Private Antitrust Enforcement of Resale Price Maintenance in China: What Lessons Can China Learn from the United States? Jingmeng Cai* I. INTRODUCTION ..................................................................................... 2 II. PROFILE OF PRIVATE ANTITRUST ENFORCEMENT IN CHINA .................. 5 A. Definition ...................................................................................... 5 B. Roles of Private Antitrust Enforcement ........................................ 6 C. Status Quo of Private Antitrust Enforcement ............................... 8 D. Typical Cases of Resale Price Maintenance (RPM) ................... 10 1. Rainbow v. Johnson & Johnson .......................................... 10 2. Infant Formula Milk “Follow-on” Case .............................. 13 III. RAISING QUESTIONS – REASONS FOR THE PROBLEMS......................... 15 A. Reform of Civil Process in China ............................................... 17 B. Regulations of Civil Procedure Law ........................................... 18 1. Plaintiff’s Difficulties of Discovering and Obtaining Evidence .............................................................................. 19 2. Limitations of Court-Conducted Investigations .................. 20 C. Lack Support from Public Antitrust Enforcement—Conflict and Ambiguity ............................................................................. 22 1. Prima Facie Evidence ......................................................... 23 2. Commitment and Leniency ................................................. 24 IV. FINDING SOLUTIONS—WHAT CHINA CAN LEARN FROM THE U.S. ..... 26 A. Fundamental Issues—Roles and Purposes ................................. 26 1. The U.S. Law ...................................................................... 27 2. Lessons from the U.S. Law ................................................. 29 B. Specific Rules and Mechanisms—Effects on the Plaintiffs’ Burden of Proof .......................................................................... 31 1. Standing Test of Antitrust Injury ......................................... 31 2. The Indirect Purchaser and “Passing-on” Doctrines ........... 32 3. Class Action......................................................................... 34 C. Seek Support from and Resolve Conflicts with Public Antitrust Enforcement ................................................................................ 39 1. The U.S. Laws ..................................................................... 40 2. Lessons from the U.S. ......................................................... 41 V. CONNECTIONS WITH ON-GOING PUBLIC ENFORCEMENT .................... 44 VI. CONCLUSION ...................................................................................... 45

*

J.S.D., IIT Chicago-Kent College of Law. For helpful comments and discussions, I thank Professor David J. Gerber. Any errors or omissions are my own. Contact information: [email protected]/[email protected].

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The reception of foreign legal institutions is not a matter of nationality, but of usefulness and need. No one bothers to fetch a thing from afar when he has one as good or better at home, but only a fool would refuse quinine just because it didn't grow in his back garden.1 — Rudolf von Jhering, 1818–1892 I.

INTRODUCTION

Many countries are following the U.S. model to expand private antitrust enforcement or are actively discussing this model; 2 however, American academics and legal practitioners are beginning to review their model with considerable skepticism.3 Professor Daniel Crane even warns developing antitrust law jurisdictions to avoid the “pitfalls” of the U.S. system, and encourages these jurisdictions to conduct “robust experimentation,” which may be hard to carry out in the United States.4 1

RUDOLF VON JHERING, GEIST DES RÖMISCHEN RECHTS (9th ed. 1955), in KONRAD ZWEIGERT & HEIN KÖTZ, INTRODUCTION TO COMPARATIVE LAW 17 (Tony Weir trans., Clarendon 3d ed. 1998). 2

For example, the European Union released a Green Paper in 2005 and a White Paper in 2008 successively to clarify some issues of private antitrust enforcement in order to promote private litigations within the European Union, see Claire Korenblit, Quantifying Antitrust Damages—Convergence of Methods Recognized by U.S. Courts and the European Commission, CPI ANTITRUST CHRONICLE (2012), https://www.competitionpolicyinternational.com/assets/Uploads/KorenblitMAR-121.pdf. Also, in 2000, Japan has modified its antitrust law and expanded private enforcement as well. See Toshiaki Takigawa, The Prospect of Antitrust Law and Policy in the TwentyFirst Century: In Reference to the Japanese Antimonopoly Law and Japan Fair Trade Commission, 1 WASH. U. GLOBAL STUD. L. REV. 275, 298-299 (2002). 3

See Edward D. Cavanagh, The Private Antitrust Remedy: Lessons from the American Experience, 41 LOY. U. CHI. L. J. 629 (2010) (this article states that private antitrust remedy is not effective in the United States, and analyzes under such a circumstance what other countries could learn from the U.S. experience); see also Daniel A. Crane, Optimizing Private Antitrust Enforcement, 63 VAND. L. REV. 675 (2010) (this article argues that private enforcement is not very effective at advancing either of the antitrust law’s purposes—competition and deterrence.); see also Harry First, Is Antitrust “Law”?, 10 ANTITRUST 9 (1995) (this article points out that in recent years, antitrust has come to be seen more as policy and less as law, the enforcement of which increasingly relies on bureaucratic regulatory; and the author thinks that this shift will be detrimental to U.S. antitrust enforcement eventually). 4

Crane argued that, although there are several problems of the US private antitrust enforcement, it “is not so obviously broken,” so the US system may need a “modest, incremental reforms.” However, Crane suggested that “more robust experimentation” could be taken place in the developing antitrust world. For example, these jurisdictions can “start with a different set of premises about what private enforcement is and why it should exist.” Moreover, these jurisdictions can also adopt a “problem-solving approach to implement in jurisdictions that do not generally regulate commercial behavior through

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In China, movements and discussions about private antitrust enforcement reflect ambivalence toward the U.S. model.5 When China considers expanding private antitrust enforcement, it may be wise to neither blindly follow nor to completely reject the U.S. model. Only a clear analysis of predicaments faced by China and a comprehensive understanding of both the merits and the defects of private antitrust enforcement in the U.S. can help China avoid the “pitfalls” and find the “Midas touch” from the U.S. experience. This article focuses on China’s private enforcement of resale price maintenance (RPM), but discussions and conclusions can also be generally applicable to larger issues concerning private antitrust enforcement. Through discussing the status quo of private antitrust enforcement and typical RPM lawsuits in China, this article argues that the most serious problem that has hindered the development of private antitrust enforcement is the plaintiffs’ heavy burden of proof, because it greatly discourages people from filing lawsuits in courts. Thereafter, this article raises a question: what has caused the antitrust plaintiffs’ heavy burden of proof? In order to answer this question, this article identifies three reasons: the reform of civil process (a background reason), current provisions of the Civil Procedure Law (a primary reason), and a lack of support from public antitrust enforcement (a subordinate reason). First, China’s reform of civil process is a background reason, which has transformed the traditional “extreme interrogation” model6 to an adversarial, rights-based system as the United States does.” See Crane, id., at 720-22. 5

In Chinese academic community, scholars hold divergent attitudes toward the American experience. For example, a professor at Fudan University suggests that China should adopt the U.S. antitrust class action mechanism. See Zhang Wusheng (章武生), Lun Quntixing Jiufen de Jiejue Jizhi, Meiguo Jituan Susong de Fenxi He Jiejian (论群体性纠 纷 的 解 决 机 制——美 国 集 团 诉 讼 的 分 析 和 借 鉴) [The Mechanism for Collective Disputes, the Analysis and Reference of the U.S. Class Action], 3 ZHONGGUO FAXUE (中 国法学) [CHINA LEGAL SCI.] 20 (2007). In contrast, other scholars argue that the U.S. experience may be of little help to China, and China should rely on public antitrust enforcement, rather than expending private enforcement. See Li Jian (李 剑), Fanlongduan Siren Susong Kunjing yu Fanlongduan Zhifa de Guanzhihua Fazhang (反 垄断私人诉讼困境与反垄断执法的管制化发展) [Predicaments of Private Antitrust Enforcement and the Development of Administrative Regulatory of Antitrust Enforcement], 5 FAXUE YANJIU (法学研究) [CHINESE J. L.] 70 (2011). Moreover, in practice, the analyzing approaches between antitrust agencies and courts are divergent. For example, the judicial system seems prefer the U.S. rule of reason for analyzing RPM, but the antitrust agency follows the E.U. pattern to analyze RPM to treat RPM as per se illegal. See Jingmeng Cai, Antitrust Public Enforcement of Resale Price Maintenance in China: A Crusade or Discrimination?, 42:1 BROOK J. INT’L L.1, 50-52 (2016). 6

After the People’s Republic of China was founded in 1949, a model of civil trial named as the “Ma Xiwu Model” was widely accepted, which was created by a judge (Ma Xiwu) in the 1940s. Under this model, judges played an active role of interveners, who dealt

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an adversarial litigation model. This reform has changed the role of judge from an active intervener to a neutral arbiter. The litigant parties are responsible for presenting evidence to prove their claims, which sounds reasonable for normal civil litigation. However, without the evidence discovery system, Chinese antitrust plaintiffs’ burden of proof seems very heavy. In many Chinese antitrust cases, especially RPM lawsuits, plaintiffs generally have inferior economic position to gain information and evidence regarding defendants’ monopolistic behaviors. Second, current regulations of the Civil Procedure Law are the primary reason. The antitrust litigation operates within the system of civil process. However, few regulations are designed to guarantee plaintiffs’ rights of discovery and evidence collection. Moreover, under the current system of civil process, judges are expected to restrain their authority of initiating court-conducted investigations. Therefore, it further increases the difficulty of plaintiffs’ efforts to obtain evidence. Third, the influence of public enforcement is a subordinate reason, which aggravates the problem of the plaintiffs’ burden of proof. China is a country with strong administrative power,7 in which antitrust agencies normally have stronger power and superior position than private plaintiffs to discover and obtain evidence. 8 Unfortunately, because of the with issues even beyond parties’ claimants, and judges investigated and collected evidence by themselves. Moreover, such a model valued “coordination,” rather than “judgment,” to solve disputes. Such a trial model is regarded as a “super-inquisitorial judicial model.” See Liu Sida, The Shape of Chinese Law, 1 PEKING U. L. J. 416, 418-419 (2014). 7

Wang Xianlin (王先林), Lun Fanlongduan Minshi Susong Yu Xingzheng Zhifa de Xianjie Yu Xietiao (论反垄断民事诉讼与行政执法的衔接与协调) [Connection and Coordination between Private and Public Antitrust Enforcement], 3 JIANGXI CAIJING DAXUE XUEBAO（江西财经大学学报） [J. JIANGXI U. OF FIN. & ECON.] 87, 87 (2010). 8

Chinese antitrust agencies normally have strong administrative powers to launch investigations on antitrust violations, which have also drawn criticism from foreign companies and observers alike. A Reuters’s report once described the investigations of National Development and Reform Commission (NDRC), one of three antitrust agencies in China, as “interrogations,” which included intimidation, insinuation, and “widespread behind-the-scenes tactics” to push companies to “confess.” See Michael Martina & Matthew Miller, “Mr. Confession” and His Boss Drive China’s Antitrust Crusade, REUTERS (Sep. 15, 2014), http://www.reuters.com/article/us-china-antitrust-ndrc-insightidUSKBN0HA27X20140915. For example, in July 2014, the NDRC launched an investigation of Mercedes-Benz after implementing RPM in China. See Wang Yipeng & Wang Junqing(王毅鹏&王君擎), Benchi Shanghai Bangongshi Zao Fanlongduan Tuji Jiancha (奔驰上海办公室遭反垄断突击检查) [Antitrust Agency Raids Mercedes-Benz Shanghai Offices], SINA.COM (Aug. 5, 2014), http://finance.sina.com.cn/chanjing/gsnews/20140805/085419915156.shtml. After launching the investigation, Mercedes-Benz speedily responded and claimed that it would reduce prices of some spare parts. Even though Mercedes-Benz reduced prices in order to “beg” a suspension of the investigation, the NDRC still raided its office in Shanghai,

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administrative agencies’ large discretion and the non-transparent decisionmaking process, public enforcement does not provide sufficient support for private litigations, especially in “follow-on” civil lawsuits, which further suppresses people’s motivations for filing private litigation.9 After identifying these reasons that have caused the predicaments of China’s private antitrust enforcement, this article attempts to seek solutions from U.S. antitrust law to determine whether certain rules and mechanisms can solve China’s problems. The discussion includes three aspects. First, this article argues that China’s private antitrust enforcement should strengthen the purpose of deterrence, but the mandatory trebling on all antitrust violations—as the U.S. law provides—is not recommended to China. Second, this article examines certain rules and mechanisms under the U.S. antitrust system, including the standing test, the indirect purchaser rule, the “pass-on” doctrine, and the class action. A major standard the article adopts to evaluate a mechanism or a rule is its effects on the plaintiffs’ burden of proof. Third, regarding the relationship with public antitrust enforcement, this article suggests that administrative agencies’ decisions should be used as prima facie evidence in subsequent private lawsuits and antitrust agencies should offer more support for private litigation through improving transparency of decision-making process and limiting the scope of non-disclosed materials. II. PROFILE OF PRIVATE ANTITRUST ENFORCEMENT IN CHINA A. Definition Under China’s legal system, if individuals or/and entities violate laws, at least one of the three legal liabilities will be imposed upon them: criminal liability, civil liability, or/and administrative liability. China’s Antimonopoly Law (AML), 10 however, does not stipulate criminal “forcibly” checked some computers, and interrogated senior managers. See Jingmeng Cai, supra note 5, at 30-31. 9

Today, in China, the information disclosed by the antitrust agencies is insufficient. Overall, the disclosed decisions of the NDRC are brief and only include penalties imposed on companies and conclusory reasoning. Since limited information disclosed to the public, it is difficult for private plaintiffs to determine what and how much benefits they can have from public enforcement. See Jingmeng Cai, supra note 5, at 55. 10

Zhonghua Renmin Gongheguo Fan Longduan Fa (中华人民共和国反垄断法) [AntiMonopoly Law of the People’s Republic of China] (promulgated by the Standing Comm. Nat’l People’s Cong., Aug. 30, 2007, effective Aug. 1, 2008) CLI.1.96789(EN) (Lawinfochina) [hereinafter the AML]. The term used to refer to the antitrust law varies in different countries. In the U.S., this area of law is referred to as the “antitrust law.” In China, the term is the “antimonopoly law.” In this article, I use the terms “antimonopoly law,” “competition law,” and “antitrust law” to refer to a set of laws whose aim is to fight with restraints on the competition and markets. In this article, the terms “competition law,” “antimonopoly law,” and “antitrust law” are used interchangeably.

