TY - JOUR
AU - Liu,, Jie
AB - Key Points The Anti-Unfair Competition Law of China has undergone a major overhaul to reflect developments in the Chinese economy. The amendments to the Anti-Unfair Competition Law will impact all business operators, especially the provisions related to commercial bribery and the added provisions related to unfair online behaviours. The amended Anti-Unfair Competition Law changes the definition and enhances the power and measures of the supervision and inspection of unfair competition behaviours. The latest structural reform of China’s anti-monopoly law enforcement authorities is expected to bring simplified procedures and enhanced efficiency, but not fundamental changes in enforcement. Possible information exchange mechanism among the previous three anti-monopoly law enforcement authorities calls for more prudent attitude of multinational companies operating in China. I. Introduction Ten-years of enforcement of the Anti-Monopoly Law (‘AML’) in China has achieved great results with the cooperation and support of various competent authorities. However, the multi-sector enforcement at the same time has brought about non-uniform standards and less transparency of the working process. To avoid enforcement conflicts, simplify the enforcement procedures and enhance the efficiency, on the occasion of the tenth anniversary of the AML enforcement, a unified and consolidated agency, the Anti-Monopoly Bureau (‘AMB’) under the newly established State Administration for Market Regulation (‘SAMR’) was set up in 2018, aiming to integrate the enforcement experience and official’s resources of previous competent authorities, and to face new challenges in the next decades. As for the international cooperation among anti-monopoly authorities in different jurisdictions, during the enforcement of the AML, China’s anti-monopoly authority has been growing its awareness of the significance of international cooperation in anti-monopoly law enforcement. The authorities previously have signed Memorandums of Understanding on Antitrust Cooperation, ‘BRICS’ Anti-Monopoly Memorandums as well as similar arrangements with the anti-monopoly authorities of many jurisdictions, including the European Union (‘EU’), United States, Japan, South Africa, Russia, Kenya, etc. In addition, China’s anti-monopoly authority attended multiple competition law communication seminars, meetings and conferences held by international organisations including the World Trade Organization (‘WTO’), Organization for Economic Co-operation and Development (‘OECD’), United Nations Conference on trade (‘UNCTAD’), etc. During the cooperation, China’s anti-monopoly authority carried out communications, project discussion and cooperation in case enforcement and shared experience both in the enforcement process and in the legislation process, e.g. taking suggestions from US anti-monopoly authorities during the legislation of specific enforcement guidelines. With the development and transition of the economy in China, the Anti-Unfair Competition Law has been increasingly expected to facilitate fair competition, in addition to safeguarding the market order. However, the 1993 version of the Anti-Unfair Competition Law (‘AUCL 1993’) failed to meet such requirements and satisfy such needs. In particular, under the AUCL 1993, the law enforcement power was dispersed at different levels with conflicted jurisdiction powers prescribed in other legal provisions such as the AML, the Advertising Law, and the Price Law, etc. In addition, the AUCL 1993 could not deter operators from engaging in unfair but well-rewarded competition due to its inadequate punishment. Moreover, the AUCL 1993 was insufficient to regulate new forms of unfair competition behaviours in the internet era. The above-mentioned reasons led to the amendment process of the AUCL 1993 in 2018. 2018 has witnessed the great transform of China’s competition law regime and enforcement powers in order to maintain the sound market competition environment though overall punch set: structural reform of the enforcement authorities and amendment of the Anti-Unfair Competition Law. This article will briefly summarise critical changes in the two actions and provide observation opinions on their impact to the market and legal practice. II. Recent development of intra-jurisdictional AML enforcement cooperation China’s anti-monopoly authority has previously signed Memorandums of Understanding on Antitrust Cooperation as well as similar arrangements with the anti-monopoly authorities of many jurisdictions, including the EU, United States, Japan, South Africa, Russia, Kenya, etc. Regarding the intra-jurisdictional AML enforcement cooperation between China and the EU, the former anti-monopoly law enforcement authorities in China have all signed memorandums with the European Commission,1 which built a long-term cooperation framework with regard to the legislation and enforcement experience, the operation experience in how to improve the work of enforcement authorities, the experience in how to enhance the legal awareness of enterprises and the public regarding AML, etc. and held EU-China Competition Week Seminars regularly each year. In particular, MOFCOM has developed its case cooperation with DG Competition. For example, in the merger review process in 2017, more than 10 cases have gone through the intra-jurisdictional cooperation during