A high-profile Internet law case is hogging headlines in China. Qihoo 360 Technology Co. Ltd (“Qihoo”) and Tencent, the world’s 3rd largest Internet company behind Amazon and Google, have been entangled in a nearly decade-long legal battle. Think of Qihoo v. Tencent as the Google antitrust saga – Eastern Hemisphere edition.
Arguably the Google of China, Tencent has its tentacles in nearly every facet of Internet business. Valued at US$101B in 2013, the ISP handles approximately 90% of China’s instant messaging traffic. The company’s mascot — a penguin with a red scarf — is as ubiquitous in China as the Nike swoosh is in the United States.
2010: Qihoo v. Tencent, Rivalry Origins
In September 2010 Qihoo sued Tencent for allegedly breaching users’ privacy via QQ Doctor – a Tencent security packet for the company’s popular IM service. Qihoo insists Tencent used QQ Doctor to scan and monitor users’ personal data.
Pundits quickly commented on the timing of the lawsuit, which coincided with the launch of Qihoo’s Koukou Guard, a security package meant to compete with QQ Doctor.
In the wake of the claim, and in the name of “users’ rights,” Tencent shut down its instant messaging app on computers running Quihoo’s security package.
From that point, it was game on between Tencent and Qihoo. At one point, the Ministry of Industry and Information Technology warned both sides to curb the antics, or else.
And they complied. Things quieted down, for a bit.
But when Qihoo released Koukou Guard, Tencent released a provocative statement, insinuating that Qihoo’s new security product would break Tencent products. Qihoo swears it lost $135 million on account of the statement.
2012: Let The Qihoo v. Tencent Battle Continue!
About Qihoo 360
Founded in 2005, and a fierce competitor of Tencent, Qihoo is another Chinese ISP that runs a Web browser and several popular apps.
Fast Forward to November 2012, Qihoo, revived its legal beef with Tencent, over the same issue.
This time, Qihoo accused Tencent of abusing its market position with the Koukou Guard announcement. Unfortunately for Qihoo, the Guangdong High People’s Court rejected the case.
Undeterred, Qihoo turned to the Supreme People’s Court. At the beginning of this month, both sides made arguments. Now, the Supreme People’s justices must deliberate and ultimately rule on the definition of “Internet Marketplace.”
One of The First Big Monopoly Lawsuits Since China’s 2008 Anti-Monopoly Law
The Qihoo versus Tencent showdown is significant for two reasons. First, the impact it could have on international Internet law is huge. Secondly, it’s one of the first major online monopoly cases heard since China passed its 2008 anti-trust law.
A law Professor at Peking University explained that Chinese anti-trust law considers 3 elements:
- Whether or not an entity is unfairly blocking competitors;
- Whether or not government intervention is a factor;
- Whether or not an industry’s barriers to entry are low.
If Qihoo v. Tencent resolves like the Google monopoly investigation, Tencent will suffer a slap on the wrist and a stern warning. If the Supreme People’s Court sides with Qihoo, perhaps Chinese technology companies will start seeking greener pastures to grow.