360 v. Tencent

Last updated
360 v. Tencent
Court Supreme People's Court
Full case nameQihoo 360 v. Tencent, Inc.
Decided2016
Citation(s)（2013）民三终字4号
(pinyin :(2013) Min San Zhong Zi No. 4)
Stanford Law School China Guiding Cases Project, English Guiding Case (EGC78), Apr. 7, 2017 Edition

360 vs Tencent is a dispute between two Chinese IT companies, Tencent and Qihoo, over competition practices that has escalated in November 2010, and hundreds of millions of users were forced to choose sides in the dispute. [1] It is the first anti-monopoly case to be heard by the Supreme People's Court since the Anti Monopoly Law of China was promulgated. [2]

Contents

At the time Qihoo, the producer of the anti-virus software 360 Safeguard, was a competitor of QQ Doctor, which gained 40% of the Chinese market overnight when it bundled with Tencent QQ. On September 27, 2017, Qihoo released privacy guard software that showed QQ's suspicious spying activities on its users. Tencent then responded with a fabricated report alleging that Qihoo was under investigation for ads involving pornographic websites, as that Qihoo was attempting to gain support from its competitors in the anti-virus front like Baidu, Kingsoft, and Kaspersky Lab.[ citation needed ]

Tencent Tencent Logo.svg
Tencent

Later Qihoo alleged that QQ scans the installed programs in user's computer based on a "super black list", and attacked TenCent CEO Ma Huateng, saying he had been receiving government subsidies for housing. Qihoo also updated its privacy guard software to block ads in QQ, [3] Tencent's responded by filing an unfair competition lawsuit against Qihoo and released an update that blocked Tencent products from running on machines with 360 Safeguard installed. Hundreds of millions of Chinese computer users were forced to choose sides in the legal conflict by choosing to, either uninstall QQ or 360's privacy guard. [4]

Teng Xun Qi Dian .jpg

Litigation at the Guangdong High People's Court

A case of “abuse of dominant market position”, the first anti-monopoly law (AML) private enforcement case that was initially brought to and examined by the provincial high people's court.

The Guangdong High People's Court issued a judgment [5] that was both controversial and highly criticized by commentators.

In their judgment they held that:

Tencent was found to not have abused a dominant market position. [5] [6] [7] [8]

Litigation at the Supreme People's Court

Dissatisfied with the decision of the Guangdong High Court, Qihoo decided to appeal to the Supreme People's Court.

By far, the Supreme Court's written judgment is the best and most professional, both judicially and technically, judicial judgment of its kind ever amongst all AML cases in China. Given the judicial power and nature of the Supreme Court, this judgment established and reaffirmed several very important judicial rules with precedent case law effect insofar as the private enforcement of AML is concerned. These important judicial rules include:

  1. reaffirms the doctrine of semper necessitas probandi incumbit ei qui agit (he who alleges must prove) with regard to the allocation of onus probandi (burden of proof) in the AML judicial case
  2. defining the relevant market is not a purpose but instead rather a methodology in assessing the relevant undertaking's market power and the influence power of the alleged monopoly conduct on to the competition, as such it is not compulsory to specifically and exactly define the relevant market in every AML litigation of abuse of dominant market position
  3. a hypothetical monopoly test (HMT) based on tools of SSNIP (small but significant and non-transitory increase in price) or SSNDQ (small but significant and non-transitory decrease in quality) may be conducted in defining the relevant market but should be conducted carefully with caution
  4. the related market situation and technology development trend post the litigation may be taken into consideration in defining the relevant market
  5. market share is not the only element in concluding a dominant market position
  6. multi-elements should be comprehensively evaluated in defining the dominant market position, including but not limited to:
    1. the market share of the undertaking in question and the competition situation of the said market;
    2. the control ability of the undertaking in question in the said market;
    3. the financial and technical status of the undertaking in question;
    4. the degree of dependence of other undertakings on the undertaking in question; and
    5. the degree of difficulty to access to the relevant market by other undertakings
  7. if the relevant market is clearly defined and the alleged undertaking does not have dominant market position, normally it is not necessary to conduct an abuse behavior analysis and it can be directly concluded that such undertaking did not have abuse behavior; however, if neither the boundary of the relevant market nor the dominant market position of the alleged undertaking is clear or if the alleged undertaking had dominant market position, “effect examination” may be carried out so as to determine if the alleged conduct was lawful or not
  8. the “tie-in” under the AML is illegal if it meets all of these criteria:
    1. the base product and the “tie-in” product are independent to each other,
    2. ) the undertaking has a dominant market position in the base product market,
    3. certain enforcement implemented upon the buyer who became lack of other options but to accept the tie-in product,
    4. the tie-in could not be justified and was contrary to the commercial or consumer practice or ignored the functionalities of the products, and
    5. the tie-in gave rise to a negative effect to the competition
  9. if an undertaking successfully proved the alleged monopoly conduct was justifiable under AML does not mean such undertaking has automatically and same successfully proved the monopoly conduct has not caused negative effect of exclusion or restriction of competition.

