Dispute concerning abuse of market dominant position between Beijing Qihoo 360 Technology Co and Tencent Technology (Shenzhen) Co, Tencent Computer System Co.

Background

Beijing Qihoo told Guangdong’s superior people’s court that the two Tencent companies played a dominant role in instant messaging software and service market. It accused Tencent of abuse of the dominant role and restricting trade and implementing bundle sales without justified reasons. Qihoo requested that Tencent immediately stop the monopoly action and compensate Qihoo with 150 million yuan for financial loss. In the first trial, the court held that the commodity market in the case went far beyond the comprehensive instant messaging market and related regional market should be global. Tencent didn’t have dominant role in the market in question. Qihoo had wrongfully defined the related commodity market and evidence it submitted was not enough to prove Tencent’s monopoly. Therefore, the court ruled that Qihoo’s appeal was not based on fact and didn’t have proper cause. The court rebutted all appeals from Qihoo, which refused to take the ruling and appealed to a superior court. The supreme court used economic analysis methods and redefined the related market range in the case. It held that the existing evidence was not enough to prove Tencent carried out trade and sales banned by the antitrust law. Therefore, it rejected the appeal and maintained the ruling from the first trial.

Significance

This case was the first of its kind to be handled by the supreme people’s court and, in its 74,000-word statement, the court elaborated on market definitions, market’s dominance definitions and the analyzing methods of market abuse and clarified the adjudication standards to be used in the antitrust law. The ruling also involved a creative application of an international model with a competitive-effect evaluation of abuse of behavior. In defining the market in relation to the Internet, the ruling applied common economic analysis methods as well as sociology and psychology. It also established market definitions and made it clear that market definition was not necessary. The ruling covered the market’s influence on players and their dominance and proposed basing market analysis case-by-case. It said that there was no need for a fixed analysis model that doesn’t in fact exist. The ruling had a fairly widespread effect in China and abroad and people in industry and academics spoke highly of it calling it a clear legal standard that provides Internet guidance at a high level. Some reviews said that it reflected a true understanding of the Internet and that China has set an example in trust rulings on the Internet that will have an effect worldwide.