Toutiao v. Tencent for Anti-unfair Competition: Business Freedom or Social Responsibility? (Ⅰ)

Toutiao v. Tencent for Anti-unfair Competition: Business Freedom or Social Responsibility?

Peng Zhe, Associate research fellow of Law School of Shandong University, Doctor of Law of University of Washington


According to the media report, Tencent sued Jinri Toutiao (News aggregation products) and Tik Tok (short video product) attached to the same patent company as Jinri Toutiao to Haidian People's Court in Beijing on June 1, 2018, on grounds that "Toutiao series" products involved the unfair competition and caused serious harm to Tencent's reputation, asking 1 Yuan for damages and requiring the two companies to push a public apology in full quantity on their own news media platform. In addition, Tencent will suspend its cooperation with Jinri Toutiao and Tik Tok, including commercial procurement, investment of resources and other cooperation with commercial service nature.


In the face of the lawsuit launched by Tencent and suspension of cooperation, Jinri Toutiao gave a strong response, instituted a countersuit immediately on grounds that Tencent involved unfair competition, accused two products of Tencent Qzone and Tencent Security Guarder of intercepting and blocked Jinri Toutiao's web link, which constituted unfair competition, required Tencent to claim for economic loss of 40 million Yuan, and required to make a public apology for 100 days on Tencent webpage, Qzone homepage and specified national media.


In addition, Jinri Toutiao and jointly sued Tencent and asked the court to judge that Tencent immediately stopped all behaviors of unfair competition, made a public apology for 100 days on China Youth News, Legal Evening News and other media and compensated Jinri Toutiao for the economic loss of 50 million Yuan. The indictment said when the Internet users visited 365yg. com, Tencent hinted "Please do not access this site in danger", "The website you are going to visit is reported by a large number of users, and the fake Tencent lottery information has been intercepted for you" and other contents on the "Tencent Safe Manager" "Tencent QQ" through pop-up windows and other means, which kept users from visiting, carried out the publicity and promotion on "Tencent Safe Manager" and diverted website traffic of Jinri Toutiao through unfair means, which increased the number of users of Tencent.  


The lawsuit has been dubbed a "headache" by netizens because of the intense conflict and the complicated legal issues involved.


The legal battle between Tencent and Toutiao is rooted in the market competition of the two companies. With WeChat and QQ, the two most important social software in China, Tencent is now the Internet enterprise with the most user time and largest traffic. Toutiao products have come from behind. Currently, the number of users of Toutiao App has reached 700 million, and the daily amount of play of Tik Tok has reached 1 billion. Tencent itself has daily express (news polymerization product) and Microview (short video product), but its number of users is far less than that of Jinri Toutiao and Tik Tok. Tencent can't compete with Toutiao on news polymerization product and short video product but Toutiao doesn't necessarily threaten the market position of Tencent on the surface. Although users' use of Toutiao products will occupy some user time and attention, which may reduce users' time on Tencent social platform, users' use of Tencent social platform to share links has also promoted the application of Tencent social platform to some extent. However, if the Toutiao products move forward and start to enter the social domain, the social platform that Tencent relies on as the traffic pool will face competitive threats. It's told that Tik Tok has planned to launch a photo-sharing function and got involved in social contact.  


Tencent sued Jinri Toutiao for copyright infringement and won the case in 2017. The copyright dispute is just the beginning of the battle. Since March this year, Tencent has repeatedly intercepted and blocked the "Toutiao series" products for various reasons, including Jinri Toutiao and Tik Tok. In response, a lot of comments on condemning and denouncing Tencent were spread by Toutiao on Jinri Toutiao and Tik Tok. Most recently, Toutiao spread a piece of news titled Xinhua: how many documents Tencent would take to stop and pressed Tencent in the name of the official media. The news, however, has problems with the signature and headline and in the sight of Tencent, such a mistake is a deliberate false accusation of Toutiao. So Tencent took Jinri Toutiao to court, which also caused a lawsuit against Tencent.


Myth of Anti-Unfair Competition Law in the battle between Toutiao and Tencent 

The core of the dispute between Tencent and Toutiao is whether the behavior of Tencent blocked Toutiao on its social media platform violates the Anti-Unfair Competition Law.


In accordance with Article 12 of the Anti-Unfair Competition Law, a business operator shall comply with each provision of this Law when engaging in production and operating activities by using networks. A business operator shall not hinder or damage a network product which is lawfully provided by other business operator or normal running of a service, by using technical means and by influencing a user's choice or through other means.. Paragraph 3 stipulates that the network products or services legally provided by other operators shall be maliciously incompatible.  


According to the above legal prov i s ions, whether WeChat constitutes unfair competition shall be seen on the one hand whether the link shielded by it belongs to the network product or service provided "legally", and on the other hand whether the shield action of WeChat is "vicious".  


Although Jinri Toutiao only accused Qzone and Tencent Safe Manager of blocking Jinri Toutiao in the lawsuit and didn't mention the issue of WeChat blocking Jinri Toutiao and Tik Toking links, once blocking links was regarded as illegal, Jinri Toutiao can follow the victory and continue to sue WeChat for blocking Jinri Toutiao. Toutiao didn't mention the issue of WeChat blocking Toutiao in the lawsuit, maybe because that Toutiao deliberately avoided the grey regulatory problem of Tik Tok.  


With respect to the legality of Toutiao products, the "Links Forbidding Announcement" issued by WeChat said that "external links shall not disseminate contents containing audio-visual programs in any form without obtaining the license for broadcasting audiovisual programs on the information network and other legal licenses". According to media reports, the "micro broadcast vision" itself, which belongs to "Tik Tok", doesn't hold the license for broadcasting audiovisual programs on the information network, and its parent company "Bytedance" owns the license through the acquisition of Yuncheng Sunshine Culture Media Co., Ltd. The subject owning the license doesn't completely match the operation subject of the APP, and there is a suspicion of borrowing the license. However, the license has been suspended.  There are more than 500 units that have obtained the license legally before, and other companies can only obtain the license indirectly through acquisition and other means. In the field of short video, currently the operation subjects of several platforms in the market don ' t hold this license. The supervision departments have neither legalized them nor taken prohibitive measures, so they are in a grey state.  


Therefore, in the case that there is some room for dispute on the legality of Tik Tok, Toutiao only chose Jinri Toutiao which had no dispute on the legality in the lawsuit, and the lawsuit against unfair competition focused on whether the blocking act of Tencent is "malicious".  


How to determine what behaviors are "malicious incompatibility"? "The particularity of Internet technology has made it easier for technology competition in the Internet field to create problems with unclear power boundary. Legality and illegality, competition and unfair competition need to be further explored and analyzed in the process of law enforcement. In the process of law enforcement, we generally adopt a prudent and tolerant attitude towards the competition in the Internet field, take into account the impact of technical progress on fair competition, market order and rights and interests of consumers, and make an overall judgment."Yang Hongcan, director of the Anti-monopoly and Anti-unfair Competition Enforcement Bureau of the State Administration for Industry & Commerce of the People's Republic of China, said in response to correspondents' questions after the NPC standing committee passed the revised Anti-unfair Competition Law. This answer reflects that "malicious incompatibility" has not yet been clearly judged and is subject to being further explored in judicial and law enforcement practice.