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Yong Lim, Yunyu Shen, Feb 12, 2015
The decision by the Supreme People’s Court of the People’s Republic of China (“SPC”) in the Qihoo vs. Tencent case is notable in many aspects starting from the fact that it is the SPC’s first decision involving the country’s Anti-Monopoly Law. But, one eye-catching statement in the decision that commentators have been particularly quick to point out is the court’s opening salvo in its reasoning that an explicitly and clearly defined relevant market is not necessary for every abuse of dominance case brought under Article 17 of the AML. Other than hinting that the availability of evidence and relevant data, and the particular complexities of the market involved could all be factors in determining whether market definition is necessary, the decision does not provide further guidance as to determine whether and when, if at all, market definition would be required for antitrust analysis in abuse of dominance cases.
The unqualified and sweeping nature of the court’s declaration on market definition may prompt some to believe that the SPC has embraced the renewed criticism on the futility of the market definition exercise, and is on its way to eventually dumping market definition as a clumsy partner in antitrust analysis for the more adroit and nimble direct analysis of anticompetitive effects. As further explained below, the authors believe that the embrace is short of a full one, likely just enough to enable the court to dance around the floor without tripping over market definition. And one of the reasons for this is the explicit statutory incorporation of market shares and market share-based presumptions of market power into the AML.
This is in contrast with other major jurisdictions such as the United States and the European Union. While U.S. courts continue to rely on market shares as an important factor in determining monopoly power after Judge Hand’s holdings in United States v. Aluminum Co. of America nothing in the Sherman Act explicitly requires this nor does it provide for presumptions of market power based on market shares. This is the same for Articles 101 and 102 of the TFEU.
However, China’s AML is not unique in terms of such statutory embodiments. Korea’s Monopoly Regulation and Fair Trade Act (“MRFTA”) has long incorporated market shares and market share-based presumptions for market power (since 1990), and the thresholds for presuming dominance are quite similar between the two statutes. In fact, shortly after the Tencent decision, the Supreme Court of Korea (“SCK”) rendered its own judgment on the alleged abuse of dominance by NAVER Corporation (“Naver Corp”), which operates Naver.com, Korea’s top search portal (“Naver”). Both cases shared the same outcome—the allegations were dismissed based on the failure to prove and establish market dominance and also illegal conduct.
The two Supreme Courts, however, diverged in the paths they took to come to that conclusion, which in part reflects differences in how they dealt with the statutory embodiments mentioned above. As the Tencent decision grants lower courts and agencies a certain amount of flexibility to further explore and choose different approaches for handling market definition issues, the Korean courts’ approach in Naver is worth observing because it shows one real world possibility among an array of alternatives.