Abuse of Dominance Enforcement in China
Abuse of dominance enforcement under China’s Antimonopoly Law (AML, Articles 17-19) has produced some of the most significant competition law cases in Chinese legal history. Enforcement has evolved from traditional industrial contexts to the platform economy, culminating in record fines against major technology companies.
Qihoo 360 v Tencent: Dominance in IM Markets
Qihoo 360 v Tencent (2013-2014) was the most significant abuse of dominance case in Chinese competition law. The dispute arose when Tencent required users of its QQ instant messaging platform to choose between QQ and Qihoo 360’s security software — a binary choice affecting hundreds of millions of users. Qihoo 360 sued, alleging that Tencent had abused its dominant position in the instant messaging market.
The Supreme People’s Court’s 2014 decision established the analytical framework for abuse of dominance in two-sided markets. The SPC defined the relevant product market broadly as instant messaging services, including both text-based and voice-based services, and rejected arguments that QQ’s social networking features created a separate market. The SPC held that Tencent did not hold a dominant position because users could easily switch to competing services and because the market was dynamic with low barriers to entry.
The decision applied the substantially lessening competition test, holding that even conduct by a firm with significant market power does not violate the AML unless it substantially lessens competition in the relevant market. The SPC’s sophisticated economic analysis — including consideration of network effects, multi-homing, and dynamic competition — established the analytical standard for subsequent platform competition cases.
Tea House Case: Refusal to Deal
The Tea House case (Guangxi Yulin Tea House v. China Telecom, 2011) addressed refusal to deal in telecommunications markets. The plaintiff, a tea house operator, alleged that China Telecom had abused its dominance in the fixed-line telephone market by refusing to provide service. The court found China Telecom dominant in the relevant market and held that its refusal to deal without legitimate justification constituted an abuse.
The case established the principle that dominant firms with essential facilities were required to deal on reasonable terms. The court applied a variant of the essential facilities doctrine, holding that China Telecom’s network was an essential input for the plaintiff’s business and that the refusal to provide access was not objectively justified. The case was significant because it applied competition law to a state-owned enterprise and established that SOEs were not exempt from abuse of dominance enforcement.
Huawei v IDC: FRAND and SEPs
Huawei v InterDigital (2013) addressed the intersection of competition law and standard-essential patents (SEPs). Huawei alleged that InterDigital, a patent licensing company, had abused its dominant position by demanding excessive royalties for its SEPs essential to 3G, 4G, and wireless LAN standards. The Shenzhen court found InterDigital dominant in its SEP portfolio market and held that its demand for royalties exceeding FRAND (fair, reasonable, and non-discriminatory) terms constituted an abuse.
The court’s decision was notable for applying AML abuse of dominance analysis to SEP licensing. The court held that a SEP holder’s commitment to license on FRAND terms created a legitimate expectation that could be enforced through competition law. The decision established the principle that excessive royalty demands could constitute abuse of dominance and set FRAND royalty rates for the parties. The case influenced global SEP licensing jurisprudence and established Chinese courts as significant forums for FRAND disputes.
Platform Monopolization: Alibaba (2021)
The 2021 SAMR investigation of Alibaba was the most significant antitrust enforcement action in Chinese history. SAMR found that Alibaba had abused its dominant position in the Chinese online retail platform market by requiring merchants to choose between Alibaba’s Tmall platform and competing platforms — a practice known as the er xuan yi (choose one from two) requirement.
SAMR imposed a fine of RMB 18.228 billion (approximately $2.8 billion), calculated at 4% of Alibaba’s domestic turnover in 2019. SAMR also ordered Alibaba to engage in comprehensive rectification, including eliminating exclusivity requirements, protecting merchant rights, and strengthening compliance systems. The case marked a turning point in Chinese antitrust enforcement against technology platforms, signaling the government’s determination to regulate platform market power.
The AML revision of 2022 codified the principles applied in the Alibaba case, expressly prohibiting platform operators from using data, algorithms, and other methods to engage in monopolistic conduct. The revision clarified that platform market definition should take into account multi-sidedness and that dominance assessment should consider data advantages and network effects.
Meituan Investigation (2021)
Following the Alibaba case, SAMR investigated Meituan — China’s largest food delivery platform — on similar grounds. SAMR found that Meituan had required merchants to enter into exclusive agreements and had imposed penalties on merchants listing on competing platforms. SAMR imposed a fine of RMB 3.442 billion (approximately $530 million), representing 3% of Meituan’s domestic turnover.
SAMR also ordered Meituan to implement comprehensive rectification, refund exclusive deposit fees collected from merchants, and strengthen internal compliance. The Meituan case confirmed that SAMR would apply consistent standards across platform sectors and that the enforcement campaign against platform monopolization would extend beyond e-commerce to other platform-based markets.