*AI-generated translation, for reference only.

[Keywords]

Civil, monopoly agreement, horizontal monopoly agreement, repetitive lawsuit, different causes of action, substantive negation of prior judgment result

[Case Facts]

Zhong [REDACTED] Technology (Weifang) Co., Ltd. (hereinafter referred to as Zhong [REDACTED] Company) alleged that it was established in 2014, with its shareholders being Zhong [REDACTED] Technology (Beijing) Co., Ltd. (hereinafter referred to as Zhong [REDACTED] Beijing Company) and Zong [REDACTED], each holding a 50% stake. On January 15, 2018, Zhong [REDACTED] Company and Zong [REDACTED] signed the “Zhong [REDACTED] Technology (Weifang) Co., Ltd. Division Agreement” (hereinafter referred to as the division agreement in question). Article 6 of the division agreement in question divided the markets, stipulating that the markets and receivables in the 14 districts and counties under Weifang City would be divided by region, allocated respectively to Zhong [REDACTED] Company and Zong [REDACTED], and also stipulated that neither party would encroach on the other's market within three years of the market division, with a penalty of RMB 10,000,000 (same currency below) payable to the other party in case of breach. On January 16, 2018, Zong [REDACTED] and Zhong [REDACTED] Company completed the handover procedures for the business contracts of customers in the divided markets. Zhong [REDACTED] Company contended that the market division provision in Article 6 of the division agreement in question constituted a monopoly agreement dividing markets, and the relevant content of this clause violated Article 13(1)(3) of the Anti-Monopoly Law of the People's Republic of China (2008), and should be deemed invalid. Therefore, it requested the court to order: confirmation that the market division content in Article 6 of the division agreement in question is invalid.

Zong [REDACTED] argued that the division agreement in question was essentially an arrangement regarding company assets and related matters when a shareholder exited the company. The purpose of the division agreement in question was not to eliminate or restrict competition, but to provide reasonable consideration or compensation for Zong [REDACTED]'s exit from the company. Moreover, the parties' agreement on market division did not involve areas where Zhong [REDACTED] Company had not yet conducted business. Therefore, the market division provision in Article 6 of the division agreement in question did not have the effect of eliminating or restricting competition.

The court ascertained through trial: Articles 1 through 5 of the division agreement in question respectively addressed the division of equity transfer, personnel, fixed assets, external debts, and source code ownership. Article 6 of the agreement stipulated that the markets and receivables in the 14 districts and counties under Weifang City would be divided by region, with the markets and receivables of 9 cities and districts, including Gaomi City, allocated to Zhong [REDACTED] Company; and the markets and receivables of 5 districts and counties, including Binhai District, allocated to Zong [REDACTED]; after the market payments belonging to Zong [REDACTED] were received in Zhong [REDACTED] Company's account, they would be remitted to Zong [REDACTED]'s designated account within 7 working days; the parties agreed not to encroach on each other's divided markets for three years, with a penalty of RMB 10,000,000 payable in case of breach.

In the case of dispute over right of recourse filed by Zhong [REDACTED] Company against Zong [REDACTED] (Case No. (2020) Lu 0705 Min Chu No. 139, hereinafter referred to as Case No. 139), accepted by the Kuiwen District People's Court of Weifang City, Shandong Province (hereinafter referred to as Kuiwen District Court), in the principal claim of that case, Zhong [REDACTED] Company, based on Article 4 of the division agreement in question which stipulated that Zong [REDACTED] would personally bear the principal and interest of loans borrowed by Zhong [REDACTED] Company from natural persons including Wang [REDACTED], requested the court to order Zong [REDACTED] to pay Zhong [REDACTED] Company RMB 3,153,994 for the loan principal and interest it had paid on behalf of Zong [REDACTED]. Zong [REDACTED] filed a counterclaim, arguing that under the receivable division provision in Article 6 of the division agreement in question, the receivables in areas including Binhai District of Weifang City belonged to Zong [REDACTED], and he was unable to recover these amounts due to reasons attributable to Zhong [REDACTED] Company. Therefore, he requested the court to order Zhong [REDACTED] Company to pay Zong [REDACTED] RMB 3,252,205 for the receivables belonging to him. In response to Zong [REDACTED]'s counterclaim, Zhong [REDACTED] Company argued that Article 6 of the division agreement in question, which divided the sales markets, violated Article 13(1)(3) of the Anti-Monopoly Law (2008), which prohibits competing operators from entering into monopoly agreements to divide markets, and that the relevant content of this clause should be deemed invalid according to law. The Kuiwen District Court, after trial, held: after Zhong [REDACTED] Company repaid RMB 3,153,994 to natural persons including Wang [REDACTED], it had the right to seek recourse against Zong [REDACTED]; based on the division agreement in question, RMB 1,201,110 of market payments belonged to Zong [REDACTED]; the provision in Article 6 of the division agreement in question was reasonable consideration or compensation for Zong [REDACTED]'s exit from Zhong [REDACTED] Company, and the agreement not to encroach on each other's corresponding markets for three years was a buffer period for business development and market operations, which did not satisfy the conditions set forth in Article 13(1)(3) of the Anti-Monopoly Law (2008). Therefore, the court rejected Zhong [REDACTED] Company's claim that the clause was invalid for violating the Anti-Monopoly Law (2008). On February 5, 2021, the Kuiwen District Court rendered a first-instance judgment: Zong [REDACTED] was to repay Zhong [REDACTED] Company RMB 3,153,994 for the amount paid on his behalf, and Zhong [REDACTED] Company was to pay Zong [REDACTED] RMB 1,201,110 in contract payments. On August 2, 2021, this judgment was affirmed by the Weifang Intermediate People's Court of Shandong Province in the second instance.

