Recognition of Operator’s Dominant Market Position
——Wu Xiaoqin v. Shaanxi Broadcast & TV Network Intermediary (Group) Co., Ltd.
[Syllabus]
A sole operator engaged in legitimate cable TV transmission business and an entity engaged in the centralized broadcast control of TV programs in a specific area has advantages in market access, market share, operating status, operation scale, and other elements, and may be recognized as having a dominant market position.
By taking advantage of its dominant market position, the operator bundles basic maintenance fee for receiving digital TV programs with the fee for paid digital TV programs, and collects them together from a consumer, which infringes the consumer’s right of choice, and disadvantages other service providers for accessing the digital TV service market. Even though there exist exceptions where the operator separately charges these two fees , it is insufficient to deny its constitution of tie-in sale prohibited by the Anti-Monopoly Law.
[Case No.] Supreme People's Court (2016) ZGFMZ No. 98
[Cause of Action] Dispute over Bundled Transaction
[Collegial Panel Members] Wang Yanfang Qian Xiaohong Du Weike
[Keywords] Monopoly, bundled transaction, operator, dominant market position
[Relevant Legal Provisions] Item (5), Paragraph 1, Article 17 of the Anti-Monopoly Law of the People's Republic of China
[Basic Facts]
Plaintiff Wu Xiaoqin alleged that: When he paid the basic maintenance fee for receiving digital TV programs to Shaanxi Broadcast & TV Network Intermediary (Group) Co., Ltd. (hereinafter referred to as “BC & TV Company”) on May 10th, 2012, he learned that this fee had been adjusted from RMB25 per month to RMB30 per month. Wu Xiaoqin paid RMB90 for three months, including RMB75 as the basic maintenance fee for receiving digital TV programs and RMB15 as the fee for digital TV programs. Afterwards, Wu Xiaoqin learned that digital programs should be freely chosen and voluntarily subscribed by subscribers. Wu Xiaoqin believed that as a utilities enterprise, BC & TV Company had a dominant position in the digital TV market, and its charging of the digital TV program fee deprived him of the right of choice and constituted a tie-in sale. Therefore, he instituted a lawsuit to the court and requested the court to invalidate the defendant BC & TV Company's charging of the digital TV program fee of RMB15 on May 10th, 2012 and order the defendant to refund him RMB15.
BC & TV Company contended that: It was consistent with the Anti-Monopoly Law for it, the only the centralized broadcaster of TV programs in Shaanxi Province, to charge fees from consumers who chose to receive programs beyond the basic ones; BC & TV Company had a dominant position in the provincial cable TV market, and encouraged subscribers to choose cable TV packages, but did not abuse its dominant market position or force its subscribers to buy service items beyond basic TV program services. The subscribers had the right of free choice; the finding monopolistic conduct was an administrative power rather than a judicial one. The plaintiff had no right to request for the invalidation of monopolistic conducts; although BC & TV Company launched a series of TV program packages for subscribers to choose, it had never made any compulsory tie-in sale, which guaranteed most people’s right to choose more TV programs. Therefore, BC & TV Company requested the court to dismiss the plaintiff’s claim to invalidate BC & TV Company’s increased number of TV programs and charge of fees; and BC & TV Company was willing to actively resolve the plaintiff’s second claim.
The court found through trial that: When Wu Xiaoqin paid the basic maintenance fee for receiving digital TV programs to BC & TV Company on May 10th, 2012, he learned that the minimum monthly basic maintenance fee for receiving digital TV programs increased from RMB25 to RMB30. Wu Xiaoqin paid RMB90 as the basic maintenance fee for receiving digital TV programs for the period from May 10th to August 9th, 2012. The special invoice issued by BC & TV Company to Wu Xiaoqin recorded RMB75 of the basic maintenance fee for receiving digital TV programs and RMB15 of the fee for paid digital TV programs. Afterwards, Wu Xiaoqin consulted BC & TV Company’s the customer service center (service telephone: 96766) and learned that BC & TV Company’s program update added various paid programs in different packages, the cheapest of which cost RMB360 per year, with each installment payable by subscribers for at least three months. With the approval of the People's Government of Shaanxi Province, BC & TV Company was the only operator engaged in legitimate operation of cable TV transmission business and the only entity engaged in the centralized broadcast control of TV programs within Shaanxi Province. BC & TV Company admitted its dominant position in the cable TV transmission business within Shaanxi Province.
