© Springer-Verlag Berlin Heidelberg 2015Yimeei Guo (ed.)Research on Selected China’s Legal Issues of E-Business10.1007/978-3-662-44542-6_2
2. Anti-monopoly Analysis of Tencent QQ Versus 360 Dispute
Law Department, Xiamen University, Xiamen, 361005, China
Anti-monopoly concerns are becoming more and more frequent for Internet industries competing all over the world. This paper makes a case analysis of Tencent QQ versus 360 dispute, then has some further thought from such dispute. Finally, it is hoped by this paper that China’s anti-monopoly law (AML) be healthily and perfectly enforced in the future.
KeywordsAnti-monopolyInternet industriesCase analysis
(Published by Proceedings of 2011 International Symposium on Advances in Applied Economics, Business and Development (ISAEBD 2011), Part II, Aug 2011 pp.133–141<EI indexed>).
Anti-monopoly concerns are becoming more and more frequent for Internet industries competing all over the world. For example, in February 2011, Apple launched a new service that allows for magazine and newspaper subscriptions for its popular devices, might draw claim from publishers that Apple dominates the market for consumer tablet computers and that it has allegedly used that commanding position to restrict competition (Koppel 2011). Also in February 2011, Hudong.com, an online encyclopedia, is alleging that Baidu unfairly blocks its Web pages from search results in favor of its own encyclopedia service, Baidu Baike (Wang 2011). On April 1, 2011, Microsoft plans to file a complaint with the European Commission demanding action against competitor Google on competition law grounds. Microsoft claims that Google stops other companies from accessing the information needed to run effective search operations (Microsoft files EU 2011).
Notably, in 2010 in China which has more than 400 million netizens (2011), a “war” called “Tencent QQ versus 360 battle” happened in front of the desktop of tremendous Internet users and was well known both inside and outside the industry. The number 360, which relies on its 360 free anti-virus software become world renowned, is a top company of security software services company chiefs, and Tencent QQ, which is an “overlord” of instant messaging supported by 600 million users, these two desktop client software giants revealed a typical case of Chinese Internet industry’ s competition. Undoubtedly, this case is regarded as an anti-monopoly law (AML) issue; however, compared to the traditional anti-monopoly cases, it has its own feature, i.e., it took place in Internet area.
Under the frame of analysis on AML to prohibit abusing the market dominance position, first of all, we must identify whether or not Tencent owns the dominant market position, and secondly to identify whether or not it carries on the action of abusing the dominant market position. But to identify the dominant market position, we have to begin from defining the relevant market (including commodity market and geography market).
In ordinary market, the definition of relevant market is a complex question, involving substitutable demand and supply analysis of alternatives, sometimes even having the hypothetical monopolist test. And in Internet market, it is even more complex. It is temporal and spatial boundary is difficult to determine. Internet market is in dynamic development because of the rapid technology innovation and Internet industry’s vivid characteristic of network externality. Thus, the traditional definition method for relevant market is limited in its application.
Moreover, a dominant market position in Internet market is more complex to determine either the market share or market entry barriers; all of this exhibited some characteristics different from the ordinary market. For example, Internet market entry barriers are mainly expressed as the network effects and intellectual property (IP), technical standards or other non-price factors.
For this reason, although the public tend to make sure that Tencent QQ has a conduct of violating the AML, but it is difficult to convict legally that Tencent QQ violates AML, this article thinks that this issue is very complicated and has a long way to go; it still wants to provide an analysis on the captioned Tencent QQ versus 360 case according to China’s Anti-Unfair Competition Law (AUCL) and the AML and brings forward some further thought and suggestion.
2.2 Anti-monopoly Analysis of Tencent QQ Versus 360 Dispute
2.2.1 Fact Summary
Tencent Technology (Shenzhen) Limited is an Internet service provider (ISP)—its most well-known product, however, is an instant messaging system known as “QQ” (Tencent QQ).
Beijing Qihoo Technology Limited supplies security software—its most well-known line of products, are its “360” line of security software (including software, which protects user’s privacy on the Internet and anti-virus software) (Qihoo 360).
In September 2010, Qihoo 360 launched the software called “360 Privacy Protector.” This product is used to keep tabs on other software on a user’s computer and is able to detect a number of things, for instance, the type of data that software extracts from a user’s computer. The objective of this product is to shield a user from software that illegally extracts or retains a user’s personal data—in other words, to protect a user’s privacy.
On September 26, 2010, Qihoo 360 published an article on their Web site entitled “360 Privacy Protector 1.1 Beta—new function—privacy clean up function.” In this article, Qihoo 360 alleged that its 360 Privacy Protector software had recently detected that “a certain instant messaging software” was found to be “peeping” at the private files and data of users, without first obtaining the approval of those users. The article itself did not name which instant messaging software Qihoo 360 was referring to. However, a screenshot in the article bore the logo of the Tencent QQ instant messaging software.
On October 14, 2010, Tencent Technology (Shenzhen) Limited and Shenzhen Tencent Computer System Limited (hereinafter Tencent QQ) filed an application with the Beijing Chaoyang District People’s Court, alleging that:
Beijing Qihoo Technology Limited (manufacturer and copyright holder of 360 Privacy Protector; and owner of www.360.cn); Qizhi Software (Beijing) Limited (company which supplies 360 Privacy Protector software); and Beijing San Ji Wu Xian Internet Technology Limited (operator of www.360.cn) (hereinafter Qihoo 360) have fabricated or spread false facts about Tencent QQ’s instant messaging software resulting in the Tencent QQ’s business reputation or “commodity fame” being damaged. This conduct was allegedly in breach of Article 14 of the AUCL.
Further in Tencent QQ’s court application, they claimed that they could properly be construed as a competitor to Qihoo 360 as the latter also manufactures and supplies their own anti-virus or security software (i.e., called “QQ Computer Housekeeper”). In its complaint, Tencent QQ requested that the court prohibit Qihoo 360 from fabricating or spreading false facts about Tencent QQ’s instant messaging software; that Qihoo 360 apologize to Tencent QQ for the conduct described above; and that Qihoo 360 pay damages of RMB 4 million.
On November 3, 2010, the court accepted this case (the AUCL allegation).