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liability, so only civil and administrative liabilities are involved in antitrust cases. First, it is necessary to clarify the scope of private antitrust enforcement. Antitrust violations may harm interests of other individuals and companies. For example, consumers paying monopoly prices are victims of defendants’ price restricting behaviors. If these consumers choose to file lawsuits against defendants’ behaviors directly in courts, rather than request agencies to launch investigations, such lawsuits are private antitrust litigations and governed by the Civil Procedure Law. In sum, China’s private antitrust enforcement can be defined as litigation in which private parties have independent civil claims and/or counter-claims based on the AML’s provisions and governed by the Civil Procedure Law. This type of litigation is defined as private antitrust enforcement. When antitrust violations are investigated and punished by administrative agencies, liability imposed on defendants are administrative liability, rather than civil liability.11 If defendants believe antitrust agencies have harmed their legitimate interests and/or agencies have misused their administrative power, they can file appeals in courts to seek administrative redresses.12 Such litigation is governed by administrative procedural laws and categorized as administrative lawsuits, separate from the private antitrust enforcement discussed in this article. B. Roles of Private Antitrust Enforcement Generally speaking, when the AML was drafted, lawmakers designed public enforcement as the center of the antitrust enforcement system, and put private enforcement in a subordinate position.13 Due to the civil law tradition, Chinese laws generally are divided into two groups: private laws and public laws. Private laws regulate behaviors and disputes among equal individuals and companies, such as contract and torts disputes. Civil law, labor law, and corporation law, for example, belong to the group of private laws. Public laws govern legal relations between unequal parties, such as relations between individuals/companies and governments. Administrative law and criminal law are typical examples of public laws.

11

See id. art. 46-48.

12

China’s general courts have jurisdictions over administrative lawsuits. Most courts set up administrative tribunals to hear administrative litigation separately. See Zhonghua Renmin Gongheguo Xingzheng Susong Fa (2014 Xiuzheng) (中华人民共和国行政诉讼 法（2014 修正）)[Administrative Litigation Law of the People's Republic of China (2014 Amendment)], (promulgated by the Standing Comm. Nat’l People’s Cong., Dec.1, 2014, effective Dec.1, 2014) CLI.1.239820 (Lawinfochina), arts. 4, 14, 15, 16 &17. 13

Wang Xianlin, supra note 7, at 87.

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Unlike western civil law countries, China’s legal system has a third group of laws, named economic laws, 14 which is considered to stand between private laws and public laws, 15 but closer to public laws. Economic laws in China can be defined as laws regulating private transactions based on public concerns. 16 The AML is grouped with economic laws. 17 It regulates competitive relations and behaviors of private parties; meanwhile, it functions like public laws to regulate competition and market on behalf of the State. Moreover, because China is a country with strong administrative power, more emphasis has been put on the AML’s feature of public laws. Therefore, public antitrust enforcement is naturally considered as the dominating way of enforcing the AML. 18 The view that antitrust enforcement should be administration-oriented has been generally accepted by Chinese scholars.19 Compared to public enforcement, the role of private antitrust enforcement is subordinate. When the AML was drafted, most of clauses were designed for public enforcement. For example, other than behaviors listed in Articles 13 (1) (f), 14 (3), and 17(1) (g), the AML grants antitrust agencies discretion to determine other forms of horizontal agreements, vertical agreements, and abuse of dominant market position to discern 14

The term “economic laws” has different meanings in different legal systems. In Germany, some scholars define economic laws, “Wirtschaftsrecht”, as a set of laws restricting and regulating economic activities from the State’s perspective. Then, the Soviet Union transplanted the German term, which was defined as laws regulating all economic relations emerging in the process of the State regulating and organizing the economy. The Soviet Union’s definition has significantly affected Chinese legislators’ concept of “economic laws.” In contrast, in common law countries, “economic laws” refers to all laws and regulations related to economic activities, without ideological meaning. Although the term “economic laws” is not an official usage in common law countries, laws related to economics are well developed. See Li Shuguang (李曙光), Jingjifa Ciyi Jieshi yu Lilun Yanjiu de Zhongxin (经济法词义解释与理论研究的重心) [Interpretation and Researching Focus of Term of Economic Laws], 23 ZHENGFA LUNTAN (政法论坛) [TRIBUNE OF POLITICAL SCIENCE & LAW] 3 (2005). 15

Masanobu Kato, Civil and Economics Law in the People’s Republic of China, 30 AM. J. COMP. L. 429, 437(1982). 16

Id. at 439.

17

See Wang Xianlin (王先林), Fanlongduan Fa de Jiben Xingzhi He Tezheng (反垄断法 的基本性质和特征) [The Nature and Characteristic of the Anti-monopoly Law], 1 FAXUE ZAZHI（法学杂志） [JURID. SCI. J.] 16, 17 (2002). 18 19

Id. at 87.

See Wang Xiaoye (王晓晔), Guangyu Woguo Fanlongduan Zhifa Jigou de Jige Wenti (关于我国反垄断执法机构的几个问题) [Several Issues about China’s Antimonopoly Law’s Enforcement Organs], 28 DONGYUE LUNCONG (东岳论丛) [DONGYUE TRIB.] 30 (2007); see also Li Jian, supra note 5.

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whether they violate the AML. In addition, the entire Section VI of the AML provides procedural process of public enforcement, and most of the articles in Section VII regulate how antitrust agencies impose penalties on violators. In stark contrast, only Article 50 of the AML addresses private enforcement. It merely states that, “The business operators that carry out the monopolistic conducts and cause damages to others shall bear the civil liability according to law.”20 On May 3, 2012, the Supreme Court issued the first Judicial Interpretation about private enforcement of the AML (“Judicial Interpretation”).21 The Judicial Interpretation specifies Article 50 of the AML, which includes private antitrust litigation’s jurisdiction, burden of proof, statute of limitations, and so on. It is the predominant guideline for private antitrust enforcement so far. According to the Judicial Interpretation, a person can file a private antitrust lawsuit without obtaining agencies’ decisions or approvals. Any individuals, legal person, or other organizations who suffer loss arising from any monopolistic conduct or disputes about contracts or business associations’ by-laws can file civil lawsuits directly in courts.22 C. Status Quo of Private Antitrust Enforcement In recent years, many countries that rely mainly on administrationoriented enforcement (namely public enforcement) have extended private enforcement for antitrust damages because of the impact of the U.S. experience.23 China follows this trend. Private antitrust enforcement is a hot topic in the Chinese legal community.24 Since the enactment of the AML 20

The AML, supra note 10, art. 50.

21

Provisions of the Supreme People’s Court on Several Issues Concerning the Application of Law in the Trial of Civil Dispute Cases Arising from Monopolistic Conduct (promulgated by Sup. People’s Ct. May 3, 2012, effective Jun. 1, 2012) CLI.3.173345(EN) (Lawinfochina) [hereinafter Judicial Interpretation on AML Lawsuits]. It is the first judicial interpretation of the AML issued by the Supreme Court. 22

Id. art. 1.

23

Crane, supra note 3, at 676.

24

Many Chinese academic literatures introduce the U.S. experience, discuss the merits of private enforcement, and encourage China to expand private antitrust enforcement. See Shi Jianzhong (时建中), Siren Susong Yu Woguo Fanlongduan Fa Mubiao de Shixian (私 人诉讼与我国反垄断法目标的实现) [Private Enforcement and the Realization of the Purpose of China’s Antimonopoly Law], 6 ZHONGGUO FAZHAN GUANCHA（中国发展观 察） [CHINA DEVELOPMENT OBSERVATION] 10 (2006); see also Wang Jian (王健), Fanlongduan Siren Zhixing Zhidu Chutan (反 垄 断 私 人 执 行 制 度 初 探) [Study of Antimonopoly Private Enforcement], 2 FASHANG YANJIU （法商研究）[STUDIES IN LAW AND BUSINESS] 104 (2007); see also Huang Yong (黄勇), Zhongguo Fanlongduan Minshi Susong Ruogan Wenti de Sikao (中国反垄断民事诉讼若干问题的思考) [Research on

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in 2008, however, the pace of the development of private antitrust enforcement is still slow. According to public data, the number of private antitrust cases heard by courts gradually grew from 10 in 2008 to 141 in 2015.25 By contrast, China’s Ministry of Commerce (the MOFCOM)—one of three antitrust agencies—has decided 1,313 cases as of December 31, 2015. 26 Moreover, very few plaintiffs of private antitrust lawsuits are successful. For example, until June 2010, no antitrust plaintiff had won a case.27 Moreover, “a great majority of the actions are either dismissed by courts or settled for [a] relatively insignificant amount of money.”28 A speaker of the Supreme Court has also admitted that the prominent difficulty for private antitrust litigation is the plaintiffs’ heavy burden of proof.29 Aug. 2008- 2010 2011 2012 2009 Docket 10 33 48 55 Closed 6 23 24 49

2013 2014 Jan.-Oct. 2015 72 86 141 N/A N/A N/A

Figure 1: Number of private antitrust lawsuits filed in courts.30

Several Issues of China’s Antimonopoly Private Litigations], 19 RENMIN SIFA (人民司法) [PEOPLE’S JUDICATURE] 20 (2008). 25

Dacheng Law Office, 2015 Intellectual Property and Antitrust Forum: Comprehensive Disclosure of Antitrust Enforcement Figures, CHINA MONTHLY ANTITRUST UPDATE: OCTOBER 2015 11, 11-12 (2015), http://www.dachengnet.com/service/rest/tk.File/756b8458029643349c7704581c480763. 26

As of Dec. 31, 2015, the MOFCOM has closed 1,308 cases regarding business concentration, and 5 cases related to failure of reporting the concentration. See LIN WEN(林文), ZHONGGUO FANLONG XINGZHENG ZHIFA BAOGAO 2008-2015（中国反垄 断行政执法报告 2008-2015）[REPORT ON THE ADMINISTRATIVE ENFORCEMENT OF ANTI-MONOPOLY LAW IN CHINA 2008-2015], 3 (2016). 27

Li Jian, supra note 5, at 71.

28

Jiangxiao Athena Hou, Is Chinese Private Antitrust Litigation Ready to Take Off? COMPETITION POLICY INTERNATIONAL 1, 2 (June 2015), https://www.competitionpolicyinternational.com/assets/Asia-Column-June-Full.pdf. 29

Press Release, Zuigao Renmin Fayuan Tongbao “Longduan Sifa Jieshi” Xiwen Fabuhui (最高人民法院通报《垄断司法解释》新闻发布会) [The Supreme Court Held the Press Conference Regarding Judicial Interpretation of Antimonopoly Law] (May 9, 2012), http://www.scio.gov.cn/ztk/xwfb/jjfyr/24/tt/Document/1154851/1154851.htm. 30

Id.; see also Dacheng Law Office, supra note 25, at 11; Zhongguo Fanlongduan Fa Fazhan Qushi (中 国 反 垄 断 法 发 展 趋 势) [Trends of the Development of China’s Antimonopoly Law], KING & WOOD MALLESONS LAW FIRM, 1,26 (May 2015), https://www.acc.com/chapters/china/upload/20150529_Program_PDF.pdf.

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D. Typical Cases of Resale Price Maintenance (RPM) First of all, I will give a very brief introduction to RPM. Firms always look for the most cost-effective way to distribute their products in order to maximize profits. 31 In practice, manufacturers may sell their products directly to end consumers through their own employees32 or by signing distribution contracts with independent distributors to reach ultimate consumers, depending on the cost of distribution.33 When firms choose independent distributors rather than self-distribution, the relationships between them are vertical. The agreements and contractual provisions signed by those vertically related and independent firms to impose restraints on products’ distribution are vertical restraints. When such restraints involve prices, theses restraints are RPM. For example, manufacturers may restrict a retail price and only sell products to retailers who agree to adhere to the price. RPM includes three types: restricting the minimum resale price, restricting the maximum resale price, and fixing the resale price.34 Therefore, by implementing a RPM agreement, resellers are required to adhere to certain price requirements. 1.

Rainbow v. Johnson & Johnson

Beijing Ruibang Yonghe Equipment Technology & Trading Co., Ltd. (“Rainbow”), a medical equipment distributor, filed a lawsuit in the Shanghai Intermediate Court (“Intermediate Court”) in August 2010, claiming that its 15-year cooperative partner—Johnson & Johnson (Shanghai) Medical Equipment Co., Ltd. and Johnson & Johnson (China) Medical Equipment Co., Ltd. (collectively referred as “Johnson & Johnson”)—enforced RPM with its distributors, which had violated Article 14 of the AML.35 In January 2008, Johnson & Johnson entered into a distribution agreement with Rainbow. According to the agreement, Rainbow could sell products neither outside the designated territory nor at a lower price than 31

HERBERT HOVENKAMP, ANTITRUST ENTERPRISE: PRINCIPLE AND EXECUTION 181(2005).

32

PHILLIP AREEDA, LOUIS KAPLOW, and ARRON EDLIN, ANTITRUST ANALYSIS: PROBLEMS, TEXT, AND CASES 534 (6th ed., 2004). 33

Id., at 534.

34

See ERNEST GELLHORN, WILLIAM E. KOVACIC AND STEPHEN CALKINS, ANTITRUST LAW AND ECONOMICS IN A NUTSHELL 340-352 (5th ed. 2004). 35

Shanghai Shi Diyi Zhongji Renmin Fayuan Minshi Panjueshu (2010) Huyi Zhongmin Wu(Zhi) Chuzi Di 169 Hao (上海市第一中级人民法院民事判决书 （2010）沪一中民 五（知）初字第 169 号)） [No. 169 Civil Judgment of Shanghai No.1 Intermediate Court(2010)] (Shanghai Interm. People’s Ct., May 18, 2012), http://www.hshfy.sh.cn:8081/flws/text.jsp?pa=ad3N4aD0xJnRhaD2jqDIwMTCjqbum0rv W0MPxzuUo1qops/XX1rXaMTY5usUmd3o9z.

