Main Changes in the Draft Amendment to the Anti-Unfair Competition Law of the People's Republic of China Announced on December 25, 2024

The current Anti-Unfair Competition Law was promulgated and implemented in 1993 and was revised twice in 2017 and 2019. This third revision within five years, which began in December 2021, does not involve significant amendments. Instead, it focuses on targeted modifications and improvements within the framework and main institutions of the current law, addressing new issues arising in economic development, especially in the context of the internet economy.

The main contents of the proposed amendments in the draft are as follows:

1.     The draft refines and adds specific types of unfair competition practices, including the expansion of protected commercial identifiers to include items such as "new media account names, application names and icons"; the introduction of unfair competition practices related to the setting of keywords for search purposes;

2.     It strengthens the governance of commercial bribery by penalizing both the briber and the recipient of the bribe. It also introduces penalties for the legal representatives, principal officers, and directly responsible persons of business operators who engage in commercial bribery;

3.     It increases regulation of large enterprises and platform operators, enhancing the responsibilities of platform operators;

4.     It enhances the penalties for unfair competition practices;

5.     It introduces provisions for extraterritorial jurisdiction.

The provision on "unfair competition practices related to keyword search" may make the implicit use of keywords more easily identified as unfair competition, thereby affecting both businesses that purchase keywords and platform operators. There is currently significant controversy surrounding this provision. Some experts argue that the implicit use of keywords generally does not cause confusion, and it is debatable whether such practices should be regulated as commercial confusion under Article 7 of the Anti-Unfair Competition Law.

The public consultation phase for the draft amendment concluded on January 16, 2025. Subsequently, the Legislative Affairs Commission of the National People's Congress convened seminars to hear opinions from experts, scholars, and businesses on the draft. Currently, the draft is being revised and improved by integrating these opinions. We estimate that it will take approximately another year before the final version comes into effect.

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The detailed main contents of this revision are as follows.

1.     Refinement and Addition of Specific Unfair Competition Practices

l Regarding commercial confusion, the draft introduces the following specific types of conduct and explicitly states that "business operators shall not facilitate the implementation of confusing acts by others" (Article 7).

①  Business operators shall not use without authorization the new media account names, application names or icons of others that have a certain influence;

②  Business operators shall not use without authorization the registered trademarks, unregistered well-known trademarks of others as the trade names in their enterprise names;

③  Business operators shall not use without authorization the names of goods, enterprise names (including abbreviations, trade names, etc.) of others that have a certain influence as their search keywords.

LexField Comment: ①The addition of "new media account names, application names and icons" as protected commercial identifiers has long existed in practice. The draft amendment further clarifies the legal basis for their protection.

②This is an existing provision in the judicial interpretation of the Anti-Unfair Competition Law, which is now explicitly included in the law.

③This is a newly added type of unfair competition practice. There is controversy surrounding this amendment, such as:

-         The implicit use of keywords generally does not cause confusion. However, since this content is included under "confusing acts," it should be clarified whether it is intended to regulate the explicit use of keywords;

-         Platform operators find it difficult to determine whether the names of goods or enterprise names of others "have a certain influence." Therefore, they should not be held liable as facilitators of infringement.

l Regarding commercial disparagement, the scope is expanded from "damaging the commercial reputation of competitors" to "damaging the commercial reputation of other business operators." In terms of conduct, in addition to the existing "fabricating and disseminating false or misleading information," the draft adds "instigating others to fabricate and disseminate false or misleading information" (Article 12).

l Regarding unfair competition practices on the internet, the draft introduces two specific behaviors: First, business operators shall not obtain and use data legally held by other business operators through improper means such as fraud, coercion, or electronic intrusion. Second, business operators shall not abuse platform rules to engage in malicious transactions (Article 13).

2.     Strengthening the Governance of Commercial Bribery: First, based on the existing legal provision that the act of bribery constitutes unfair competition, the draft explicitly states that the act of accepting bribes also constitutes unfair competition (Article 8, Paragraph 2). Second, penalties are imposed on individuals. It stipulates that if the legal representatives, principal officers, and directly responsible persons of a business operator are personally responsible for the implementation of bribery, they may be fined up to one million yuan.

