*AI-generated translation, for reference only.

[Keywords] Civil, abuse of dominant market position, relevant market, refusal to deal, tying

Case Facts

[REDACTED] Network Co., Ltd. Anshan Branch (hereinafter referred to as [REDACTED] Network Anshan Branch) is the sole enterprise in Anshan City, Liaoning Province that provides cable television scrambled signals and broadband business signals. On November 23, 2018, [REDACTED] Huafang Video Communication Repair Station and [REDACTED] Network Anshan Branch entered into a three-year cooperation agreement stipulating: [REDACTED] Network Anshan Branch would transmit digital cable television scrambled signals within the cooperation area; [REDACTED] Huafang Video Communication Repair Station would dismantle its own cable television front-end system, complete the renovation of its existing network and connect to [REDACTED] Network Anshan Branch's cable television network; users in the cooperation area who had already participated in the digital signal conversion before the signing of the agreement would continue using their current set-top boxes, while newly developed users would continue using the remaining set-top boxes of [REDACTED] Huafang Video Communication Repair Station; after the remaining set-top boxes of [REDACTED] Huafang Video Communication Repair Station were exhausted, only set-top boxes provided by [REDACTED] Network Anshan Branch could be used; upon expiration of the cooperation period, [REDACTED] Huafang Video Communication Repair Station would have the priority right to renew the cooperation under the same conditions, and if neither party had any objection, the cooperation would be automatically extended. On November 21, 2021, [REDACTED] Network Anshan Branch notified [REDACTED] Huafang Video Communication Repair Station in writing that the cooperation would be terminated and not renewed effective November 23, 2021. As consultations between the parties were unsuccessful, [REDACTED] Huafang Video Communication Repair Station filed a lawsuit with the court, requesting: 1. Confirmation that [REDACTED] Network Anshan Branch holds a dominant market position in the cable television sector in Anshan City; 2. An order for [REDACTED] Network Anshan Branch to cease the refusal to deal and renew the contract according to the fee standards originally agreed upon; 3. A declaration that [REDACTED] Network Anshan Branch's tying of set-top boxes and IC cards was invalid, and that [REDACTED] Huafang Video Communication Repair Station be permitted to use customer terminals (set-top boxes and IC cards) of other brands for network access.

 [REDACTED] Network Anshan Branch argued in its defense: First, [REDACTED] Network Anshan Branch did not hold a dominant market position in the television and broadband network market in Liaoning Province. Second, [REDACTED] Huafang Video Communication Repair Station had not obtained a Cable Television Station License, and the property rights of the network equipment it used did not belong to it; therefore, it was not qualified to cooperate with [REDACTED] Network Anshan Branch. Third, [REDACTED] Network Anshan Branch had not engaged in any monopolistic conduct constituting an abuse of dominant market position.

The Intermediate People's Court of Shenyang, Liaoning Province rendered the civil judgment (2021) Liao 01 Min Chu No. 3624 on September 7, 2022, dismissing all claims of [REDACTED] Huafang Video Communication Repair Station. After the judgment was pronounced, [REDACTED] Huafang Video Communication Repair Station, dissatisfied, filed an appeal. The Supreme People's Court rendered the civil judgment (2023) SPC IP Civil Final No. 383 on August 2, 2024: 1. Setting aside the civil judgment (2021) Liao 01 Min Chu No. 3624 of the Intermediate People's Court of Shenyang, Liaoning Province; 2. Ordering [REDACTED] Network Anshan Branch to compensate [REDACTED] Huafang Video Communication Repair Station for reasonable expenses of RMB 5,000 within ten days from the effective date of this judgment; 3. Dismissing the other claims of [REDACTED] Huafang Video Communication Repair Station.

Judge's Opinion

The focus of the dispute in this case is: whether [REDACTED] Network Anshan Branch held a dominant market position in the cable television sector in Anshan City, whether it engaged in a refusal to deal, and whether it engaged in tying. The object directly affected by the alleged monopolistic conduct is [REDACTED] Huafang Video Communication Repair Station (which also indirectly affects end users). Therefore, the commodity directly involved in the alleged monopolistic conduct is the digital cable television scrambled signal service. For [REDACTED] Huafang Video Communication Repair Station, which is both the direct demander of this service and the direct victim of the alleged conduct, digital cable television programming itself is clearly not the commodity it demands. From the perspective of demand substitution, the relevant product market in this case should be defined as the market for digital cable television scrambled signal services. [REDACTED] Network Anshan Branch is capable of providing digital cable television scrambled signals covering the entire city of Anshan; thus, the relevant geographic market in this case should be defined as Anshan City, Liaoning Province. The service involved in the alleged abuse of dominant market position is the provision of digital cable television scrambled signals, a business with an undeniably strong public utility character. Moreover, [REDACTED] Network Anshan Branch is the only business entity in Anshan City capable of achieving citywide coverage in this business and has also admitted to being the only enterprise in Anshan City qualified to operate cable television. Therefore, it can be determined that at the time of the alleged monopolistic conduct, [REDACTED] Network Anshan Branch held a dominant position in the market for digital cable television scrambled signal services in Anshan City, Liaoning Province.