It was also found that: As prescribed in the Interim Measures for the Administration of Basic Maintenance Fees for Receiving Cable TV Programs issued by the National Development and Reform Commission and the State Administration of Radio, Film and Television on December 2nd, 2004, the basic maintenance fee for receiving cable TV programs shall be priced by the government and the fee rates shall be set by the price authorities. As prescribed in the Several Opinions on Promoting the Integral Transition of Cable TV Digitalization by Pilot Entities (for Trial Implementation) issued by the State Administration of Radio, Film and Television on July 11th, 2005, in the process of promoting the overall transition, all pilot entities shall pay attention to the promotion of paid channels and other new business for subscribers to freely choose and voluntarily subscribe. As provided in the Notice on the Standards of Basic Maintenance Fees for Receiving Digital TV Programs across the Province issued by the Pricing Bureau of Shaanxi Province on May 29th, 2006, the standard for basic maintenance fee for receiving digital TV programs was that on the basis of one terminal per residential TV set, the maintenance fee for each terminal for urban residential subscribers at or above the county level across the Province was RMB25 per month; and subscribers of digital cable TV programs may, according to their actual circumstances, voluntarily choose to pay the basic maintenance fees for receiving TV programs on a monthly, quarterly or annual basis. As noted in the Notice on Issues concerning Strengthening the Administration of Fee Charging of Cable TV Programs issued by the National Development and Reform Commission and the State Administration of Radio, Film and Television on August 25th, 2009, the basic maintenance fees for receiving cable TV programs shall be priced by the government, and the fee rates of value-added cable TV business services and paid digital TV programs shall be set by the cable TV operators themselves.
During the second instance, BC & TV Company submitted the photocopies of four special invoices for charges, proving that around May 10th, the outlet of BC & TV Company collected a monthly service fee at RMB25. Given the absence of originals, Wu Xiaoqin refused cross-examination. After the hearing, BC & TV Company submitted the originals for three of them, which both parties verified and cross-examined. All these invoices showed that the annual payment was RMB300, i.e. RMB25 per month. BC & TV Company submitted the originals of five invoices, including the originals of the three invoices submitted during the first instance, all transacted in Xianyang City. They proved that around May 10th, BC & TV Company provided paid services for RMB25 per month.
In the retrial, BC & TV Company submitted the screenshots of fee packages on its website as of 2016, the Notice on Issuing the Measures for the Implementation of Public Business in 2016 (for Trial Implementation), and the 2016 invoices of some subscribers.
Holding
On January 5th, 2013, the Intermediate People's Court of Xi’an City, Shaanxi Province rendered a civil judgment (No. 438 [2012], First, Civil Division IV, IPC, Xi'an): 1) it is invalid for BC & TV Company to charge the plaintiff Wu Xiaoqin RMB15 on May 10th, 2012 for digital TV fee; and 2) BC & TV Company shall, within ten (10) days after the judgment’s effective date, refund Wu Xiaoqin RMB15. BC & TV Company appealed on September 12th, 2013, and the High People’s Court of Shaanxi Province rendered a civil judgment (No. 38 [2013], Final, Civil Division III, HPC, Shaanxi) that: 1) the judgment of the first instance shall be set aside; and 2) the claims of Wu Xiaoqin shall be dismissed. Unsatisfied with the second-instance judgment, Wu Xiaoqin requested the Supreme People's Court for a retrial. On May 31st, 2016, the Supreme People’s Court rendered a civil judgment (No. 98 [2016], Civil Retrial, Supreme People’s Court) that: 1) the civil judgment (No. 38 [2013], Final, Civil Division III, HPC, Shaanxi) rendered by the High People’s Court of Shaanxi Province shall be set aside; and 2) the civil judgment (No. 438 [2012], First, Civil Division IV, IPC, Xi'an) rendered by the Intermediate People's Court of Xi’an City, Shaanxi Province shall be affirmed.