The Qingdao Intermediate People's Court of Shandong Province rendered the (2021) Lu 02 Min Chu No. 388 civil judgment on March 30, 2022, dismissing Zhong [REDACTED] Company's claims. After the judgment was announced, Zhong [REDACTED] Company refused to accept it and filed an appeal. The Supreme People's Court rendered the (2022) SPC IP Civil Final 1416 civil ruling on July 29, 2024, ordering: 1. Revocation of the (2021) Lu 02 Min Chu No. 388 civil judgment of the Qingdao Intermediate People's Court of Shandong Province; 2. Dismissal of Zhong [REDACTED] Company's lawsuit.

[Reasons for Judgment]

Since the parties had already filed a lawsuit concerning the division agreement in question before the court of first instance accepted the filing of this case, and although the causes of action in the prior and subsequent lawsuits were different, the effective judgment in the prior lawsuit had already determined the validity of the division agreement in question. Therefore, it was first necessary to examine whether this case constituted a repetitive lawsuit.

Article 247 of the “Interpretation of the Supreme People's Court on the Application of the Civil Procedure Law of the People's Republic of China,” effective February 4, 2015, stipulates: “A repetitive lawsuit is constituted where a party files another lawsuit regarding a matter already brought to court during the proceedings or after the judgment becomes effective, and the following conditions are concurrently met: (1) the parties in the subsequent lawsuit are identical to those in the prior lawsuit; (2) the subject matter of the subsequent lawsuit is identical to that of the prior lawsuit; (3) the claims in the subsequent lawsuit are identical to those in the prior lawsuit, or the claims in the subsequent lawsuit substantively negate the outcome of the prior judgment. If a party files a repetitive lawsuit, the court shall rule not to accept it; if already accepted, the court shall rule to dismiss the lawsuit, unless otherwise provided by law or judicial interpretation.” In the trial of the dispute in this case, it should likewise be examined based on this provision whether a repetitive lawsuit existed, and a ruling should be made to either not accept the case or dismiss the lawsuit according to law, so as to avoid conflicts between prior and subsequent judgments and waste of judicial resources.

Comparing this case with Case No. 139 (counterclaim), the parties in both cases were Zhong [REDACTED] Company and Zong [REDACTED], and the subject matter of both cases was the contractual relationship formed by the division agreement in question, satisfying the first two conditions for a repetitive lawsuit: identical parties and identical subject matter. Article 6 of the division agreement in question contained two parts: market division and receivable division. In Case No. 139 (counterclaim), Zong [REDACTED], based on the receivable division provision in that article, requested the court to order Zhong [REDACTED] Company to pay him the corresponding amounts. Zhong [REDACTED] Company argued that the article was invalid on the grounds that the market division provision contained therein was a monopoly agreement dividing markets. Therefore, whether Zong [REDACTED]'s claim could be supported depended first on whether the article was lawful and valid. After trial, the Kuiwen District Court determined that the provisions concerning market division and receivable division in this article did not violate the Anti-Monopoly Law (2008), were lawful and valid, rejected Zhong [REDACTED] Company's claim that the article was invalid, and ordered it to perform the corresponding payment obligations under the article. In this case, Zhong [REDACTED] Company's claim was to confirm that the market division provision in Article 6 of the division agreement in question was invalid. This claim substantively negated the outcome of Case No. 139, thereby satisfying the third condition for a repetitive lawsuit.

In conclusion, the court of second instance determined that Zhong [REDACTED] Company's filing of this case constituted a repetitive lawsuit and accordingly ruled to dismiss the lawsuit by law.

[Judgment Digest]

Whether a dispute over monopoly constitutes a repetitive lawsuit should not be determined solely by whether the causes of action in the prior and subsequent lawsuits are identical. Instead, a specific analysis and determination should be made based on the provisions of the Civil Procedure Law judicial interpretation regarding repetitive lawsuits, examining the three aspects of whether the parties, subject matter, and claims in the prior and subsequent lawsuits are identical (or whether the claims in the subsequent lawsuit substantively negate the outcome of the prior judgment).

[Corresponding Index]

Interpretation of the Supreme People's Court on the Application of the Civil Procedure Law of the People's Republic of China (Fa Shi (2015) No. 5), Article 247 (the applicable version in this case is Article 247 of the Interpretation of the Supreme People's Court on the Application of the Civil Procedure Law of the People's Republic of China effective February 4, 2015)

First Instance: Qingdao Intermediate People's Court of Shandong Province (2021) Lu 02 Min Chu No. 388 Civil Judgment (March 30, 2022)

Second Instance: Supreme People's Court (2022) SPC IP Civil Final 1416 Civil Ruling (July 29, 2024)