China’s Supreme Court Upholds High Court’s AML Ruling in Tencent Case

On Oct. 8, 2014, China’s Supreme Court made the final decision upholding the first instance ruling by Guangdong High People’s Court dismissing allegations by Qihoo against Tencent for allegedly abusing market dominance.

In November 2011, Beijing Qihoo Technology Ltd. (Qihoo) sued Tencent Technology (Shenzhen) Co., Ltd. and Shenzhen Tencent Computer Systems Company Limited (collectively Tencent) before the Guangdong High People’s Court, alleging Tencent abused its dominant market position in the relevant market of instant message (IM) software and service.

The first instance decision was made in March 2013, dismissing Qihoo’s allegations. Although the Supreme Court upheld the lower court’s ruling, it corrected some analyses made in the first instance decision. In particular, the final decision concluded the following: 1) The relevant market shall be defined as the Mainland China IM service market (rather than the global market as defined by the first instance court), including not only personal computer terminal IM service but also mobile terminal IM service, and including not only comprehensive IM services but also non-comprehensive IM services like text, audio or visual, etc.; 2) The evidence presented was not sufficient to establish that Tencent holds a dominant market position―market share-related evidence alone was not enough given that the IM field is rapidly developing and features a great number of players (e.g., Alitalk, Fetion, MSN, Renren, Skype and many others) Furthermore, Tencent’s ability to control the commodity price, quality, quantity or other trading conditions is weak; factors like network effects do not significantly increase the users’ dependence on the IM service provided by Tencent; entering the IM market is relatively easy; 3) Tencent’s alleged conduct did not constitute abuse of market dominance. The company’s issues with incompatible products did not result in excluding or limiting competition despite their inconvenience to users, the Supreme Court found, nor did Tencent’s product tie-ins.

The Supreme Court’s decision is available here.