Cause of Action

The plaintiff ACE Renovation Design Engineering Co., Ltd. has maintained collaboration with the defendant Guangzhou Gaosi Trading Company for many years. The plaintiff was entrusted by the defendant to process and produce light box equipment, including McDonald's light box advertisements. Both parties made the above agreement when signing the Confidentiality Agreement in 2016, the Manufacturing and Supply Agreement in 2017 and the Confidentiality Agreement in 2018 (hereinafter referred to as the involved agreements). 

In March 2019, the plaintiff participated in the bidding for McDonald's signboard advertisement. In April, the defendant asked the plaintiff to stop bidding for McDonald's project on the grounds that the plaintiff violated the involved agreements. The plaintiff sued the defendant on the grounds that the agreements involved were invalid. 

Case Proceedings

According to the plaintiff, the defendant is originally a horizontal operator. The defendant asked the plaintiff to sign the agreements involved in the case to ensure that the plaintiff did not compete with specific customers, and by setting clauses such as liability for breach of contract, the plaintiff's competition cost was improperly increased, and some downstream customers were intentionally cut off, making them the defendant's unique customers. In fact, the agreements involved have achieved the effect of dividing the upstream and downstream sales markets, severely restricting the competition in relevant markets and damaging the interests of downstream customers. Therefore, the agreements involved are horizontal monopoly agreements that divide the sales market and should be considered invalid. 

The court pointed out that, when reviewing the monopoly agreement, although it is necessary to decide whether the agreement in dispute is a horizontal agreement or a vertical agreement according to whether the subject of the agreement is located at the same economic level or commercial link in the chain of commercial activities, in view of the relativity of "economic level or commercial link" in practice, the identity of the same subject in different transaction links may change, so the decisive factor for identifying the agreement in dispute is not whether the subject of the agreement has engaged in commercial activities at a certain economic level or commercial link, but should be specific to the transaction involved, and examination should be conducted on whether the subjects in the agreement involved are vertical or horizontal. 

The plaintiff and the defendant in this case have the buyer-supplier relationship actualized on the products such as light box advertisements and signs in the catering industry from 2016 to 2018, and have completed the products of merchants including McDonald's, plus the contents of the Confidentiality Agreement signed by the plaintiff and the defendant in 2016 and 2018 and the Manufacturing and Supply Agreement signed in 2017, it can be determined that the relationship between the plaintiff and the defendant is a vertical relationship between the suppliers and buyers, instead of a horizontal one. Therefore, the claims of the plaintiff are inconsistent with the facts, which will not be accepted by court. 

Conclusion

The court holds that the relationship between the plaintiff and defendant belongs to a vertical rather than a horizontal one, and naturally, the agreements involved may not belong to horizontal monopoly agreements that would divide the sales market. On such ground, the court rejects all the claims of the plaintiff.