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Beijing Qihu Technology Co., Ltd. v. Tencent Technology (Shenzhen) Company Limited and Shenzhen Tencent Computer Systems Company Limited, A Dispute over Abusing Dominant Market Positions

Guiding Case No. 78 (Discussed and Passed by the Adjudication Committee of the Supreme People’s Court Released on March 6, 2017)

CHINA GUIDING CASES PROJECT English Guiding Case (EGC78) ∗ April 7, 2017 Edition

∗ The citation of this translation of this Guiding Case is: 《北京奇虎科技有限公司诉腾讯科技（深圳）有限公司、深圳市腾讯计算机系统有限公司滥用市场支配地位纠纷案》 (Beijing Qihu Technology Co., Ltd. v. Tencent Technology (Shenzhen) Company Limited and Shenzhen Tencent Computer Systems Company Limited, A Dispute over Abusing Dominant Market Positions ), STANFORD LAW SCHOOL CHINA GUIDING CASES PROJECT , English Guiding Case (EGC78), Apr. 7, 2017 Edition, http://cgc.law.stanford.edu/guiding-cases/guiding-case-78. The original, Chinese version of this case is available at 《中国法院网》 (WWW .CHINACOURT .ORG ), http://www.chinacourt.org/article/detail/2017/03/id/2574869.shtml. See also 《最高人民法院关于发布第 16 批指导性案例的通知》 (The Supreme People’s Court’s Notice Concerning the Release of the 16 th Batch of Guiding Cases ), issued on and effective as of Mar. 6, 2017, http://www.chinacourt.org/law/detail/2017/03/id/149260.shtml. This document was primarily prepared by Sean Webb and Dr. Mei Gechlik; it was finalized by Sean Webb, Dimitri Phillips, and Dr. Mei Gechlik. Minor editing, such as splitting long paragraphs, adding a few words included in square brackets, and boldfacing the headings, was done to make the piece more comprehensible to readers; all footnotes, unless otherwise noted, have been added by the China Guiding Cases Project. The following text is otherwise a direct translation of the original text released by the Supreme People’s Court.

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Keywords

Civil Abusing Dominant Market Positions Monopoly

Relevant Market

Main Points of the Adjudication

1. In the course of handling an anti-monopoly case, defining the relevant market is usually an important analytical step. However, whether the relevant market can be unequivocally defined depends on the specific situation in the case. In a case about abusing a dominant market position, defining the relevant market is not an end in itself, [but rather] a tool for assessing a business operator’s market power and the impact of the allegedly monopolistic act on competition. If the business operator’s market position and the impact of the allegedly monopolistic act on the market can be assessed by direct evidence of exclusion or hindrance of competition, then it is not necessary to unequivocally and clearly define the relevant market in every case about abusing a dominant market position.

2. The Hypothetical Monopolist Test (HMT) 1 is an analytical approach generally applicable to defining the relevant market. In [its] actual application, the Hypothetical Monopolist Test can be carried out by [various] methods, such as the [Small but Significant and Non-transitory] Increase in Price (SSNIP) [method] 2 or the [Small but Significant and Non- transitory] Decrease in Quality (SSNDQ) [method]. 3 The free-of-charge feature of Internet

