Authors: Zhan Hao, Song Ying, Tian Chen
1
This case was firstly initiated in January, 2014, by Yunnan Ying Ding Bio-energy Co, Ltd (“YD”); the largest waste oil processing enterprise in Yunnan Province. YD claimed that SINOPEC and the Yunnan branch of SINOPEC's trading company (hereinafter collectively referred to as“SINOPEC”), abused, with no justifiable reasons for doing so, their dominant market position, by refusing to purchase the biodiesel produced by YD out of waste oil for use in SINOPEC's distribution system, and were therefore in violation of Article 17 of the AML.
After the period of more than three and half years with four procedures, the Higher People's Court of Yunnan Province finally issued a judgment dismissing the appeal and upholding the original verdict; thereby supporting the allegations of SINOPEC by confirming that the facts of the case were clear, the law was applied correctly, and no procedural errors occurred during the course of the remanded proceedings in the court of first instance.
2
Generally speaking, this case has resulted in the creation of several “firsts” when taken from different perspectives.
Firstly, it has been reported that the case is the first antitrust dispute regarding the Chinese petroleum industry, therefore garnering extensive public concern and attention. Some antitrust law experts have accordingly pointed out that this case may to some extent, become an example for future reference, since it involves the use of antitrust litigation in a regulatory industry, opening up new means of solving this type of dispute in future.
Secondly, it is the first case in which the claims and relevant assertions alleged by the plaintiff were related to “refusal to purchase”, subsequently posing a challenge to the methods traditionally used to define the relevant market.
More specifically, the Higher People's Court of Yunnan Province considered that SINOPEC’s behavior in refusing to purchase YD’s biodiesel occurred in a“buyers’ market”. This meant that the methods stipulated in the Guidelines on the Relevant Markets Definition by the Anti-monopoly Committee of the State Council (the “Guidelines”) could not be appropriately applied during the process of defining the relevant market in this case, since those methods are in theory structured mainly from a demand side market perspective. To the contrary, the court held that the economic focus should be on the supply side of the market, examining the extent to which the supplier (YD in this case) would obtain access for products sales and circulation, or in evaluating the actual or potential purchasers of the supplier’s products in the market. In other words, the details regarding the behavioral performance of a refusal to deal may lead to a shift away from traditional methods for defining the relevant market, further influencing the outcome of a case.
Thirdly, it’s the first time that an Anti-monopoly litigation has been subject to this degree of procedural complexity, having twice gone through both first instance and appeal procedures, due to being remanded following the first appeal.
Specifically, in the first instance, the Intermediate People's Court of Kunming ruled that Sinopec Yunnan Branch bore a legal obligation to purchase and distribute the biofuel made by Yingding and had abused its dominance in the refined oil market by refusing to purchase Yingding's biodiesel for no justifiable reason. However, the Higher People's Court of Yunnan Province reversed the first-instance decision and remanded the case on account of unclear facts and procedural errors. After another round trial proceedings of the first instance and appeal, the final judgments came out. From this perspective, it is seen that Anti-monopoly litigations can be very time consuming, and that the case details may determine the course of the case.
Finally, as the first Anti-monopoly case to be filed in Yunnan Province, the courts had no specific experience of this type of competition based lawsuit, yet still demonstrated the clear use of logic and professional proficiency in its application of the relevant laws, to reach a reasoned conclusion in the judgment. Hence, under these circumstances, both the Higher People's Court of Yunnan Province,and Intermediate People's Court of Kunming completed a “tough mission” quite brilliantly, despite some unclear facts and procedural errors being identified by the appeal court upon remand.
3
During every trial proceeding in this case, lawyers on behalf of both parties fiercely debated each other and exchanged legal views on relevant issues, such as the definition of the relevant market, the determination of the market dominant position of SINOPEC, and confirmation of the contractual relationship between YD and SINOPEC. Besides this, Article 12 of the Provisions of the Supreme People's Court on Several Issues concerning the Application of Law in the Trial of Civil Disputes arising from Monopolistic Behaviors stipulates that the parties concerned may apply to the people's court for one or two persons with corresponding special knowledge to participate in the trial, and explain the professional issues of the case. Based on this article, SINOPEC applied for both an industry and an economist expert to attend the trial in this case, and elaborate on the issues regarding the main raw materials of biodiesel, the characteristics of the products sales and the corresponding effect of the market definition. Similarly, in the previous “Qihu v. Tecent Case”, both parties involved applied for both Internet industry expertsand economists to explain and elucidate upon issues regarding business models in the Internet Economy and their corresponding effect on market definition.
It could therefore be inferred that more and more anti-monopoly litigation cases will arise in which experts will play a significant role. The opinions of those experts will, to some extent, influence the judges’ recognition and confirmation of the legal issues at play, especially in regard to the definition of the relevant market, market position, competitive analysis and perhaps in influencing the general attitude towards the case. It’s worth noting that the experts are at all times expected to maintain aneutral position in explaining the relevant issues during the trial, rather than siding with either party. However, this also presents an opportunity for the lawyers involved to take advantage of the professional opinions put forth by the experts, to help evidence their legal viewpoints and support their litigation strategies. Hence, all of the above characteristics combine to make Anti-monopoly civil litigations generally more complex and technical than other types of civil litigations.
4
Generally, the main legal issues in this case relate to the cross-application of three different laws: the Contract Law, AML and the Renewable Energy Law. In considering the substantive legal issues, and based upon the evidence provided by the both parties, firstly the Higher People's Court of Yunnan Province firstly clarified that legal relationship between both parties was a type of private legal relationship, rather than a regulated relationship from an economic law perspective. Secondly, the court confirmed that there was in fact nolawful and effective contract between YD and SINOPEC, since the Lawyer's Letter sent by YD was to be merely regarded as an Invitation to Offer without setting out the specific and indispensable clauses and trading terms of a legal contract. In addition, the quality of the biodiesel produced by YD from waste oil was not certified, and could not be held as meeting the relevant national standard in this area. In line with this, SINOPEC therefore had no obligation to observe the rules of the Renewable Energy Law. In other words, SINOPEC’s refusal to purchase the biodiesel was held not to be related to the AML behavior sued for in this case.
As previously mentioned, this case may open up access to new means of resolution in Anti-monopoly disputes in China, especially for regulated industries in which there are always several regulatory and industrial laws, and for which parallels with this case can be drawn. The courts on the other hand,are tasked with balancing the relationship between such laws and the AML, as may extend to include even the relationship between regulatory and competitive policies.
5
In this case, YD, as a private enterprise, lost the lawsuit. However, more Anti-monopoly lawsuits fought against the State-Owned Enterprises in the regulatory industries in China are likely to follow in suit. In addition, it can be seen from this case that Anti-monopoly litigations always provide one of the best textbooks for examining the implementation of the AML in practice, since due process will be maximized during the trial. Meanwhile, lawyers and experts alike will play a more significant role in this type of litigation.
After receiving the final judgment, YD’s legal representative expressed that they will apply to the Supreme Court for a retrial. From this perspective, if YD succeeds, the curtain over this case will once again be lifted, but this time in a higher level court in respect of the follow-up Anti-monopoly law issues remaining. We shall but wait and see.
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