On April 10, 2021, Alibaba Group put forward the requirement of “one out of two” for businesses on the platform, prohibited businesses on the platform from opening stores or participating in promotional activities on other competitive platforms, and took a variety of incentive and punishment measures to ensure the implementation and maintenance of the “one out of two” requirement by virtue of market forces, platform rules, data, algorithms and other technical means, Violated the provisions of Item (4), Paragraph 1, Article 17 of the Anti monopoly Law, which prohibits “restricting the trading counterpart to trade only with it without justified reasons”, and was fined 18.2 billion yuan by the market supervision department.

On the same day, the news that Alibaba was punished for its monopoly at a high price quickly spread all over the network. The reason why this news received such high attention was that, This is because Alibaba’s “choose one from two” approach not only restricts the independent operation of businesses on the platform, but also excludes and restricts the competition in the online retail platform service market in China, hinders the free circulation of commodity services and resource elements, affects the innovation and development of the platform economy, infringes on the legitimate rights and interests of businesses on the platform, and damages consumers’ choice interests.

Alibaba’s punishment means that “monopoly” is no longer an abstract economic concept, but an important part of enterprise compliance. So, as the main body of market operation, in which aspects of daily operation will enterprises encounter monopoly, or anti-monopoly? We try to solve the problem by combining data and cases.

I. Market Position

Alibaba is subject to anti-monopoly punishment, and the final legal characterization is “abuse of market dominance”. According to Article 5 of the Interim Provisions on the Prohibition of Abusing Market Dominant Position, “market dominant position” refers to the market position of operators in the relevant market that can control the price, quantity or other trading conditions of goods or services, or can hinder or affect the ability of other operators to enter the relevant market.

Therefore, the control power of an enterprise’s goods or services in the relevant market and its impact on fair competition, that is, the market position, are important criteria for judging whether it has monopoly behavior.

II. Sales Phase

Some business operators simply think that “our company is small in size, and our industry position is not good enough, so there is no anti-monopoly risk”. In fact, it is not. Let’s look at the following two cases:

On January 28, 2021, Shandong Provincial Market Supervision and Administration Bureau decided to impose an anti-monopoly penalty of 220 million yuan on eight cement enterprises involved in the case in accordance with the law. The reason is that the eight cement enterprises with competitive relationships jointly initiated the establishment of a joint venture company, and took the joint venture company as a platform to jointly achieve and implement a number of acts suspected of violating Article 13 of the Anti monopoly Law to prohibit operators with competitive relationships from entering into monopoly agreements. The decision on administrative penalty points out that the illegal facts of the above-mentioned enterprises include three aspects: first, the conclusion and implementation of a monopoly agreement on fixed commodity prices; The second is to reach and implement monopoly agreements that limit the quantity of goods; The third is to reach and divide the monopoly agreements of the sales market. These agreements make it difficult for cement enterprises and downstream users in other regions to substitute their supply and demand, so they have the effect of eliminating and restricting competition.

Theoretically, these eight cement enterprises are independent economic organizations that produce and sell similar products and have competitive relationships. From a single perspective, the scale and market position of the enterprises are not large, but the union reached through horizontal monopoly agreements is enough to achieve monopoly effect in the relevant markets.

Let’s look at another case. In April 2021, the State Administration of Market Supervision imposed an anti-monopoly penalty of 764 million yuan on Yangzijiang Pharmaceutical. The reason is that from 2015 to 2019, Yangzijiang Pharmaceutical Group, through signing cooperation agreements, issuing price adjustment letters, oral notices and other means Downstream enterprises such as retail pharmacies have reached an agreement on fixing the resale price of drugs and limiting the minimum resale price of drugs, and ensured the implementation of the agreement by formulating implementation rules, strengthening assessment and supervision, punishing low price sales dealers, and entrusting intermediaries to supervise the price of drugs sold online, In violation of Article 14 of the Anti monopoly Law, “operators are prohibited from entering into the following monopoly agreements with trading counterparts: (1) fixing the price of goods resold to a third person; (2) limiting the minimum price of goods resold to a third person”.

The reason why Yangzijiang Pharmaceutical was judged as a monopoly was that it was punished because it restricted the minimum resale price by signing a vertical agreement on purchasing and selling goods with downstream enterprises, that is, the opposite party of the transaction, as well as cooperative behavior, which had the effect of eliminating and limiting competition.

Therefore, even if an enterprise is small in scale and has a low market position in the industry, it may eliminate and restrict fair competition and obtain monopoly benefits by signing horizontal agreements with competitors in the industry or signing vertical agreements with the other party (such as zoning, hierarchical distribution, chain operation). Therefore, small enterprises with such business models still have the possibility of being characterized as monopolies, that is There are still anti-monopoly risks in a series of circulation links such as supply and marketing.

III. Investment or enterprise M&A

In the market, operators usually obtain control over other operators or can exert decisive influence on other operators through merger, asset purchase, share purchase, contractual agreement (joint venture, joint venture), personnel arrangement, technical control, etc. Among them, enterprise merger and consolidation are the most important and common forms.

If the above-mentioned business activities have an effect on the order of competition, such as excessive concentration of economic forces and the emergence of a monopoly structure that damages competition, it may be subject to anti-monopoly adjustment, which is also the concentration of business operators specified in Article 20 of China’s Anti monopoly Law.

In order to avoid improper competition caused by business concentration, if China stipulates that business concentration meets the standards prescribed by the State Council, business operators shall report to the antimonopoly law enforcement agency of the State Council, and those who do not report shall not implement concentration.

According to the 2019 Annual Report of China’s Anti monopoly Law Enforcement issued by the State Market Supervision Administration, in 2019, 103 monopoly cases were filed and investigated, 44 cases were closed, and the amount of fines and confiscations was 320 million yuan. Among them, 28 cases of monopoly agreements were filed for investigation and 12 cases of administrative penalties were imposed; 15 cases of abuse of dominant market position were filed and investigated, and 4 cases of administrative punishment were imposed; 24 cases of administrative monopoly were filed and investigated, and 12 cases of abuse of administrative power to eliminate restrictions on competition were corrected; Investigated 36 cases of concentration of business operators that failed to declare according to law, and imposed 16 administrative penalties. 503 business concentration declarations were received, 462 cases were filed, and 465 cases were concluded.

From the above data, the anti-monopoly punishment of centralized operation by means of enterprise merger, asset purchase, equity participation, technology control, personnel arrangement, etc. accounts for 1/3 of the total, which is the focus of anti-monopoly investigation and punishment in China at present. Therefore, enterprises should first consider anti-monopoly compliance issues when these operations occur, so as to avoid being burned.

To sum up, we can draw a simple conclusion that antitrust is investigated and defined in relevant markets. Therefore, enterprises may encounter antitrust risks in many aspects such as establishment, circulation of goods and services, personnel arrangement, intellectual property protection, equity expansion, etc. Antitrust has little to do with the size of individual enterprises, but is closely related to the industry, market and business measures taken.

Lawyer Wang Fen

Graduated from the Northwest Institute of Political Science and Law, Economic Law Department, with nearly 10 years of legal service experience, and high customer satisfaction;

Advocate that the law should serve the business, be able to go deep into the frontline of the consulting unit, and provide the consulting unit with operable and valuable services that can pre control risks;

It can independently research and develop topics and provide daily legal training for enterprises, including labor law, contract law, shareholder disputes, intellectual property rights and competition law.