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A Landmark Court Ruling in China: Resale Price Maintenance as Examined in the Johnson & Johnson Case

Chunfai (CF) Lui, Oct 28, 2013

In this article, I will examine the landmark case where the Shanghai High People's Court ruled against the Chinese subsidiaries of Johnson & Johnson for resale price maintenance violation, in favor of the plaintiff, a Chinese distributor, Beijing Ruibang Yonghe Technology and Trade Co. Ltd.

This case is significant because it is the first case where a private antitrust litigation has been successful (on appeal) in China, since the Chinese antitrust legislation, the Anti-Monopoly Law came into effect half a decade ago. There has not been a shortage of plaintiffs in China seeking to sue competitors and suppliers under the AML, but the Chinese courts have so far taken a cautious approach, willing to entertain lawsuits in only a few instances.

Antitrust law, as an area of law, is still relatively new in China. Law departments in most universities have not yet offered standalone courses on the AML and this, in turn, may have slowed the growth of antitrust expertise in the Chinese judiciary. At present, cases involving Chinese antitrust disputes are adjudicated by the judges in charge of intellectual property law. So, given these limitations, this successful antitrust litigation is a major milestone by the Shanghai court, and an encouraging sign that Chinese antitrust regime is developing, even at a gradual pace.

The Shanghai court case is also important because it reflects on how an emerging antitrust regime deals with vertical restraints. In several other new antitrust jurisdictions in neighboring countries in Asia, resale price fixing has been treated very differently: Singapore's Competition Act takes a benign approach towards resale price maintenance; Hong Kong's Competition Ordinance is silent on whether vertical price-fixing is specifically prohibited.

Since the AML came into effect, there have been many administrative enforcements involving price-fixing cartels among competitors, including the most recent case against foreign milk producers which produced fines of more than U.S.$100 million, but the Johnson & Johnson case is one of the first major cases involving supplier and distributor in a vertical context. The judicial treatment in this case should provide guidance for how the Chinese judiciary and enforcement agencies might, in the future, approach similar resale price maintenance violations.

 

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