Shanghai's highest court ordered two Johnson & Johnson subsidiaries Thursday to pay one of their distributors in Beijing 530,000 yuan ($86,513) for violating the country's anti-monopoly laws.

The case was the first involving a vertical monopoly since the Anti-monopoly Law of China took effect five years ago.

In the case, Shanghai Higher People's Court overturned a lower court decision that ruled in favor of the Johnson & Johnson's subsidiaries, Johnson & Johnson Medical (Shanghai) Ltd and Johnson & Johnson Medical (China) Ltd.

The high court determined that the appellant, Beijing Ruibang Yonghe Technology and Trade Co Ltd, provided enough evidence to show that Johnson & Johnson's price fixing agreement with its distributors restricted competition in the market and constituted a monopoly.

The court used four criteria to determine whether the agreement was a monopoly, including Johnson & Johnson's market presence, its motive and whether there was "complete competition" in the market, said Ding Wenlian, the judge who presided over the case.

The court believed that Johnson & Johnson's suture products hold a leading market share in China, so the company has a dominant influence in setting the product's price, given the fact that the market of suture product is very specific and does not have complete competition.

Johnson & Johnson signed an annual contract with Ruibang Yonghe for 15 years. It normally set a common minimum sales price with its distributors, in which they agreed not to discount the sale price below the minimum price.

The court found that Johnson & Johnson had a stranglehold over how much its products sold for.

The court said the purpose of the rigid control of prices was to avoid competition.

Although price fixing is permitted in some cases to prevent sellers from competing too fiercely and losing profits or in the case of launching a new product to increase market share, it violates anti trust law in this case, because the product is not new, and the price fixing prevented others from entering the market, the court said.

In March 2008, Ruibang Yonghe won a bid to supply a suture produced by Johnson & Johnson to Peking University People's Hospital.

According to hospital documents, Ruibang Yonghe offered a price 6 percent below the minimum price set by Johnson & Johnson, the court said in its verdict.

Johnson & Johnson warned the company and eventually stopped supplying Ruibang Yonghe with suture products. Johnson & Johnson did not renew its contract with the company in 2009.

In August 2010, Ruibang Yonghe sued Johnson & Johnson in Shanghai No.1 Intermediate People's Court, demanding 14 million yuan in compensation for financial losses it suffered from the termination of the agreement, which it asserted violated anti trust law.

The court ruled that Ruibang Yonghe did not produce sufficient evidence to show the agreement violated the anti trust law. Ruibang Yonghe appealed the ruling in May 2012.

In the appeal, the appellant provided more evidence to demonstrate Johnson & Johnson's market presence, the motivation for the price control and its effect, the court said.

As a result of the price control, the price of suture products did not change for 15 years. "It not only affected the normal market order, but also it eventually forced patients to pay more than they should," said Gong Jiong, a professor from University of International Business and Economics, who testified as an expert witness. 

Shanghai Higher People's Court did not support Ruibang Yonghe's claim for 14 million yuan in compensation due to lack of evidence, Ding said.