The Dongfeng Nissan Case and the Gaps of China’s Competition Law Regime in Tackling Vertical Restraints(Excerpts)

• Author: Jessica Hua Su

The Dongfeng Nissan Case

The plaintiff, Mr Liu Dahua, is the owner of a passenger car manufactured by Dongfeng Nissan Passenger Vehicle Company (Dongfeng Nissan). Liu claimed that Hunan Huayuan Industry Corporation Ltd. (Huayuan), a Dongfeng Nissan’s authorized dealer, had charged excessively high prices for spare parts and repair services and had tied the supply of repair services with the sales of spare parts. However, Huayuan told Liu that Dongfeng Nissan prohibited its authorized dealers from selling spare parts to end users without also providing the related services. Furthermore, except for Dongfeng Nissan’s authorized dealers, there was no supply of genuine Dongfeng Nissan car parts in the market. In his complaint, Liu alleged that Dongfeng Nissan and Huayuan, through monopolizing the supply of spare parts for Nissan passenger cars, had engaged in excessive pricing and tying, and such conduct had constituted the abuse of a dominant position in violation of the AML.

On 15 December 2011, the Changsha Intermediate People’s Court (Changsha Court) dismissed Liu’s complaint. The Changsha Court held that the plaintiff had failed to produce sufficient evidence to establish that the defendants held a dominant position and had abused that position. The Changsha Court also held that the plaintiff had failed to sufficiently investigate the market for the supply of car parts and repair services and that the defendants’ management of the car aftermarket did not necessarily have a restrictive effect on competition.

The Gaps in the AML Vertical Rules

The disputed conduct was in essence the result of typical vertical arrangements in relation to the supply of spare parts in China’s car aftermarket. The underlying vertical arrangements could have been challenged as suspected anticompetitive vertical agreements under the AML. However, the AML does not provide sufficient certainties for the scope and...