One of the major considerations in establishing the anti-monopoly civil litigation regime in China is to determine who has the standing to initiate anti-monopoly proceedings. If the range of potential plaintiffs is too wide, it may become a burden on business operators who are potential defendants and result in a floodgate of litigation against them. A restrictive application may on the other hand be detrimental to the enforcement of private anti-monopoly laws, which is necessary to fill in the gap left by insufficient public enforcement.
1. Overview on the Standing of a Plaintiff in Anti-Monopoly Civil Procedure
Anti-monopoly civil procedure is a category of civil litigation and in relation to the standing of a plaintiff in a civil action, article 49(1) of the Civil Procedure Law provides that “citizens, legal persons and other organizations may act as litigants in civil proceedings”. Article 108 of the Civil Procedure Law stipulates that “in starting an action, the following conditions must be met : (1) the plaintiff is a citizen, a legal person or other organization having a direct interest in the case; (2) there is an ascertained defendant; (3) there are concrete requests, facts and reasons; (4) the suit is a civil proceeding within the scope of jurisdiction of a people’s court and under the jurisdiction of the people’s court to which the suit is filed.”
The Interpretation of Anti-Monopoly Law does not provide different requirements as to a plaintiff’s standing stated above and states that both business operators and consumers can be a plaintiff in an anti-monopoly action.
In an anti-monopoly case, there often exist victims from various levels, such as competitors in the relevant market, intermediary traders, retailers and consumers etc. A direct victim may also transfer his losses to other competitors through reselling, and finally to end customers. The determination of a plaintiff¡¦s standing may therefore be an exceptionally complicated issue.
2. Conception of Business Operator
According to the Interpretation of Anti-Monopoly Law, both business operators and consumers can act as a plaintiff.
(a) Legal Requirements of Business Operator
According to article 12 of Anti-Monopoly Law, “a business operator refers to a natural person, legal person or other organization that engages in production and marketing of commodities or provision of services.” On a literal reading of the article, a business operator is required to satisfy two requirements : one is the nature of conduct, ie engagement in commodity marketing or profit-making services; another is legal capacity which is a natural person, legal person or other organization.
(b) Legal Capacity of Business Operator
Some takes the view that a business operator has to possess the legal capacity ie being either a natural person, legal person or other organization and engage in commodity marketing or profit-making services before it can be a plaintiff in an anti-monopoly action. Yet there is another view that such legal capacity is not necessary to be a business operator for the purpose of the Anti-Monopoly Law.
Since the fundamental objective of the Anti-Monopoly Law is to pursue free and fair market competition, it should therefore not be necessary for a party of the action to possess the above capacity. The Anti-Monopoly Law would be violated if any operator monopolizes or competes through unfair means. Likewise, if the rights of an operator are infringed by any monopolistic conduct, it should be protected by the Anti-Monopoly Law and be allowed to be a plaintiff.
(c) Nature of Conduct
There is no consensus as to whether the activities of non-corporate bodies like hospitals, law firms, trade unions etc can be regarded as business undertaking to which the Anti-Monopoly Law applies. The core issue under the law is whether the business operator is profit generating.
Most supports the view that the definition of business operator should be expanded to include non-profit making bodies. If a non-corporate legal person engages in profit making business such as commodity marketing, it is possible for it to affect the order of market competition and practice unfair competition. Hence, it should not avoid liability by reason only of it being a non-profit making body.
(d) Business Operator as a Plaintiff in Anti-Monopoly Civil Proceedings
Business operators that may possibly be affected by a monopolistic act include those in same market with or, at the upper or lower market end of the defendant business operator. Specific examples are as follows :-
(i) A business operator in the same market as the defendant business operator may suffer loss of reasonable profits owing to the defendant¡¦s excessively low prices with a view to taking away the plaintiff¡¦s business. The former business operator may commence anti-monopoly proceedings on the ground of the loss of reasonable profits.
(ii) Some kinescope manufacturers have reached a monopoly agreement to limit productivity resulting in increased production costs of the television manufacturers at the manufacturing downstream. The television manufacturers may commence action in respect of losses due to such increased costs.
(iii) A business operator may divide the raw materials market regionally by way of monopoly agreements. The raw materials suppliers at the upper level cannot then freely sell their raw materials in the whole region. They may therefore seek damages against the monopolistic act at the lower level.
(iv) Business operators who are potential competitors may also commence anti-monopoly civil proceedings. In the event that a business operator acts with intent to deter potential competitors from entering into its dominant market, any business operators not already in competition with or not at the upper or lower trading level of that business operator may also initiate civil action.
3. Ultimate Consumers’ Standing to Sue
The Interpretation of Anti-Monopoly Law has expressly clarified that end consumers may act as a plaintiff in anti-monopoly civil proceedings, which is an important step towards consumers rights and public interest.
If you have any questions of the above or other issues on foreign direct investments, joint ventures, mergers and acquisitions or doing business in Mainland China, experienced lawyers in our China Business Department will be happy to assist you.