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the retail price set by Johnson & Johnson.36 In March 2008, Rainbow bid for a project outside the designated territory with a lower price. Johnson & Johnson terminated Rainbow’s distributorship, stopped supplying all products (not only the suturing products involved in the alleged RPM agreement, but also other products, like surgical staplers), and confiscated the bond Rainbow had deposited. 37 The Intermediate Court held in favor of the defendant (Johnson & Johnson) with the reasoning that the plaintiff (Rainbow) could not prove that the agreement was a “monopoly agreement” with effects of eliminating or restricting competition.38 The case was appealed before the Shanghai High People’s Court (“High Court”). The High Court reversed the Intermediate Court’s judgment. 39 As the final judgment, the High Court upheld parts of Rainbow’s claims and ordered Johnson & Johnson to compensate Rainbow with 530,000 yuan ($85,483 USD).40 Compared to the analyzing approach for RPM adopted by the National Development and Reform Commission (one of the antitrust agencies, referred as NDRC),41 the High Court used an analyzing method 36

Id.

37

Id.

38

Id.

39

Beijing Ruibang Yonghe Kemao Youxian Gongsi Su Qiangsheng (Shanghai) Yiliao Qicai Youxian Gongsi Deng Zongxiang Longduan Xieyi Jiufen An (北京锐邦涌和科贸 有 限 公 司 诉 强 生 （ 上 海 ） 医 疗 器 材 有 限 公 司 等 纵 向 垄 断 协 议 纠 纷 案) [Beijing Ruibang Yonghe Equipment Technology & Trading Co. Ltd. (“Rainbow”) v. Johnson & Johnson (Shanghai) Medical Equipment Co. Ltd. et Al.] (Shanghai High People’s Ct. Aug. 1, 2013) CLI.C.6234448 (Lawinfochina) [hereinafter Rainbow v. Johnson & Johnson]. 40 41

Id.

Xu Kunlin, the former leader of the Antitrust Bureau of the NDRC, summarized the approach toward RPM as “Prohibition + Exemption.” Xu explained that, under the AML, RPM agreements are generally prohibited but may be exempted if listed conditions are satisfied in accordance with Article 15. See Xu Kunlin(许昆林), Kuanda Zhengce Shiyong Yu Zongxiang Longduan Xieyi (宽大政策适用与纵向垄断协议) [Leniency Policy Applying to Vertical Monopoly Agreements], ZHONGGUO JINGJI DAOBAO（中国经 济导报） [CHINA ECON. HERALD] Oct. 31, 2013, at A3. For example, the NDRC, the antitrust agency having authority to investigate RPM, has adopted an approach similar to the “per se rule” to analyze RPM when it investigated and penalized several automakers. See Hubei Province Price Bureau, Yiqi Dazhong Xiaoshou Youxian Zeren Gongsi Bufen Aodi Jingxiaoshang Zai Huibeisheng Shishi Jiage Longduan Bei Chufa (一汽大众销售 有 限 责 任 公 司 部 分 奥 迪 经 销 商 在 湖 北 实 施 价 格 垄 断 被 处 罚) [Penalty FAWVolkswagen and Part Audi Distributors in Hubei Province for the Price Monopoly], http://www.hbpic.gov.cn/zwgk/gfwj/xzxkhcf/201701/t20170110_23774.html; also see Shanghai DRC, Kelaisile Ji Shanghai Diqu Bufen Jingxiaoshang Shishi Jiage Longduan Bei Yifa Chachu (克 莱 斯 勒 及 上 海 地 区 部 分 经 销 商 实 施 价 格 垄 断 被 依 法 查 处) [Penalty on Chrysler and Part Distributors in Shanghai District for the Price Monopoly],

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like the rule of reason in U.S. antitrust law. The High Court argued that RPM was not “per se illegal” according to Article 14 of the AML but stated that the AML defines monopoly agreements as agreements with effects of eliminating or restricting competition. Therefore, the plaintiff had to provide prima facie evidence to prove that the alleged agreement was a monopoly agreement. As to this point, the High Court affirmed the lower court’s holding. However, compared to the Intermediate Court’s reasoning, the High Court conducted a relatively comprehensive analysis to draw a conclusion that the plaintiff had already satisfied its burden of proof. First, the High Court rejected Johnson & Johnson’s argument that Rainbow was not eligible to bring a private antitrust lawsuit because Rainbow was a party of the agreement. According to Article 50 of the AML, any party who suffered loss arisen from a monopoly agreement was a qualified plaintiff. Furthermore, the High Court stated that a party involved in an alleged agreement could access more evidence and information about this monopoly agreement than consumers and outsiders.42 Second, the High Court held that the plaintiff had to prove that the alleged RPM agreement was a “monopoly agreement” with effects of eliminating or restricting competition. The High Court stated that Article 7 of the Judicial Interpretation provided that “if a conduct is alleged to violate Article 13 of the AML (regulations about horizontal monopoly agreements), a defendant bears the burden of proof to prove that her conduct does not have effects of eliminating or restricting competition in order to avoid a penalty.”43 Therefore, the High Court stated that the Judicial Interpretation provided that such a reversed burden of proof can only be applied to horizontal monopoly agreements, rather than vertical monopoly agreements, such as RPM. Since such a reversed burden of proof should be explicitly provided by laws, regulations, or judicial interpretations, plaintiffs of RPM litigations cannot be exempted from the responsibility of proving the alleged RPM as a monopoly agreement. Third, the highlight of the High Court’s judgment was that the Court summarized four factors to evaluate RPM’s economic effects on competition: (a) whether the relevant market was highly competitive; (b) whether the defendant had strong market power; (c) the motivation of the defendant to conduct RPM; and (d) whether anti-competitive effects of the RPM can be offset by its pro-competitive effects.

(Sept. 11, 2014), http://www.shdrc.gov.cn/fzgggz/jggl/jgjgdt/12463.htm. 42

Rainbow v. Johnson & Johnson, supra note 39.

43

Judicial Interpretation on AML Lawsuits, supra note 21, art. 7.

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In sum, the High Court found that the demand elasticity of the relevant market was low; Johnson & Johnson had a strong market power to control prices and had the motivation to restrict resale prices; and Johnson & Johnson could not prove that anti-competitive effects of the RPM could be offset by its pro-competitive effects. Therefore, the High Court held that the RPM agreement implemented by Johnson & Johnson had effects of eliminating and restricting competition, and was therefore a monopoly agreement prohibited by Article 14 of the AML. Although Rainbow v. Johnson & Johnson is thus far the first and only RPM private lawsuit that the plaintiff (Rainbow) won, even the attorney of Rainbow expressed his concerns about the heavy burden of proof which may easily let RPMs with anticompetitive effects escape penalties.44 2.

Infant Formula Milk “Follow-on” Case

As of June 2016, there has only been one antitrust “follow-on” private lawsuit related to RPM in China. It is a “follow-on” litigation of the NDRC’s administrative decision on the infant formula milk industry. In August 2013, the NDRC imposed fines on six manufacturers of infant formula milk (Abbott was one of manufacturers) for restricting the minimum resale price with distributors.45 After the NDRC imposed the penalty on Abbott, a consumer sued the manufacturer, Abbott, and a branch store of Carrefour in Beijing, where he had purchased the infant formula. The plaintiff claimed that the defendants conspired to raise prices on Abbott infant formula milk that he purchased and he demanded compensation for his damages under the antitrust claim. When the case was filed in the Beijing Intellectual Property Court (“Beijing IP Court”)46, the defendants filed a demurrer to assert that the 44

Dai Bin & Zeng Fanyu (戴宾&曾凡宇), Zongxiang Jiage Longduan Xieyi Minshi Susong FalÜ Wenti Yanjiu—Yi Qiangsheng An Wei Shijiao Zhankai (纵向价格垄断协议 民事诉讼法律问题研究——以强生案为视角展开) [Research on Private Enforcement of Vertical Price Restraints—From the Perspective of Rainbow v. Johnson & Johnson], 3 FALÜ SHIYONG (法律适用) [J. L. APPLICATION] 97, 101 (2016). 45

Heshengyuan Deng Rufen Shengchan Qiye Weifan Fanlongduan Fa Xianzhi Jingzheng Xingwei Bei Chufa 6.6873 Yiyuan (合生元等乳粉生产企业违反《反垄断法》限制竞 争行为共被处罚 6.6873 亿元) [Penalty on Milk Powder Producers of Restricting Competition and Fined 668.73 Million Yuan], http://www.ndrc.gov.cn/xwzx/xwfb/201308/t20130807_552991.html [hereinafter NDRC Decision on Infant Formula Milk Producers]. 46

On Aug. 31, 2014, the Standing Committee of National People’s Congress passed a decision to set up IP courts in three cities—Beijing, Shanghai and Guangzhou. The level of the IP courts is as same as courts of appeal, intermediate courts. See Guanyu Zai Beijing, Shanghai, Guangzhou Sheli Zhishi Chanquan Fayuan de Jueding (关于在北京、 上海、广州设立知识产权法院的决定) [The Decision of Setting IP Courts in Beijing,

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Beijing IP Court had no jurisdiction. In June 2015, the High People’s Court of Beijing (Beijing High Court) issued a final verdict to affirm the IP Court’s jurisdiction over the first-instance of antitrust private litigations.47 On December 31, 2015, the Beijing IP Court issued the judgment in favor of the defendants. 48 The Court acknowledged that the administrative penalty imposed by the NDRC on Abbott was evidence to prove that the RPM agreements implemented by Abbott violated the AML, as long as there was no contrary evidence against it.49 The Beijing IP Court stated that the NDRC’s penalty decision, however, only could prove that the penalty was imposed on Abbott, but did not identify its distributors. 50 Namely, merely the NDRC’s decision cannot prove that the branch store of Carrefour, as a distributor, had singed the illegal RPM agreement with Abbott. 51 Abbott and Carrefour admitted that they had entered into a commodity contract, but the contract did not include any provisions related to price restriction. 52 Although the date of signature of the commodity contract is on November 30, 2013, later than the date the

Shanghai and Guangzhou] (promulgated by the Standing Comm. Nat’l People’s Cong., Aug.31, 2014, effective Aug.31, 2014), http://npc.people.com.cn/n/2014/0901/c1457625574846.html. On Oct. 31, 2014, the Supreme People’s Court issued a regulation about the jurisdiction of the three IP courts. See Provisions of the Supreme People’s Court on the Jurisdiction of Intellectual Property Courts of Beijing, Shanghai and Guangzhou over Cases (promulgated by the Sup. People’s Ct., Oct. 31, 2014, effective Nov. 3, 2014) CLI.3.237583(EN) (Lawinfochina). the Beijing Intellectual Property Court is the first Intellectual Property Court in China, founded on November 6, 2014. 47

Beijing Jialefu Shangye Youxian Gongsi Shuangjingdian Deng Yu Tian Junwei Longduan Jiufen Ersheng Minshi Caiding Shu (北京家乐福商业有限公司双井店等与 田军伟垄断纠纷二审民事裁定书) [Beijing Carrefour Ltd. Co. (Shuangjing Store) & Abbott Trade Co. v. Tian Junwei (Civil Verdict for Appeal Trial)] (Beijing High Ct. Jun. 18, 2015), http://wenshu.court.gov.cn/content/content?DocID=eb0ba701-ece3-440890c3-954c5e5b45f3. 48

Tian Junwei Su Beijing Jialefu Shangye Youxian Gongsi Shuangjingdian Deng Longduan Jiufen Yian（田军伟诉北京家乐福商业有限公司双井店等垄断纠纷一案） [Tian Junwen v. Beijing Carrefour Ltd. Co. etc., re Antimonopoly Disputes](Beijing IP People’s Ct. Dec. 31, 2015), (2014) Jingzhi Minchu Zidi 146 Hao ((2014)京知民初字第 146 号 ) [(2014) Beijing IP Court First Trial No. 146], http://wenshu.court.gov.cn/content/content?DocID=d1cf3c53-6ba1-4192-a8e19bcfcb1c96e4&KeyWord=%E7%94%B0%E5%86%9B%E4%BC%9F. 49

Id.

50

Id.

51

Id.

52

Id.

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NDRC issued the penalty decision, the contract stipulated that the effective date was traced back to January 1, 2013.53 Therefore, the Beijing IP Court ruled that because the NDRC’s decision did not disclose relevant evidence involved in the investigation, it could only assume that the penalty was imposed merely on Abbott, but not on the distributor, such as Carrefour.54 Therefore, there was not sufficient evidence to prove that an illegal RPM agreement existed between the defendants. In addition, from the Beijing IP Court’ judgment, we can conclude that the court upheld that indirect purchasers, such as consumers, have standing to sue in antitrust private litigation. 55 The plaintiff appealed to the Beijing High Court and argued that the signing date of the commodity contract was later than the date of the NDRC’s decision, so it was possible that the defendants concealed a real contract which included price restrictions.56 The Beijing High Court stated that the Contract Law permits individuals or business entities to sign a contract to regulate their previous behaviors; namely, the effective date of a contract prior to the signing date is permitted.57 The Beijing High Court ruled that the plaintiff failed to prove that the commodity contract was false or there was an illegal RPM agreement between the defendants, so it upheld the judgment of the Beijing IP Court.58 The judgment of Beijing High Court is final. III. RAISING QUESTIONS – REASONS FOR THE PROBLEMS From the discussion of the status quo of China’s private antitrust enforcement, it shows that private enforcement is underdeveloped in China. The difficulty of plaintiffs to prove an antitrust violation greatly suppresses people’s motivation to file an antitrust litigation in courts. This article identifies three reasons that have caused the plaintiffs’ heavy burden of proof. The reform of civil process, started at the end of 53

Id.

54

Id.

55

Id.

56

Tian Junwei Shangsu Beijing Jialefu Shangye Youxian Gongsi Shuangjingdian Deng Longduan Jiufen Yian (田军伟上诉北京家乐福商业有限公司双井店等垄断纠纷一案) [Tian Junwen v. Beijing Carrefour Ltd. Co. et Al., re Antimonopoly Disputes] (Beijing High People’s Ct., Aug. 22, 2016), (2016) Jingmin Zhong 214 Hao ((2016)京民终 214 号) [(2016) Beijing High Court No. 214] 3, http://wenshu.court.gov.cn/content/content?DocID=7ad234f9-cfdc-453a-ae0aa8f22dc22004&KeyWord=%E7%94%B0%E5%86%9B%E4%BC%9F. 57

Id.