[Reasoning]
In the effective judgment, the Supreme People's Court focused the disputes on 1) whether the disputed conduct violated Item (5), Paragraph 1, Article 17 of the Anti-Monopoly Law and 2) whether the court of first instance appropriately applied the Anti-Monopoly Law.
1. Whether the disputed conduct violated Item (5), Paragraph 1, Article 17 of the Anti-Monopoly Law
Item (5), Article 17 of the Anti-Monopoly Law prohibits a business operator with a dominant market position from implementing tie-in sale or attaching other unreasonable trading conditions at the time of trading without just cause. In its defense during the first instance of this case, BC & TV Company explicitly conceded that it “was the only business operator that was legally engaged in the cable TV transmission business within Shaanxi Province with the approval of the People’s Government of Shaanxi Province. As the only the centralized broadcaster of TV programs in Shaanxi Province, BC & TV Company had a dominant position in the provincial cable TV market, and encouraged subscribers to choose cable TV packages, but did not abuse its dominant market position or force its subscribers to buy service items beyond basic TV program services.” While denying this during the second instance, BC & TV Company failed to produce the corresponding evidence proving that it did not have a dominant market position. In the process of retrial examination, BC & TV Company raised no objection to the fact found by the courts of first and second instance that it had a dominant market position. Given that BC & TV Company was the only legal operator engaged in cable TV transmission business and the entity engaging in the centralized broadcast control of TV programs within Shaanxi Province, and on the basis of the facts found, the courts of first and second instance did not error in recognizing that in the cable TV transmission business market, BC & TV Company had advantages in market access, market share, operating status, scale of operation, and other elements and had the dominant market position.
Did BC & TV Company made a tie-in sale while serving Wu Xiaoqin? Item (5), Paragraph 1 of Article 17 of the Anti-Monopoly Law prohibits a business operator with a dominant market position from engaging in tie-in sale without just cause. In this case, according to facts found by the original courts, when providing services, the personnel of BC & TV Company notified Wu Xiaoqin that from March 2012, the minimum monthly fee rate had increased from RMB25 to RMB30, with each installment payable for at least a quarter; however, they failed to notify Wu Xiaoqin that he may separately pay the basic maintenance fee for receiving digital TV programs or the fee for paid digital TV programs. Afterwards, Wu Xiaoqin consulted BC & TV Company’s customer service center (service telephone: 96766) and learned that BC & TV Company’s program update increased the number of paid programs with various packages, the cheapest of which cost RMB360 per year (RMB30 per month), with each installment payable by subscribers for at least three months. According to the aforesaid facts and in light of the fact that among the charge items recorded on the special invoices issued by BC & TV Company to Wu Xiaoqin, i.e. RMB75 for the basic maintenance fee for receiving digital TV programs and RMB15 for paid digital TV programs, it was recognizable that BC & TV Company actually bundled the basic digital TV programs with the paid digital TV programs and sold them together to Wu Xiaoqin without notifying Wu Xiaoqin whether or not he could separately choose the service item of receiving the basic digital TV programs. In addition, the reply of BC & TV Company’s customer service center (service telephone: 96766) also corroborated that BC & TV Company charged together the basic maintenance fee for receiving digital TV programs and the fee for paid digital TV programs and provided the services together. Although BC & TV Company submitted, during the second instance, relevant documents for its separate charge of the basic maintenance fee for receiving digital TV programs from other subscribers, such evidence could only prove that when BC & TV Company collected such charge, there were exceptions to the package detailed by the customer service center. In the retrial, BC & TV Company failed to make reasonable explanations on exceptions to the package detailed by the customer service center. Furthermore, BC & TV Company's submission of receipts in which the relevant fees were separately charged occurred after this lawsuit was instituted, which was insufficient to prove the circumstances of this lawsuit and is not admitted. Therefore, exceptions to the package explained by the customer service center was insufficient to deny BC & TV Company's common practice of charging together the basic maintenance fee for receiving digital TV programs and the fee for paid digital TV programs. The recognition of the court of second instance that BC & TV Company not only provided portfolio services, but basic services is insufficiently evidenced and shall be corrected. Therefore, the existing evidence could not prove that an ordinary consumer could only pay the basic maintenance fee for receiving digital TV programs or the fee for paid digital TV programs, or that there existed the consumers’ right of choice. Without the right of choice proven, the court of second instance directly concluded that this case was about the failure to inform the consumer of his right of choice and henceforth the infringement of his right to know. On this basis, the second-instance court held that BC & TV Company’s sale did not constitute a tie-in sale without just cause as provided in the Anti-Monopoly Law, which judgment lacked factual and legal basis and shall be corrected.
