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360 v. Tencent Monopoly Case Final Trial: Upholding Original Judgment Rejects 360 Appeal

Author: Views: 2102 Published: 2014-10-18 11:09:30 Tencent , the first instance verdict , Sina science and technology , computer , Qihoo
Sina Technology News On the morning of October 16, the Supreme People's Court today sentenced the second trial of 360 v. Tencent over the abuse of market dominance. The court held that although the facts of the first instance verdict were found to be improper, the applicable law was correct and the decision was appropriate. The appeal was rejected and the original sentence was upheld.

360 company claims that Tencent has a dominant position in the market of instant messaging software and services. On November 3, 2010, Tencent and Tencent Computer issued a "letter to the majority of QQ users" expressly prohibiting their users from using Qihoo's 360 software, or otherwise stopping QQ software services; Users provide related software services, forcing users to delete 360 software; adopting technical means to prevent users with 360 browsers from accessing the QQ space, during which a large number of users deleted Qihoo related software.

360 Company believes that the above actions by Tencent constitute a restricted transaction. In addition, Tencent and Tencent Computer Co., Ltd. bundled QQ Software Manager with instant messaging software, installed QQ Doctor in the name of upgrading QQ Software Manager, constituting a bundled sale. Tencent and Tencent Computer jointly implemented the abuse of market dominance, which caused 360 companies to be harmed and they shall bear joint and several liability.

In summary, 360 requested an order: Tencent and Tencent Computer immediately ceased to be accused of monopoly behavior; jointly compensated 360 companies for economic losses of 150 million yuan; apologized to 360 companies; assumed reasonable expenses paid by Qihoo for rights protection of 1 million yuan.

Tencent defended that 360 had misdefined the relevant market in this case; the two defendants did not have a dominant market position in the instant messaging service market. The accused monopoly does not constitute an abuse of market dominance, nor does it have the effect of restricting competition. Request to dismiss all Qihoo claims.

In the first instance, the Guangdong Higher People's Court held that 360 Company's claim that the comprehensive instant messaging service constitutes an independent related commodity market and that the relevant regional market in this case should be the mainland China market cannot be established. The relevant commodity market in this case is far beyond the comprehensive instant messaging service market, and the relevant regional market should be the global market.

The first instance stated that Tencent neither had the ability to control the price, quantity or other trading conditions of commodities, nor the ability to hinder and affect other operators from entering the relevant market, and had no dominant position in the relevant market. Due to the incorrect definition of the relevant commodity market by the 360 company in this case, the evidence provided by it was insufficient to prove that Tencent and Tencent Computer Co., Ltd. had a monopoly position in the relevant commodity market. Therefore, the 360 company's lawsuit lacked factual and legal basis and could not be established. The court ruled that all claims of 360 Company were rejected.

A focus of this case is on whether the case is suitable to use the "hypothetical monopolist test" method to define the relevant market and whether the court of first instance applied the method correctly.

The Supreme People's Court holds that, as an analytical thinking to define the relevant market, it is assumed that the Monopoly Test (HMT) has universal applicability. In the case of free Internet-based instant messaging services that have existed for a long time and become a common business model, users have extremely high price sensitivity. Changing the free strategy and charging even a small amount of fees may cause a large number of users to be lost.

The Supreme Court said that in this case, taking a hypothetical monopolist test based on relative price increases would likely include products that do not have a substitution relationship into the relevant market, resulting in the relevant market being too broadly defined. Therefore, a hypothetical monopolist test based on a relative price increase is not appropriate in this case. The court of first instance directly applied the hypothetical monopolist test based on the price increase in this case, which was inappropriate.

Regarding whether Tencent's "product incompatibility" behavior (users choose one of two) constitutes a trading restriction behavior prohibited by antitrust law. The Supreme People's Court held that Tencent's motivation for adopting "product incompatibility" in order to exclude and restrict competition in the instant messaging service market was not obvious. Secondly, Tencent's implementation of "product incompatibility" lasted only one day, but brought more active competition to the instant messaging service market where it was located, and its impact on the security software market was extremely weak.

The judgment stated that this aspect shows that Tencent's "product incompatibility" behavior does not constitute an abuse of market dominance prohibited by the antitrust law, and it also supports the conclusion that Tencent does not have market dominance.

Regarding whether Tencent constitutes a tie-in sale prohibited by antitrust law. The Supreme Court considers that there is no reliable evidence in this case that the alleged tie-in has caused Tencent to extend its leading position in the instant messaging market to the security software market. Secondly, QQ instant messaging software and QQ software management package installation is reasonable.

"By installing and installing QQ instant messaging software and QQ software management to achieve the functional integration of QQ instant messaging software, users can better manage QQ instant messaging software and ensure account security, thereby improving the performance and value of QQ instant messaging software. Therefore "Tencent does not constitute a tying sale prohibited by the antitrust law." The judgment said.

In the end, the Supreme Court held that although the facts in the first instance judgment were inappropriate, the applicable law was correct and the decision was appropriate, so it rejected the appeal and upheld the original judgment. (Zhang Nan Luo Liang)

Case review:

In February 2010, Tencent launched "QQ Doctor" to compete with 360 security guards. On October 29 of the same year, Qihoo 360 launched a "snap bodyguard" sword pointing at QQ, and it was required to implement a series of "bodily" actions including garbage removal and advertising. On the evening of November 3 of that year, Tencent announced that it would stop running the QQ software on computers with 360 software. Users must uninstall 360 software to log in to QQ, requiring users to "choose one", which caused a large number of users to be forced to delete the 360 software.

After the Ministry of Industry and Information Technology's access, Tencent resumed 360 software compatibility, and the two companies apologized to users. However, a new round of competition started in the court.

In November 2012, Qihoo 360 sued the Guangdong Higher People's Court, claiming that Tencent abused its dominant market position in instant messaging software and service-related markets and constituted a monopoly.

On March 20, 2013, the Guangdong Provincial Higher People's Court made a judgment of first instance and rejected all Qihoo's claims. Regarding the above judgment, Qihoo expressed its dissatisfaction, appealed to the Supreme People's Court, and claimed a financial loss of 150 million yuan.

On November 26 of the same year, the second trial of the case opened in the Supreme People's Court. The trial lasted for two full days. As of the end of the trial, the appellant and the appellee still refused to give up each other, and both insisted on their respective claims.
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