58

Id.

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the 1980s, is a background reason. This reform has changed the role of judges from an active fact finder to a relatively neutral arbitrator, and litigant parties have the burden of proving what they claim. China’s effort to establish a modern civil process should be applauded. When we put the antitrust litigation into this system, however, problems emerge. Moreover, the area of civil process is one of the most complicated and changeable legal areas in China,59 which may cause the antitrust litigation to become more complicated than necessary. The current provisions of the Civil Procedure Law are the primary reason for plaintiffs’ heavy burden of proof. The law does not grant sufficient support to antitrust plaintiffs of investigating and collecting evidence. It further aggravates antitrust plaintiffs’ burden of proof. The last reason is that public antitrust enforcement does not offer appropriate support for private litigants. Chinese administrative agencies normally have stronger power and superior ability than private litigants to discover potential antitrust violations and collect evidence. However, in practice, antitrust agencies’ enforcement activities do not give adequate assistance to private enforcement as they are supposed to do. For example, because of the less transparent decision-making process of public enforcement, it is hard for private litigants to know about the progress of the agencies’ investigation, what evidence they can rely on to sue, and how to take advantages of administrative enforcement to win a case.

59

China enacted the Civil Procedure Law (For Trial Implementation) in 1982. After nine years of trial implementation, the final version of the Civil Procedure Law was enacted in 1991. it has been amended twice, once in 2007, and again in 2012. Nowadays, along with the judicial reform, the development of China’s Civil Procedure Law is still in a transitional period. Although the achievement of 20 years of judicial reform should be applauded, the development of civil process still faces great challenges. First, China has a vast territory and a large population, and the “opening-up” of the economy has caused significant imbalances between different regions. China requires a more delicate and complicated design of civil procedure law. Second, China is in a transition period from a highly-controlled planned economy to a market-oriented economy. The State is gradually reducing its interference with people’s private life; however, after more than 40 years of centralization, people have not gotten used to (or do not know how to) utilize private enforcement mechanisms to solve private disputes. Therefore, the mechanism of “social autonomy,” such as private litigation, has not matured yet. Third, groups of professionals, such as judges and lawyers, are not mature enough to support the development of civil process. See Fu Yulin (傅郁林), Maixiang Xiandaihua de Zhongguo Minshi Susong Fa (迈 向 现 代 化 的 中 国 民 事 诉 讼 法) [China’s Civil Procedure Law, Towards Modernization], 1 DANGDAI FAXUE (Chinese chars.) [CONTEMPORARY L. REV.] 8, 12-13 (2011).

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A. Reform of Civil Process in China The term, “civil process,” is not a Chinese phrase; instead, it was transplanted from western countries a hundred years ago. 60 After the People’s Republic of China was founded in 1949, the civil process did not make any significant progress until the economic reform and opening-up policies at the end of the 1970s. The Congress issued the Civil Procedure Law in 1982.61 Since then, China has engaged in comprehensive reform of market-oriented economy, which released individuals from restrictions of organizations (“Dan Wei, 位”) of the planned economy.62 Since then, people, as independent individuals, were allowed to participate into private economic activities, such as setting up private companies, selling or purchasing private properties, and hiring employees, or being hired. Because people have been released from the highly-planned economy system, a large number of private disputes arise, resulting in a surge of private lawsuits filed in courts.63 Facing a significant caseload, courts asked for an urgent reform to change the traditional trial model to achieve juridical effectiveness and alleviate the courts’ workload. Thus, an “unprecedented revolution in China’s judicial system”64 was igniting, and this revolution is still in process today. At first, this revolution was launched by lower court judges, which was a bottom-to-up reform without

60

China’s traditional law did not distinguish between civil and criminal process until western laws were introduced into China in the 1890s. In 1911, the Qing Dynasty completed a draft of civil procedure law based on western and Japanese law. It included several concepts and institutions of modern civil process, such as lawyers, an adversarial system, collateral estoppel, judicial independence, etc. Unfortunately, due to the collapse of the Qing Dynasty, this law was not enacted. See Xiao Jianhua & Liao Hao（肖建华& 廖浩）, Qingmo Minshi Susong Fa de Yanjing （清末民事诉讼法的演进）[ Revolution of Civil Procedure Law in Late Qing Dynasty], 6 BEIFANG FAXUE（北方法学） [N. L. SCI.] 118, 123-24 (2015). 61

Zhonghua Renmin Gongheguo Minshi Susong Fa (Shi Xing) (中华人民共和国民事诉 讼 法 （ 试 行 ）) [Civil Procedure Law of People’s Republic of China (For Trial Implementation) (promulgated by the Standing Comm. Nat’l People’s Cong., Mar. 8, 1982, effective Oct. 1, 1982, expired), http://www.npc.gov.cn/wxzl/gongbao/200012/06/content_5004411.htm. 62

Xiao Jianhua（肖建华）, Shenpanquan Quewei He Shifan Zhi Jiantao—Zhongguo Minshi Susong Fazhan Luxiang de Sikao (审判权缺位和失范之检讨——中国民事诉讼 法发展路向的思考) [Examination of the Absence and Abuse of Judicial Authority— Thoughts on the Development of China’s Civil Process], 23 ZHENGFA LUNTAN (政法论 坛) [POL. SCI & L. TRIB.] 44, 45 (2005). 63

Id. at 45.

64

Id. at 48.

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nationwide guidelines or a comprehensive plan. 65 A more systematic reform started at the end of the 1980s.66 The Civil Procedure Law (for Trial Implementation) was issued in 1982, and was enacted as a law in 1991. The law has been amended twice. The latest amendment was issued in August 2012, and the Supreme Court made corresponding judicial interpretation of the law in February 2015. The reform has three features: first, the general rule is that the burden of proof lies upon a party who claims, rather than who denies. In other words, civil litigants have to prove their claims and bear adverse consequences of failing to prove their propositions.67 Second, the role of judges has been changed from an active intervener to a relatively neutral arbitrator, and the courts’ authority to initiate investigations and collect evidence has been limited.68 Third, the scope of courts’ trial has been limited to the disputes litigants have claimed, rather than issues identified by the courts.69 I will not evaluate the reform of civil process, which is beyond the scope of this article. This article will only focus on the influence of this reform on private antitrust litigation. This reform provides a background for enacting the Civil Procedure Law, which has directly affected antitrust plaintiffs’ motivation to file a lawsuit. B. Regulations of Civil Procedure Law After the reform of civil process, parties became responsible for presenting evidence to prove their claims; otherwise they would lose cases or bear any adverse consequence of failing to prove. While this system may sound reasonable to American readers, without the evidentiary discovery system that the U.S. legal system has, Chinese antitrust plaintiffs’ burden of proof is overly heavy. Furthermore, in many antitrust cases, especially RPM lawsuits, plaintiffs have inferior economic power 65

Id. at 45.

66

In 1988, the Supreme Court held the 14th trial working meeting, which decided to launch civil judicial reforms. See Jiang Huiling & Yang Xiaoli (蒋惠岭&杨小利), Chongti Minshi Susong de “Tingsheng Zhongxin Zhuyi” (重提民事诉讼的“庭审中心主 义”) [Reiterate the “Center of Trial” in Civil Process], 12 FALÜ SHIYONG (法律适用) [J. L. APPLICATION] 2, 3 (2015). 67

Zuigao Renming Fayuan Guanyu Shiyong Zhonghua Renmin Gongheguo Minshi Susong Fa de Jieshi (最高人民法院关于适用《中华人民共和国民事诉讼法》的解释) [The Supreme Court’s Interpretation of Civil Procedure Law of People’s Republic of China] (promulgated by Sup. People’s Ct., Jan. 30, 2015, effective Feb. 4, 2015), art. 90, CLI.3.242703(EN) (Lawinfochina) [hereinafter Judicial Interpretation on Civil Procedure Law]. 68

Id. art. 94, 96.

69

Id. art. 228.

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than defendants to access information and are unlikely to uncover evidence of monopolistic behavior.70 1.

Plaintiff’s Difficulties of Discovering and Obtaining Evidence

According to the Civil Procedure Law, litigants’ lawyers have the right to investigate, collect evidence, and review case files recorded by courts.71 Lawyers, by showing their license and certificates of their law firms, can investigate and interview persons involved in disputes.72 Also, the Supreme Court further provides what and how lawyers can review case files kept by courts.73 However, although lawyers are entitled to investigate and obtain evidence according to laws, such rights in practice lack teeth. There is no civil or criminal penalty for individuals or/and companies if they do not cooperate with lawyers’ investigation or they refuse to provide relevant evidence and information.74 As to lawyers’ right of reviewing cases’ files recorded by courts, it has been criticized that there lacks transparent procedure and clear redress to guarantee lawyers’ such right.75 Besides, considering judges’ heavy caseload, 76 it is impractical for judges to respond to each request of records review. 70

The NDRC’s investigations found that most RPM agreements are carried out by large multinational and state-owned companies—such as Mercedes-Benz, Nikon, Moutai, a Chinese state-owned liquor producer —and involve a range of industries, such as automobiles, infant formula milk, pharmaceuticals, technology, and food packaging. Compared to the NDRC’s powerful administrative authority, it seems difficult for individual consumers and independent distributors to file private lawsuits against these big companies. See Jingmeng Cai, supra note 5, at 13-33. 71

Civil Procedure Law of the People’s Republic of China (2012 Amendment) (promulgated by the Standing Comm. Nat’l People’s Cong., Aug. 31, 2012, effective Jan. 1, 2013), art. 61, CLI.1.183386(EN) (Lawinfochina) [hereinafter Civil Procedure Law of 2012]. 72

Lawyers Law of the People’s Republic of China (2012 Amendment) (promulgated by the Standing Comm. Nat’l People’s Cong., Oct. 26, 2012, effective Oct. 26, 2012), art. 35, CLI.1.188538 (EN) (Lawinfochina). 73

The Supreme People’s Court provides that a litigant’s lawyer can review materials of the civil cases he/she represents, but records of judicial committee and materials related to other cases cannot be reviewed. In addition, a request of reviewing courts’ records should not affect a case at trial. See Provisions of the Supreme People's Court on Law Agents' Consulting of Civil Case Materials (promulgated by Sup. People’s Ct., Nov. 15, 2002, effective Dec. 7, 2002) CLI.3.43937(EN) (Lawinfochina). 74

Hou, supra note 28, at 3.

75

See Xia Juan & Zeng Jiuping (夏娟 & 曾就萍), Zaitan Lüshi Quanli Xingshi: Yi Lüshi Yuejuan Quan He Huijian Quan Wei Shijiao (再谈律师权利行使——以律师阅卷权和 会见权为视角) [Lawyers’ Right: From the Perspective of Reviewing Records Right and Meeting Right], 12 FAZHI YU SHEHUI (法制与社会) [L. SYS. & SOC’Y.] 290, 290 (2010). 76

For example, I talked with a judge (who asked to remain anonymous), who is

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Limitations of Court-Conducted Investigations

According to China’s Civil Procedure Law, courts have the authority to investigate and collect evidence. Compared to private litigants’ discovery capabilities, the court-conducted investigation is much more powerful. Courts can impose fines, detain parties who refuse to cooperate with investigations, and make judicial suggestions to an entity’s supervisory institutions or other relevant organs on imposing a disciplinary sanction on the entity which refuses to cooperate with investigations.77 Courts can investigate and collect evidence on their own initiative under two circumstances. First, courts can conduct investigations in either of the five “necessary” situations: (1) evidence involving injury to the State and the public’s interests; (2) evidence involving identity relations, such as divorce and adoption lawsuits when one party is absent from the trial; (3) lawsuits involving environmental pollutions, harms of consumers’ interests and rights, and other acts undermining the public’s interest; (4) litigations in which parties conspire to harm any third-parties’ legitimate interests; and (5) other procedural issues.78 The second circumstance where courts can investigate and gather evidence is upon a litigant party’s request if she cannot investigate and collect evidence due to “objective reasons.”79 However, the “objective reasons” referred to very limited situations: (1) the evidence is in the procession of governmental agencies, which is not accessible to private parties; (2) the evidence involves the State’s confidential information, business secrets, or personal privacy.80 A scholar conducted a survey on an anonymous court about the court-conducted investigations.81 Based on his survey, in practice, because responsible for hearing civil lawsuits at a local court in Beijing. She said from January to June of this year (2016) she by herself had already closed 272 cases, and had 600 unclosed cases. Interview with anonymous Judge, Chaoyang Dist., Beijing, People’s Ct, (Jul.31, 2016). 77

Civil Procedure Law of 2012, supra note 71, art. 114.

78

Judicial Interpretation on Civil Procedure Law, supra note 67, art. 96.

79

Id. art. 94.

80

Id.

81

Wu Aibing (毋爱斌), Dangshiren Shenqing Diaocha Quzheng Zhidu Yunxing de Yihua Yu Huigui—Jiyu S Fayuan Minshangshi Sifa Shijian de Shizheng Fenxi (当事人申请调 查 取 证 制 度 运 行 的 异 化 与 回 归——基 于 S 法 院 民 商 事 司 法 实 践 的 市 政 分 析) [Divergence and Return of the Mechanism of Court-conducted Investigation upon Parties’ Requests—An Empirical Study of S. Court’s Practices in Civil Lawsuits], 16 XINAN ZHENGFA DAUXUE XUEBAO (西南政法大学学报) [J. Sw. U. POL. SCI. & L.] 81 (2014) (China).

