CHINA Trends and Developments Contributed by: Li Ren (Roy), Beijing DHH Law Firm
Key highlights: • clarified that joint boycotts involve competi - tors collectively excluding specific rivals, not limited to direct agreements; • detailed analysis of cartel co-ordination, not - ing that even non-signatories participating in funding (eg, paying deposits) or approving price adjustments constituted co-ordination; and • adjusted damages based on subjective malice, duration, market impact, and fairness, raising compensation from CNY20,000 to CNY1.1 million to reflect deterrence without over-compensation. “Kindergarten” Horizontal Cartel Case [Supreme Court (2021) Zui Gao Fa Zhi Min Zhong No. 2253] The plaintiff, a private art kindergarten in Jiangxi, entered into a co-operation agreement with four defendant kindergartens, stipulating profit- sharing, territorial restrictions, and uniform pric - ing adjustments. When the defendants failed to pay the agreed compensation, the plaintiff sued for payment and breach of contract. Both the first-instance court and the SPC on appeal ruled that the agreement constituted unlawful market allocation and price-fixing, which produced anti- competitive effects in violation of China’s Anti- Monopoly Law. Consequently, the plaintiff’s claims were dismissed. Key highlights: • Affirmed the illegality of market allocation and price-fixing conduct – the judgment establish - es clear precedent that such practices consti - tute violations per se of competition law. • Emphasised the void nature and unenforce - ability of cartels (monopoly agreements) – the court unequivocally ruled that the subject
agreement is null and void as it contravenes mandatory provisions of the Anti-Monopoly Law. The plaintiff’s claim, being essentially a demand for distribution of monopoly profits, was denied as gains derived from anti-com - petitive conduct enjoy no legal protection. • Refined the identification standards for horizontal cartels – this judgment devel - oped more nuanced criteria for determining horizontal cartels, requiring comprehensive analysis of the market order, agreement content and its anti-competitive purpose, and actual or potential exclusion/restriction of competition. For horizontal cartels expressly enumerated in the Anti-Monopoly Law (eg, price-fixing and market division), the “per se illegality rule” applies – meaning neither precise market definition nor proof of actual anti-competitive effects is required for viola - tion determination. “No-Load Switch Patent Settlement” Horizontal Cartel Case [Supreme Court (2021) Zui Gao Fa Zhi Min Zhong No. 1298] In this case, the plaintiff, a Shanghai-based power equipment manufacturer, entered into a mediation agreement with the defendant, Wuhan Transformer Switch Company, in 2015 to set - tle a patent dispute. The agreement contained provisions restricting product production, fixing uniform selling prices, and allocating sales mar - kets. In 2019, the plaintiff petitioned the court to declare this mediation agreement a cartel and invalidate it. The first-instance court dismissed all claims. On appeal, the SPC ruled that the mediation agreement constituted a horizontal cartel involving market allocation, output restric - tion, and price-fixing – provisions substantively unrelated to the scope of patent protection at issue – thereby violating mandatory provisions of China’s Anti-Monopoly Law. The SPC conse -
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