1 The Hypothetical Monopolist Test (HMT) is used to properly define a relevant market before determining whether a company has monopoly power in that market in violation of antitrust laws. For a more detailed description of this test, see THE OXFORD HANDBOOK OF INTERNATIONAL ANTITRUST ECONOMICS (Roger D. Blair & D. Daniel Sokol eds., Oxford University Press, 2015), at 354–55, https://books.google.com/books?id=8W_DBAAAQBAJ&pg=PA357&dq=hypothetical+monopolist+test&hl=en&sa =X&ved=0ahUKEwi41-ORkIvTAhVkh1QKHeUdDgYQ6AEITTAJ#v=onepage&q=hypothetical%20monopolist% 20test&f=false. 2 The U.S. Government first implemented the SSNIP test in the 1980s as a method for defining relevant markets in antitrust cases. Since then, governments and other entities around the world, including the European Union, have also applied the SSNIP test to define relevant markets before determining whether a company has market power in violation of antitrust laws. Under the SSNIP test, a relevant market exists for a product or service “if a profit-maximizing hypothetical monopolist of [that product or service] could impose a small but significant, non-transitory increase in price (SSNIP) above the current prices of the brands of [that product or service].” See Serge X. Moresi, Steven C. Salop & John R. Woodbury, Implementing the Hypothetical Monopolist SSNIP Test With Multi-Product Firms , Antitrust Source (Feb. 2008), at 2, http://www.americanbar.org/content/dam/aba/publishing/antitrust_source/Feb08_FullSource.authcheckdam.pdf. 3 Although it has not been used as widely as the SSNIP test, the SSNDQ test is another version of the HMT. To define a relevant market, the SSNDQ test considers “whether a change in performance attributes […] of a given product or service would induce substitution to or from another product/service. If a supplier were to reduce quality significantly, holding all else equal, and no substitution takes place, then the product is a relevant market. If customers switch to another product/service, then this other product/service would also be in the relevant market.” See Maria Maher, Paul Reynolds, Paul Muysert & Fred Wandschneider, GSMA, RESETTING COMPETITION POLICY

2017.04.07 Edition instant messaging services makes users have higher price sensitivity and adopting the [Small but Significant and Non-transitory] Increase in Price testing method will result in a broader definition of the relevant market. [In such cases, the court] should adopt the [Small but Significant and Non-transitory] Decrease in Quality [method] of the Hypothetical Monopolist Test to carry out a qualitative analysis.

3. Because of the low-cost and high-coverage characteristics of Internet-based instant messaging services, when the relevant geographic market [of these services] is defined, [the court] should conduct a comprehensive assessment based on such factors as the actual regions [where] most demanders choose the commodities, [relevant] provisions of laws and regulations, the current status of overseas competitors, and the timeliness of entering the relevant geographic market.

4. In the Internet sector, market share is only a relatively rough and potentially misleading indicator for determining [the existence of] a dominant market position. The status and role of [a business operator’s] market share in determining [the operator’s] market dominance must be ascertained on the basis of the specific situation in the case.

Related Legal Rule(s)

Article 17, Article 18, and Article 19 of the Anti-Monopoly Law of the People’s Republic of China 4

Basic Facts of the Case

On October 29, 2010, Beijing Qihu Technology Co., Ltd. 5 (hereinafter referred to as “Qihu Company”) and Qizhi Software (Beijing) Co., Ltd. 6 released the Koukou Bodyguard Software. On November 3, 2010, Tencent Technology (Shenzhen) Company Limited 7 (hereinafter referred to as “Tencent Company”) released A Letter to All QQ Users , [requesting

FRAMEWORKS FOR THE DIGITAL ECOSYSTEM (Oct. 2016), at 57, http://www.gsma.com/publicpolicy/wp- content/uploads/2016/10/GSMA_Resetting-Competition_Report_Oct-2016_60pp_WEBv2.pdf. 4 《中华人民共和国反垄断法》 (Anti-Monopoly Law of the People’s Republic of China), passed and issued on Aug. 30, 2007, effective as of Aug. 1, 2008, http://www.gov.cn/flfg/2007-08/30/content_732591.htm. 5 The name “ 北京奇虎科技有限公司 ” is translated herein as “Beijing Qihu Technology Co., Ltd.” in accordance with the English name appearing for it in the document available at https://www.sec.gov/Archives/edgar/data/1508913/000114420413028444/R37.htm 6 The name “ 奇智软件（北京）有限公司 ” is translated herein as “Qizhi Software (Beijing) Co., Ltd.” in accordance with the English name appearing for it in the document available at https://www.sec.gov/Archives/edgar/data/1508913/000114420413028444/R37.htm 7 The name “ 腾讯科技（深圳）有限公司 ” is translated herein as “Tencent Technology (Shenzhen) Company Limited” in accordance with the English name appearing for it in the document available at https://www.tencent.com/en-us/articles/1700051460102129.pdf.

2017.04.07 Edition users] stop running QQ software on computers installed with [Qihu Company’s] 360 software. On November 4, Qihu Company announced a recall of the Koukou Bodyguard Software. On the same day, [Qihu Company’s] 360 Security Center also announced that, under the strong intervention of the relevant departments of the State, QQ [software] and 360 software had become completely compatible.