Designation as a guiding case

Qihoo v Tencent was designated as a guiding case by the Supreme People's Court. While China does not have case law guiding cases can be considered to be persuasive precedents.

Reactions

Yu Fei, CEO of Langezhiyang International Sales Consultant Principal, speculates that the dispute resulted from poor competitive strategy.[ citation needed ]

In a poll conducted by Sina, 1.06 million users, or 79% of the participants, agree that the two companies "care more about their business interests than about their users." [9]

Kingsoft and Kaspersky made their security services free for one year shortly after the dispute escalated. [9]

On November 4, 2010, the day after Tencent stopped messaging service on computers with 360 installed, TencentHolding (SEHK :  700) lost 10.6 billion HKD, or 3.1% in market capitalization, including 1.1 billion HKD for Tencent CEO Ma Huateng. Kingsoft (SEHK :  3888) jumped 17.86% and gained 784 million HKD in market cap. Another instant messaging software producer Beijing Shenzhou Taiyue Software Corp., Ltd (Shenzhou Taiyue) (SZSE : 300002) increased by 3.7%. [10]

Microsoft's MSN may be seen as the winner of this dispute, as it agreed to integrate their products with Sina "in areas including microblogging, blogging, instant messaging, information content and mobile services." [11] [12]

On November 10, 2010, Qihoo 360 said they are going to resume their product's compatibility with QQ. [13]

Related Research Articles

<i>United States v. Microsoft Corp.</i> 2001 American antitrust law case

United States of America v. Microsoft Corporation, 253 F.3d 34, was a landmark American antitrust law case at the United States Court of Appeals for the District of Columbia Circuit. The U.S. government accused Microsoft of illegally maintaining its monopoly position in the personal computer (PC) market, primarily through the legal and technical restrictions it put on the abilities of PC manufacturers (OEMs) and users to uninstall Internet Explorer and use other programs such as Netscape and Java.

Predatory pricing is a commercial pricing strategy which involves the use of large scale undercutting to eliminate competition. This is where an industry dominant firm with sizable market power will deliberately reduce the prices of a product or service to loss-making levels to attract all consumers and create a monopoly. For a period of time, the prices are set unrealistically low to ensure competitors are unable to effectively compete with the dominant firm without making substantial loss. The aim is to force existing or potential competitors within the industry to abandon the market so that the dominant firm may establish a stronger market position and create further barriers to entry. Once competition has been driven from the market, consumers are forced into a monopolistic market where the dominant firm can safely increase prices to recoup its losses.

Tencent QQ, also known as QQ, is an instant messaging software service and web portal developed by the Chinese technology company Tencent. QQ offers services that provide online social games, music, shopping, microblogging, movies, and group and voice chat software. As of March 2023, there were 597 million monthly active QQ accounts.

