Battle of the giants
The Higher People's Court of Guangdong Province on April 18 began the court's first monopoly case, involving two Chinese Internet giants.
Online security service provider Qihoo 360 Technology Co announced on April 13 that it was suing Tencent Holdings, the country's largest Internet company by market value, for abusing its dominant market position in various ways, including forcing users to uninstall Qihoo's anti-virus software.
New York-listed Qihoo is claiming 150 million yuan ($ 23.79 million) in compensation from the Hong Kong-listed Tencent, said the court.
Debate begins
"Since Tencent has a dominant position in the market, most companies choose to accept its requirements, and companies which are opposed to such behavior do not go beyond condemning it," Zhou Hongyi, chairman and CEO of Qihoo, said in an e-mail to the Global Times.
"Qihoo 360 hopes this antitrust lawsuit against Tencent can help fight against the monopolistic practice of excluding and limiting competition in the market and put an end to the chaotic situation in the Internet industry," wrote Zhou.
Chen Huifen, Tencent's general manager of investor relations, declined to comment when reached by the Global Times.
During the court hearing, lawyers and experts from both sides presented their arguments, focusing on three main questions: Whether Tencent has a dominant market position; whether Tencent has engaged in unfair competitive practices by using its monopoly role in the market; and whether the compensation required by Qihoo should be awarded.
"There are many companies with dominant market positions in their specific business areas in the Internet sector. But technically, it is difficult to ascertain 'abuse of dominant market position' under Chinese law,"
He Zhengsheng, an economic law expert and founding partner of Beijing Honor Base Law Firm, told the Global Times.
He said it would be difficult for Qihoo to prove that Tencent caused the company losses of nearly 150 million yuan.
According to Qihoo's annual report for 2011, which was released last week, the company had 402 million monthly active users in December 2011, and is the country's largest free anti-virus software provider.
Meanwhile, Tencent said last month that the company's instant messaging platform QQ had expanded its user base and "maintained its leading market position in China," demonstrated by the number of active user accounts reaching 721 million at the end of 2011, representing year-on-year growth of 11.3 percent.
David Stallibrass, a UK competition economist called as a witness by Qihoo, said in the court that because QQ has a share of more than 70 percent of the instant messaging market in China, and because no other competitor has a share of more than 5 percent, "there are barriers to entering the instant messaging market in China."
His argument was countered by Jiang Qiping, secretary-general of the Information Research Center of the Chinese Academy of Social Sciences, called as an expert witness by Tencent.
"Weibo, social networking services, and instant messaging services can all easily step into the instant messaging market. Also, some of Tencent's products have been imitated already. There are no concrete barriers to entering the market," Jiang said in court.
He from the Beijing Honor Base Law Firm said he thought it was unlikely that Qihoo would win the suit.
"If Qihoo wins, the case could influence the country's Internet industry in many ways. For example, smaller Internet firms could take larger companies to court, which could impact the development of China's Internet sector," said He, noting that the case between Qihoo and Tencent may possibly be settled out of court.
Drawn-out war
The long war between Tencent and Qihoo can be traced back to early 2010.
During the Spring Festival holidays of 2010, Tencent pushed users to install its QQ Doctor security software by bundling it with the QQ instant messaging platform.
The move was an obvious threat to Qihoo, as QQ Doctor has similar functions to Qihoo's 360 Guard software, and Tencent was able to take about 40 percent of the market for free security software overnight thanks to the ubiquity of its messaging service.
On September 27, 2010, Qihoo claimed that QQ scanned and monitored customers' computers for personal data. In response, Tencent on the next day announced a report alleging that Qihoo was under investigation by the authorities for carrying advertisements for pornographic websites.
Then, on October 14, Tencent announced that it was suing Qihoo for unfair competition, and was claiming 4 million yuan in compensation, as well as an apology. Tencent also began rallying support from Qihoo's competitors, including Kingsoft, Kaspersky and Rising, all of which profit mainly from selling anti-virus software.
Soon, the conflict between the two companies turned into a serious predicament for the users, as Tencent tried to force users to stop using Qihoo antivirus software by shutting down the QQ service on computers that had Qihoo software installed on them.
"In an era of so many competing firms, enterprises seek profit and market share through cut-throat competition instead of improving their core technology and corporate culture, a sign of immaturity," Yu Fei, CEO of Langezhiyang International Sales Consultant Group, told the Global Times.
As the war between the two Internet giants triggered a public outcry, the Ministry of Industry and Information Technology (MIIT) in November 2010 intervened in the argument, and ordered the two to stop their bickering. On November 21, both companies apologized to Internet users.
The MIIT said in a statement that unfair competition between the companies, especially Tencent's move to shut down its instant messaging service on computers using Qihoo software, had affected users and caused "bad social consequences."
In April 2011, a Beijing court ordered Qihoo to apologize for claiming that QQ was infringing users' privacy and to pay 400,000 yuan in compensation to Tencent. This seemed to bring the long-running dispute to an end, at least temporarily.
However, Tencent filed another lawsuit against Qihoo in June 2011 alleging that the company's "Koukou Guard" software prevented Tencent's advertisements from displaying, and sought 125 million yuan in compensation. Qihoo responded that it had stopped offering the software. The case has been accepted by the Higher People's Court of Guangdong Province, although a court date has yet to be set.
Because "Tencent didn't learn from its mistakes in the disputes in 2010… and decided to create obstacles for our company's future development," according to Qihoo's CEO Zhou Hongyi, the lawsuit prompted Qihoo to file its current lawsuit against Tencent.
Source: Global Times
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