In September 2010, Tencent QQ Instant Messaging Software and QQ Software Management were [available] for installation as a package. During the installation process, users were not informed that QQ Software Management would be installed at the same time. On September 21, 2010, Tencent Company issued a notice stating that QQ Software Management and QQ Doctor in current use would be automatically upgraded to QQ Computer Housekeeper.

Qihu Company brought suit in the Higher People’s Court of Guangdong Province, alleging that Tencent Company abused its dominant market position in the relevant instant messaging software and services market. Qihu Company claimed that Tencent Company and Shenzhen Tencent Computer Systems Company Limited 8 (hereinafter referred to as “Tencent Computer Company”) had dominant market positions in the relevant instant messaging software and services market. The two companies explicitly prohibited their users from using Qihu Company’s 360 software; [should users go against this prohibition,] the QQ software services would stop. [They] refused to provide related software services to users who had installed 360 software and [they] forced users to delete 360 software. [They] used technical means to prevent users who had installed the 360 browser from visiting Qzone.9 [All of] the above-mentioned acts constituted restricted transactions. Tencent Company and Tencent Computer Company bundled QQ Software Housekeeper with [their] instant messaging software and installed QQ Doctor in the name of upgrading QQ Software Housekeeper. [These acts] constituted bundled sales. [Qihu Company] requested [that the court] order Tencent Company and Tencent Computer Company to immediately stop the monopolistic acts of abusing [their] dominant market positions and to jointly and severally pay Qihu Company RMB 150 million as compensation for [its] economic losses.

Results of the Adjudication

On March 20, 2013, the Higher People’s Court of Guangdong Province rendered the (2011) Yue Gao Fa Min San Chu Zi No. 2 Civil Judgment:10 [the court] rejects the litigation

8 The name “ 深圳市腾讯计算机系统有限公司 ” is translated herein as “Shenzhen Tencent Computer Systems Company Limited ” in accordance with the English name appearing for it in the document available at https://www.tencent.com/en-us/articles/1700051460102129.pdf. 9 Qzone is a social networking platform created by Tencent Company in 2005. Its users, currently numbering over 500 million, can write blogs and diary entries, send photos, and share music and videos. Each user has a homepage with a status, blog, background music, photo albums, personal information, etc. There are also third-party applications which connect with Qzone. See QZONE , http://qzone.qq.com; see also The Story of China’s Biggest Social Network: QZone , CHINA INTERNET WATCH (Sept. 13, 2013), https://www.chinainternetwatch.com/3346/tencent-qzone. 10 The first-instance judgment has not been found and may have been excluded from publication.

2017.04.07 Edition requests of Beijing Qihu Technology Co., Ltd. Not accepting [the judgment], Beijing Qihu Technology Co., Ltd. appealed. On October 8, 2014, the Supreme People’s Court rendered the (2013) Min San Zhong Zi No. 4 Civil Judgment: 11 [the court] rejects the appeal and upholds the original judgment.

Reasons for the Adjudication

In the effective judgment, the court opined: 12 the focal points of the dispute involved in this case primarily include: first, how to define the relevant market in this case; second, whether the appellees had dominant market positions; third, whether the appellees’ [acts] constituted acts of abusing dominant market positions as prohibited by the Anti-Monopoly Law .

1. How to define the relevant market in this case

This focal point of the dispute could be further broken down into a few specific problems, which were summarized as follows:

First, it is not necessary to unequivocally and clearly define the relevant market in every case about abusing a dominant market position[:]

Acts of competition always occur and unfold within a certain market scope. Defining the relevant market can clarify the market scope within which the business operators compete with each other and the constraints on the competition that they face. In a case about abusing a dominant market position, defining the relevant market reasonably is of great significance to such key issues as identifying the business operator’s market position correctly, analyzing the impact of the business operator’s acts on market competition, and determining whether the business operator’s acts are unlawful—and, if they are, the legal liability that [the business operator] has to bear. Therefore, in the course of handling an anti-monopoly case, defining the relevant market is usually an important analytical step. Despite this, whether the relevant market can be unequivocally defined depends on the specific situation in the case, especially the evidence in the case, the availability of relevant data, and the complexity of [market] competition in the relevant sector.