the review process of the AMB. Both the Chinese authority and the foreign authorities including DG Competition can proactively raise cooperation invitations. During the cooperation process, the main content of the cooperation includes a variety of issues, e.g. definition of relevant markets, competition analysis, especially different competition concerns in different jurisdictions, verification of relevant market data, the confirmation and implementation of remedy proposals, including the choice of monitoring trustees, the timing for divestiture, etc. The cooperation has been carried out in multiple forms, including not only con-calls, e-mail communications, but also face-to-face communications and video conferences. III. Recent development of authority structure in the enforcement of AML A. Three Anti-monopoly Enforcement Authorities in China have merged into one authority Previously, there were two authorities in China responsible for the Anti-monopoly laws: the Anti-Monopoly Committee under the State Council, which is responsible for developing competition policy, conducting market investigations, publishing guidelines and coordinating the competition administrative enforcement work; and the Anti-Monopoly Enforcement Authority designated by the State Council, which is responsible for the enforcement of the AML. Before the structural reform of the enforcement structure, the enforcement powers of the Anti-Monopoly Enforcement Authority were divided among three different agencies, as shown in Figure 1. Figure 1: View largeDownload slide The Enforcement Agencies of the AML in China before April 2018. Figure 1: View largeDownload slide The Enforcement Agencies of the AML in China before April 2018. The Price Supervision/Inspection and Anti-Monopoly Bureau of the NDRC was responsible for enforcing the price related rules of the AML (including anticompetitive agreements and abuse of dominance) in China and perform price related anti-monopoly investigations. The Anti-Monopoly and Anti-Unfair Competition Bureau of the SAIC was responsible for enforcing the non-price related rules of the AML and rules against the abuse of administrative powers to restrict competition in China as well as non-price-related anti-monopoly investigation. The Anti-Monopoly Bureau of MOFCOM was responsible for enforcing the merger control regime in China. On the 13th National People’s Congress (‘NPC’) of China in 2018, the proposal of consolidating the three anti-monopoly enforcement agencies and the anti-monopoly committee into the newly established SAMR was passed, as listed in the below timeline March 17, 2018 The NPC of China passed legislation to consolidate the three anti-monopoly enforcement authorities into one. March 21, 2018 SAMR was officially established. April 20, 2018 the relevant officials in charge of antitrust enforcement at MOFCOM and the NDRC were transferred to the SAMR located in the previous SAIC. August 9, 2018 the finalised three-pronged plan2 for consolidating China’s antitrust agencies under the SAMR was released. March 17, 2018 The NPC of China passed legislation to consolidate the three anti-monopoly enforcement authorities into one. March 21, 2018 SAMR was officially established. April 20, 2018 the relevant officials in charge of antitrust enforcement at MOFCOM and the NDRC were transferred to the SAMR located in the previous SAIC. August 9, 2018 the finalised three-pronged plan2 for consolidating China’s antitrust agencies under the SAMR was released. March 17, 2018 The NPC of China passed legislation to consolidate the three anti-monopoly enforcement authorities into one. March 21, 2018 SAMR was officially established. April 20, 2018 the relevant officials in charge of antitrust enforcement at MOFCOM and the NDRC were transferred to the SAMR located in the previous SAIC. August 9, 2018 the finalised three-pronged plan2 for consolidating China’s antitrust agencies under the SAMR was released. March 17, 2018 The NPC of China passed legislation to consolidate the three anti-monopoly enforcement authorities into one. March 21, 2018 SAMR was officially established. April 20, 2018 the relevant officials in charge of antitrust enforcement at MOFCOM and the NDRC were transferred to the SAMR located in the previous SAIC. August 9, 2018 the finalised three-pronged plan2 for consolidating China’s antitrust agencies under the SAMR was released. With the new structure, SAMR will be directly supervised by the State Council. MOFCOM and the NDRC will survive but without any anti-monopoly law enforcement powers. SAIC will be entirely integrated into SAMR and will no longer exist as it is known today. This places antitrust enforcement of SAMR at the same level as MOFCOM and the NDRC, elevating its importance within the government system (Figure 2). Figure 2: View largeDownload slide The Agencies of the SAMR after the Structural Reform in 2018. Figure 2: View largeDownload slide The Agencies of the SAMR after the Structural Reform in 2018. According to the finalised plan, three bureaus will be established in order to deal with anti-monopoly laws, anti-unfair competition laws and other law enforcement activities respectively: According to the finalised plan, AMB will be responsible for: drafting supplementary antitrust rules and guidelines; carrying out antitrust enforcement; providing guidance to enterprises to respond to and cope with antitrust investigations