Guangdong Higher People’s Court Releases Decision in Abuse of Dominance Case

On March 28, 2013, the Guangdong Higher People’s Court ruled against Qihoo 360 (Qihoo) in its long running dispute with Tencent over market dominance. This is the first antitrust case to be heard by a higher people’s court in China and the first significant decision since the Provisions on Several Issues Concerning the Application of the Law in Trials of Civil Dispute Cases Arising from Monopolistic Acts came into effect on May 4, 2012. (See Orrick Antitrust and Competition Newsletter coverage here.)

Qihoo, a leading Chinese antivirus software developer, filed a lawsuit against Tencent, China’s biggest Internet company, in October 2011 accusing Tencent of abusive practices and alleging that Tencent had abused its dominant market position by introducing bundled sales to prevent users from installing Qihoo’s antivirus software. Qihoo sought damages of RMB 150 million ($24 million).

Qihoo claimed that QQ, the online chat program developed by Tencent, has a market share of over 76 percent in China. However, the court disagreed with Qihoo’s market definition and also refused to consider some of Qihoo’s evidence about the defendant’s market power. The court found against Qihoo and ordered it to pay RMB 790,000 ($125,912) in legal fees. The chief judge in the case, Zhang Xuejun, stated: “Those who gain a dominant market position through technological innovation, better operation and management and price advantages are not the targets of the country’s anti-monopoly law.” The judgment indicates that market share is only one of many factors the court will consider when assessing market dominance. Qihoo is considering an appeal to the Supreme People’s Court.