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the legislative language is abstract and unclear, courts’ attitudes about standards of launching court-conducted investigations vary. Some courts adopted looser standards to decide whether they would launch an investigation or collect evidence while others used stricter ones.82 For example, when parties filed requests beyond the deadline of application, some courts still approved the requests, but other courts denied. 83 Moreover, judges are inclined to decline parties’ requests since courtconducted investigations would increase judges’ workload and may make judicial proceedings more complicated. 84 Considering that the heavy caseload of courts—the survey showed that the target court had more than 50,000 cases a year, and each individual judge dealt with 400-500 cases a year85—it is no surprise that most private plaintiffs cannot rely on courts to conduct investigation and collect evidence. As discussed above, China’s Civil Procedure Law states that a party can apply for a court-conducted investigation only if she cannot investigate and obtain evidence due to “objective reasons.”86 However, in many antitrust lawsuits, plaintiffs’ inability to gather evidence is not because of “objective reasons.”87 By lacking comprehensive economic and legal knowledge, antitrust plaintiffs, who normally are individuals or small to medium-size companies, cannot understand clearly and accurately what kinds of evidence should be collected, where and how to obtain them. For example, in the Baidu (百 度) case, 88 the plaintiff (a less known information services company) alleged that Baidu (the largest provider of internet search services in China) abused its dominant market position to block the plaintiff’s website in defendant’s internet search results.89 Facing the internet tycoon in the Chinese market, the plaintiff, who lacked the ability to prove Baidu’s anticompetitive behaviors, provided merely two 82

Id. at 83.

83

Id. at 83.

84

Id. at 83.

85

Id. at 84.

86

Civil Procedure Law of 2012, supra note 71, art. 64.

87

Jiang Yanbo & Yuling (蒋岩波& 喻玲), Woguo Fanlongduan Minshi Susong Zhidu Mianlin de Tiaozhan Jiqi Biange (我国反垄断民事诉讼制度面临的挑战及其变革) [Challenges and Reform Faced by China’s Antimonopoly Law Private Enforcement], 4 JIANGXI SHEHUI KEXUE (江西社会科学) [JIANGXI SOC. SCI.] 161, 163 (2011) (China). 88

Tangshanshi Renren Xinxi Fuwu Youxian Gongsi Su Beijing Baidu Wangxun Keji Youxian Gongsi Longduan Jiufen An (唐山人人信息服务有限公司诉北京百度网讯科 技有限公司垄断纠纷案) [Tangshang Renren Information Service Ltd. Co. v. Beijing Baidu Wangxun Technology Ltd., Co.], (Beijing High People’s Ct. July 9, 2010) CLI.C.516272 (Lawinfochina). 89

Id.

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papers from the internet as evidence of the defendant’s dominant market position, and, unsurprisingly, lost the case.90 In sum, since the civil process reform, judges tend to play a more neutral and passive role in civil litigations. In general civil lawsuits, litigant parties normally have equal power and economic positions. A more adversarial system indeed can improve fact-finding, grant redress, and achieve justice. In most private antitrust lawsuits, however, litigant parties usually have significantly unequal economic positions and bargaining power. When antitrust parties are in unbalanced economic positions, such ostensible justice is very likely to lead to de facto injustice. C. Lack Support from Public Antitrust Enforcement—Conflict and Ambiguity As discussed in Part II, public antitrust enforcement plays a prominent role in China’s antitrust system while private enforcement is in a subordinate position. The relationship between public and private enforcement, to a large extent, influences the development of private antitrust litigation. China does not have a uniform antitrust agency. After the AML was enacted, the State Council appointed three administrative agencies—the NDRC, the Ministry of Commerce (MOFCOM), and the State Administration for Industry and Commerce (SAIC) to enforce the AML. Specifically speaking, both the NDRC and the SAIC are responsible for investigating monopoly agreements, abuse of dominant market positions, and abuse of administrative power. The difference between the NDRC and SAIC’s responsibility is whether a conduct is price-related or not. In other words, the NDRC is responsible for investigating price-related behaviors (such as RPM), while the SAIC is in charge of non-price-related ones. The MOFCOM is accountable for merger review and international cooperation related to competition laws. In this article, investigating RPM is the NDRC’s responsibility. The NDRC, the most powerful Chinese bureaucracy, has begun a series of proactive PRM investigations, especially since 2013. 91 The increase of public enforcement raises the issue about the relationship between public and private antitrust enforcement. For example, can antitrust agencies’ decisions be used as prima facie evidence by a private 90 91

Li Jian, supra note 5, at 72.

From 2014 to 2015, the NDRC fined multinational automakers—Mercedes-Benz, Audi, Chrysler, and Dongfeng-Nissan—for restricting resale prices of vehicles and associated spare parts. The fines totaled $ 509 million. In February 2013, the NDRC fined two stateowned liquor producers for carrying out RPM. On August 7, 2013, the NDRC imposed fines totaling 668.73 million yuan ($102.88 million) on six manufacturers of infant formula. The NDRC also launched an investigation into the corrective lenses market and imposed penalties on several multinational producers of corrective lenses in Beijing, Shanghai, and Guangdong. See Jingmeng Cai, supra note 5, at 13-33.

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plaintiff? If antitrust agencies decided a behavior with different analyzing methods and drew divergent conclusions with judicial decision-makers, should courts turn down a “follow-on” case? Can defendants’ commitments and confessions made during agencies’ investigations be used as evidence in “follow-on” private lawsuits? Based on the legal provisions and judicial practices, in the following sections, I will discuss difficulties and challenges to answer these questions. 1.

Prima Facie Evidence

When China’s Supreme Court drafted the Judicial Interpretation for private antitrust enforcement, it provided that antitrust agencies’ decisions could be used as prima facie evidence.92 Unfortunately, when the Judicial Interpretation was formally enacted, this provision had been deleted from the official version due to controversies. Supporters of keeping this provision claimed that accepting antitrust agencies’ decisions as prima facie evidence in “follow-on” cases could save judicial resources, alleviate plaintiffs’ proof of burden, and improve consistency with agencies’ decisions.93 In contrast, opponents argued that under China’s legal system, administrative decisions are persuasive rather than binding on courts, so it is not reasonable to impose on courts an obligation to accept agencies’ decisions as evidence. Although the Judicial Interpretation does not provide whether agencies’ decisions should be accepted as prima facie evidence in private litigation, the Provisions of Evidence in Civil Procedure issued by the Supreme Court provides that, when there is more than one piece of evidence concerning a same fact, documents produced by administrative organs are, as a general rule, more forceful than other written evidence.94 Therefore, in “follow-on” cases, based on the general rule of evidence, previous agencies’ decisions are likely to be accepted by courts. For example, in Infant Formula Milk Follow-on Case, as we discussed 92

Zuigao Renmin Fayuan Guanyu Shenli Longduan Minshi Jiufen Anjian Shiyong Falü de Guiding (Zhengqiu Yijiang Gao) (最高人民法院关于审理垄断民事纠纷案件适用法 律的规定（征求意见稿) [The Supreme Court’s Regulations about Several Issues in Hearing Antimonopoly Private Lawsuits (Draft)] (promulgated by the Sup. People’s Ct. Apr.26, 2011), Chinacourt.org, art. 11, para. 2-3, http://old.chinacourt.org/html/article/201104/26/449182.shtml (China). 93

Huang Yao (黄尧), Qianxi Fanlongduan Minshi Susong Zhong Zhifa Jigou Yu Sifa Jiguan de Xietiao (浅析反垄断民事诉讼中执法机构与司法机关的协调) [Discussion on Coordination Between Antimonopoly Private and Public Enforcement], 2 LI LUN JIE (理论界) [THEORY HORIZON] 66, 67 (2012) (China). 94

Some Provisions of the Supreme People’s Court on Evidence in Civil Procedures (promulgated by the Sup. People’s Ct., Dec. 21, 2001, effective Apr.1, 2002) CLI.3.38083(EN), art. 77 (Lawinfochina).

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above, both the Beijing IP Court and the Beijing High Court acknowledged that the NDRC’s penalty decision on Abbott could be accepted as evidence to prove that the formula milk producer implementing an RPM agreement, which violated the AML. However, when courts hold different opinions or use differing analyzing approaches with the antitrust agency, the problem arises. Taking RPM as a typical example, in the Infant Formula Milk Case, 95 the NDRC’s analyzing approach for RPM is much more like the per se rule under U.S antitrust law. The NDRC ruled that RPM agreements implemented by formula producers were in breach of Article 14 of the AML, and defendants failed to prove that they could be exempted under Article 15.96 However, in Rainbow v. Johnson & Johnson, the Shanghai High Court held that an RPM agreement signed by a medical producer and its distributors was not per se illegal, but the plaintiff had to prove that the RPM agreement had anticompetitive effects of restricting or limiting the competition.97 The analyzing approach adopted by the Shanghai High Court is much more like the rule of reason under U.S. antitrust law. The inconsistent approaches adopted by the antitrust agency and courts is very likely to put courts in an awkward position, especially when they hear follow-on cases. If courts follow their own analyzing approaches to draw divergent conclusions with the NDRC, it would lead consumers and companies to confusion on one hand, and injure the consistency and predictability of the antitrust decision-making on the other. However, if courts accept the agency’s decisions as evidence, it would conflict with their precedents. 2.

Commitment and Leniency

Since 2013, the NDRC has begun to adopt a leniency program for antitrust violators. In the Infant Formula Milk Case, three producers were exempted from penalty because they voluntarily reported to the agency about the RPM, submitted important evidence, and made commitments to stop carrying out RPM and to reduce prices.98 Besides, five other formula milk producers were given mitigated penalties.99 Applying the programs of commitment and leniency100 requires transparent procedures and clear requirements to ensure the certainty and 95

NDRC Decision on Infant Formula Milk Producers, supra note 45.

96

Id.

97

Rainbow v. Johnson & Johnson, supra note 39.

98

NDRC Decision on Infant Formula Milk Producers, supra note 45.

99

Id.

100

The commitment program can be applied when business operators promise to take certain measures to eliminate anticompetitive effects of its conduct within a time limit

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predictability. The NDRC’s enforcement, however, leads to certain problems because of lacking specific guidelines and regulations. For example, the NDRC granted more than one company exemptions in its decisions. 101 Under the U.S. antitrust law, only the first qualifying wrongdoer may be granted leniency no matter whether the company reports illegal antitrust activity before or after an investigation has begun.102 This process guarantees that the regulator can obtain evidence to investigate a violation on the one hand, and on the other, the agencies would not abuse of such authority. Furthermore, standards and the procedure for the NDRC granting a leniency are unclear. More information should be specified when the NDRC applies the leniency program, such as detailed procedures for leniency application, the criteria for granting leniency, conditions for granting leniency or revoking it, and leniency applicants’ confidentiality, and so on. 103 Unfortunately, the NDRC has not yet enacted regulations or guidelines for applying a leniency policy to RPM. It should be noticed that in early 2016, the NDRC drafted two guidelines about commitment and leniency programs respectively. 104 As of March 2017, the process of soliciting public opinions on the two drafted guidelines has been completed, but has not yet been enacted. However, the draft of the guideline of leniency program explicitly states that it applies agreed by the agencies, then the agencies may decide to suspend the investigation. See the AML, supra note 10, art. 45. The leniency program is applied when business operators voluntarily report any violations or provide important evidence to the agencies, the agencies may give the reporters a mitigated penalty or an exemption. See the AML, supra note 10, art. 46, para. 2. 101

In the NDRC’s investigations concerning RPM, three infant formula producers, two eyeglass manufacturers, and two vehicle distributors have been exempted from penalties because they have “voluntarily reported to the agency and provided important evidence about RPM agreements.” See Jingmeng Cai, supra note 5, 41-45. 102

Scott D. Hammond & Belinda A. Barnett, Frequently Asked Questions Regarding the Antitrust Division’s Leniency Program and Model Leniency Letters, U.S. DEPT. OF JUSTICE, 4-6 (Nov. 19, 2008), https://www.justice.gov/sites/default/files/atr/legacy/2014/09/18/239583.pdf. 103 104

Id. at 1.

See Hengxiang Longduan Xieyi Anjian Kuanda Zhidu Shiyong Zhinan (Zhengqiu Yijian Gao) (横向垄断协议案件宽大制度适用指南（征求意见稿) [Guideline for the Application of Leniency Policy on Horizontal Monopoly Agreement (Draft)] (promulgated by the NDRC, Feb. 2, 2016), the NDRC, http://www.sdpc.gov.cn/gzdt/201602/t20160203_774297.html (China) [hereinafter Guideline for Leniency Policy (Draft)]; see also Fanlongduan Anjian Jingyingzhe Chengnuo Zhinan Zhengqiu Yijian Gao (反垄断案件经营者承诺指南（征求意见稿) ） [Guideline for Businesses’ Commitments (Draft)] (promulgated by the NDRC, Feb. 2, 2016), the NDRC, http://www.sdpc.gov.cn/gzdt/201602/t20160203_774296.html [hereinafter Guideline for Commitments (Draft)].

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exclusively to horizontal monopoly agreements.105 It is not clear whether the NDRC will issue another guideline for vertical monopoly agreements (like RPM), or whether the NDRC has already realized it is inappropriate to implement a leniency policy for vertical agreements. According to the two guidelines drafts,106 the basic rule is that materials, documents, or reports produced or provided by investigated companies during the process of making commitment or applying leniency should be excluded as evidence in subsequent private lawsuits. However, without further limitations and clarifications, the antitrust agencies may expand the scope of excluded materials, which would further increase the private plaintiffs’ burden of proof. IV. FINDING SOLUTIONS—WHAT CHINA CAN LEARN FROM THE U.S. When we try to find possible solutions to develop China’s private antitrust enforcement, it is important to bear in mind that a feasible and sound solution should depend largely on carefully adapting to the local environment. As a result, when I attempt to seek solutions from U.S. antitrust law to solve China’s problems, it is rational to conduct discussions within the current framework of China’s antitrust enforcement system, rather than overturning the system completely. Based on the previous discussion, the plaintiffs’ heavy burden of proof is the major problem hindering the development of private antitrust enforcement, which significantly discourages people from filing private lawsuits in courts. However, suggestions of transplanting the whole evidence discovery system in U.S. law to China is unrealistic, because it would require a complete change of China’s current civil process framework. Therefore, my analysis only focuses on specific rules and mechanisms in U.S. antitrust law. Then, I evaluate the effect of these rules and mechanisms on improving China’s private antitrust enforcement. A. Fundamental Issues—Roles and Purposes Imagine you were a judge, facing a private antitrust lawsuit. You may have to roll out a list of questions to hear the lawsuit: Does the 105 106

Guideline for Leniency Policy (Draft), id., art. 3.