In accordance with the facts found by this court, the basic maintenance fee for receiving digital TV programs and the fee for paid digital TV programs were for two separate services. In the trials of first and second instance and that of this court, BC & TV Company failed to prove that the combined provision of both services conformed to the trading practices of digital TV services. Moreover, there was no evidence proving that the separate charges of the basic maintenance fee for receiving digital TV program and the fee for paid digital TV programs would impair the performance and usage value of these two services; and BC & TV Company did not state the just cause for the aforesaid conduct. Under these circumstances, by taking advantage of its dominant market position, BC & TV Company’s combined charging of the basic maintenance fee for receiving digital TV programs and the fee for paid digital TV programs objectively affected the consumer’s choice of relevant paid digital TV programs provided by other service providers, and disadvantaged other service providers for accessing the TV service market, and had adverse impact on market competition. Therefore, the court of first instance did not error in holding that the defendant’s conduct violated the provisions of Item (5), Paragraph 1, Article 17 of the Anti-Monopoly Law. Some grounds of Wu Xiaoqin’s application for retrial were tenable and upheld.
II. Whether the court of first instance appropriately applied the Anti-Monopoly Law
In its defense in this case, BC & TV Company contended that the occurrence of this case was in essence a dispute over whether the right enjoyable by Wu Xiaoqin under the Law on the Protection of Consumer Rights and Interests was infringed, which was irrelevant to monopolistic conduct. BC & TV Company argued that the court of first instance should not have recognized its dominant market position and invalidated its charges in accordance with the Anti-Monopoly Law and relevant provisions. Pursuant to Articles 226 and 228 of the Interpretation of the Supreme People’s Court on the Application of the Civil Procedure Law of the People’s Republic of China, a people’s court shall, as per the claims and answers of the parties as well as the circumstances on evidence exchange, summarize the focus of disputes and consult the parties on the summarized focus. The court shall focus the trial on focal issues such as the facts disputed by the parties, evidence, and application of law. According to the facts found, Wu Xiaoqin clearly claimed in his complaint that, “The digital TV program fee charged by the defendant was actually an additional service provided to the plaintiff beyond the scope of the aforesaid services, which the plaintiff should have the right to autonomously choose. The defendant was a utilities enterprise or other operator enjoying a lawful monopoly and had a dominant position in the digital TV market. The aforesaid conduct of the defendant violated Item (5), Paragraph 1, Article 17 of the Anti-Monopoly Law that “business operators with a dominant market position are prohibited from implementing tie-in sale or abusing their dominant market position by imposing other unreasonable trading conditions at the time of trade without just cause,” and thus impaired the lawful rights and interests of the plaintiff. The Plaintiff instituted a civil lawsuit in accordance with the Provisions of the Supreme People’s Court on Several Issues concerning the Application of Law in the Trial of Civil Dispute Cases Arising from Monopolistic Conduct and requested the people’s court to invalidate the defendant’s bundled transaction according to the law and order it to refund the plaintiff RMB15.” In that complaint, Wu Xiaoqin did not claim that his consumer rights and interests were impaired. Therefore, the court of first instance did not error in applying the Anti-Monopoly Law to Wu Xiao Qin’s claims.
In conclusion, BC & TV Company had a dominant market position in the cable TV transmission service market within Shaanxi Province, bundled service for receiving digital TV programs with the paid digital TV programs and sold them together to Wu Xiaoqin, which violated Item (5), Paragraph 1, Article 17 of the Anti-Monopoly Law. Wu Xiaoqin’s retrial claims to invalidate BC & TV Company's charge of RMB15 for digital TV programs and have the RMB15 refunded were tenable. The first-instance judgment was clear in its finding of facts and correct in its application of law, and shall be affirmed. The second-instance judgment was insufficient in its factual basis and wrong in its application of law, and shall be corrected.
