The restricted trading behavior prescribed by the Anti-Monopoly Law can be explicit and direct or implicit and indirect. In the event that an operator with a dominant market position is a public utility operator for water supply, power supply, or gas supply or belongs to other operators with statutory market exclusivity, which allows it to cast greater influence on market competition, if in relevant transactions， the operator exclusively recommends specific trading objectives or solely discloses information about specific trading partners, based on which it is difficult for the transaction counterparty to choose other operators for transactions, it usually can be preliminarily deemed that restricted trading has been essentially implemented.
In a dispute over abusing dominant market position between the Appellant Weihai A Company and the Appellee Weihai B Group, Weihai A Company, a real estate developer in Weihai City, Shandong Province, filed a lawsuit to the court of first instance requesting Weihai B Group to compensate its damages caused by Weihai B Group’s abusing its dominant market position and reasonable expenses.
In the first instance, the court held that Weihai B Company has a dominant market position in water supply and the construction and management of sewage facilities in the urban district of Weihai City, but the existing evidence cannot prove that it has restricted trading. Thus, the court rebutted the legal requests of Weihai A Company. Weihai A Company, dissatisfied with the judgment, appealed to the Supreme People’s Court.
The Supreme People’s Court, deeming that Weihai B Group implemented restricted trading behaviors, revoked the first-stance judgment on June 23, 2022, and ruled Weihai B Group to compensate reasonable expenses that Weihai A Company incurred for investigating and preventing the monopoly behaviors.
In the second instance, the Supreme People’s Court held that trading restriction behaviors banned by Item 4 of Paragraph 1 of Article 17 of the Anti-Monopoly Law refer to the operator with market dominance restricting the transaction counterparty to only trade with it or operators designated by it through direct means or implicit means, such as setting transaction conditions, Such trading restriction behaviors damage the legal rights and interests of the counterparty and break normal marketing orders and competence mechanisms. In this case, Weihai B Group implemented monopoly behaviors of restricting trading. Detailed analysis is as follows:
First, Weihai B Group provided a Service Guide for Water Supply and Drainage Business of Municipal Water Group with the intention and contents of restricting transactions. When determining whether an operator restricts the transaction counterparty to exclusively trade with it or operators designated by it, the key is whether the operator essentially restricted the transaction counterparty’s freedom to choose. The trading restriction behavior can be explicit and direct or implicit and indirect. In the event that an operator with a dominant market position is a public utility operator for water supply, power supply, or gas supply or belongs to other operators with statutory market exclusivity, which has characteristics of both market operation and industrial management, it could cast greater influence on market competition. If in relevant transactions, the operator exclusively recommends specific trading objectives or solely discloses information about specific trading partners, based on which the transaction counterparty can hardly choose other operators, it usually can be preliminarily deemed that restricted trading has been essentially implemented.
In this case, Weihai B Group has a dominant market position in water supply facility construction in the urban district of Weihai City, Shandong Province. Meanwhile, it is not only the sole operator providing public water supply service in the urban district of Weihai City, but also bears the public utility management responsibility of auditing and accepting water supply facilities. When Weihai B Group carries out water supply and drainage business, its exclusive indication of contacts and information about itself and its subsidiaries, without informing or reminding the transaction counterparty of other qualified water supply and drainage implementation companies in option, implicitly restricts that only the design and construction units that it designates can handle the design and construction of water supply and drainage system in newly construction projects, in other words, it may cause the transaction to inwardly worry that if they do not use the designated design and construction units, they may encounter with inconvenience in water supply facility auditing, acceptance, and other management procedures. Therefore, Water B Group may be deemed as having a subjective intention and having provided relevant objective content to restrict transactions.
Secondly, the alleged monopoly acts of Weihai B Group have an actual effect of restricting and limiting competition. Based on the existing evidence in this case, Weihai B Group can be deemed as having market dominance in the urban water supply construction market in the urban district of Weihai City, and its market power in the said market inevitably affects the water supply facility construction market. Its behavior of only disclosing contacts and information about itself and its subsidiaries when accepting the municipal business of water supply and drainage not only excludes and limits other qualified design and construction companies’ equal opportunity to attend the market competition in the urban water supply facility construction market in the urban district of Weihai City, but also deprived the freedom to choose of the real estate developer with new projects having water supply and drainage demands, which causes that Weihai B Group intensively accepts large quantity of water supply and drainage design and construction business in water supply facility construction market in the urban district of Weihai City, resulting in more evidently effect of anti-competition.
Thirdly, Weihai B Group lacks justifiable reasons and accordance. Urban public water supply services, having public utility characteristics, on the one hand, have higher requirements on quality and security, and on the other hand, naturally have monopoly characteristics due to the government’s designation as the sole enterprise for operation. However, the water supply construction market, which closely relates to water supply service, is open to competition. In principle, any party that meets qualification requirements and follows the relevant technical standards and regulations of the state shall be allowed to enter the market for fair competition. Weihai B Group not only has market dominance in the water supply construction market in the urban district of Weihai City, but also as a public utility company, is the exclusive urban water supply service provider in the urban district of Weihai City and bearing the management responsibility of water supply municipal services such as auditing and accepting water facility. When it and its subsidiaries attend the competition in the water supply facility construction market in the urban district of Weihai City, it bears a higher level of special attention obligation of not excluding or limiting competition. When indicating contacts and information about itself and its subsidiaries in the Service Guide, Weihai B Group shall simultaneously list information of other qualified enterprises in the same way or indicate that users that need water supply and drainage services have the full freedom to choose other operators via other explicit and reasonable ways. Weihai B Group claimed that its indicating of information of itself and its subsidiaries in the Service Guide was to provide convenient services, but not to restrict trading. However, as analyzed above, its relevant behavior has essentially excluded or limited other operators from attending the competition in the water supply facility construction market in the urban district of Weihai City. Thus, this claim of Weihai B Group can hardly be established and is not supported.
(2022) Zui Gao Fa Zhi Min Zhong No. 395
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