or litigations in foreign jurisdictions; and organising and guiding fair competition reviews. B. Specific internal arrangements for the new AML Enforcement Authority As mentioned above, the functions of the two anti-monopoly enforcement agencies under NDRC and SAIC were mainly distinguished by whether the issue was price-related or not. It nevertheless created some uncertainty as to the boundaries in law enforcement in China. Also, there existed certain overlapping functions among divisions under different authorities, e.g. competition policy and international cooperation division under NDRC and competition policy division under MOFCOM. Below are figures showing the previous internal arrangements for the three anti-monopoly authorities in China before the structural reform (Figures 2-1–2-3). Figure 2-1: View largeDownload slide Internal arrangements for the price supervision/inspection and Anti-Monopoly Bureau of the NDRC before April, 2018. Figure 2-1: View largeDownload slide Internal arrangements for the price supervision/inspection and Anti-Monopoly Bureau of the NDRC before April, 2018. Figure 2-2: View largeDownload slide Internal arrangements for the Anti-Monopoly and Anti-Unfair Competition Bureau of the SAIC before April, 2018. Figure 2-2: View largeDownload slide Internal arrangements for the Anti-Monopoly and Anti-Unfair Competition Bureau of the SAIC before April, 2018. Figure 2-3: View largeDownload slide Internal arrangements for the Anti-Monopoly Bureau of the MOFCOM before April, 2018. Figure 2-3: View largeDownload slide Internal arrangements for the Anti-Monopoly Bureau of the MOFCOM before April, 2018. Below is a figure showing the internal arrangements for AMB of SAMR after the structural reform. From the newly established and systemised divisions under AMB, it can be observed that: Divisions having the responsibilities of investigations under NDRC and SAIC have been merged into three new divisions, namely: (i) Monopoly Agreement Division (based on Chapter 2 of AML); (ii) Abuse of Dominant Market Position Division (based on Chapter 3 of AML); and (iii) Administrative Monopoly Division (based on Chapter 5 of AML). There are no more differences between price-related investigations and non-price related investigations. Divisions having the responsibilities of merger review under MOFCOM have not been changed, which means that all merger review work will have a smooth transition under this reform. Anti-Monopoly Committee Coordination Division and Supervision and Law Enforcement Division have not been changed, while we cannot eliminate the possibility that more staff will be appointed in the Supervision and Law Enforcement Division for frequenter and stricter AML enforcement. Divisions relating to policy research, international cooperation and guidance under NDRC, SAIC and MOFCOM have been merged for better coordination and improved efficiency (Figure 3). Figure 3: View largeDownload slide Internal Arrangements for the AMB of SAMR after the Structural Reform in 2018. Figure 3: View largeDownload slide Internal Arrangements for the AMB of SAMR after the Structural Reform in 2018. C. Implications of the Structural Reform As to what to expect immediately, according to our observations, other than that the competent authority has changed from the respective authorities before the structural reform to the newly-established AMB of the SAMR, it is important to note that the structural reform has not had any impact on the merger filings as well as the anti-monopoly investigations that are currently undergoing since there was limited impact on the working division level. 1. Consistency and efficiency improvement in interpretation and enforcement of anticompetition law It is expected that consolidation will result in greater consistency in the interpretation of the AML and the application of it to individual cases. There has been some conflict in findings by the NDRC and SAIC where their jurisdiction overlapped in cases containing both price and non-price related antitrust issues. With consolidation, companies can expect to receive unified guidance about how the enforcer will implement the AML in investigations. Moreover, it is expected that integration of the three authorities will address inconsistencies in how resources are allocated in enforcing the AML. Prolonged investigations or approval processes have been attributed to manpower shortages at the authorities. This has been a major concern since the AML came into effect in 2008. With all antitrust matters under a single agency, SAMR will have more flexibility in allocating staffing based on changes in the flow of matters and based on the agency’s policy direction. The integration should also enable greater knowledge and information exchange among staff working on the various antitrust matters. This may further improve the work efficiency of handling complex antitrust matters in China. 