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China – Shaanxi High People’s Court Rules That Bundled Sales Of Cable TV Services Does Not Violate Antimonopoly Law.

7 February, 2014

 


The Shaanxi High People’s Court has formally issued its Sept. 12, 2013 verdict overturning the first instance judgment of a Xi’an Intermediate People’s Court ruling that Shaanxi Broadcast and TV Network Media’s (Shaanxi) sales of its cable TV services to a consumer did not constitute bundled sales in violation of the Antimonopoly Law of the People’s Republic of China (AML).

 

In May 2012, Shaanxi charged a consumer RMB 30 yuan per month ($5) for cable TV service, a five-yuan increase from the previous monthly rate. According to Shaanxi, the increased fee includes a RMB 15 yuan ($3) fee for the value-added cable services sold together with the basic cable TV services. The consumer plaintiff filed a claim in the first instance court, Xi’an Intermediate People’s Court, asserting that Shaanxi abused its dominant market position by selling bundled cable TV services without reasonable justification. He requested that the court: (1) confirm that the appellant’s act of charging the RMB 15 yuan value-added cable service fee was invalid, (2) order the return of RMB 15 yuan, and (3) order that Shaanxi pay the plaintiff’s litigation fees.

 

The main legal issue was whether Shaanxi violated Article 17 of the AML, which prohibits a business with a dominant market position from engaging in bundled sales practices without reasonable justification.

 

The first instance court ruled in favor of the plaintiff, explaining that the sale was an unlawful bundled sale prohibited by the AML. The court defined the relevant market as the cable transmission service market within Shaanxi province. The court further determined that Shaanxi had a dominant market position, because it held a 100 percent share in the relevant market and entry barriers were high. The court determined that Shaanxi abused its dominant market position because it did not inform the plaintiff that he had the right to choose cable TV services, but directly asked him to pay the services fee for both value-added cable service and basic cable TV service. According to the court, this constituted a bundled sale that the plaintiff was required to accept because of Shaanxi’s dominant market position. The court also ruled that Shaanxi did not provide any evidence of a reasonable justification for its bundled sales.

 

Shaanxi appealed, arguing that there were other competitors in the market, that it did not have dominant market position, and that its bundled sales were normal sales activities consistent with state policies. The second instance court, Shaanxi High People’s Court, upheld the lower court’s ruling that Shaanxi had a dominant market position. The court then ruled, however, that Shaanxi’s sale of cable services did not constitute unlawful bundled sales, because it offered both combined cable TV services and the basic cable TV service alone for purchase, and there were transactions where the two types of services were purchased separately during the same period. This demonstrated that consumers had the ability to purchase different services separately, so the bundled sales were not compelled. The court noted that if Shaanxi failed to notify the consumer of the choice to purchase the basic cable TV service alone, then Shaanxi might have violated other consumer rights under the Consumer Rights Protection Law or the Contract Law.

 

The court’s decision is available here.

 

Orrick

 

For further information, please contact:

 

Robert A. Rosenfeld, Partner, Orrick

rrosenfeld@orrick.com

 
Homegrown Competition & Antitrust Law Firms in China

 

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