Guideline for Businesses’ Commitments (Draft) provides, “When antitrust agencies suspend or stop investigations due to investigated companies’ commitments, private companies and individuals are still entitled to file private lawsuits against the investigated companies in courts. However, the agency’s decisions about suspending and stopping investigations cannot be used as evidence in related private lawsuits to prove the defendants’ behaviors as antitrust violations.” See Guideline for Businesses’ Commitments (Draft), supra note 104, art. 3. The Guideline for Leniency Policy (Draft) provides that all reports, documents, and materials provided by investigated companies to apply for leniency cannot be taken as evidence in related private litigation. See Guideline for Leniency Policy (Draft), supra note 103, art. 16.

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plaintiff have standing to bring a lawsuit? What kinds of evidence should the plaintiff provide? Can antitrust agencies’ previous decisions be used as prima facie evidence to claim compensation by the plaintiff? It seems that all these questions are about specific issues during a litigation. However, if you think twice, you will quickly realize that in order to answer these questions, you have to first answer two more fundamental questions: What is the role of private antitrust enforcement in the antitrust law system? What is the purpose of private antitrust enforcement? 1.

The U.S. Law

i. Roles of Private Antitrust Enforcement Private antitrust enforcement can be regarded as one of the brightest creations of the U.S. antitrust laws. The United States is unique in the world because private litigation is “the predominant means” of antitrust enforcement and “it vastly outstrips public enforcement.”107 The rough ratio between private cases and public cases brought by the federal antitrust agencies (the DOJ and the FTC) is 10 to 1.108 When the U.S. Congress enacted the first modern antitrust law in the world in 1890, legislators recognized that the antitrust agency—the Department of Justice—was then a “mere fledgling”109 that did not have enough experience and resources to enforce the law and protect competition. As a result, Congress hoped to rely on private enforcement to make up the deficiency of governmental resource. Furthermore, the American people’s widespread mistrust of political institutions and government officials is another traditional and cultural reason to explain the predominant position of private antitrust enforcement, unlike those in most other countries.110 ii. Purposes of Private Antitrust Enforcement Private plaintiffs’ right of claiming treble damages serves two major purposes of private antitrust enforcement: compensating injured victims and deterring any future wrongdoings. The Supreme Court has reiterated the two purposes in its rulings.111 107

Crane, supra note 3, at 675.

108

Daniel A. Crane, Technocracy and Antitrust, 86 TEX. L. REV. 1159, 1179 (2008).

109

Paul D. Carrington, The American Tradition of Private Law Enforcement, 5 GERMAN L. J. 1413, 1414 (2004). 110 111

Id. at 1413.

See Pfizer, Inc. v. Gov’t India, 434 U.S. 308, 314 (1978) (The Court stated that “§ 4 [of Clayton Act] has two purposes: to deter violators and deprive them of ‘the fruits of their illegality,’ and “to compensate victims of antitrust violations for their injuries.”) See also

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First, because public enforcement generally does not grant monetary recovery for private victims, the mandatory trebling damage awards in private litigation provide victims incentives to detect, investigate, sue for the violation, and finally be compensated.112 Second, deterrence has been considered as the predominant goal of the American private antitrust enforcement, which is superior to compensation when the two goals diverge.113 The direct purchaser rule, established by the U.S. Supreme Court, is a typical example. The direct purchaser rule114 provides that indirect purchasers do not have standing to sue, even though they are actual victims, because direct purchasers may pass on losses to them.115 In other words, under such a scenario, direct purchasers may gain a windfall because the mandatory trebling damage awards them, while they have already passed losses to indirect purchasers. Such rules reflect American legislators and judges’ preference when they strike the balance between deterrence and compensation. Moreover, the rule of joint and several liability,116 the class action, and the “one-way cost” rule 117 have likewise enhanced the goal of Ill. Brick Co. v. Illinois, 431 U.S. 720, 746 (1977) (the Court stated that the trebled damage both aided deterrence and provided the incentive of compensation). See also Blue Shield of Va. v. McCready, 457 U.S. 465, 472 (1982) (the Court stated that “Congress sought to create a private enforcement mechanism that would deter violators and deprive them of the fruits of their illegal actions, and would provide ample compensation to the victims of antitrust violations.”) 112

Cavanagh, supra note 3, at 631.

113

See Empagran S.A. v. F. Hoffman-LaRoche, 315 F. 3d 338, 335-357 (D.C. Cir. 2003), cert. granted, 124 S. Ct. 966 (Dec. 15, 2003); see also RICHARD A. POSNER, ANTITRUST LAW 266 (2d ed. 2001). 114

Ill. Brick Co. v. Ill., 431 U.S. 720 (1977) (The indirect purchaser rule was established by Illinois Brick’s Court, but the Illinois Brick rule only applies at federal antitrust level.) 115

Id. at 746-748.

116

The U.S. antitrust law allows a plaintiff to identify a single participant of an antitrust violation and to sue that participant for treble damages, even if there are many other unnamed participants who are still involved in and benefited from the violations. This is “joint and several liability,” which increases deterrence, because a single defendant would be responsible for the whole violation. Joint and several liability also inspires defendants to negotiate damage settlements, rather than litigate. See LAWRENCE A. SULLIVAN & WARREN S. GRIMES, THE LAW OF ANTITRUST: AN INTEGRATED HANDBOOK 1007-10 (2d ed. 2006). 117

The “one-way cost” rule means that, in private antitrust litigation, a plaintiff can recover litigation costs from the defendant upon prevailing, but a successful defendant can recover nothing. The “one-way cost” rule is different from the normal rule, that losers of litigation should pay winners reasonable litigation costs. The purpose of this rule is to give extra motivation of filing private antitrust litigations. See Donald I. Baker, Revisiting History—What Have We Learned about Private Antitrust Enforcement That We Would Recommend to Others? 16 LOY. CONSUMER L. REV. 379, 386 (2004).

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deterrence. For example, in 2013, a New York jury awarded treble damages ($ 162.3 million) to a plaintiff class after three Chinese vitamin C manufacturers were found liable for fixing prices.118 In a short, facing a trebled punishment and a large number of “private attorney generals,” any potential violators of antitrust law would take private antitrust enforcement as a serious deterrence. 2.

Lessons from the U.S. Law

i. Roles of Private Antitrust Enforcement As we discussed in Chapter II, China’s AML enforcement has primarily relied on public enforcement since the AML’s inception, and private enforcement is in a subordinate position. Considering China’s historically strong administrative power, such a subordinate role of private antitrust enforcement may be a natural and necessary choice of legislators. Therefore, although China’s private enforcement may become much more active or prosperous in a foreseeable future, it has little possibility to become a dominant means of enforcing the antitrust law as that in the United States. With regard to this point, the American experience may be of limited reference value to China. ii. Purposes of Private Antitrust Enforcement One predicament of China’s private antitrust enforcement is that antitrust litigations proceed within the frame of Civil Procedure Law. The major purpose of civil litigations is “compensation.” 119 However, compensation is insufficient to satisfy the purpose of antitrust enforcement. As we know, the antitrust law operates quite differently from other civil laws. Besides resolving civil disputes among equal parties, antitrust law has the function of regulating the market and competition from the State’s perspective. Therefore, the purpose of antitrust enforcement should not only be to compensate victims’ injuries, but also to have certain public law functions: punishing violators and deterring future wrongdoing. If we only emphasize the purpose of “competition,” as normal private litigation does, but ignore the purpose of “deterrence,” the function 118

Jury Verdict, In re Vitamin C Antitrust Litig., No. 06-MD-01738-BMC-JO (E.D.N.Y. Mar. 14, 2013), Docket No. 675 (The jury awarded damages of $54 million USD and the court tripled this amount to $162 million USD. Although the court reduced $9 million USD because of a settling defendant's contribution (for a total of $153,3 million USD in the end), the actual damage awarded here still is $162 million USD). 119

See Liu Yingshuang (刘迎霜), Qianxi Woguo Fanlongduanfa Zhong de Minshi Zeren (浅 析 我 国 反 垄 断 法 中 的 民 事 责 任) [Discussion on Civil Liability in China’s Antimonopoly Law], 1 NANJING SHEHUI KEXUE (南京社会科学) [SOCIAL SCIENCES IN NANJING] 105, 107 (2009).

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of antitrust law would be injured. The merits of private antitrust enforcement are generally acknowledged, such as making up the shortage of public enforcement resource, detecting and punishing antitrust violations that are not detected by agencies, restricting or avoiding agencies’ abuse of authority, educating people about antitrust laws, and developing the culture of competition. Without the purpose of deterrence, however, all these merits can hardly be achieved. Victims lack motivation to file lawsuits, and business operators purposefully refrain from complying with antitrust law. In the United States, deterrence is the primary purpose of private antitrust enforcement, which is largely ascribed to the mandatory treble damages and “one-way cost” rule.120 These rules offer a “bounty hunting” in the United States,121 which has significantly boosted private antitrust litigation and deterred antitrust violations. China’s private antitrust enforcement currently does not put emphasis on deterrence, which, in a large part, impedes the development of private enforcement. For instance, in Rainbow v. Johnson & Johnson, for almost three years’ efforts, the plaintiff finally won the case with a mere compensation of $85,483USD. 122 Although the plaintiff, a medium-sized medical equipment distributor, won the case, it lost its fifteen-years business partner. Considering the defendant’s market power, the plaintiff is very likely to lose its future business as well. However, for Johnson & Johnson (an international enterprise with market power in the medical equipment market), such a compensation is insignificant. In sum, I am reluctant to conclude that private antitrust enforcement without a purpose of deterrence will flourish in China in the coming years. However, the U.S. private antitrust enforcement has been criticized as over-deterrence,123 so I would not recommend the mandatory treble damages on all antitrust violations—as the U.S. antitrust law stipulates— to China, but I do recommend China’s legislators and judges to take deterrence as a primary purpose for private antitrust enforcement. 120

However, some scholars criticize that U.S. private antitrust litigation is not very effective to achieve the purpose of deterrence, since “the time lag between the planning of the violation and the final judgment day is usually so long that the corporate managers responsible for the planning have left their corporate employer before the employer internalizes the cost of the violation.” See Crane, supra note 3, at 677. 121

Baker, supra note 117, at 382.

122

Rainbow v. Johnson & Johnson, supra note 39.

123

The focus of criticism is that treble damages liability lets companies “forego legitimate competitive initiatives that would increase competition and benefit consumers,” which generates “false negatives.” Moreover, private enforcement may also be used by antitrust plaintiffs to tactically disadvantage a rival, whose behavior may benefit competition as well as consumers. See SULLIVAN & GRIMES, supra note 116, at 953-954.

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B. Specific Rules and Mechanisms—Effects on the Plaintiffs’ Burden of Proof When I examine specific rules and mechanisms under U.S. antitrust law, a major standard to determine whether a rule or mechanism should be adopted by China is its influence on the plaintiffs’ burden of proof. Easing antitrust plaintiffs’ burden of proof is an efficient and feasible way to inspire people to file lawsuits in courts, and, in turn, improve private antitrust enforcement. 1.

Standing Test of Antitrust Injury i. The U.S. Law

Section 4 of the Clayton Act provides that any person who has been injured in his business or property by reason of any forbidden behaviors under the antitrust laws may sue for treble damages and the cost of suit.124 This provision has triggered a surge of private litigations. Under “a backdrop of concern with the burgeoning number of private suits,”125 the Supreme Court limited plaintiffs’ standing with the test of “antitrust injury” in Brunswick Corp v. Pueblo Bowl-O-Mat, Inc.126 In Brunswick, the Court required that a plaintiff had standing to sue only if she established the “injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants’ act unlawful.”127 Moreover, the Court also extended the “antitrust injury” test to lawsuits for injunctive relief in Cargill Inc. v. Monfort of Colorado, Inc.128 In Cargill, the plaintiff, the nation’s fifth largest beef packer, brought an antitrust action under Section 7 of the Clayton Act to enjoin merger between the second and third largest beef packers. The plaintiff alleged that after the merger, the defendants would lower prices in an attempt to increase the market share. The Supreme Court held that “the threat of loss of profits due to possible price competition following a merger does not constitute a threat of antitrust injury.”129

124

15 U.S.C. § 15(a) (2006).

125

SULLIVAN & GRIMES, supra note 116, at 961.

126

Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977).

127

Id.

128

See generally Cargill Inc. v. Monfort Colo., Inc., 479 U.S. 104 (1986).

129

Id. at 109.

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ii. Lessons from the U.S. Law The antitrust injury test raises the threshold of plaintiffs’ standing to sue. Besides showing the traditional causation (injury-in-fact), it requires a plaintiff to show the injury she suffers is what the antitrust law is designed to prevent. The antitrust injury test, however, has been criticized as ambiguous and improper.130 In Brunswick, it was unclear whether this test was used in determining damages or checking plaintiffs’ standing.131 After Brunswick, most courts adopted Brunswick to analyze the standing issues.132 However, it is not reasonable to focus exclusively on plaintiffs’ “incentive incompatibility” with the antitrust law to determine whether the plaintiffs have standing.133 In practice, plaintiffs’ incentives are mixed. They may fear that a rival’s RPM agreement may increase distribution efficiency and improve service, which is inconsistent with the purpose of antitrust law. However, a company with market power may, meanwhile, utilize the same RPM agreement to set retail prices at a monopoly level, to block rivals, and to punish violators. Under such a scenario, a plaintiff suing a defendant for implementing this RPM agreement has an incentive which is consistent with the purpose of the antitrust law. Therefore, it is improper to require plaintiffs to prove their “incentive compatibility” at the pleading stage. Some scholars argue that “a better rule would be that a claim would be dismissed only if the plaintiff could have no credible and substantial procompetitive incentive.”134 In my view, the “antitrust injury” test should not be recommended to China, since it would unnecessarily increase the plaintiffs’ burden of proof. 2.