2. Possible information sharing mechanism among previously different authorities The being said, companies may encounter unnecessary antitrust scrutiny that they may not have experienced when MOFCOM, the NDRC and SAIC functioned independently of each other. With the new structure, companies should assume that materials contained in future merger filings may be readily shared among staff within SAMR having responsibility for non-merger enforcement. We also cannot rule out the possibility now that a merger investigation could lead to antitrust investigations involving non-merger issues. Thus, merger filing undertakings should be more cautious and prudent when providing information and arguments in the notification materials. The SAMR’s enforcement features and the detailed reform plan should continue to be monitored, as they will significantly affect the antitrust risks which companies face in practice. Under the former antitrust agencies of the SAIC and the NDRC, two divisions were in charge of violation investigations, one mainly for service industries and another for product industries. However, under the SAMR’s new AMB, it remains to be seen what their focuses will be. These issues are of practical importance for the enforcement of the AML. In addition, the enforcement team’s composition is expected to influence the SAMR’s enforcement characteristics. IV. Recent amendments to the Anti-Unfair Competition Law and their expected impact A. Introduction of the New Anti-Unfair Competition Law legislation China’s Anti-Unfair Competition Law was originally promulgated in 1993 to encourage and protect fair competition among businesses in a then-booming Chinese economy. In February 2016, the State Council Legislative Affairs Office, together with the SAIC, released its first set of draft amendments to the AUCL 1993. Finally, on 4 November 2017, the 30th Session of the Standing Committee of the 12th National People’s Congress of the People’s Republic of China passed the amendment to the AUCL 1993, which has come into effect as of 1 January 2018 (‘AUCL 2018’). This is the first major amendment to the AUCL since its implementation in 1993. B. Comparison of the unfair competition behaviours regulated by the AUCL 2018 and the AUCL 1993 1. General definition of unfair competition This amendment3 changes the element of unfair competition from damaging the legitimate rights and interests of other operators to damaging the legitimate rights and interests of other operators or consumers. 2. Provision regarding Confusion The AUCL 2018 revised Article 5 to remove duplication with the trademark Law by deleting the reference to ‘counterfeiting the registered trademark of others’ in the first paragraph. Consistently, the amendment also removes the fourth paragraph of Article 5, which prohibited forging or falsely using symbols of quality, falsifying the origin of goods and making false representations that are misleading as to the quality of the goods. The amendment also expands the definition of ‘protected commercial marks’ to include the name, packaging, domain name, and website name used for a particular product. The expanded scope of this definition will facilitate greater effectiveness in regulating anticompetitive conduct online. 3. Provision regarding commercial bribery (i) Expanding the recipients of commercial bribery AUCL 2018 listed three specific categories of entities and/or individuals as potential bribe recipients: - employees of parties to a transaction; - entities or individuals entrusted by parties to a transaction to handle transaction-related matters; and - any other entities or individuals potentially influencing transactions by taking advantage of their power, function, or influence. Compared to AUCL 1993, the AUCL 2018 expands the recipients of commercial bribery. (ii) Clarifying corporate liability for commercial bribery The AUCL 2018 provides that if an employee of a business operator engages in commercial bribery, the activity should be deemed as the act of the business operator itself. This is based on the experience gained in the pharmaceutical commercial bribery cases published in recent years. The recipients of commercial bribes have been expanded to include entities potentially influencing transactions. Furthermore, the AUCL 2018 provides that an activity of commercial bribery of a business operator’s employee should be viewed as the conduct of the business operator and that the burden of proof would remain on the business operator. However, the AUCL 2018 also provides that if the operator can prove with evidence that the employee’s activity is not related to the business operator’s efforts in seeking a transaction opportunity or competitive advantage, the business operator will not be held liable for the employee’s conduct. The burden of proof would remain on the business operator, should the business operator seek to argue no corporate liability. It could be anticipated the in the next years, employee training of legal sense would be the new pot in the corporate compliance. 4. Provision regarding false commercial promotion Article 8 of the AUCL 2018 defines false commercial promotion with reference to false commercial advertisements. Compared to the AUCL 1993, it expands the scope of false commercial promotion to include commercial advertisements that cause public misunderstanding. In addition, Article 20 of the AUCL 2018 makes it clear that in the event of a business operator’s violation of Article 8, the Advertising Law must be applied first. The amendment also addresses the issue of false commercial promotion in e-commerce by introducing a prohibition on the use of false ‘sales status’, ‘user evaluation’ or ‘honours’ to cheat or mislead consumers. It is hopeful that the business of paid poster could be greatly vanished with the enforcement of AUCL, particularly in the movie evaluation webpage. The amendment also prohibits operators from assisting other operators to engage in false commercial promotion by organising false transactions, or by any other means. 