Competition law is the field of law that promotes or seeks to maintain market competition by regulating anti-competitive conduct by companies. Competition law is implemented through public and private enforcement. It is also known as antitrust law, anti-monopoly law, and trade practices law; the act of pushing for antitrust measures or attacking monopolistic companies is commonly known as trust busting.

<span class="mw-page-title-main">Kingsoft</span> Chinese software company

Kingsoft Corporation is a Chinese software company based in Beijing. Kingsoft operates four subsidiaries: Seasun for video game development, Cheetah Mobile for mobile internet apps, Kingsoft Cloud for cloud storage platforms, and WPS for office software, including WPS Office. It also produced security software known as Kingsoft Security. The most popular game developed by Kingsoft is JX Online 3, launched in 2009.

Market dominance is the control of a economic market by a firm. A dominant firm possesses the power to affect competition and influence market price. A firms' dominance is a measure of the power of a brand, product, service, or firm, relative to competitive offerings, whereby a dominant firm can behave independent of their competitors or consumers, and without concern for resource allocation. Dominant positioning is both a legal concept and an economic concept and the distinction between the two is important when determining whether a firm's market position is dominant.

In United States antitrust law, monopolization is illegal monopoly behavior. The main categories of prohibited behavior include exclusive dealing, price discrimination, refusing to supply an essential facility, product tying and predatory pricing. Monopolization is a federal crime under Section 2 of the Sherman Antitrust Act of 1890. It has a specific legal meaning, which is parallel to the "abuse" of a dominant position in EU competition law, under TFEU article 102. It is also illegal in Australia under the Competition and Consumer Act 2010 (CCA). Section 2 of the Sherman Act states that any person "who shall monopolize. .. any part of the trade or commerce among the several states, or with foreign nations shall be deemed guilty of a felony." Section 2 also forbids "attempts to monopolize" and "conspiracies to monopolize". Generally this means that corporations may not act in ways that have been identified as contrary to precedent cases.

Article 102 of the Treaty on the Functioning of the European Union (TFEU) is aimed at preventing businesses in an industry from abusing their positions by colluding to fix prices or taking action to prevent new businesses from gaining a foothold in the industry. Its core role is the regulation of monopolies, which restrict competition in private industry and produce worse outcomes for consumers and society. It is the second key provision, after Article 101, in European Union (EU) competition law.

<span class="mw-page-title-main">Tencent</span> Chinese conglomerate holding company

Tencent Holdings Ltd. is a Chinese multinational technology conglomerate and holding company headquartered in Shenzhen. It is one of the highest grossing multimedia companies in the world based on revenue. It is also the world's largest company in the video game industry based on its equity investments, with Tencent Games being the subdivision of Tencent Interactive Entertainment Group (IEG) focused on publishing of games.

Microsoft has been involved in numerous high-profile legal matters that involved litigation over the history of the company, including cases against the United States, the European Union, and competitors.

Höfner and Elser v Macrotron GmbH (1991) C-41/90 was a significant EU competition law case, concerning the definition of an "undertaking" and abuse of a dominant position.

360 Safeguard and its international version, 360 Total Security, is an antivirus software developed by Beijing, China-based internet security company Qihoo 360. 360 Safeguard's focus is on stopping malware such as computer viruses and trojan horses and providing security patches for Microsoft Windows.

<span class="mw-page-title-main">360 Secure Browser</span> Multi-platform web browser

360 Secure Browser or 360 Safe Browser is a web browser developed by the Qihoo company of Beijing, China. It was first released in September 2008.

Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451 (1992), is a 1992 Supreme Court decision in which the Court held that even though an equipment manufacturer lacked significant market power in the primary market for its equipment—copier-duplicators and other imaging equipment—nonetheless, it could have sufficient market power in the secondary aftermarket for repair parts to be liable under the antitrust laws for its exclusionary conduct in the aftermarket. The reason was that it was possible that, once customers were committed to the particular brand by having purchased a unit, they were "locked in" and no longer had any realistic alternative to turn to for repair parts.