In the course of handling a case about abusing a dominant market position, defining the relevant market is not an end in itself, [but rather] a tool for assessing a business operator’s market power and the impact of the allegedly monopolistic act on competition. Even if the relevant market is not unequivocally defined, the sued business operator’s market position and

11 See 《奇虎公司与腾讯公司垄断纠纷上诉案判决书》 (Qihu Company and Tencent Company, The Appellate Judgment of a Monopoly Dispute ) （2013 ）民三终字第 4 号民事判决）((2013) Min San Zhong Zi No. 4 Civil Judgment), rendered by the Supreme People’s Court on Oct. 8, 2014, full text available on the Stanford Law School China Guiding Cases Project’s website, at http://cgc.law.stanford.edu/judgments/spc-2013-min-san-zhong- zi-4-civil-judgment. 12 The original text does not specify which court opined. Given the context, this should be the Supreme People’s Court.

2017.04.07 Edition the possible impact of the allegedly monopolistic act on the market can still be assessed by direct evidence of exclusion or hindrance of competition. Therefore, it is not necessary to unequivocally and clearly define the relevant market in every case about abusing a dominant market position.

The first-instance court had actually defined the relevant market in this case. Because the boundaries of the relevant market in this case were ambiguous, the first-instance court merely analyzed the possible boundaries of the relevant market without giving an unequivocal conclusion on the boundaries. In view of [the fact that the court did define the relevant market even though it did not unequivocally define its boundaries], Qihu Company’s grounds [for appeal] the first-instance court did not ascertain the basic facts of this case because it did not unequivocally define the relevant market in this case could not stand.

In addition, on the issue of whether the “Hypothetical Monopolist Test” method could be applied to a [market] sector with free-of-charge commodities[:]

In the effective judgment, the court opined: first, as an analytical approach to defining the relevant market, the Hypothetical Monopolist Test (HMT) has general applicability. In practice, there are multiple analytical methods [for implementing] the Hypothetical Monopolist Test. [The test] can be carried out by the Small but Significant and Non-transitory Increase in Price (SSNIP) method or by the Small but Significant and Non-transitory Decrease in Quality (SSNDQ) method. At the same time, as an analytical approach or way of thinking, the Hypothetical Monopolist Test can, in actual application, be carried out by qualitative analytical methods and, if the conditions permit, also by quantitative analytical methods.

Second, in practice, selecting the method with which to carry out the Hypothetical Monopolist Test depends on the specific situation of the case, [including] the market sector of the competition involved in the case and the available relevant data. If [in] the specific market sector, the feature of commodity homogenization is relatively obvious and price competition is a more important form of competition, then it is more feasible to use the Small but Significant and Non-transitory Increase in Price (SSNIP) method. However, in a sector where product differentiation is very obvious and non-price competition (e.g., quality, service, innovation, consumer experience, etc.) has become an important form of competition, it is more difficult to use the Small but Significant and Non-transitory Increase in Price (SSNIP) method. In particular, when the market equilibrium price of the commodities in a specific sector is zero, using the SSNIP method is especially difficult. When the SSNIP method is used, it is usually necessary to identify the appropriate benchmark price, increase that price by 5% to 10%, and then ascertain the response of the demander. When the benchmark price is zero, if the price is increased by 5% to 10%, the price, after the increase, is still zero. If the price is raised from zero to a small positive price, then it is equivalent to [having] an infinite increase in the price, suggesting that the special nature of the commodity or the business model has changed greatly, thus [making] it difficult to carry out the SSNIP test.

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Third, on the issue of the applicability of the Hypothetical Monopolist Test in this case. In competing in the Internet sector, there are several aspects of competition, including quality, service, and innovation, to which providers of Internet services pay more attention than they do to price competition. Under the circumstances where free-of-charge basic Internet instant messaging services have long existed and become a popular business model, users have extremely high price sensitivity and thus changing the free-of-charge strategy to charge even a small fee may lead to the loss of a large number of users. At the same time, changing the price from free-of-charge to charging a fee also suggests major changes in the commodity’s special nature and business model, i.e., changing from a free-of-charge commodity to a commodity charging a fee and from an indirect profit model to a direct profit model. In this situation, if a Hypothetical Monopolist Test that is based on the relative increase in price is used, it is likely that commodities that are not substitutes will be included in the relevant market, resulting in a broader definition of the relevant market. Therefore, a Hypothetical Monopolist Test that is based on the relative increase in price was not entirely suitable for use in this case.

