Qihoo 360 V. Tencent: A Landmark Decision Under China's Anti-Monopoly Law

On March 29, 2013, the Guangdong High People's Court ruled that Tencent, Inc. ("Tencent") did not violate China's Anti-Monopoly Law ("AML"). In the first lawsuit of its kind, Beijing Qihoo Technology Co. Ltd. ("Qihoo") sued Tencent under the AML, claiming Tencent was engaging in anti-competitive behavior. They sought ¥150 million in damages and an injunction against Tencent.

Qihoo is the software developer of the anti-virus program 360 Safeguard, and has more than 445 million users in China. Tencent is the company behind popular social networking, micro-blogging, and instant messaging software platforms such as WeChat, Weibo, and QQ. Tencent has nearly 800 total million users overall.

In 2010, Tencent introduced an anti-virus program called QQ Doctor, competing directly with Qihoo. QQ Doctor came bundled with the QQ instant message service. Because of its aggressive business tactics, Tencent quickly captured a 40% share of that market. Faced with this new competition and declining market share, Qihoo initiated defensive tactics, such as blocking QQ pop-up ads on devices using Safeguard 360. Tencent countered with a software update that rendered 360 Safeguard virtually inoperable on QQ-equipped devices, effectively forcing consumers to choose between the new rivals.

The AML, which went into effect on August 1, 2008, prohibits a company from engaging in anti-competitive conduct. One of the provisions states that if a company has a "dominant market position," it cannot abuse that position. "Dominant market position" occurs where one or several business operators(s) control(s) a specific market. Here, the plaintiff bears the burden of proof to demonstrate that the alleged harm is a result of the defendant's: (a) dominant position in a "relevant" market, and (b) use of...