<span class="mw-page-title-main">Qihoo 360</span> Chinese computer security software company

Qihoo 360, full name 360 Security Technology Inc., is a Chinese internet security company that has developed the antivirus software programs 360 Safeguard and 360 Mobile Safe, the Web browser 360 Secure Browser, and the mobile application store 360 Mobile Assistant. It was founded by Zhou Hongyi and Qi Xiangdong in June 2005. The company's head office is in Chaoyang District, Beijing.

The Anti Monopoly Law of China is the main legal statute that regulates competition law in the People’s Republic of China. The National People’s Congress passed it in 2007 and it came into effect on 1 August 2008. The law aims to prevent and restrain monopolistic behaviors, protect fair market competition, safeguard consumer interests, and promote the healthy development of the socialist market economy.

Morton Salt Co. v. G.S. Suppiger Co., 314 U.S. 488 (1942), is a patent misuse decision of the United States Supreme Court. It was the first case in which the Court expressly labeled as "misuse" the Motion Picture Patent/Carbice tie-in defense to a charge of patent infringement and created the present blanket remedy in infringement cases of unenforceability of the misused patent. The decision re-emphasized that misuse can be found without finding an antitrust violation.

<i>Deutsche Telekom AG v Commission</i>

Deutsche Telekom AG v Commission (2010) C-280/08 is a European competition law case relevant for UK enterprise law, concerning telecommunications.

<i>Telefónica SA v Commission</i>

Telefónica SA v Commission (2014) C-295/12 is a European competition law case relevant for UK enterprise law, concerning telecommunications.

<span class="mw-page-title-main">QQ Browser</span> Web browser

QQ Browser is a web browser developed by Mainland Chinese technology company Tencent. It utilizes two browser engines: WebKit and Trident. Previously, Tencent had developed Tencent Explorer and Tencent TT, two browsers based on the Trident engine, as well as QQ Browser versions 5 and 6, which integrated the WebKit engine.

References

  1. ↑ "Popular messaging service shut down as fight between China's Internet firms escalates". Archived from the original on 2015-04-10. Retrieved 2014-01-07.
  2. ↑ "Lifang represented Qihoo before the Supreme Court in China's No.1 Internet Antitrust Case_立方律师事务所".
  3. ↑ "CEO: 360 will not release IM software". Archived from the original on 2010-11-06. Retrieved 2010-11-03.
  4. ↑ "360 Anti-Virus vs. Tencent QQ in desktop cat fight". Archived from the original on 2010-11-05. Retrieved 2010-11-03.
  5. 1 2 "(2013) Min San Zhong Zi No. 4 Civil Judgment". Archived from the original on 2019-04-26. Retrieved 2019-04-26.
  6. ↑ https:\cgc.law.stanford.edu\commentaries\1-insights-2017-john-walker\
  7. ↑ "Qihoo v. Tencent: economic analysis of the first Chinese Supreme Court decision under Anti-Monopoly Law" (PDF). Archived (PDF) from the original on 2017-04-15. Retrieved 2019-04-26.
  8. ↑ https:\www.chinacourt.org\article\detail\2015\01\id\1529289.shtml
  9. 1 2 "Cyber fans need to be aware free lunch may not always be so". Archived from the original on 2010-11-06. Retrieved 2010-11-08.
  10. ↑ 中国新闻周刊/山东商报. 媒体称腾讯市值一天缩水百亿[Z/OL]. http://news.inewsweek.cn/news-4-7060.html Archived 2011-07-07 at the Wayback Machine , 2010-11-5.
  11. ↑ "The Secret Winner of the QQ-360 War?". Archived from the original on 2011-01-30. Retrieved 2017-08-23.
  12. ↑ "MSN China, Sina to Integrate Social Platforms in China". 11 November 2010.
  13. ↑ "China Plus". Archived from the original on 2010-11-14. Retrieved 2010-11-11.
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.