Although it was difficult to completely apply in this case a Hypothetical Monopolist Test that is based on a relative increase in price, it was still possible to adopt a variant of the method, such as a Hypothetical Monopolist Test that is based on a decrease in quality. Because it was more difficult to assess the extent of a decrease in quality and relevant data were difficult to obtain, a Hypothetical Monopolist Test [that is based on] a decrease in quality could be used to conduct [only] qualitative analysis—and not quantitative analysis.

Further, on the issue of whether the relevant market in this case should be identified with Internet application platforms[:]

The appellant argued that Internet application platforms were not relevant to the definition of the relevant market in this case. The appellees, however, argued that competition on the Internet was actually competition on the platforms and the scope of the relevant market in this case went far beyond the instant messaging services market. In the effective judgment, the court, with a focus on the characteristics of platform competition in the Internet sector, elaborated on how the characteristics of platform competition should be considered when the relevant market is defined and on handling methods, opining [as follows.]

First, Internet competition has, to a certain extent, shown the features of platform competition. When the allegedly monopolistic acts occurred, the features of Internet platform competition had already become more obvious. Through specific entry points into the Internet sector, Internet business operators play mediating roles between consumers of different types and with different demands, thereby creating value.

Second, to determine whether the relevant commodity market in this case should be identified with Internet application platforms, the key question was whether mutual competition among network platforms for users’ attention and for advertisers had completely crossed boundaries determined by the characteristics of the product or service and had imposed on

2017.04.07 Edition business operators a strong enough constraint on competition. The answer to this question ultimately depended on empirical testing. In the absence of precise empirical data, at least the following [points] should be noted: [(1)] first of all, competition among Internet application platforms for users’ attention and for advertisers is based on core products or services that they provide. [(2)] In addition, core products or services [provided by] Internet application platforms have quite a number of differences in their attributes, features, functions, and uses. Advertisers may not care about the differences in these products or services and [may] only care about the price and effect of advertising. Thus, [they] probably perceive different Internet application platforms as substitutes for each other. However, for all free-end users, it is difficult to perceive products or services which are provided by different platforms and have completely different functions and uses as effective substitutes for each other. A user who tries to find [information about] a historical person’s life usually chooses to use a search engine rather than instant messaging; he is unlikely to think that the two can substitute each other. [(3)] Further, differences in the special nature, functions, and uses of core products or services [provided by] Internet application platforms determine the possible differences between the major user groups and advertisers that [these providers] are competing for. Thus, there exist large differences in various aspects [of Internet application platforms], including the models for obtaining economic benefits, the target user groups, and the products provided by follow-up markets. [(4)] Finally, in this case, attention should be paid to whether the appellees had taken advantage of their possible market dominance in the sector of instant messaging to exclude and restrict the competition in the sector of Internet security software, extending the market dominance that they possibly had in the sector of instant messaging to the sector of security software. This process of competition occurs more frequently in the free-of-charge user terminals. In view of the above reasons, at the stage of defining the relevant market in this case, the special nature of competition among Internet platforms was not a primary factor for consideration.

Third, the way of considering the features of the competition between Internet enterprise platforms in this case. The purposes of defining the relevant market are to clarify the constraints on competition that a business operator faces, to reasonably determine the business operator’s market position, and to correctly judge the impact of its acts on market competition. Even if the special nature of Internet platform competition is not a primary consideration at the stage of defining the relevant market, it, for the purpose of correctly determining the business operator’s market position, can still be given due consideration when the business operator’s market position and market control are identified. Therefore, for this case, [the fact that] the special nature of competition among Internet platforms was not a primary consideration at the stage of defining the relevant market did not suggest that this special nature was neglected, but rather [reflects a determination] to consider the special nature in a more appropriate way.

