Angela Zhang, May 20, 2011
On December 18, 2009, Beijing No. 1 Intermediate People’s Court issued a ruling in favor of Baidu, Inc., a leading search engine provider in China, in an abuse of a dominant position case brought by Tangshan Renren Information Services Co., an operator of a medical information consulting website. Renren alleged that Baidu had downgraded its website in order to coerce it into using its search advertising services. The Court dismissed the case primarily on the grounds that Renren had failed to establish that Baidu had a dominant position in China’s search engine service market.
Although the dismissal may have been the correct outcome, the Court’s analysis was misguided. While the Court recognized certain two-sided features of Baidu’s business model, it failed to further explore the impact of those features on the competition analysis. Crucially, the Court erred in defining the relevant product market as the search engine service market. Instead of using a one-sided approach, the Court should have adopted a two-sided approach in defining therelevant market.
Moreover, the Court readily accepted Baidu’s defense without investigating whether the blockage was solely motivated by the existence of junk links the information asymmetry between Baidu and customers such as Renren made it difficult to discern whether Baidu had downgraded the websites with the legitimate reason of penalizing junk links or with the motive of coercing those web