WU Xiaoqin v. Shaanxi Broadcast & TV Network Intermediary (Group) Co., Ltd., A Dispute over a Bundled Transaction CHINA GUIDING CASES PROJECT

Transcription

1 WU Xiaoqin v. Shaanxi Broadcast & TV Network Intermediary (Group) Co., Ltd., A Dispute over a Bundled Transaction Guiding Case No. 79 (Discussed and Passed by the Adjudication Committee of the Supreme People s Court Released on March 6, 2017) CHINA GUIDING CASES PROJECT English Guiding Case (EGC79) September 14, 2018 Edition The citation of this translation of this Guiding Case is: 吴小秦诉陕西广电网络传媒 ( 集团 ) 股份有限公司捆绑交易纠纷案 (WU Xiaoqin v. Shaanxi Broadcast & TV Network Intermediary (Group) Co., Ltd., A Dispute over a Bundled Transaction), STANFORD LAW SCHOOL CHINA GUIDING CASES PROJECT, English Guiding Case (EGC79), Sept. 14, 2018 Edition, The original, Chinese version of this case is available at 中国法院网 ( See also 最高人民法院关于发布第 16 批指导性案例的通知 (Notice of the Supreme People s Court on the Release of the 16th Batch of Guiding Cases), issued on and effective as of Mar. 6, 2017, This document was primarily prepared by Roland Reimers, Sean Webb, Peter Witherington, WU Yin, and Dr. Mei Gechlik; it was finalized by Sean Webb, Dimitri Phillips, and Dr. Mei Gechlik. Minor editing, such as splitting long paragraphs, adding a few words included in square brackets, and boldfacing the headings, was done to make the piece more comprehensible to readers; all footnotes, unless otherwise noted, have been added by the China Guiding Cases Project. The following text is otherwise a direct translation of the original text released by the Supreme People s Court.

2 Keywords Civil Bundled Transaction Monopoly Dominant Market Position Tying Main Points of the Adjudication 1. As the only business operator in a specific region that legally operates a cable television transmission business and the [only] centralized broadcaster of television programs, [the business operator] possesses advantages in every respect, including market access, market share, operating status, and operating scale; and it can be determined that this business operator possesses a dominant market position. 2. A business operator that uses its dominant market position to bundle the maintenance fee for basic viewing of digital television together with the fee for paid digital television programs to charge consumers infringes the consumer right to choose to consume [such services] and disadvantages other service providers entering the digital television services market. Even if additional circumstances exist in which the business operator charges separately two services, [this] is insufficient to deny that [the business operator s acts] constitute tying as prohibited under the Anti-Monopoly Law. Related Legal Rule(s) Article 17 Paragraph 1 Item 5 of the Anti-Monopoly Law of the People s Republic of China 1 Basic Facts of the Case Plaintiff WU Xiaoqin claimed: on May 10, 2012, he 2 went to Shaanxi Broadcast & TV Network Intermediary (Group) Co., Ltd. 3 (hereinafter referred to as Broadcast & TV Company ) to pay a maintenance fee for basic viewing of digital television and was informed that the fee had been adjusted from RMB 25 to RMB 30 per month. WU Xiaoqin paid a three-month fee of RMB 90, of which the maintenance fee for basic viewing of digital television was RMB 75 and the fee for digital television programs was RMB 15. Afterwards, WU Xiaoqin learned that digital television programs were to be freely chosen and voluntarily ordered by users. WU Xiaoqin 1 中华人民共和国反垄断法 (Anti-Monopoly Law of the People s Republic of China), passed and issued on Aug. 30, 2007, effective as of Aug. 1, 2008, 2 The terms he and his as used herein are gender-neutral terms that may refer to she and her or it and its. 3 The name 陕西广电网络传媒 ( 集团 ) 股份有限公司 is translated herein as Shaanxi Broadcast & TV Network Intermediary (Group) Co., Ltd. in accordance with the English name appearing for its website,

