*AI-generated translation, for reference only.

Keywords: civil; monopoly; abuse of dominant market position; tying arrangement; bundled sale; follow-on litigation

Case Facts

Haidong Hua[REDACTED] Gas Appliances Trading Co., Ltd., Minhe Branch (hereinafter "Hua[REDACTED] Gas Appliances Company") alleged as follows: In October 2017, Hua[REDACTED] Gas Appliances Company sold and installed gas wall-mounted boilers for Ma [REDACTED] and more than ten other villagers in Milawan Village, Minhe Hui and Tu Autonomous County, Haidong City, Qinghai Province (hereinafter "Minhe County"). When processing the said villagers' applications for natural gas service, Qinghai Minhe Chuan[REDACTED] Petroleum and Natural Gas Co., Ltd. (hereinafter "Chuan[REDACTED] Natural Gas Company") required the villagers to install wall-mounted boilers designated by Chuan[REDACTED] Natural Gas Company as a condition for gas connection, compelling them to remove the boilers already installed. Because the removed boilers could not be resold, Hua[REDACTED] Gas Appliances Company suffered losses as a result, and accordingly requested that Chuan[REDACTED] Natural Gas Company be ordered to compensate for economic losses in the amount of RMB 107,200.

Chuan[REDACTED] Natural Gas Company defended as follows: Chuan[REDACTED] Natural Gas Company did not hold a dominant position in the natural gas market and did not compel users to install designated wall-mounted boilers. Chuan[REDACTED] Natural Gas Company had no knowledge of, and was unrelated to, Hua[REDACTED] Gas Appliances Company's sale of wall-mounted boilers to the villagers in question or the subsequent refund. Moreover, the return of goods does not equate to the boilers being scrapped, and there is no causal link between the losses alleged by Hua[REDACTED] Gas Appliances Company and Chuan[REDACTED] Natural Gas Company's conduct.

The court found through trial as follows: On May 14, 2020, the Qinghai Provincial Market Supervision Bureau issued Administrative Penalty Decision No. Qing Shi Jian Longduan [2020] 02 (hereinafter the "Administrative Penalty Decision"), which stated that the relevant product market was the urban residential pipeline natural gas market and the relevant geographic market was the main urban area of Minhe County. During the period from 2009 to 2018, Chuan[REDACTED] Natural Gas Company, as the sole urban residential pipeline natural gas supplier in the main urban area of Minhe County, abused its dominant market position by engaging in the tying of goods without justification.

Chuan[REDACTED] Natural Gas Company, dissatisfied with the Administrative Penalty Decision, filed an administrative lawsuit requesting that it be annulled. On December 30, 2020, the Xining Railway Transport Court of Qinghai Province rendered Administrative Judgment (2020) Qing 8601 Xing Chu No. 186, dismissing Chuan[REDACTED] Natural Gas Company's claims. Chuan[REDACTED] Natural Gas Company appealed. On May 14, 2021, the Xining Intermediate People's Court rendered Administrative Judgment (2021) Qing 01 Xing Zhong No. 31, dismissing the appeal and affirming the original judgment.

On April 19, 2023, the Xining Intermediate People's Court of Qinghai Province rendered Civil Judgment (2022) Qing 01 Zhi Min Chu No. 142, ordering Chuan[REDACTED] Natural Gas Company to compensate Hua[REDACTED] Gas Appliances Company for losses in the amount of RMB 80,000.

Chuan[REDACTED] Natural Gas Company, dissatisfied with the judgment, appealed on the grounds that the evidence on the record was insufficient to prove that it had engaged in the alleged tying conduct, and that the amount of compensation determined by the court of first instance was excessive. On August 29, 2024, the Supreme People's Court rendered Civil Judgment (2023) SPC IP Civ Final No. 1547, dismissing the appeal and affirming the original judgment.

Judge's Opinion

The central issues in this case were: (1) whether Chuan[REDACTED] Natural Gas Company had engaged in the alleged tying conduct; and (2) whether the amount of compensation determined by the court of first instance was appropriate.

 (1) Whether Chuan[REDACTED] Natural Gas Company Engaged in the Alleged Tying Conduct

The Administrative Penalty Decision found that Chuan[REDACTED] Natural Gas Company, as the sole urban residential pipeline natural gas supplier in the main urban area of Minhe County, engaged in the tying of goods in abuse of its dominant market position during the period from 2009 to 2018. Chuan[REDACTED] Natural Gas Company failed to submit evidence sufficient to rebut the basic facts established by the Administrative Penalty Decision. Having submitted the Administrative Penalty Decision, Hua[REDACTED] Gas Appliances Company was not required to adduce further evidence to prove that Chuan[REDACTED] Natural Gas Company had engaged in the alleged tying conduct in this case.

 (2) Whether the Amount of Compensation Determined by the Court of First Instance Was Appropriate

As a result of Chuan[REDACTED] Natural Gas Company's tying conduct, the wall-mounted boilers sold and installed by Hua[REDACTED] Gas Appliances Company for the villagers became unusable due to the denial of natural gas connection, and Hua[REDACTED] Gas Appliances Company was compelled to refund the boiler purchase price to the villagers. Hua[REDACTED] Gas Appliances Company claimed economic losses totaling RMB 107,200, representing the refunded boiler purchase price and installation fees paid to the villagers. Given that the installation fees had already been actually incurred, that wall-mounted boilers are subject to high safety standards such that the resale price after removal would fall sharply, and taking into account Hua[REDACTED] Gas Appliances Company's direct losses, lost profits, and reasonable expenses incurred in rights protection, the court of first instance's discretionary determination of RMB 80,000 was appropriate.

Judgment Digest

1. In anti-monopoly civil litigation, where the plaintiff submits a penalty decision issued by an anti-monopoly administrative enforcement authority finding that the defendant engaged in monopolistic conduct, and the defendant fails to adduce contrary evidence sufficient to rebut the basic facts established by such penalty decision, the plaintiff is not required to adduce further evidence to prove that the defendant engaged in the alleged monopolistic conduct.

2. Where an operator is unable to complete the relevant transaction with its counterparty due to tying conduct engaged in by the alleged monopolist, resulting in the termination of the contract and the removal and return of products already delivered and installed, the determination of such operator's losses shall take into account factors including the benefit of performance that would have been realized had the alleged monopolistic conduct not occurred, and the price decline in the goods in question resulting from secondary sale.

Related Index

*Article 22(1)(5) and Article 60(1)* of the *Anti-Monopoly Law of the People's Republic of China* (The provisions applicable to this case are *Article 17(1)(5) and Article 50* of the *Anti-Monopoly Law of the People's Republic of China* as effective August 1, 2008)

*Articles 10(1), 44(1), and 45* of the *Provisions of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trial of Civil Monopoly Dispute Cases* (Fa Shi [2024] No. 6)

First Instance: Xining Intermediate People's Court of Qinghai Province, Civil Judgment (2022) Qing 01 Zhi Min Chu No. 142 (April 19, 2023)

Second Instance: Supreme People's Court, Civil Judgment (2023) SPC IP Civ Final No. 1547 (August 29, 2024)