China: Anti-Unfair Competition Law Of China Emerged Under The Calling Of The Era

Last Updated: 2 February 2018
Article by AFD China Intellectual Property

On November 4, 2017, Order no. 77 of President Xi Jinping was issued to promulgate the revised Anti-Unfair Competition Law of China adopted at the 30th Session of the Standing Committee of the Twelfth National People's Congress of China. On January 1, 2018, the revised Law came into effect and started to serve for the maintenance of the fundamental orders in production and operating activities instead of the Anti-Unfair Competition Law had been adopting as of December 1, 1993.

This revision comes out 24 years after the Anti-Unfair Competition Law was enacted, during which period China's economic system reform is gradually deepening and China's market is increasingly mature. New unfair competition behaviors, which are not covered by the old Law, come out along with the development of new technology. This revision is aimed at adapting the Anti-Unfair Competition Law to the new situations and changes, so as to match China's law system with the rapidly developed market economy and thereby strive to make all market behavior have laws to follow and the rights and interests of concerned parties can be safeguarded.

Below, we summarize and analyze points which are worth-noting and important to participants of the market economy in this revised Law.

Application scope of the Law is enlarged

  • The application scope of the revised Law is enlarged from "market transactions" to "production and operating activities".
  • The definition of "disrupting the order of social economics" mentioned in unfair competition behaviors is adjusted to "disrupting the order of market competition" in the revised law. "Harming the legal rights and interests of consumers" is also added as an unfair competition behavior.
  • The scale of subjects is enlarged. "Natural persons, legal entities, and other organizations that engage in "manufacturing products" or "providing services" are all operators.

Expressions of unfair competition behaviors are adjusted

  • "Famous commodities" is no longer a necessary element, and as long as "the commodity is of certain influence", using a label identical or similar to the name, package, decoration, etc. of that commodity without permission of the owner of the commodity will be deemed as unfair competition behavior. The goodwill of the commodity is protected substantially.
  • The name (including abbreviations, trade names, etc.) of an enterprise, the name (including abbreviations, etc.) of a social organization, or the name (including pseudonyms, stage names, its translations, etc.) of an individual, main part of domain names, website names, webpages, etc. of certain influence cannot be used without the permission of the owner. The behavior is not limited to only "fake a registered mark".
  • A miscellaneous provision is added, i.e. "acts of confusion sufficient to mislead a person into thinking that the commodity is a commodity of another person or has a particular connection with another person" are all unfair competition behavior.
  • Behaviors that monopoly enterprises, government and its departments using their market position and their public power to disrupt the order of the market as well as behaviors of offering or accepting bribes are collected to be enlarged into general provisions so as to fully adjust the relations between concerned parties. For instance, "seeking a transaction opportunity or competitive edge" in the revised law covers a larger scope than "force other people to purchase commodities" and such local protectionism in the old law.
  • Misleading false publicity on not only conventional items, such as "performance, functions, and qualities of a commodity" but also "sales status user evaluation and honors achieved" are included. In our opinion, it is a new regulation adapt to the sales mode of e-commerce.
  • As regards business secrecy, the condition of "being able to bring economic benefit to the right holder and possessing practicability" is simplified into "being of commercial value", which defines the "commercial value" of business secrecy and "the employees and ex-employees, ought to know the business secrecy, of the right holder's" obligation to keep the business secrecy confidential.
  • Provisions in relation to "ban on dumping", "ban on selling commodities attached with unfair conditions" and "ban on collusions for bidding" are deleted. Provisions on sales with prizes are also adjusted. To be specific, it is required that information of the sales with prizes, such as the kinds of the prizes, the conditions of claims the prize, the amount of the monetary prizes or the content of merchandise prizes are, etc., shall be explicit; and the amount of the top prize in an unfair sale with prizes is adjusted from more than CNY 5,000 to more than CNY 50,000.
  • Special provisions on "online production and operating activities" are added, which stipulates:

    "Article 12 Operators engaged in online production and operating activities shall follow all provisions of this Law.

    Operators shall not use technological means to carry out the following activities that will hinder or damage the normal operation of online products or service legally provided by other operators through impacting the users' selection or other means:

    • Without the permission of other operators, inserting links in the online products or services legally provided so as to force the user to go to another object;
    • Misleading, cheating or forcing the users to change, close or uninstall online products or services legally provided by other operators.
    • Maliciously making the online products or services legally provided by other operators incompatible.
    • Other behaviors that hinder or damage the normal performance of the online products or services legally provided by other operators."

The amount of compensation and penalty for unfair competition behaviors are increased

As regards the civil responsibilities, the new law explicitly stipulates that if an operator conducts "misleading acts" or "violates business secrecy" and the amount of actual damage the right holder bears or the actual interests the infringer gains because of the infringement is hard to define, the people's court will determine that the amount of compensation the right holder should receive in accordance with the seriousness of the infringement and the amount of compensation here shall be less than CNY 3,000,000.

As regards adjustments on the amount of compensation and penalty, please refer to the table below:

Unfair competition behaviors In the old law In the revised law
Misleading behaviors More than 1 time and less than 3 times of the illegal income If the unlawful sales volume is more than CNY 50, 000, a fine of less than 5 times of the unlawful sales volume may be imposed; if the unlawful sales volume is 0 or less than CNY 50,000, a fine of less than CNY 250,000 may be imposed.
Bribery More than CNY10,000 and less than CNY 200,000 More than CNY100,000 and less than CNY 3,000,000
False or misleading publicity More than CNY10,000 RMB and less than CNY200,000 More than CNY 200,000 RBM and less than CNY 1,000,000; or more than CNY 1,000,000 Rand less than CNY 2,000,000 for severe case s.
Infringement upon business secrecy More than CNY 10,000 and less than CNY 200,000 More than CNY100,000 RMB and less than CNY 500,000; or more CNY 500,000 and less than CNY 3,000,000 RMB for severe cases.
Unfair sales with prizes More than CNY 10,000 and less than CNY 100,000 More than CNY 50,000 and less than CNY 500,000

Other penalties are not listed here. It can be seem obviously from the above comparison that the overall benchmark of the compensation and/or penalty is increased along with the development of economy, the improvement of the overall living standards of people and the more and more serious damage caused by improper behaviors conducted by operators. Hopefully, the unfair competition behaviors can be reduced by increasing the cost for misbehaviors.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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