3 argued that Broadcast & TV Company was a public enterprise and had a dominant position in the digital television market; its act of charging a fee for digital television programs deprived [him] of his own autonomous right to choose [whether or not to order the digital television programs] and constituted tying. Therefore, [WU Xiaoqin] brought suit in the court and requested an order confirming that the defendant s act, on May 10, 2012, of charging [WU Xiaoqin] a digital television program fee of RMB 15 was invalid and that the defendant [must] return RMB 15 to the plaintiff. Broadcast & TV Company defended its position, claiming: as the only centralized broadcaster of television programs in Shaanxi Province, Broadcast & TV Company s charging of consumers other than those who choose to watch basic television programs complied with the Anti-Monopoly Law. Broadcast & TV Company had a dominant market position in the Shaanxi Province cable television [market] and encourages users to choose cable television packages, but does not abuse its dominant market position or forcibly stipulate that users must consume service items beyond [its] basic viewing services. Users have an autonomous right to choose [which services they consume]. Determinations of monopolistic acts belong to administrative authority and not to judicial authority; the plaintiff did not have the right to request a determination that a monopolistic act was ineffective. Although Broadcast & TV Company had launched a series of television packages that satisfied the personalized selections of its users, it had never carried out forcible acts of tying and had [always] ensured the right of the majority of people to choose to watch more television programs. Therefore, [Broadcast & TV Company] requested that [the court] reject the plaintiff s request asking [the court] to confirm that Broadcast & TV Company s addition of programs and charge of an [additional] fee were invalid; [but it] was willing to actively resolve the second item of WU Xiaoqin s litigation request. The court handled the case and ascertained: 4 on May 10, 2012, when WU Xiaoqin went to Broadcast & TV Company to pay a maintenance fee for basic viewing of digital television, he learned that the minimum standard monthly maintenance fee for basic viewing of digital television had been adjusted upwards from RMB 25 to RMB 30. WU Xiaoqin [then] paid RMB 90 as the maintenance fee for basic viewing of digital television for May 10 through August 9, An invoice specifically used for these fees that was issued by Broadcast & TV Company to WU Xiaoqin stated: the maintenance fee for basic viewing of digital television was RMB 75 and the fee for digital television programs was RMB 15. Thereafter, WU Xiaoqin, through consultation with Broadcast & TV Company s customer service center (service telephone [number] 96766), [learned that] Broadcast & TV Company had upgraded its programs and had added different paid programs; [that it] had different packages, the cheapest package of which had a [maintenance] fee for basic viewing of RMB 360 per year; [and that] every time, users should pay the fee for at least three months [of service]. With the approval of the government of Shaanxi Province, Broadcast & TV Company was the only business operator in Shaanxi Province that legally operated a cable television transmission business and the only centralized broadcaster of television programs [in Shaanxi Province]. Broadcast & TV Company admitted that it possessed a dominant position in the cable television transmission business in Shaanxi Province. 4 The original text does not specify which court is referred to here. It is likely meant to be the first-instance court of this case, namely, the Intermediate People s Court of Xi an Municipality, Shaanxi Province.

4 [The court] also ascertained that the Interim Measures for the Administration of Maintenance Fees for Basic Viewing of Cable Television, which was issued on December 2, 2004, by the National Development and Reform Commission and the State Administration of Press, Publication, Radio, Film, and Television, provides that maintenance fees for basic viewing of cable television are subject to government pricing fixing and that the fee standards shall be determined by the pricing department. The notice [released] by the State Administration of Press, Publication, Radio, Film, and Television on July 11, 2005, regarding the issuance of Several Opinions (Trial) on the Promotion of an Overall Switch to Digitalization of Cable Television at Pilot Work Units provides that each pilot work unit shall, in the course of promoting the overall switch to the digitalization of cable television, emphasize the promotion of new services, such as paid channels, [in order to] provide customers with [the ability to] freely choose and voluntarily order [such services]. The Notice on Provincial Standards for Maintenance Fees for Basic Viewing of Digital Television, which was promulgated on May 29, 2006, by the Shaanxi Provincial Price Bureau, provides that the fee standards for maintenance fees for basic viewing of digital television shall be [as follows]: each television set for viewing by residential users that uses one receiving terminal serves as one billing unit. Residential users of all municipalities in the province at or above the county-seat level [shall pay a fee of] RMB 25 per month for each master terminal. Cable digital television users may, according to [their] actual circumstances, voluntarily choose to pay the maintenance fee for basic viewing on a monthly, quarterly, or annual basis. The Notice on Strengthening the Management of Cable Television Fees and Other Relevant Issues, which was promulgated on August 25, 2009, by the National Development and Reform Commission and the State Administration of Press, Publication, Radio, Film, and Television, notes that the maintenance fee for basic viewing of cable television is subject to government price fixing and that fees for cable television value-added services and paid digital television programs shall be determined by cable television operating agencies themselves. In the second-instance trial, Broadcast & TV Company provided four copies of invoices specifically used for its fees, which proved that before and after May 10, 2012, the business office of Broadcast & TV Company charged RMB 25 as a monthly service fee. Because there were no original copies, WU Xiaoqin did not cross-examine [this evidence]. After the trial, Broadcast & TV Company provided three original copies, and the parties carried out verification and crossexamination. These bills all showed that the annual fee amounts were RMB 300, i.e. RMB 25 per month. Broadcast & TV Company provided five original copies of bills, including the three original copies that were provided in the first-instance [trial], which all [recorded] the transaction locations as Xianyang Municipality. This proved that Broadcast & TV Company, before and after May 10, 2012, provided services for a fee of RMB 25 per month. In the retrial, Broadcast & TV Company submitted a screenshot of its 2016 website fee package, [evidence] regarding the issuance of the Notice on the 2016 Measures (Trial) for the Implementation of Public Services, and a portion of its invoices for customer fees in 2016.

