SHANGHAI, Aug. 1 (Xinhua) -- A Shanghai court on Thursday ordered two Chinese Johnson & Johnson subsidiaries to pay a pharmaceutical distributor 530,000 yuan (85,800 U.S. dollars) in compensation for monopolistic practices.
In the final verdict, the Shanghai Municipal Higher People's Court revoked a previous verdict issued by a municipal intermediate court and demanded that Johnson & Johnson Medical China Ltd. and Johnson & Johnson Medical Shanghai Ltd. compensate Rainbow Medical Equipment & Supply Company, a former distributor of the pharmaceutical giant's equipment.
Rainbow Medical appealed to the higher court in May 2012 after losing a lawsuit at the Shanghai No. 1 Intermediate People's Court.
In January 2008, the Johnson & Johnson subsidiaries signed a sales contract with Rainbow Medical. The agreement said Rainbow Medical would sell Johnson & Johnson's Ethicon products in designated areas at prices that could not be lower than what Johnson & Johnson had set.
In March 2008, Rainbow Medical won a medical suture tender in a public bid at the Peking University People's Hospital. One month later, Johnson & Johnson clerks issued a warning to Rainbow Medical over the low price of its bid.
In July 2008, the subsidiaries canceled Rainbow Medical's sales rights at two hospitals in Beijing over the latter's low bid. In August, they started refusing to accept suture product orders from Rainbow Medical, and then completely stopped supplying the distributor with suture products in September.
The Johnson & Johnson subsidiaries did not sign a sales contract with Rainbow Medical in 2009, though the companies had cooperated for the prior 15 years.
Rainbow Medical filed a lawsuit with the Shanghai No. 1 Intermediate People's Court in August 2010, demanding about 14 million yuan in compensation for economic losses caused by Johnson & Johnson.
In May 2012, the court rejected the lawsuit in a first instance verdict, saying the sales contract was not a monopoly agreement as stipulated in China's anti-monopoly law.
After three court sessions, the Shanghai Municipal Higher People's Court ruled that subsidiaries' actions violated the country's anti-monopoly law, adding that they should compensate Rainbow Medical for the losses it incurred.
But the compensation should only cover the profits lost from Rainbow Medical's suture product sales in 2008, the final verdict said.
"I support the court's ruling on the monopolistic practices of Johnson & Johnson, but the compensation is too much lower than we expected," said Dai Bin, a lawyer for Rainbow Medical.
Ding Wenlian, the presiding judge in the case, said the verdict fully reflected the purpose of the anti-monopoly law, especially in protecting the interests of patients as consumers, as well as public interests.
China's anti-monopoly law took effect on Aug. 1, 2008. The National Development and Reform Commission is currently investigating foreign baby formula companies, including Nestle, Mead Johnson and Wyeth, as well as domestic company Biostime, over alleged anti-trust violations.
"The milestone verdict showed that Chinese courts have professional capabilities in handling anti-monopoly cases," said Huang Yong, an anti-monopoly expert.
The contract signed between Rainbow Medical and the Johnson & Johnson subsidiaries was a typical vertical monopoly agreement, said Huang, a consultant for the country's anti-monopoly committee and a professor at the University of International Business and Economics.
"China has begun to refer to the legal practices of the United States and the European Union and punish vertical monopoly practices," said Huang. "This will protect the price competition and will not hinder the commercial choices of enterprises."