3.     Increased Regulation of Large Enterprises and Platform Operators, and Enhanced Responsibilities of Platform Operators, such as:

①  A new provision in Article 6, Paragraph 4 of the general principles:

Platform operators shall clearly define the rules for fair competition within the platform in the platform service agreement and transaction rules in accordance with the law, and take necessary measures in a timely manner to stop unfair competition practices by business operators within the platform.

②  Two new specific unfair competition practices are added:

-         Article 14, Platform operators shall not force business operators within the platform to sell goods at prices below cost in accordance with their pricing rules, thereby disrupting the order of fair competition.

-         Article 15, Large enterprises and other business operators shall not abuse their advantageous positions in terms of capital, technology, channels of trade, and industry influence, by imposing clearly unreasonable payment terms, methods, deadlines, or liability for breach of contract on small and medium-sized enterprises, forcing the conclusion of exclusive agreements, or other means to disrupt the order of fair competition.

Regarding the above two specific unfair competition practices, the draft stipulates corresponding legal liabilities (Articles 29 and 30), namely, the regulatory authorities shall order rectification, stop the illegal acts, and may impose a fine of up to one million yuan. In serious cases, a fine of between one million and five million yuan shall be imposed.

LexField Comment: As platform economies increasingly occupy an important or even dominant position in economic life, platforms have significant advantages in rule-setting and information disclosure. Therefore, while platforms are subject to regulation, the draft stipulates the responsibility of platforms for collaborative regulation (Article 6, Paragraph 4).

Article 14 of the draft is mainly aimed at curbing "involution-style competition" and preventing the exchange of low prices for traffic. Article 15 is intended to protect fair trade and maintain the development space for small and medium-sized enterprises. Based on the aforementioned legislative purposes, the draft introduces two new specific types of unfair competition practices through these two articles.

4.     Enriching Regulatory Means and Enhancing Penalties for Unfair Competition Practices, including:

①      Introducing provisions and penalties for aiding infringement: It is explicitly stated that business operators shall not facilitate the implementation of confusing acts by others (Article 7). Moreover, it is clarified that if a business operator knowingly facilitates the implementation of confusing acts by others, it shall bear the same liability as the implementer of the confusing acts (Article 22).

②      Tiered penalties and increased fine amounts. Except for malicious infringement of trade secrets, no punitive damages are stipulated for other offenses.

For violations such as commercial bribery, commercial disparagement, unfair competition on the internet, and large enterprises abusing their competitive advantages, penalties are differentiated based on general and serious circumstances. The purpose is to avoid excessive discretion in law enforcement due to a large span of penalty amounts.

For general circumstances, the fine range has been increased from the original 100,000 to 500,000 yuan to 100,000 to 1,000,000 yuan; for serious circumstances, the fine range has been increased from the original 500,000 to 3,000,000 yuan to 1,000,000 to 5,000,000 yuan (Articles 27 and 28).

③      Introducing measures for interviews: Article 18, if a business operator is suspected of violating the provisions of this law, the supervisory and inspection department may conduct an interview with its legal representative or person in charge, and require it to take measures to rectify in a timely manner.

5.     Introducing provisions for extraterritorial jurisdiction, Article 40 in the appendix, unfair competition practices stipulated by this law implemented outside the territory of the People's Republic of China, which disrupt the market competition order within the territory or damage the legitimate rights and interests of business operators within the territory, shall be dealt with in accordance with this law and other relevant laws.

LexField Comment: Referring to Article 2 of the Anti-Monopoly Law, in the context of economic globalization and the increasing number of foreign-related disputes, this provision lays the foundation for the extraterritorial application of the Anti-Unfair Competition Law, where the place of infringement is outside the territory and the place of infringement result is within the territory, as well as for the judicial jurisdiction of the people's courts over unfair competition practices occurring outside the territory.