5 Results of the Adjudication On January 5, 2013, the Intermediate People s Court of Xi an Municipality, Shaanxi Province, rendered the (2012) Xi Min Si Chu Zi No. 438 Civil Judgment: 1. [the court] confirms that Shaanxi Broadcast & TV Network Intermediary (Group) s act, on May 10, 2012, of charging plaintiff WU Xiaoqin a digital television program fee of RMB 15 was invalid; 2. [the court orders] Shaanxi Broadcast & TV Network Intermediary (Group) Co., Ltd., within 10 days of the judgment s coming into effect, to return RMB 15 to WU Xiaoqin. Shaanxi Broadcast & TV Network Intermediary (Group) Co., Ltd. appealed. On September 12, 2012, the High People s Court of Shaanxi Province rendered the (2013) Shaan Min San Zhong Zi No. 38 Civil Judgment: 1. [the court] revokes the first-instance judgment; 2. [the court] rejects WU Xiaoqin s litigation requests. Unconvinced by the second-instance judgment, WU Xiaoqin applied to the Supreme People s Court for retrial. On May 31, 2016, the Supreme People s Court rendered the (2016) Zui Gao Fa Min Zai No. 98 Civil Judgment: 1. [the court] revokes the High People s Court of Shaanxi Province s (2013) Shaan Min San Zhong Zi No. 38 Civil Judgment; 2. [the court] upholds the Intermediate People s Court of Xi an Municipality, Shaanxi Province, (2012) Xi Min Si Chu Zi No. 438 Civil Judgment. Reasons for the Adjudication In the effective judgment, the court opined: 5 the focal points of the dispute in this case included: first, whether the act in dispute in this case violated Article 17 Item 5 of the Anti- Monopoly Law, and second, whether the application by the court of first instance of the Anti- Monopoly Law was proper. 1. On [the issue of] whether the act in dispute in this case violated Article 17 Item 5 the Anti-Monopoly Law Article 17 Item 5 of the Anti-Monopoly Law provides that a business operator that possesses a dominant market position is prohibited, without justifiable reasons, from tying [the 5 The original text does not specify which court opined. Given the context, this should be the Supreme People s Court.