The Indirect Purchaser and “Passing-on” Doctrines i. The U.S. Law

The doctrines of indirect purchaser and “passing-on” are two edges of a sword. During the products’ distribution process, more than one reseller is involved in the distribution chain. If a direct purchaser has to pay extra-charge because of a monopoly behavior, the surcharge would be passed on to the next purchaser until the product is paid by end130

See Clare Deffense, A Farewell to Arms: The Implementation of a Policy-Based Standing Analysis in Antitrust Treble Damages Actions, 72 CAL. L. REV. 437, 447 (1984); see also SULLIVAN & GRIMES, supra note 115, at 966. 131 132

Deffense, id. at 447. Id.

133

SULLIVAN & GRIMES, supra note 115, at 966.

134

Id.

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consumers.135 If the antitrust law permits indirect purchasers to sue, it has to allow defendants to use “passing-on” as a defense to rebut direct purchasers’ antitrust damages, and vice versa. In the United States, as a general rule, the federal antitrust law neither grants indirect purchaser standing to sue, 136 nor permits defendants to use the “passing-on” doctrine as a defense.137 The rationale of the Supreme Court’s rejection of these two doctrines are, (1) allowing indirect purchasers to sue but not permitting defendants to use “passingon” as a defense would create multiple liabilities on defendants;138 and (2) prohibiting both indirect purchasers’ standing and the use of “passing-on” would “prevent the courts from an unmanageable morass of complexity.”139 ii. Lessons from the U.S. Law When we consider the rules of “indirect purchaser” and “passingon,” we should strike a balance between the values of efficiency and justice. Permitting indirect purchasers to sue would decrease judicial efficiency; however, prohibiting them to sue would cause injustice, because some indirect purchasers are actual victims of antitrust violations. It seems that U.S. federal antitrust law prefers the value of efficiency if the two values conflict. U.S. law puts more emphasis on the effect of deterring antitrust violations and preventing courts from unmanageable complexity. Although such provisions have been criticized, 140 it is still a reasonable choice under the backdrop of the American society. Within the U.S. legal system, several mechanisms are designed to support and inspire private antitrust litigation, such as mandatory treble damages, evidence discovery system, and the class action. The concern of a flood of frivolous litigation leads legislators to limit the standing of indirect purchasers. However, such a concern may not exist in China today. Private antitrust enforcement in China is inactive, and plaintiffs lack motivation to file lawsuits. As a result, the reason of prohibiting indirect purchasers to file antitrust lawsuits is not persuasive to China. However, risks of 135

Id. at 970.

136

See Ill. Brick Co. v. Ill., supra note 114.

137

See Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U.S. 481 (1968).

138

SULLIVAN & GRIMES, supra note 116, at 972-973

139

Id. at 972.

140

Nowadays, many states have enacted “Illinois Brick Repealers,” which refers to legislation that gives indirect purchasers the right to sue for antitrust damages. See Robert H. Lande, New Options for State Indirect Purchaser Legislation: Protecting the Real Victims of Antitrust Violation, 61 ALA. L. REV. 447, 451-60 (2010).

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imposing multiple liabilities on defendants and bringing “unmanageable morass of complexity” to courts if indirect purchasers are permitted to sue—the primary concern of U.S. legislators—should be taken into consideration by Chinese law-makers. I have two suggestions: first, in order to avoid imposing multiple liabilities on defendants, the law may provide that only direct purchasers can claim a punitive damage while indirect purchasers are merely entitled to claim actual damages.141 Second, a better designed mechanism of the class action may help indirect purchasers to sue as well as prevent courts from unmanageable chaos. I will discuss the class action in the following section. 3.

Class Action

i. The U.S. Law The class action is a potent mechanism for aggregating a large number of people or companies who have been damaged by a same antitrust violation in situations where it is nearly impossible (or lacking motivation) to bring individual lawsuits. Although most of successful class actions involve cartels,142 the class action also plays a vital role in lawsuits related to RPM because products’ distribution process usually involves a large number of distributors and consumers. Chinese scholars have expressed interest in the U.S. class action,143 while the class action is facing increased scrutiny in the U.S. Today, the U.S. federal courts impose increasingly stringent requirements for antitrust class action and tend to narrow its application.144

141

See DAIBIN & LANLEI (戴宾&兰磊), FANLONGDUAN FA MINSHI JIUJI ZHIDU BIJIAO YANJIU (反垄断法民事救济制度比较研究) [COMPARATIVE STUDY OF ANTITRUST CIVIL REDRESS], 205 (2010) (China). 142

Directorate for Financial and Enterprise Affairs Competition Committee, Relationship between Public and Private Antitrust Enforcement: United States, OECD Doc. DAF/COMP/WP3/WD (2015)11, para. 5 (June 9, 2015), http://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=DAF/COMP/W P3/WD(2015)11&docLanguage=En [hereinafter U.S. Working Report on Co-operation and Enforcement]. 143 144

See Zhang Wusheng, supra note 5, at 24-28.

See Spencer Weber Waller & Olivia Popal, The Fall and Rise of the Antitrust Class Action, 39 WORLD COMPETITION 29, 1-8 (2016), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2641867 ; see also EDMUND W. SEARBY, United States: Private Antitrust Litigation—Class Actions, in THE ANTITRUST REVIEW OF THE AMERICAS 2015, 45, 46-47 (2015), https://www.bakerlaw.com/files/uploads/Documents/News/Articles/LITIGATION/2014/S earby-US-Private-Antitrust-LitigationClass%20Action.pdf.https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2641867.

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Rule 23 (a) of Federal Rules of Civil Procedure (amended in 1966) provides four basic prerequisites for the class action: (1) the class is so numerous that joinder of all members is impracticable; (2) there are questions of law or fact common to the class; (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class. 145 Rule 23 (b) describes types of class actions. The most likely to be relevant in antitrust litigation are (b) (2) and (b) (3). Rule 23 (b) (2) is a type of class action to protect a class who benefit from final injunctive relief. Rule 23 (b) (3) requires: The court finds that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.146 Rule 23 (b) (3) is the most controversial article regarding class action. The majority of antitrust class actions need to pass the test of Rule 23 (b) (3) to obtain certification. In recent years, federal courts have adopted rigorous standards to narrow the use of class action. In Comcast Corp. v. Behrend,147 customers brought antitrust class action against Comcast—a cable television company—to allege that Comcast allocated regional cable markets and engaged in conduct that excluded and prevented competition. The Supreme Court denied a class action certification with the holding that plaintiffs did not satisfy the Rule 23 (b) provision to prove that “damages were susceptible of measurement across entire class.”148 The Court stated that certification of class action only can be satisfied “after a rigorous analysis.” 149 After Comcast, some lower federal courts followed the Supreme Court’s attitude. For example, in re Rail Freight, the DC Circuit Court vacated the district court’s class certification decision and remanded

145

FED. R. CIV. P. 23(a).

146

FED. R. CIV. P. 23(b)(3).

147

Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013).

148

Id. at 1426.

149

Id. at 1429.

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to the district court to reconsider in light of the Comcast decision. 150 Similarly, in re VHS of Michigan, Inc, the Sixth Circuit remanded to the district court to review the class certification in light of Comcast. 151 ii. Lessons from the U.S. Law As discussed above, the U.S. class action mechanism has both merits and defects. If China considers whether to learn this mechanism from the U.S. law, it is necessary to evaluate whether these merits would be equally applicable in Chinese society and how likely the defects would occur in China. In China’s civil process, the representative lawsuit can be regarded as a rough analogy of the class action in the U.S. law. The Civil Procedure Law provides two kinds of representative lawsuits: lawsuits with identified members and lawsuits with an uncertain number of members.152 The most significant difference between the representative lawsuit and the class action is that the former one adopts the “opt-in” system, but the later one uses the “opt-out” one.153 In other words, in the representative lawsuit, courts’ judgments and adjudications only have binding effect on members enrolling in the lawsuit. However, in the class action, courts’ judgments and adjudications have automatic and binding effect on all class members unless they expressly choose to “opt-out” of the class action. When the representative lawsuit in Chinese legal system is used to solve antitrust disputes, it has three drawbacks. First, Articles 53 and 54 of the Civil Procedure Law provide that the litigant representative has to obtain a consent from all of the parties represented when changing the representative, relinquishing claims, acknowledging claims of the opposing party, or negotiating a settlement.154 Obtaining a consent sounds feasible when a lawsuit includes limited identified members; however, it is difficult to have such a consent when a large number (or uncertain number) of members are involved. Without a doubt, the collective decision-making requirement has increased the difficulty of filing a representative lawsuit to solve antitrust disputes, especially, involving a large number of consumers.

150

See In re Rail Freight Fuel Surcharge Antitrust Litig. MDL No. 1869, 725 F.3d 244 (D.C. Cir. 2013). 151

See In re VHS Mich, Inc, No. 13-0113, 2014 U.S. App. LEXIS 4447 (6th Cir. Jan. 6, 2014). 152

In addition, the law provides that the minimum number of a representative lawsuit should be ten people. Civil Procedure Law of 2012, supra note 71, art. 53-54. 153

Id. art. 54.

154

Id. art. 53, 54.

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Second, there is no incentive to file a representative lawsuit in China. The AML does not provide punitive damages in civil lawsuits. Victims—normally consumers in RPM case—generally have very small claims, so they may have little incentive to sue. In addition, Chinese lawyers are prohibited from charging a contingency fee in representative lawsuits,155 so they lack motivation to participate in such lawsuits as well. Third, Chinese courts are wary of using the representative lawsuit in practice, especially when the lawsuit involves an uncertain number of members.156 Courts worry a representative lawsuit may expand disputes unnecessarily because of overly public attention or they may lead to large scale mass activities.157 Based on China’s situation, I will assess whether the merits of class action can be achieved in China, and whether the defects of class action concerned by the U.S. are likely to emerge in Chinese society. iii. Merits of Class Action First, the class action can encourage people to file antitrust lawsuits. The class action is designed on a wholesale basis to bring litigation that are impossible to litigate by individuals. The class action is particularly useful in RPM lawsuits since RPM disputes usually involve a large group of consumers or distributors of low-value items, such as consumers of baby formula milk. The “opt-out” system would let more common people (normally consumers) get involved in antitrust lawsuits and naturally make them get closer to the antitrust enforcement. In addition, the class action can push lawyers and judges to pay attention to antitrust law enforcement. In China, private antitrust lawsuits only represent a very small portion of all private lawsuits.158 If lawyers are permitted to charge a contingency fee to bring class actions, many lawyers 155

Notice of the National Development and Reform Commission and the Ministry of Justice on Issuing the Measures for the Administration of Lawyers' Fees (promulgated by the NDRC and Ministry of Justice, Apr. 13, 2006, effective Dec. 1, 2006), art. 12, CLI.4.76093(EN) (Lawinfochina) [hereinafter Notice for the Administration of Lawyers' Fees]. 156

Chen Wenxuan (陈文煊), Fanlongduan Minshi Susong Zhong Daibiaoren Susong Zhidu de Shiyong Yu Wanshan (反垄断民事诉讼中代表人诉讼制度的适用与完善) [Application and Improvement of Representative Lawsuit in Antitrust Private Enforcement], Z1 FALÜ SHIYONG (法律适用) [J. L. APPLICATION] 103, 104-05 (2010). 157 158

Id. at 105.

In 2015, there were only 141 private antitrust lawsuits filed with courts nationwide in China. See Dacheng Law Offices, supra note 25, at 11. In stark contrast, the number of closed civil lawsuits of all courts only in Beijing was 254,842. See Beijing Shi Gaoji Renmin Fayuan 2015 Nian Gongzuo Baogao (北京市高级人民法院 2015 年工作报 告)[2015 Working Report of Beijing High Court], Beijing Court, http://www.bjcourt.gov.cn/article/newsDetail.htm?NId=55001802&channel=100001012.

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would be motivated to study and enforce antitrust law. Furthermore, because the class action usually involves a large group of members, the class action can push judges to put more emphasis on antitrust issues because their judgments would generate great public attention and affect the judges’ own reputation. In my view, the class action could be considered as a way not only to let common people get familiar with the antitrust law through participating private litigation, but also to raise legal practitioners’ attention to the antitrust law enforcement. Second, the class action can enhance the antitrust law’s purpose of deterrence. In the U.S., the class action is a valuable tool for providing deterrence for antitrust violations. 159 As I discussed earlier, China’s antitrust law should enhance the purpose of deterrence, and the class action can be used as a channel to achieve such a purpose. Third, the “opt-out” system of the class action can better compensate victims. The “opt-out” system can cover many more victims in a defendant’s compensation scheme, even though some victims do not know about the class lawsuit when the action is filed. Moreover, the class action can claim an injunction. For consumers who have very small claims, an injunction may be more effective than a small monetary compensation. Fourth, the “opt-out” system of the class action can make up defects of China’s representative lawsuit. The representative lawsuit requires that the representative must obtain a consent from all of represented members when changing the representative, relinquishing claims, acknowledging claims of the opposing party, or negotiating a settlement. These provisions make the trial of a representative lawsuit unreasonably difficult. iv. Risks of Class Action The U.S. courts are attempting to limit the use of the class action because of the risk of over-enforcing antitrust law. Would China also face such a situation? The major concern of American legislators is the abuse of the class action. The “opt-out” system has caused the use of the class action to rapidly expand in several areas of U.S. law. 160 The “opt-out” system means that if a member does not choose to opt out, the judgment or settlement has binding effect on her.161 Because of the binding effect on a large number of class members (under some circumstances each class member is not able to be identified),162 there is indeed a risk of the class 159

SULLIVAN & GRIMES, supra note 116, at 998.

160

Waller & Popal, supra note 144, at 2.

161

FED. R. CIV. P. 23(b)(3)(B).

