Beijing High Court Upholds Decisions Finding Violation of AML by Seafood Trade Association

China’s Beijing High Court has upheld the Beijing Second Intermediate Court’s September 2013 decision in Lou, Binglin v. Beijing Seafood Wholesale Industry Association, the first case in which a court found a violation of the Anti-Monopoly Law (AML) through horizontal monopolistic agreements since the AML was promulgated in 2008.

Binglin Lou and his wife had been selling seafood, mainly scallops originated from Dalian Zhangzi Island Group Co., Ltd., in a Beijing seafood market. Lou was a member of the Beijing Seafood Wholesale Industry Association, which was registered on Sept. 29, 2011, with 31 members. The Association Manual provided, in the section “Rules on Rewards and Penalties,” that “[m]embers are prohibited from unfair competition, nor are they permitted to sell scallops at a discounted price that goes against the Association’s provisions,” and that “[m]embers are prohibited from selling whole packages of scallops to non-members in the market where a member operates a business.” The Association organized meetings among members regarding the scallop business, including concerted consultation with the Dalian Zhangzi Island Group, on sources, prices, rewards and restrictions on sales to non-members. The Association also implemented rewards and penalties and fined Lou several times for violations.

The court found that the Association conducted activities externally as an independent legal entity from at least Sept. 29 to Dec. 31, 2011. Meeting minutes of the Association showed that although the meetings since January 2012 referred to Dalian Zhangzi Island Group Company Ltd. Beijing Sales Alliance (“Sales Alliance”), most participants were Association members, and meeting agendas related to the operations of the Association. Accordingly, the court determined that the Association was an eligible entity, and the Association’s allegation and argument that all the alleged acts were conducted by Sales Alliance and the Association should not be a party of this case were invalid.

The court found that the Association had arranged for undertakings to reach monopolistic agreements on fixing or alteration of prices and thus violated the AML. The court also found that the provisions in the “Rules on Rewards and Penalties” of the Association Manual constitute monopolistic agreements that were invalid. The Association’s allegations that prices were set to follow Zhangzi Island’s requirements, and the restriction on sales to non-member merchants were an implementation of Zhangzi Island’s sales policies, were found invalid.

The Beijing Second Intermediate Court’s decision is available here.