E-commerce giants' legal battle shrouds Singles Day gala

"Double Eleven" was promoted as a shopping day by Alibaba in 2009, and Alibaba's online shopping platform Taobao.com has been breaking sales records on Singles Day year after year. Singles Day (Nov 11) has gradually become a national shopping gala, with JD.com emerging as a key competitor of Alibaba in the last three to four years.

Although e-commerce titans are endeavoring to expand their sales performance using new promotional methods, such as offering coupons and higher discounts, the legal battle between JD.com and Alibaba, China's e-commerce giants, deserves close attention.

JD.com sued Alibaba in the Beijing High People's Court, accusing it of misusing its dominant position in the market. JD.com has alleged that Alibaba is forcing online clothes and furniture enterprises as well as other companies to sign an "exclusive cooperation contract" which says that once a certain merchant decides to sell its products on Alibaba's e-commerce platform of Taobao or Tmall, it cannot enter into a contract with JD.com or any other e-commerce platform for the 618(June 18) or Double 11 shopping gala. It has also alleged that Alibaba's contract says that even if a merchant has launched an online store on JD.com, it has to shut it to participate in Alibaba's Singles Day sales.

JD.com claims that the fact that Alibaba has given the merchants an either-or choice is an abuse of its dominant market position and a violation of the Anti-trust Law, and has sought 1 billion yuan ($142.90 million) in damages from Alibaba.

Before the case could be heard in detail, Alibaba and its subsidiary, the Tmall app operator, raised an objection regarding the jurisdiction of the Beijing High People's Court, claiming they as defendants are not domiciled in Beijing, so according to the provisions of jurisdiction in the Civil Procedure Law, the court should transfer the case to the Zhejiang High People's Court as the defendants are domiciled in Zhejiang province. But the Beijing court ruled that it is within its jurisdiction to hear the case, as Alibaba is an internet company and the merchants with whom it had signed the contracts are domiciled in Beijing.

With the Supreme People's Court sustaining the Beijing People's High Court ruling, Alibaba's objection has been overruled.

Since a lawsuit, especially an anti-trust lawsuit, is generally complicated and takes time to settle and can have far-reaching economic consequences, the courts are trying to establish a system of checks and balances to protect the interests of all parties - e-commerce companies and their competitors, as well as consumers. And the jurisdiction issue, which has now been settled, is only the first step in a long-drawn process.

Normally, there are three key aspects in a case regarding the abuse of dominant market position by an e-commerce company.

First, the court must identify the market of competition of the relevant e-commerce companies. Second, after identifying the market, the court has to decide whether the defendant, Alibaba in this case, occupies a dominant position in that market. And third, it has to decide whether Alibaba's either-or choice clause constitutes an abuse of its dominant market position, and evaluate its corresponding impact on market competition.

As far as an anti-trust lawsuit involving internet companies is concerned, there is a precedent: 360 vs QQ. Referred to as the first internet anti-trust civil litigation in China, the case attracted the attention of legal professionals and ordinary netizens alike. The case concerned QQ requiring its users to make an either-or choice between QQ and 360, that is, if a user chose to use QQ, he/she would have to get rid of the 360 software in his/her computer due to compatibility issues. This prompted 360 software operator Qihoo 360 Technology Co to file an anti-trust lawsuit against QQ's operator Tencent Technology, alleging that Tencent was abusing its dominant market position.

The case was referred to the Supreme People's Court. In its final judgment, the court used professional economic analysis to redefine the market in respect of instant messaging tools and concluded that Tencent's QQ did not enjoy monopoly in the market despite having a large market share, which was different from the public perception. The 360 vs QQ case is of great significance to the construction of internet anti-trust judicial rules and the Supreme People's Court has included it in the 16th batch of guiding cases. Which means it could be referred to in similar cases in the future.

That's why it is necessary for the Beijing High People's Court to identify the competition market of relevant e-commerce companies despite the fact that such a competition could be highly dynamic and the market boundary might not be as clear as that of a physical market.

Besides, evaluating whether a company enjoys a dominant market position, whether it has abused this position and, if so, what are its consequences on the market and its competitors are big challenges for the Beijing court.

As for common consumers, they are curious to know what measures the two e-commerce giants will take to mitigate the impact of the anti-trust case.

The author is an assistant judge of the Beijing Intellectual Property Court. The views don't necessarily represent those of China Daily.