Finally, on which questions need to be noted in defining the relevant geographic market of instant messaging services[:]

In the effective judgment, the court opined: the definition of the relevant geographic market in this case should begin with [a consideration of] the target geographical [area] of the

2017.04.07 Edition instant messaging services market in mainland China, followed by an [actual] investigation of the relevant geographic market in this case. Because Internet-based instant messaging services can reach or cover the world at a low cost and low price and there are no additional noteworthy transportation costs, pricing costs, or technical barriers, such factors as the actual regions [where] most demanders choose the commodities, [relevant] provisions of laws and regulations, the current status of overseas competitors, and the timeliness of entering the relevant geographic market are primary considerations for defining the relevant geographic market. Since no one factor is decisive, it is necessary to conduct a comprehensive assessment based on the above factors.

First, the vast majority of users within the territory of mainland China choose to use instant messaging services provided by business operators in mainland China. The users within the territory of mainland China do not pay much attention to international instant messaging products. In addition, China’s 13 Internet-related administrative regulations and rules provide unequivocal requirements and conditions for the operation of instant messaging services. China implements an administrative licensing system [to regulate] value-added telecommunication businesses, including instant messaging [businesses]. Foreign business operators usually cannot directly enter the territory of mainland China to operate; [they] need to enter by [establishing] sino-foreign equity joint ventures and obtaining the corresponding administrative licenses.

Further, [on] the actual situation of business operators [that offer] instant messaging services [but] that are located outside the territory [of China]. Prior to the occurrence of the allegedly monopolistic acts in this case, most of the major international instant messaging business operators, such as MSN, Yahoo, Skype, Google, etc., had already entered the mainland Chinese market through joint ventures. As a result, when the allegedly monopolistic acts were occurring, very few major business operators of international instant messaging services had not entered the territory of mainland China. If the quality of instant messaging services within the territory of mainland China had declined slightly, there would not have been many overseas business operators of instant messaging services available for domestic users to choose from.

Finally, there is more difficulty for an overseas business operator of instant messaging services to, within a short period of time (e.g., a year), timely enter mainland China and develop a scale [of business] that is [big] enough to restrict the business operators within the territory. An overseas business operator of instant messaging services first needs to establish an enterprise through a joint venture, meet a series of licensing conditions, and obtain the corresponding administrative licenses. [All of these], to a considerable extent, delay the entry time of overseas business operators. In conclusion, the relevant geographic market in this case should be the market in mainland China.

Combining other evidence and the actual situation in this case, the relevant market in this case should be defined as the instant messaging services market in mainland China. [This market] not only included personal computer instant messaging services, but also included

13 The original text reads “ 我国 ” (“my/our country”) and is translated herein as “China”.

2017.04.07 Edition mobile instant messaging services; [it] not only included integrated instant messaging services, but also included non-integrated instant messaging services, such as text, audio, and video [services].

2. Whether the appellees had dominant market positions

On the status and role of a business operator’s market share in the relevant market in determining [the operator’s] market dominance, the court opined in the effective judgment: the status and role of [a business operator’s] market share in determining [the operator’s] market dominance must be ascertained on the basis of the specific situation in the case. In general, the higher the market share is and the longer it is sustained, the more likely it is to indicate the existence of a dominant market position. Nonetheless, market share is only a relatively rough and potentially misleading indicator for determining [the existence of] a dominant market position.

The existence of a dominant market position cannot be directly inferred from the higher market share under circumstances where [(1)] market entry is easier, [(2)] the high market share comes from the business operator’s higher market efficiency or [its] provision of better products, or [(3)] products outside the market have formed a stronger constraint on the competition [facing] the business operator. In particular, the competition in the Internet environment has the feature of being highly dynamic and the boundaries of the relevant market are far less clear than those in traditional sectors. In this situation, the role of market share as an indicator must not be overestimated, and more emphasis should be placed on market entry, business operators’ market behavior, the impact on competition, and specific facts and evidence that can help determine [the existence of] a dominant market position.

Combining the above-mentioned approaches, [the court] considered and analyzed in the effective judgment whether the appellees had dominant market positions by [examining] various aspects, including the market share, the state of competition in the relevant market, the ability of the sued business operator to control the price and quantity of the commodities or other transaction conditions, the financial and technical conditions of the business operator, the degree to which other business operators are dependent on the business operator during transactions, and the degree of difficulty for other business operators to enter the relevant market. Finally, [the court] opined that the current evidence in this case was not sufficient to support the conclusion that the appellees had dominant market positions.

