China’s Jinan Intermediate People’s Court of Shandong province today hears a lawsuit filed by Chinese multinational tech and entertainment conglomerate Shenzhen Tencent Computer Systems Co. Ltd. (深圳市腾讯计算机系统有限公司) against China’s third-ranking smartphone maker vivo Mobile Communications Co., Ltd. (维沃移动通信有限公司) for unfair competition practices.
Shenzhen city-headquartered Tencent sued Dongguan city, Guangdong-province headquartered vivo for tricking vivo smartphone users with unverified and baseless risk warnings away from the download and installation of MyApp, an application developed and maintained by Tencent, on their smartphones. Similar to the App Store on iPhones, MyApp is a standalone app store platform to redistribute applications as an agent to be made downloadable and installable on any consumer electronic devices such as computers and mobile phones. Online marketplaces’ main revenue sources are the commissions paid by application developers for availability and cuts of application users’ subscription fees and/or in-app purchase fees. MyApp, as a competitor gateway to enormous applications, has been excluded from the App Store of U.S. tech titan Apple, Inc’s universe and the Vivo app store, which is pre-embedded in all Vivo smartphones, due to their overlapping segments and conflicting business interests. MyApp can only be downloaded and installed on vivo smartphones, which luckily, run the open-sourced Android operating system as opposed to the completely closed iOS, via browsers or on computers before being transferred onto smartphones.
Tencent launched MyApp in 2011, which had been remaining the top downloaded app store application in China by 2020, boasting over 200 million monthly active users (MAUs). MyApp’s head start has since been encroached by emerging pre-embedded app stores, which device manufacturers in ever-increasing numbers without exception see as default tools to drive traffic. In the most recent two years, MyApp still figured prominently, if not the most despairingly, among discrete camps of app store platforms taken together counting in the strongest pre-embedded app stores of Huawei, OPPO, and Xiaomi. According to the statistics published by China’s Ministry of Industry and Information Technology (MIIT), 2.3 million applications have been developed and made available on the market in China as of the end of March, with 1.31 million of them on offer on the App Store alone and the rest on pre-embedded app stores like the vivo app store and standalone app store applications like MyApp. vivo shipped 13.3 million units of smartphones and had a market share of 17.9%, ranking third behind Oppo and Honor, in China in the first quarter ending on March 31.
Tencent accused vivo of implicitly blocking its smartphone users from accessing MyApp by means of falsely alarming pop-ups, texts, buttons, and unintended initiation of fraudulent risk monitoring programs, and diverting users to the vivo app store for alternative applications in MyApp’s stead. Tencent argued vivo camouflaged its uncompetitive practices of manipulating users’ decision processes and monopolizing web traffic with security responsibilities as the producer and ultimate operator of their devices.
Tencent filed for the court’s pre-trial order to preserve all evidence relevant to vivo’s allegedly anti-competitive practices to ensure their availability for the discovery process prior to litigation. The court granted the preservation order.
Tencent sued vivo over MyApp for similar uncompetitive practices in the Nanjing Intermediate People’s Court of Jiangsu province in 2017. The court granted Tencent a pre-litigation injunction to enjoin vivo from these practices. Tencent sued another top Chinese smartphone maker Oppo in the Wuhan Intermediate People’s Court of Hubei province likewise in the same year, securing a pre-litigation injunction issued by the court as well.
The MIIT on February 16 issued the draft Regulations on Pre-Embedded Applications on Smart Devices (《关于进一步规范移动智能终端应用软件预置行为的通告》) to solicit public comments, where the app store is defined as a foundational part of a smart device. Disputes over it will stand a greater chance of being better resolved with a legal framework concerned to gel.