Is “Abuse Of A Market Dominance Position” Actually Far Away From You?

When the terms “monopoly” or “market dominance” are mentioned, small and medium-sized enterprises (SMEs) often instinctively think of industry giants with massive social influence. However, in judicial practice, being investigated or penalized by antitrust authorities, or facing litigation, for alleged abuse of a dominant market position is not exclusive to large, well-known companies. Many enterprises that hold a dominant position in specific regions or market segments—even if they are not as well-known as large enterprises—may likewise face legal risks if their conduct violates antitrust laws.

In a recent civil lawsuit regarding the abuse of a market dominance position in which we acted as counsel, the opposing party specifically targeted our client’s dominant position in a particular niche market, alleging that our client had abused its market dominance position in the course of their business relationship. Drawing upon this typical case, we would like to take this opportunity to outline the behavioral scenarios that could be recognized as an “abuse of market dominance position,” and offer guidance on how enterprises can identify, evaluate, and mitigate such risks in practice.

• The Abuse of Market Dominance Position

The abuse of market dominance position is regulated under Chapter III of China’s Anti-Monopoly Law, which prohibits business operators with a dominant market position from abusing that position to eliminate or restrict market competition.

The determination of a dominant market position does not rely solely on the enterprise’s size or popularity; rather, it focuses more on the share and position that the enterprise holds within a specific market segment. Consequently, those “hidden champions” that have secured a leading position in certain niche sectors by virtue of core technological barriers are precisely the high-risk groups for this exposure.

If an enterprise possesses technology in a particular niche that is highly advanced and difficult to replace, that niche technology sector itself is likely to be defined as a distinct “relevant market,” such as high-end industrial products with specific performance characteristics, specialized products for specific uses (e.g., food or pharmaceutical applications), or professional services in a specialized field. Within this distinct relevant market, the basis for assessing market share and competitive conditions is no longer the broader industry as a whole, but rather this narrow niche. Once such a niche technology sector is defined as a “relevant market,” the enterprise’s high market share in these fields, achieved through its advanced technology, may enable it to attain a “market dominance position.”

In judicial practice, behaviors such as excessively high pricing, entering into exclusive purchasing or sales agreements, tying or bundling sales, and setting “most-favored-nation” clauses may all be recognized as an abuse of market dominance. Consequently, enterprises may face risks of civil litigation from transaction counterparties (particularly purchasers) and even competitors. Unlike other monopolistic practices, which are generally perceived by the public as cases subject to supervision, investigation, and penalties by administrative authorities, the consequences of abusing a dominant market position usually occur in the form of civil litigation in practice.

• Lawsuits Alleging Abuse of Dominant Market Position—Losing Parties May Face “Another Defeat”

More importantly, under China’s current laws, antitrust litigation falls under the exclusive jurisdiction of the People’s Courts, and the parties are prohibited from resolving such disputes through arbitration. This means that such cases do not enjoy the confidentiality benefits offered by arbitration proceedings, and the relevant judgments will be made public in accordance with the law. If a company loses the case, even if the judgment is redacted, its public disclosure may still expose certain operational details, business models, and even internal management issues to public scrutiny, thereby adversely affecting the company’s competitive position in the market and its long-term development. Furthermore, once a party is determined by a final judgment to have engaged in conducts constituting an abuse of a dominant market position, it is highly likely that other business partners or even competitors will file similar lawsuits, entangling the company into protracted and complex legal disputes and resulting in incalculable damage to its business reputation and financial losses.

• Responding to Abuse of Market Dominance Position Litigation

The general procedure for adjudicating cases involving the abuse of a market dominance position is as follows: define the relevant market → analyze whether the operator holds a dominant position in the relevant market → determine whether there has been an abuse of a market dominance position → determine whether the alleged monopolistic conduct has had the effect of excluding or restricting competition.

In the case in which we acted as counsel, the counterparty deliberately narrowed the definition of the relevant product market excessively in order to get the court to support its claims. To address this, we assisted our client in identifying multiple competitors offering services/products similar to those of our client, and based on this, we established a more accurate definition of the “relevant market” for the case. Meanwhile, through public information searches, industry interviews, anonymous surveys, and various other methods, we comprehensively gathered pricing information for comparable services/products within the relevant market. This effectively helped our client demonstrate that its pricing behavior aligned with competitive market levels and did not constitute an abuse of a market dominance position, such as charging “unfairly high prices.”

Fortunately, through our continuous communication, coordination, and professional efforts, the plaintiff’s claims in this case were ultimately not supported by the court.

• Mitigating the Risk of Abuse of a Market Dominance Position

As the above example shows, the abuse of a market dominance position is by no means an issue faced exclusively by industry giants. Holding an advantageous position in a niche market, signing exclusive agreements, or even triggering disputes due to pricing strategies—any of these can inadvertently cause an enterprise to step into the antitrust gray area, thereby triggering a series of risks related to administrative investigations or civil litigation. These risks are often hidden within seemingly routine business decisions.

Enterprises can build a “compliance moat” by following these three steps:

First, conduct a systematic assessment of the niche sector in which you operate, clearly define the “relevant market” in which it operates under antitrust law, and gain an objective understanding of your own market position and the boundaries of legal risks.

Second, review pricing models, transaction structures, and core contract clauses to identify potential risk points that could be deemed as unfairly high prices, restricted transactions, or tied selling.

Third, establish a normalized internal compliance mechanism, and regularly conduct anti-monopoly training for management and business teams to integrate compliance awareness into every aspect of business decision-making.

Against the backdrop of increasingly precise anti-monopoly law enforcement and growing civil litigation, proactive prevention is far superior to reactive response. Compliance is not only a “shield to avoid liability,” but also the “key to development” for an enterprise to operate steadily and win long-term trust.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.