3. Whether the appellees’ [acts] constituted acts of abusing dominant market positions as prohibited by the Anti-Monopoly Law

In the effective judgment, [the court], after breaking with the tradition of using the “Three-Step Method” 14 to analyze acts of abusing a dominant market position and using a more

14 In determining whether a company’s acts constitute abuse of a dominant market position, courts (in various jurisdictions) typically have followed a three-step analysis: first, identifying or defining a relevant market in which

2017.04.07 Edition flexible analytical step and method, opined: in principle, if a sued business operator does not have a dominant market position, there is no need to analyze whether it is abusing [its] dominant market position; [the operator’s act] can be directly determined as not constituting an act of abusing a dominant market position as prohibited by the Anti-Monopoly Law .

However, in a relevant market where the boundaries are more vague and it is not clear whether the sued business operator has a dominant market position, [the court] can further analyze the impact of the allegedly monopolistic act on competition so as to test whether the conclusion regarding [the business operator’s] having or not having a dominant market position is correct. In addition, even if the sued business operator has a dominant market position, determining whether its [act] constitutes an act of abusing a dominant market position requires [the court] to comprehensively assess the negative effects and the potentially positive effects of the act on consumers and competition so as to judge the legality of the act. This case primarily involved [the following] two issues.

First, whether the acts of [making] “products incompatible” ([forcing] users to choose one of two products) carried out by the appellees constituted acts of restricting transactions as prohibited by the Anti-Monopoly Law . According to Article 17[(4)] of the Anti-Monopoly Law , where a business operator that has a dominant market position [“]restricts, without proper reasons, transaction counterparts to only having transactions with [it] or only have transactions with [other] business operators specified by it[”], [this act] constitutes [an act of] abusing a dominant market position. The appellant claimed that the appellees had no proper reasons to force users to stop using and to uninstall the appellant’s software: [these acts carried out by appellees] constituted [acts of] abusing dominant market positions, [specifically], acts of restricting transactions as prohibited by the Anti-Monopoly Law . On this, in the effective judgment, the court opined: although the acts of [making] “products incompatible” carried out by the appellees caused inconvenience to users, they did not clearly lead to the effect of excluding or restricting competition. Thus, this showed that the acts of [making] “products incompatible” carried out by the appellees did not constitute [acts of] abusing dominant market positions as prohibited by the Anti-Monopoly Law . This also corroborated the conclusion that the appellees did not have dominant market positions.

Second, [on] whether the appellees’ [acts] constituted acts of tying as prohibited by the Anti-Monopoly Law . According to Article 17[(5)] of the Anti-Monopoly Law , where a business operator that has a dominant market position [“]without proper reasons, ties commodities or, during transaction, attaches other unreasonable transaction conditions[”], [this] constitutes [an act] of abusing a dominant market position. The appellant claimed that the appellees’ bundling the company is allegedly dominant; second, establishing the existence of a dominant market position; and third, finding that the company’s specific practices are harmful to competition and abusive. See THE OXFORD HANDBOOK OF INTERNATIONAL ANTITRUST ECONOMICS , supra note 1, at 236. See also 朱理 (ZHU Li), 滥用相对优势地位问题的法律规制（二） (Legal Regulation on Issues of Abuse of Comparative Advantage Status (II) ), 《中国知识产权报》 (CHINA INTELLECTUAL PROPERTY NEWS ), http://www.cnipr.com/sfsj/zjkf/201608/t20160812_198321.htm. The author was one of the three judges who rendered the original judgment of this Guiding Case.

2017.04.07 Edition for tying [purposes] of QQ Software Housekeeper with [their] instant messaging software and installing of QQ Doctor in the name of upgrading QQ Software Housekeeper did not conform to transaction conventions, consumers’ habits, or the functions of the commodities, thereby limiting consumers’ choices without proper reasons. [The appellant also claimed that] in the first- instance adjudication, [the court] misallocated the burden of proof on [the issue] concerning [whether] the allegedly tying acts had led to the effect of excluding and restricting competition. On this, in the effective judgment, the [Supreme People’s] Court opined: the appellant’s grounds for appeal—that the appellees had carried out [acts] of abusing dominant market positions— could not stand.

(Adjudication personnel of the effective judgment: WANG Chuang, WANG Yanfang, and ZHU Li)