Regarding whether [REDACTED] Network Anshan Branch engaged in a refusal to deal: At the time when the cooperation agreement in question was signed in 2018 between [REDACTED] Network Anshan Branch and [REDACTED] Huafang Video Communication Repair Station, the means by which end users in Huafang Residential Compound watched digital cable television programs was as follows: first, [REDACTED] Network Anshan Branch transmitted the digital cable television scrambled signal to [REDACTED] Huafang Video Communication Repair Station; then, [REDACTED] Huafang Video Communication Repair Station received the scrambled signal, further amplified it, and finally transmitted it to the end users' digital set-top boxes for signal descrambling, after which the end users could watch normal digital cable television programs. However, this cooperation model arose due to specific historical issues specific to the Huafang Residential Compound. Viewed from both the macro perspective of the overall development trend of the cable television network industry and the micro perspective of the emergence of new technical means capable of effectively improving the transmission efficiency of digital cable television, the cooperation model between [REDACTED] Huafang Video Communication Repair Station and [REDACTED] Network Anshan Branch, which resulted from historical legacy issues, has become outdated. From the perspective of end users, this transmission model requiring an intermediate link to amplify the digital cable television scrambled signal is in fact neither convenient nor economical. Furthermore, the market for digital cable television scrambled signal services has been increasingly shrinking and even disappearing due to technological and market demand factors. After [REDACTED] Network Anshan Branch ceased renewing the cooperation agreement with [REDACTED] Huafang Video Communication Repair Station, it changed to directly transmitting digital cable television programs to end users in the Huafang Community originally covered by the agreement, no longer requiring the intermediate market link of providing digital cable television scrambled signal services. After the elimination of this intermediate market link, consumer welfare for end users in normally watching digital cable television was not only unaffected by the failure of the parties to renew the agreement, but end users further enjoyed a “direct” service for digital cable television signal transmission, with consumer welfare significantly improved. Therefore, in essence, due to the objective change of circumstances caused by multiple overlapping factors such as history, policy, and technology, the relevant market involved in the alleged refusal to deal, i.e., the market for digital cable television scrambled signal services in Anshan City, had already tended toward natural extinction by the time the performance period of the cooperation agreement in question expired on November 22, 2021. The purpose of antitrust law in regulating any monopolistic conduct is to restore distorted competition in a relevant market to a normal state. For a market that has already tended toward natural extinction, using antitrust judicial remedies to restore it to its original state would neither meet the needs of market and technological development nor comply with policy requirements, and would not contribute to the improvement of consumer welfare; it is neither necessary nor meaningful. Although the analysis process of the first-instance court regarding [REDACTED] Network Anshan Branch's not having engaged in a refusal to deal within the meaning of antitrust law contained some inadequacies, the result of its determination was not improper.

Regarding whether [REDACTED] Network Anshan Branch engaged in tying: Where a business operator with a dominant market position bundles different commodities that could be sold separately, causing the counterparty to accept the tied commodity against its will, and such tying excludes or restricts competition in the relevant market, it shall be determined to constitute tying regulated by antitrust law. During the existence of the cooperation agreement in question, [REDACTED] Network Anshan Branch, by virtue of its dominant position in the market for digital cable television scrambled signal services in Anshan City, forcibly required in the cooperation agreement that [REDACTED] Huafang Video Communication Repair Station could only purchase cable television set-top boxes supplied by it as a bundle. This not only restricted and deprived [REDACTED] Huafang Video Communication Repair Station of its freedom to choose other counterparties in the cable television set-top box market, but also objectively excluded and restricted the transaction opportunities of other existing or potential suppliers of cable television set-top boxes to supply set-top boxes to [REDACTED] Huafang Video Communication Repair Station, distorting market supply-demand relationships and resource allocation. It should be held that [REDACTED] Network Anshan Branch constituted tying prohibited by antitrust law.

Judgment Digest

Where objective changes of circumstances due to factors such as history, policy, and technology cause the relevant market for providing intermediate services to have tended toward natural extinction, and a business operator in that market, upon the expiration of the cooperation period with the counterparty providing intermediate services, does not renew the contract but directly provides the relevant services to end consumers, such conduct generally does not constitute a refusal to deal regulated by antitrust law.

Related Index

Article 3, Article 6, Article 17, and Article 50 of the Anti-Monopoly Law of the People's Republic of China (as amended in 2008)

Article 8 and Article 14 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 Conduct (as amended in 2020)

Article 15, Paragraph 1; Article 17, Paragraph 1; Article 35; Article 38; and Article 40 of the Interpretation of the Supreme People's Court on Several Issues concerning the Application of Law in the Trial of Monopoly Civil Dispute Cases (Fa Shi [2024] No. 6)

First Instance: Civil Judgment (2021) Liao 01 Min Chu No. 3624 of the Intermediate People's Court of Shenyang, Liaoning Province (September 7, 2022)

Second Instance: Civil Judgment (2023) SPC IP Civil Final No. 383 of the Supreme People's Court (August 2, 2024)

The text of this case was adjusted as of May 29, 2025.