By China Sinda Law Office

The Anti-Unfair Competition Law of the People's Republic of China (hereafter referred to as “Anti-Unfair Competition Law”) was revised and adopted at the 30th Session of the Standing Committee of the Twelfth National People's Congress of the People's Republic of China on November 4, 2017 and shall come into force on January 1, 2018.

This revision is the first major revision of the Anti-Unfair Competition Law since its issuance and enforcement in 1993. The new Anti-Unfair Competition Law will have a significant influence on China's market competition environment. Beijing Sinda Law Offices hereafter addresses some of the highlights in the new Anti-Unfair Competition Law, such as the definition of unfair competition behavior, confusion behavior, network unfair competition behavior, compensation for infringement and administrative penalties.

The definition of unfair competition behavior
Paragraph 2 of Article 2 of the new Anti-Unfair Competition Law stipulates that “…for the purposes of this Law, ‘unfair competition behavior’ means that in its production or distribution activities, a business disrupts the order of market competition and causes damage to the legitimate rights and interests of other businesses or consumers, in violation of this Law.” This provision expands the scope of unfair competition behaviors by expanding the scope of the aggrieved objects of unfair competition behavior from “the legitimate rights and interests of other businesses” to “the legitimate rights and interests of other businesses or consumers”.

Confusion behaviors
Article 6 of the new Anti-Unfair Competition Law stipulates that “A business shall not commit the following confusion behaviors to mislead a person into the belief that a commodity is from others or has a particular connection with others: (1) Using without permission a label identical or similar to the name, packaging or dress, among others, of other's commodity with certain influence; (2) Using without permission other's name with certain influence, such as the name (including abbreviations and trade names) of an enterprise, the name (including abbreviations) of a social organization, or the name (including pseudonyms, stage names and name translations) of an individual; (3) Using without permission the principal part of a domain name, the name of a website, or a web page with certain influence, among others, of others; (4) Other confusion behaviors sufficient to mislead a person into the belief that a commodity is one of others or has a particular connection with others.”
According to the above provision, where business identifiers, such as the commodity name, the packaging or decoration, the name of an enterprise, the name of an individual, the principal part of a domain name, the name of a webpage, have a certain influence, the right holder could prohibit other businesses from using these business identifiers without permission. However, according to the unrevised Anti-Unfair Competition Law, the commodity name, the packaging or decoration are protected if they are well-known and unique. In contrast, the new Anti-Unfair Competition Law expands the scope of protected business identifiers.

Network unfair competition behaviors
Article 12 of the new Anti-Unfair Competition Law stipulates that “a business engaging in production or distribution activities online shall abide by the provisions of this Law. No business may, by technical means to affect users' options, among others, commit the following behaviors of interfering with or sabotaging the normal operation of online products or services legally provided by another business: (1) Inserting a link or forcing a URL redirection in an online product or service legally provided by another business without its consent; (2) Misleading, defrauding, or forcing users into altering, shutting down, or uninstalling an online product or service legally provided by another business; (3) Causing in bad faith incompatibility with an online product or service legally provided by another business; (4) Other behaviors of interfering with or sabotaging the normal operation of online products or services legally provided by another business.”

Article 12 makes enumeration provisions on unfair competition behaviors in the field of the Internet by technical means, and this is newly added content of the new Anti-Unfair Competition Law. At present, the courts generally cite a principle clause, that is, the principle of good faith, when they hear cases of network unfair competition. After the enforcement of the new Anti-Unfair Competition Law, the legal provisions on which the judges can base their decision when hearing cases of network unfair competition will become more specific.

Compensation for infringement and administrative penalties
Paragraphs 3 and 4 of Article 17 of the new Anti-Unfair Competition Law stipulate that “the amount of compensation for the damage caused to a business by any unfair competition behavior shall be determined as per the actual loss of the business incurred for the infringement or if it is difficult to calculate the actual loss, as per the benefits acquired by the tortfeasor from the infringement. The amount of compensation shall also include reasonable disbursements paid by the business to prevent the infringement. Where a business violates Article 6 or Article 9 of this Law, and it is difficult to determine the actual loss incurred by the right holder for the infringement or the benefits acquired by the tortfeasor from the infringement, a people's court may, based on the circumstances of the infringement, render a judgment to award compensation in the amount of not more than three million yuan to the right holder.” older could prohibit other businesses from using these business identifiers without permission. However, according to the unrevised Anti-Unfair Competition Law, the commodity name, the packaging or decoration are protected if they are well-known and unique. In contrast, the new Anti-Unfair Competition Law expands the scope of protected business identifiers.

This provision specifies the method of calculating the amount of compensation for unfair competition infringement, and clearly stipulates that the maximum statutory compensation for confusion behaviors and infringement of trade secrets is three million yuan.

The new Anti-Unfair Competition Law also raised the intensity of administrative penalties for unfair competition behaviors. For example, where a business conducts any confusion behavior in violation of the Anti-Unfair Competition Law, the supervisory inspection department shall confiscate the illegal commodities and may also impose a fine of not more than five times the amount of illegal business; where a business conducts any false propaganda behavior and the circumstance is serious, the supervisory inspection department shall impose a fine of not less than one million yuan nor more than two million yuan on it, and may revoke its business license; where a business infringes the trade secrets of other businesses or slanders the business reputations of other businesses and where the circumstance is serious, the supervisory inspection department shall impose a fine of not less than 500,000 yuan nor more than three million yuan.

In addition, the new Anti-Unfair Competition Law deleted the clauses for "acts of public facility enterprises or the other enterprises with a monopoly position to expel others from fair competition" and "abuse of administrative power by government departments to limit fair competition", and amongst others, because the Anti-monopoly Law has already made clear regulations on such behaviors, and the Anti-Unfair Competition Law need not provide similar or overlapping regulations.

We believe that the above-mentioned key amendments and other amendments included in this revision of the Anti-Unfair Competition Law show that China is increasing its crackdown on unfair competition behavior and is actively creating a fair business environment, which will inspire more and more businesses to actively protect their own commercial interests by administrative and judicial measures. competition behavior shall be determined as per the actual loss of the business incurred for the infringement or if it is difficult to calculate the actual loss, as per the benefits acquired by the tortfeasor from the infringement. The amount of compensation shall also include reasonable disbursements paid by the business to prevent the infringement. Where a business violates Article 6 or Article 9 of this Law, and it is difficult to determine the actual loss incurred by the right holder for the infringement or the benefits acquired by the tortfeasor from the infringement, a people's court may, based on the circumstances of the infringement, render a judgment to award compensation in the amount of not more than three million yuan to the right holder.” older could prohibit other businesses from using these business identifiers without permission. However, according to the unrevised Anti-Unfair Competition Law, the commodity name, the packaging or decoration are protected if they are well-known and unique. In contrast, the new Anti-Unfair Competition Law expands the scope of protected business identifiers.