6 sale of] a commodity or, during a transaction, from adding other transaction conditions that are unreasonable. In this case, Broadcast & TV Company, in its reply during the first-instance trial, clearly recognized that, with the approval of the government of Shaanxi Province, it is the only business operator in Shaanxi Province that legally operates a cable television transmission business. As the only centralized broadcaster of television programs in Shaanxi Province, [ ] Broadcast & TV Company has a dominant market position in the Shaanxi Province cable television [market] and encourages users to choose cable television packages, but does not abuse its dominant market position or forcibly stipulate that users must consume service items beyond [its] basic viewing services. Users have an autonomous right to choose [which services they consume]. Although Broadcast & TV Company did not recognize this during the secondinstance trial, it did not adduce evidence that it did not possess a dominant market position. During the course of the retrial review, Broadcast & TV Company did not raise an objection to the determinations of the courts of first and second instance of the fact that it possessed a dominant market position. Given that Broadcast & TV Company was the only business operator in Shaanxi [Province] that legally operated a cable television transmission business and that [it was] the only centralized broadcaster of television programs in Shaanxi Province, the determinations of the courts of first and second instance, on the basis of ascertained facts, that within the cable television transmission market, Broadcast & TV Company possessed advantages in every respect, including market access, market share, operating status, and operating scale, and that [it thus] possessed a dominant position, were not improper. On the issue of whether Broadcast & TV Company s provision of services to WU Xiaoqin constituted tying. Article 17 Item 5 of the Anti-Monopoly Law prohibits a business operator that possesses a dominant market position, without justifiable reasons, from tying [the sale of] a commodity. In this case, according to the facts ascertained by the court of first instance, when providing services, Broadcast & TV Company s employee informed WU Xiaoqin that the minimum monthly charging standard, since March 2012, had been adjusted upward from RMB 25 to RMB 30 and that every time [users had] to pay [the fees for] at least one quarter, but failed to inform WU Xiaoqin that [he] could pay separately the maintenance fee for basic viewing of digital television or the fee for paid digital television programs. WU Xiaoqin, through consultation with Broadcast & TV Company s customer service center (service telephone number 96766), learned that Broadcast & TV Company had upgraded its programs and had added different paid programs; [that it] had different packages, the cheapest package of which had a [maintenance] fee for basic viewing of RMB 360 per year, [i.e.,] RMB 30 per month; [and that] every time, users should pay the fee for at least three months [of service]. According to the above-mentioned facts coupled with the payment items that were recorded in the invoice specifically used for the charges that was issued by Broadcast & TV Company to WU Xiaoqin [indicating] the fact that the maintenance fee for basic viewing of digital television was RMB 75 and the digital television program fee was RMB 15, it can be determined that Broadcast & TV Company in fact bundled the basic viewing of digital television programs and paid digital television programs together and sold [them] to WU Xiaoqin and did not inform WU Xiaoqin whether or not [he was] able to separately choose and order the service item of basic viewing of digital television services. In addition, from the response of Broadcast & TV Company s customer service center (service telephone number

7 96766), it can also be proved that Broadcast & TV Company, when providing services, charged and provided the maintenance fee for basic viewing of digital television together with the fee for paid digital television programs. Although Broadcast & TV Company, during the second-instance trial, submitted relevant bills in which it separately charged other users the maintenance fee for basic viewing of digital television, this evidence can only prove that, at the time that Broadcast & TV Company charged these fees, there existed additional circumstances under which there were exceptions to the package described by the customer service center. During retrial, Broadcast & TV Company failed to give a reasonable explanation of the additional circumstances under which there were exceptions to the package described by the customer service center. Also, the bills that it submitted in which it separately charged the relevant fees were made after the litigation in this case. They were insufficient to prove the circumstances [involved] in the litigation and were not accepted. Therefore, the additional circumstances under which there were exceptions to the package described by the customer service center were insufficient to deny [the existence] of Broadcast & TV Company s widespread practice of charging the maintenance fee for basic viewing of digital television together with the fee for paid digital television programs. The court of second instance determined that Broadcast & TV Company not only provided composite services, but also provided basic services. The evidence [for this] was insufficient and [the determination] should be corrected. Therefore, the current evidence could not prove that ordinary consumers could only pay the maintenance fee for basic viewing of [digital] television or the fee for paid digital television programs and could not prove that there existed a consumer right to choose. The court of second instance, where it could not prove whether or not there was a right to choose, directly opined that this case constituted a question of failing to inform consumers that [they] have the right to choose and infringing on the consumer right to know. On this basis, [the court of second instance] determined that Broadcast & TV Company s act of selling did not constitute tying without justifiable reasons as regulated in the Anti-Monopoly Law. The factual and legal bases [for this judgment] were insufficient and [the judgment] should be corrected. According to the facts ascertained by the court, the maintenance fee for basic viewing of digital television and the fee for paid digital television programs constituted two separate services. In the original litigation and in the litigation of this court, Broadcast & TV Company failed to prove that providing these two services together accorded with the transaction customs for providing digital television services; at the same time, [it] also failed to prove that, if the maintenance fee for basic viewing services and the fee for paid digital television programs were charged separately, the performance and utility value of the two services would be adversely affected. Furthermore, Broadcast & TV Company failed to explain its reasons for the abovementioned acts; and under these circumstances, Broadcast & TV Company s use of its dominant market position to charge the maintenance fee for basic viewing of digital television together with the fee for paid digital television programs objectively impacted consumer choices [to use] other service providers that provide related paid digital [television] programs, and at the same time, disadvantages other service providers entering the [digital] television services market and had disadvantageous consequences for market competition. Therefore, the determination of the court of first instance that [Broadcast & TV Company s acts] violated Article 17 Item 5 of the Anti-

