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China: Amendment of Unfair Competition Law Proposed

(Mar. 20, 2017) On February 26, 2017, the National People’s Congress (NPC) of the People’s Republic of China (PRC) published the Amendment of Unfair Competition Law (Draft for Comments) (the Draft) online, to solicit public opinions on the Draft.  Comments from the public may be submitted until March 25, 2017, online at www.npc.gov.cn, or by mail. (Solicitation of Opinions on the Unfair Competition Law (Revised Draft (the Draft), NPC website (Feb. 26, 2017) (in Chinese) (to access the draft, click on any listed selection in each of the two drop-down menus, on “location” and “profession,” and then click on orange “enter” button); English translation available at Westlaw China online subscription database.)  Once the Draft takes effect, it will become the first amendment of the current Unfair Competition Law since it took effect on December 1, 1993.  (Unfair Competition Law of the People’s Republic of China (English and Chinese Text) (1993 Law) (Sept. 2, 1993), Congressional-Executive Commission on China website.) 

Unfair Competition and the Internet

The Draft prohibits unauthorized use of others’ domain names, website names, web pages, and channel names.  (Draft, art. 6(3).)  Article 14 prohibits conduct that affects website users’ choices and interferes with the normal operations of other businesses by technical means.  (Id. art. 14.)  Such conduct includes, among other actions, forcing redirection of webpages by inserting links; compelling modification, closure, or uninstallation of Internet products or services provided by others; interfering with operations of Internet products or services provided by others; and maliciously causing incompatibility with Internet products or services provided by others.  (Id.) 

Commercial Bribery

Article 8 of the current Law prohibits “bribery with the intention of selling or purchasing merchandise.” (1993 Law, art. 8.)  Legislators propose to revise this provision by providing more details.  First, the Draft prescribes that bribes must not be given to either the other party of a transaction or to any third party that might affect the transaction, nor may the other party and the third party accept any bribes.  (Draft, art. 7.)  Second, the “third party,” for the purpose of the prescribed article, refers to “entities or individuals who, by virtue of their authority, may influence the transaction.”  (Id.)  Third, bribery conducted by employees will be deemed as the conduct of the employer, unless it is proven to be the employee’s personal conduct.  (Id.) 

Trade Secret Protection

The Draft seeks to strengthen the protection of trade secrets in several revised provisions.  First, infringers of trade secrets may be subject to fines of up to three million yuan (about US$434,000) (id. art. 24), which is much higher than the standard of up to 200,000 yuan (about US$29,000) prescribed in the 1993 Law (1993 Law, art. 25).  Second, the Draft adds a provision prohibiting former employees from infringing the trade secrets of their former employers.  (Draft, art. 10.)  Violators of this provision will be personally subject to fines of up to 100,000 yuan (about US$14,000).  (Id. art. 25.)  Third, the Draft emphasizes the duty of confidentiality on the part of government officials, lawyers, and certified public accountants, the breach of which may lead to fines and disbarment.  (Id. arts. 9 & 25.) 

Civil Remedies Have Priority over Administrative Punishments

Both the 1993 Law and the Draft provide that victims of unfair competition are entitled to civil remedies. (1993 Law, art. 20; Draft, art. 20.)  The Draft adds a new provision stating that violators will first remunerate victims in fulfillment of civil remedies, before payment of any fines, if their assets are not enough to pay both.  (Draft, art. 30.) 

The Draft and Other Applicable Laws

Following the promulgation of the 1993 Law, China adopted several other relevant laws regulating the market.  In order to make the 1993 Law consistent with these newer laws, in the Draft legislators deleted several provisions concerning administrative monopoly, predatory pricing, and collusion in making tenders and bids (1993 Law, arts. 6, 7, 11, & 15) that overlap with the newer provisions found in the 2008 Antitrust Law and the 2000 Law on Tenders and Bids.  (Guanyu Zhonghua Renmin Gongheguo Fan Buzhengdang Jingzheng Fa Xiuding Caoan De Shuoming [Explanation on the Draft Amendment of the Unfair Competition Law of China], NPC website (last visited Mar. 10, 2017).)  In addition, unlike the 1993 Law, the Draft provides that business operators who engage in false advertising or false transactions will first be punished according to the Advertisement Law; absent applicable provisions in the Advertisement Law, the business operator will be subject to fines of up to two million yuan (about US$290,000) and deregistration of his or her business.  (Draft, arts. 8 & 23; Zhonghua Renmin Gongheguo Guanggao Fa [PRC Advertisement Law] (promulgated on Oct. 27, 1994, as amended on Apr. 24, 2015, effective on Sept. 1, 2015), ch. 5, NPC website.)

The Draft also clarifies article 58 of the Trademark Law by stating that using another’s registered or unregistered well-known trademark as a company name, insofar as it is misleading to the public, is an act of unfair competition.  (Draft, art. 6; Zhonghua Renmin Gongheguo Shangbiao Fa [PRC Trademark Law] (promulgated on Aug. 23, 1982, as amended on Aug. 30, 2013, effective on May 1, 2014), Trademark Office website, art. 58.)

Prepared by Emma Wei, Law Library Intern, under the supervision of Laney Zhang, Senior Foreign Law Specialist.