniency, China’s antitrust agencies share attitudes
similar to their United States counterparts.183 Information and evidence
provided and produced voluntarily by investigative sources for
commitments and leniency applications cannot be used as evidence in
relevant private lawsuits.
However, a problem is that, based on the NDRC’s recent
investigations and decisions, standards for accepting a commitment and
granting a leniency are unclear and arbitrary.184 As to commitments, I
suggest that specific guidelines and regulations should be issued to clarify
standards of accepting companies’ commitments. Regarding the leniency, I
do not agree that a leniency program should be applied to RPM. In the
United States, leniency applicants are only wrongdoers who are engaged
in criminal violations of the antitrust law.185 Such violations have serious
anti-competition effects but are hard to detect, like cartels, so it serves the
agency to trade with wrongdoers in order to discover these violations. It is
a balance between the efficient enforcement and the justice of law.
183
See Guideline for Businesses’ Commitments (Draft), supra note 104; see also
Guideline for Leniency Policy (Draft), supra note 104.
184
For example, in the infant formula milk case, a penalty of 4% of its sales volume in the
previous year was imposed on Mead Johnson Nutrition because it was accused of failing
to cooperate with the NDRC but had made commitments to implement self-corrective
measures. See NDRC Decision on Infant Formula Milk Producers, supra note 45. In
contrast, in the corrective lenses case, Nikon was accused of the same plot as Mead
Johnson Nutrition (not cooperating with the NDRC but implementing self-corrective
measures), but Nikon was given a penalty of only 2% of sales volume. See Nat’l Dev. &
Reform Comm’n, Bufen Yanjing Jingpian Shengchan Qiye Weichi Zhuanshou Jiage
Xingwei Bei Yifa Chachu (部分眼镜镜片生产企业维持转售价格行为被依法查处)
[Imposed Penalty on Part Corrective Lenses Producers’ RPM] (May 29, 2014),
http://www.sdpc.gov.cn/gzdt/201405/t20140529_613562.html.
Companies
which
“proactively cooperated with the agency and carried out self-corrective measures” were
fined 3% of the sales volume in the infant formula milk case, but the percentage was
merely 1% for eyeglasses’ producers in the corrective lenses case. The NDRC did not
explain reasons for such difference. Moreover, in infant formula milk case, the NDRC
granted an exemption to more than one producer, but it clarified neither the order of
applicants nor the requirements of granting a leniency. See NDRC Decision on Infant
Formula Milk Producers, supra note 45.
185
Hammond & Barnett, supra note 102, at 6.
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Asian-Pacific Law & Policy Journal
Vol. 18:2
However, because evidence of RPM is relatively obvious,186 it is
not necessary for the agency to apply a leniency policy. Taking the
formula milk case as an example, because of the leniency program, three
producers, fixing resale prices of formula milk at a high level, are very
likely to escape civil liability if follow-on civil lawsuits are filed against
them.
V. CONNECTIONS WITH ON-GOING PUBLIC ENFORCEMENT
When a private lawsuit conflicts with an on-going public
enforcement, from the US experience, Chinese courts can consider staying
a civil trial to avoid an inconsistent judgment with public enforcement. In
addition, improved coordination between courts and agencies can save
judicial resources.
Some Chinese scholars offer similar suggestions. They suggest that
for complicated cases, when an agency’s investigation is ongoing, a court
should suspend related civil litigation.187 If the agency’s final decision
finds no violation, private plaintiffs could file administrative lawsuits
against the administrative decision; if the agency affirms the violation, the
court can resume civil litigation as a “follow-on” lawsuit. Regarding
“simple” lawsuits without complicated facts or economic analysis, courts
need not necessarily suspend an on-going civil litigation, but the
responsible agency should pay close attention to the progress of the
private lawsuit to avoid making conflicting decisions with judicial
judgments. 188 In the following figure, I make an evaluation of all
mechanisms discussed above about their values for improving China’s
private antitrust enforcement.
Rule and Mechanism of the U.S. Antitrust Law
The predominant role of private enforcement in the
antitrust system
Purpose of deterrence & treble damage award
186
Lessons for
China
Not recommend
Neutral
Identical retail prices set by all (or most) dealers are apparent evidence of RPM.
Especially in China, some companies have taken RPM for granted, so evidence of
carrying out RPM is relatively easy to be detected. For example, the chief executive
officer of a state-owned liquor producer—Moutai—once said in public that the company
would set the minimum resale prices of its products. See Yang Qiubo (杨秋波), Moutai
Huiying Jiage Longduan Jiancha, Chexiao Dui Xiangguan Jingxiaoshang Chufa (茅台回
应价格垄断检查 撤销对相关经销商处罚) [Moutai Responses to the Price Monopoly
Investigation and Revoking Punishments on Distributors], CAIXIN WANG (财新网) (Jan.
16, 2013), http://companies.caixin.com/2013-01-16/100483460.html (China).
187
Wang Xianlin, supra note 7, at 89.
188
Id.
2017
Cai
Antitrust injury test
Indirect purchaser and “passing-on” doctrines
Class action
Prima facie evidence in “follow-on” cases
Communication between public and private antitrust
enforcement
Figure 2: Summary of Evaluation
45
Not recommend
Neutral
Recommend
Recommend
Recommend
VI. CONCLUSION
This article presents both the merits and the defects of U.S. private
antitrust enforcement. It suggests placing rules and mechanisms in the
context of China’s environment so that the U.S. experience can be more
effectively evaluated and adopted to meet the needs of the Chinese society.
This article recommends that China should develop private
antitrust enforcement from three aspects: enhancing the goal of deterrence
of private litigations, adopting solutions from specific rules and
mechanisms of the U.S. antitrust law, and resolving the conflict with
public antitrust enforcement. The plaintiffs’ heavy burden of proof is the
major problem that hinders the development of China’s private
enforcement and significantly discourages people from filing antitrust
lawsuits in courts. The article suggests that a careful analysis of the U.S.
experience with the purpose of easing the plaintiffs’ burden of proof may
be of significant value for China. A feasible and sound solution should be
adapted to local environment. Bearing that in mind, China may avoid the
“pitfalls” and find valuable lessons from the U.S. experience.