8 Monopoly Law was not improper. [Furthermore, this] portion of WU Xiaoqin s grounds for the application for retrial has been established and should be upheld. 2. On [the issue of] whether the application by the court of first instance of the Anti- Monopoly Law was proper In the litigation in this case, Broadcast & TV Company, in its reply, argued that this case was essentially a dispute about whether WU Xiaoqin s rights that he should enjoy under consumer interest protection laws were infringed, and that [the case] had nothing to do with monopolistic acts. [Furthermore,] it argued that the court of first instance should not have, in accordance with the Anti-Monopoly Law and [other] relevant provisions, opined that [Broadcast & TV Company had] a dominant market position, and therefore confirmed that its fees were ineffective. According to Articles 226 and 228 of the Interpretation of the Supreme People s Court of the Civil Procedure Law of the People s Republic of China, a people s court should, according to the litigation requests and the opinions in the defenses of the parties and the exchange of evidence, summarize the focal point(s) of the dispute and solicit the opinions of the parties on the summarized focal point(s) of the dispute. When the court handled the case, [it] should have focused on questions revolving around the facts disputed by the parties, the evidence, and the application of law. According to the ascertained facts, WU Xiaoqin in his complaint clearly claimed that the defendant s charging the plaintiff a fee for digital television programs was in fact the provision of a service to the plaintiff that was added beyond the scope of the provision of the above-mentioned services, and with respect to this [additional service] the plaintiff should have the autonomous right to choose. The defendant is either a public enterprise or a business operator that has in accordance with law an exclusive position and has a dominant position in the digital television market. The above-mentioned acts of the defendant violated Article 17 Paragraph 1 Item 5 of the Anti-Monopoly Law, which concerns the prohibition against a business operator that possesses a dominant market position, without justifiable reasons, from engaging in the tying [of the sale of] a commodity or, during a transaction, from [engaging in] an act of abusing its dominant market position by attaching or adding other transaction conditions that are unreasonable, and infringed the plaintiff s the legal rights and interests. The plaintiff, in accordance with the Provisions of the Supreme People s Court on Several Issues Concerning the Application of Law in Handling Civil Disputes Arising Out of Monopolistic Acts, initiated civil litigation and requested that the people s court, in accordance with law, confirm that the defendant s act of bundling the transaction is invalid and order [the defendant] to return RMB 15 to the plaintiff. In his complaint, WU Xiaoqin did not claim that his consumer interests had been adversely affected; therefore, the application by the court of first instance of the Anti-Monopoly Law in handling the case, according to WU Xiaoqin s litigation request, was not improper. In conclusion, Broadcast & TV Company had a dominant market position in the cable television transmission services market in Shaanxi Province, and it bundled services for the basic viewing of digital television together with paid digital television program services and sold [them] to WU Xiaoqin, which violated Article 17 Paragraph 1 Item 5 of the Anti-Monopoly Law. WU Xiaoqin s request in the retrial that [the court] confirm Broadcast & TV Company s charging him a fee for digital television programs of RMB 15 as invalid and his request [that the court] order [it] to return RMB 15 [to him], was established. The determination of facts of the first-instance

9 judgment was clear and the application of law was correct, [so both] should be upheld. The factual basis for the determination of the second-instance judgment was insufficient and the application of law had errors, [so both] should be corrected. (Adjudication personnel of the effective judgment: WANG Yanfang, QIAN Xiaohong, and DU Weike)