162

For example, in In re Disposable Contact Lens Antitrust Litigation, contact lens

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action over-enforcing antitrust law. Lawyers may utilize the class action for bounty hunting rather than for compensating victims. Since the class action generally includes many members, the amount of compensation allocated to each member sometimes is too small to be efficiently distributed. 163 As a result, some class actions yield little benefits to plaintiffs, but money flows into lawyers’ pockets.164 However, at present, China needs not to worry about this risk. First, private antitrust enforcement is inactive in China. There is no need to worry about a flood of lawsuits at present. Second, regarding the risk of the “lawyer-driven” bounty hunting, legislators can set a ceiling of the percentage of lawyers’ charge. For example, a scholar suggests that Chinese legislators could consider 20% of the claims as the maximum contingency fee in the class action,165 which is lower than a maximum contingency fee of 30% that attorneys can charge in normal civil lawsuits under Chinese law.166 Another concern of the class action is that the potentially huge amount of money made by settlements (or judgments) could cause the bankruptcy of companies and, thus, unemployment, which may lead to social instability. However, such concerns in China are unlikely as serious as that in the United States. Because China’s AML does not provide a mandatory treble damage or the “one-way cost” rule, successful class actions may not cause catastrophic effects on defendants’ companies. Finally, some concerns are expressed that when the class action is used to challenge non-hardcore antitrust violations (such as RPM), a large amount of money for settlement or compensation may deter companies’ potential pro-competitive conduct.167 This concern is the least one to be worried about. Considering the heavy burden of proof for plaintiffs in China, plaintiffs have to first prove that the alleged RPM is anticompetitive, so the risk of deterring procompetitive conduct is not substantial.

wearers brought antitrust action against contract lens producers and eye care practitioner trade organizations. See In re Disposable Contact Lens Antitrust Litig., 170 F.R.D. 524, 528-29 (M.D. Fla. 1996). Defendants moved to dismiss, but the District Court held that the class certification was warranted, because the class is so numerous and it is impracticable to identify all members. Id. at 528-29. 163

SULLIVAN & GRIMES, supra note 116, at 999.

164

Id.

165

Zhang Wusheng, supra note 5, at 30.

166

Notice for the Administration of Lawyers' Fees, supra note 155, art. 13.

167

SULLIVAN & GRIMES, supra note 115, at 1000.

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C. Seek Support from and Resolve Conflicts with Public Antitrust Enforcement In recent years, the NDRC began a series of proactive antitrust price investigations in many industries. Consequently, more “follow-on” private lawsuits related to the NDRC decisions are very likely to emerge in China. Seeking supports from and solving conflicts with public enforcement would alleviate the plaintiffs’ burden of proof in private litigation, especially in RPM lawsuits. 1.

The U.S. Laws

Section 5(a) of the Clayton Act allows that a plaintiff can use a final judgment or decree in a criminal and civil proceeding brought by the United States as prima facie evidence in a subsequent private lawsuit.168 However, this rule does not apply to cases solved by consent judgments or decrees entered before the testimony has been taken. Moreover, leniency applicants169 in criminal processing take advantage of the damages limitations granted by the Antitrust Criminal Penalty Enhancement and Reform Act of 2004,170 which protects a successful leniency applicant from the treble civil damage and joint and several liability in a subsequent private lawsuit.171 The rationale is to prevent civil lawsuits from crippling the function of commitments and leniency programs. In practice, despite of the provision of Section 5(a) of the Clayton Act, obtaining information and evidence controlled by agencies are still subject to several limitations. Private parties can occasionally obtain nonpublic civil investigation materials from the Federal Trade Commission (FTC) and the Department of Justice (DOJ) by subpoena or by requesting the information under the Freedom of Information Act. 172 Regarding confidential business information provided by investigative sources, the agencies’ general policy is to assert all applicable legal exemptions and privileges to prevent from disclosing information when they face a private party’s request for disclosure.173

168

15 U.S.C. § 16(a).

169

The U.S. antitrust laws provide that a leniency program only be applied to criminal antitrust behaviors, mainly to cartels. See Hammond & Barnett, supra note 101, at 6. In contrast, China’s AML does not impose criminal liability, so the leniency program is applied to non-criminal antitrust violations. 170

U.S. Working Report on Co-operation and Enforcement, supra note 142, para. 11.

171

Id. at 5

172

Id. at 10.

173

Id. at 10-11.

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Although there are limitations for private plaintiffs to access certain information from public enforcement, the provision of Section 5(a) of the Clayton Act significantly reduces the amount of resources that plaintiffs “must commit to survive initial dispositive motions.” 174 In addition, certain findings made by the FTC in administrative litigation can be used as evidence in a follow-on private lawsuit against the same defendant, which grants collateral estoppel effect in such lawsuits. 175 Moreover, the process of cases litigated by the agencies is highly transparent, which make the public generally “access to the evidence admitted and filed with the court in the proceedings.”176 Besides the “follow-on” civil lawsuits, there would be potential conflicts between ongoing public enforcement and private lawsuits. With regard to solutions, on a case-by-case basis, if the DOJ finds certain types of private discovery may interfere with the criminal investigation, the DOJ will seek a stay of civil discovery or limit its scope.177 The agency’s attorney usually keeps in touch with a private lawsuit’s attorney to update the progress of the private litigation and information of its effects on public enforcement.178 2.

Lessons from the U.S.

In this section, I will discuss two issues. First, regarding the “follow-on” lawsuit, should private plaintiffs be able to use decisions, evidence, and information of public enforcement as prima facie evidence? If the answer is yes, how could private parties apply for it, and what are limitations for such applications? Second, regarding ongoing public enforcement, how should judges and antitrust officers deal with conflicts between public and private antitrust enforcement, if any? i. Prima Facie Evidence for The “Follow-on” Lawsuit As we discussed earlier, the Chinese Supreme Court’s Judicial Interpretation does not provide whether the antitrust agencies’ decisions can be taken as prima facie evidence in subsequent civil lawsuits. However, according to laws related to evidence, decisions produced by governments have, as a general rule, stronger weight of proof than other written evidence.179 174

Kevin J.L. O’Connor et. Al, Interaction of Public and Private Enforcement, in PRIVATE ENFORCEMENT OF ANTITRUST LAW IN THE UNITED STATES 280, 286 (Albert A. Foer and Randy M. Stutz ed., 2012). 175

U.S. Working Report on Co-operation and Enforcement, supra note 142, para. 23.

176

Id., para 24.

177

Id., para 24.

178

Id., para 25.

179

Some Provisions of the Supreme People’s Court on Evidence in Civil Procedures,

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Even if the administrative decisions can be taken as prima facie evidence, it is still unclear whether other materials, information, and evidence obtained by antitrust agencies can be used as evidence in private lawsuits. Most of the criticisms raised by international companies and foreign regulators against China’s public enforcement are the lack of transparency during the decision-making process.180 The non-transparency has significantly hindered private plaintiffs from knowing what kinds of and how much information and evidence is controlled by the agencies. Moreover, the paternalistic culture of Chinese administrative officials makes officials feel entitled to a superior status, which gives them a prerogative to judge whether/which information can be disclosed to the public.181 In addition, after the reform of the civil process, courts are intended to limit to conduct investigation and collect evidence. Therefore, when these factors function together, information and evidence controlled by the antitrust agencies can hardly be accessed to private plaintiffs. The Infant Formula Milk Follow-on Case, as we discussed in Section II, just exemplifies how the non-transparency of decision-making process of public enforcement hindered private plaintiffs to win the case. The NDRC’s penalty decision on Abbott, the formula milk producer, was taken as the evidence to prove Abbott had implemented an illegal RPM agreement. However, the NDRC decision did not disclose other parties of the RPM agreement, other than Abbott. Therefore, the plaintiff, as a consumer, cannot prove that the distributor, whom he purchased the formula milk from, had signed the illegal RPM agreement with Abbott. In the United States, the agencies litigate cases with high transparency, and the agencies’ administrative proceedings are generally open to the public.182 Such transparency helps people learn about public enforcement. Therefore, private plaintiffs and their attorneys can well evaluate and predicate effects of public enforcement on their own private lawsuits, and then make litigation strategies. More importantly, the U.S. evidence discovery system can largely support private plaintiffs, even if they cannot obtain evidence from the agencies. Without the evidence discovery system, Chinese antitrust private plaintiffs face a much heavier burden of proof. Compared to the American counterparties, Chinese antitrust agencies should offer more support to private plaintiffs. I urge the NDRC to disclose more detailed information to the public, including, but not limited to, the process of enforcement, defensive arguments of investigated companies, minutes from meetings supra note 94, art. 77. 180

See Martina & Miller, supra note 8.

181

See Jingmeng Cai, supra note 5, at 52-55.

182

U.S. Working Report on Co-operation and Enforcement, supra note 142, para. 24.

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between the NDRC and investigated companies, transcripts of public hearings, and other related information. As to confidential business information that cannot be disclosed, I suggest Chinese legislators and enforcers to issue laws or regulations to clarify the scope of non-disclosed information in order to prevent the agencies from abusing their discretion. Regarding evidence and information produced during the programs of commitments and leniency, China’s antitrust agencies share attitudes similar to their United States counterparts.183 Information and evidence provided and produced voluntarily by investigative sources for commitments and leniency applications cannot be used as evidence in relevant private lawsuits. However, a problem is that, based on the NDRC’s recent investigations and decisions, standards for accepting a commitment and granting a leniency are unclear and arbitrary.184 As to commitments, I suggest that specific guidelines and regulations should be issued to clarify standards of accepting companies’ commitments. Regarding the leniency, I do not agree that a leniency program should be applied to RPM. In the United States, leniency applicants are only wrongdoers who are engaged in criminal violations of the antitrust law.185 Such violations have serious anti-competition effects but are hard to detect, like cartels, so it serves the agency to trade with wrongdoers in order to discover these violations. It is a balance between the efficient enforcement and the justice of law.

183

See Guideline for Businesses’ Commitments (Draft), supra note 104; see also Guideline for Leniency Policy (Draft), supra note 104. 184

For example, in the infant formula milk case, a penalty of 4% of its sales volume in the previous year was imposed on Mead Johnson Nutrition because it was accused of failing to cooperate with the NDRC but had made commitments to implement self-corrective measures. See NDRC Decision on Infant Formula Milk Producers, supra note 45. In contrast, in the corrective lenses case, Nikon was accused of the same plot as Mead Johnson Nutrition (not cooperating with the NDRC but implementing self-corrective measures), but Nikon was given a penalty of only 2% of sales volume. See Nat’l Dev. & Reform Comm’n, Bufen Yanjing Jingpian Shengchan Qiye Weichi Zhuanshou Jiage Xingwei Bei Yifa Chachu (部分眼镜镜片生产企业维持转售价格行为被依法查处) [Imposed Penalty on Part Corrective Lenses Producers’ RPM] (May 29, 2014), http://www.sdpc.gov.cn/gzdt/201405/t20140529_613562.html. Companies which “proactively cooperated with the agency and carried out self-corrective measures” were fined 3% of the sales volume in the infant formula milk case, but the percentage was merely 1% for eyeglasses’ producers in the corrective lenses case. The NDRC did not explain reasons for such difference. Moreover, in infant formula milk case, the NDRC granted an exemption to more than one producer, but it clarified neither the order of applicants nor the requirements of granting a leniency. See NDRC Decision on Infant Formula Milk Producers, supra note 45. 185

Hammond & Barnett, supra note 102, at 6.

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However, because evidence of RPM is relatively obvious,186 it is not necessary for the agency to apply a leniency policy. Taking the formula milk case as an example, because of the leniency program, three producers, fixing resale prices of formula milk at a high level, are very likely to escape civil liability if follow-on civil lawsuits are filed against them. V. CONNECTIONS WITH ON-GOING PUBLIC ENFORCEMENT When a private lawsuit conflicts with an on-going public enforcement, from the US experience, Chinese courts can consider staying a civil trial to avoid an inconsistent judgment with public enforcement. In addition, improved coordination between courts and agencies can save judicial resources. Some Chinese scholars offer similar suggestions. They suggest that for complicated cases, when an agency’s investigation is ongoing, a court should suspend related civil litigation.187 If the agency’s final decision finds no violation, private plaintiffs could file administrative lawsuits against the administrative decision; if the agency affirms the violation, the court can resume civil litigation as a “follow-on” lawsuit. Regarding “simple” lawsuits without complicated facts or economic analysis, courts need not necessarily suspend an on-going civil litigation, but the responsible agency should pay close attention to the progress of the private lawsuit to avoid making conflicting decisions with judicial judgments. 188 In the following figure, I make an evaluation of all mechanisms discussed above about their values for improving China’s private antitrust enforcement. Rule and Mechanism of the U.S. Antitrust Law The predominant role of private enforcement in the antitrust system Purpose of deterrence & treble damage award 186

Lessons for China Not recommend Neutral

Identical retail prices set by all (or most) dealers are apparent evidence of RPM. Especially in China, some companies have taken RPM for granted, so evidence of carrying out RPM is relatively easy to be detected. For example, the chief executive officer of a state-owned liquor producer—Moutai—once said in public that the company would set the minimum resale prices of its products. See Yang Qiubo (杨秋波), Moutai Huiying Jiage Longduan Jiancha, Chexiao Dui Xiangguan Jingxiaoshang Chufa (茅台回 应价格垄断检查 撤销对相关经销商处罚) [Moutai Responses to the Price Monopoly Investigation and Revoking Punishments on Distributors], CAIXIN WANG (财新网) (Jan. 16, 2013), http://companies.caixin.com/2013-01-16/100483460.html (China). 187

Wang Xianlin, supra note 7, at 89.

188

Id.

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45 Not recommend Neutral Recommend Recommend Recommend

VI. CONCLUSION This article presents both the merits and the defects of U.S. private antitrust enforcement. It suggests placing rules and mechanisms in the context of China’s environment so that the U.S. experience can be more effectively evaluated and adopted to meet the needs of the Chinese society. This article recommends that China should develop private antitrust enforcement from three aspects: enhancing the goal of deterrence of private litigations, adopting solutions from specific rules and mechanisms of the U.S. antitrust law, and resolving the conflict with public antitrust enforcement. The plaintiffs’ heavy burden of proof is the major problem that hinders the development of China’s private enforcement and significantly discourages people from filing antitrust lawsuits in courts. The article suggests that a careful analysis of the U.S. experience with the purpose of easing the plaintiffs’ burden of proof may be of significant value for China. A feasible and sound solution should be adapted to local environment. Bearing that in mind, China may avoid the “pitfalls” and find valuable lessons from the U.S. experience.