Antitrust Law Blog

The new Anti-monopoly Law of China (“AML”) was issued on August 30, 2007, although it will not come into effect until August 2008.  During the one year time window, there is no doubt that the existing enforcement system of anti-monopoly will be greatly impacted and amended by this AML.  However, it is also very important for general counsels of multinational companies in China to understand how the current anti-monopoly enforcement system might impact the future upgraded system under the AML.

Bundled discounts, the practice of selling multiple products for a single price, are ubiquitous in America, ranging from Happy Meals at your local McDonald's to a single price for telephone, Internet and television service from your local cable or satellite provider.

Courts have struggled to develop an analytical model to determine when bundled discounts violate antitrust laws. They do not fit the tying paradigm because there is no conditioning; that is, a buyer can purchase the products in the bundle separately, albeit at higher individual prices. Likewise, unless the discount causes the seller's prices to be below the seller's incremental cost, bundled discounts do not constitute predatory pricing.

The California Court of Appeal has held that Korea Supply Co. v. Lockheed Martin Corp., 29 Cal.4^th 1134 (2003), did not preclude an award of restitution under California's Unfair Competition Law ("UCL") to plaintiff by defendant Microsoft even though plaintiff paid a retailer, not Microsoft, for the product.  Plaintiff asserted that he had been misled by statements on Microsoft's packaging into purchasing a Microsoft product. Shersher v. Superior Court, 154 Cal.App.4^th 1491, 1494, 65 Cal.Rptr.3d 634 (2007) (plaintiff "alleged that he paid money to a retailer to purchase Microsoft's product based on false or misleading statements on the product package").  The Court of Appeal, which reviewed the writ at the direction of the California Supreme Court, reversed the Superior Court order granting defendants' motion to strike plaintiff's claim for restitution.

Since the venerable case of Ace Beer Distributors v. Kohn, Inc.,[1] numerous courts have held that the substitution of one distributor for another is competitively neutral.  The courts have generally upheld refusals to deal and distributorship substitutions, even where a manufacturer decides to abandon a geographic area for product distribution, a line of business, or makes significant changes in the means by which it offers its product for distribution.[2]