5. Provision regarding Protection of Trade Secrets Like the AUCL 1993, the AUCL 2018 continues to prohibit business operators from acting in three ways that infringe upon trade secrets: obtaining an obligee’s commercial secrets by theft, bribery, intimidation or other improper means; disclosing, using, or allowing others to use an obligee’s commercial secrets obtained by the means mentioned in the preceding paragraph; or disclosing, using or allowing others to use an obligee’s commercial secrets in violation of an agreement or the obligee’s requirements on keeping such commercial secrets confidential. Moreover, Article 9 of the AUCL 2018 now deems a business operator liable for infringing upon trade secrets, even if such trade secrets were obtained by others. Such a situation occurs when a business operator using a trade secret knows or should know of the fact that an employee or former employee of the right owner of trade secrets or any other entity or individual conducts any of the illegal acts specified above. 6. Certain new online behaviours deemed unfair New provisions have been added to the AUCL 2018 that define certain unfair online behaviours of businesses, which did not exist in the AUCL 1993. Inflating online orders and fabricating online reviews As mentioned above, Article 8 of the AUCL 2018 prohibits business operators from conducting misleading commercial publicity for themselves through fabricating user evaluations. Article 8 also further prohibits business operators from conducting misleading commercial publicity for others through organising false transactions, or by any other means. This Article largely governs e-commerce and aims to combat the large-scale inflation of orders and fabrication of reviews online. Interfering with other businesses Article 12 of the AUCL 2018 also states that an online business operator may not use the technical means to influence users’ choices and impede or disrupt with the business operations of other operators. This article provides much certainty to the law, as the AUCL 1993 provided little guidance on unfair online behaviours. This is an inexorable trend based on the actual development of society and technology. C. Assessment of the changes made to the AUCL 1. Removing duplications between AUCL and other laws and regulations Removing duplication between AUCL and the trademark Law In order to remove duplication and keep up with the Trademark Law, Article 6 deleted the reference to ‘counterfeiting the registered trademarks of others’ stipulated in the AUCL 1993, and changes the word ‘well known’ originally used in the AUCL 1993 to ‘a certain degree of influence’. The ‘certain degree of influence’ requirement sets a lower threshold than the ‘well known’ status requirement. For further guidance as to what the ‘certain influence’ requirement entails, reference can be made to Article 32(1) of the Trademark Law (re prior use of trademarks with a certain degree of influence), and the way in which the provision has been applied in practice. In addition, the trade names and abbreviations of enterprises or social organisations, pen names, stage names and translated names of natural person are clarified as being protected. Therefore, in addition to consumers who are misled by the faked products and be able to require for compensation by other laws, the counterfeited undertakings may more actively and directly file the lawsuit against the fakers under AUCL 2018. Besides, other online confusing acts like pretending others’ domain names, website names and webpages, etc. are also brought into the scope of the AUCL 1993. Finally, a catch-all provision has been included in the end of Article 6 of the AUCL 2018, which shows an improvement of legislative technique and leaves room for the discretion of the authorities. However, the relevant provisions on trade secrets lack exceptions, which may result in the abuse of litigations related to trade secrets as a means for other purposes. Removing duplication between AUCL and AML An important purpose of the amendment is to distinguish it from the AML and to avoid the duplication between the two. The AUCL 2018 provides a clear distinction between the AUCL and the AML. During the reform process, the question of whether to regulate ‘the use of market dominance for unfair competition’ was controversial. The legislature formed the view that businesses that do not have market dominance shall be allowed to set the terms of their transactions. If the purchaser is not willing to accept those terms, the purchaser may choose to transact with other businesses. As regulators, law enforcers and the general public are becoming more and more familiar with the AML as well as the precedents relevant to it, the revision of the AUCL has also taken into consideration the relationship between the AUCL and the AML and has removed possible duplication and confusion. Especially, considering the recent structural reform, as the AML law enforcement power has been consolidated under the Anti-Monopoly Bureau of Sate Administration for Market Regulation and the AUCL enforcement power has been consolidated under the Price Supervision, Inspection and Anti-Unfair Competition Bureau, the AUCL 2018 has been effective and timely to clarify the ‘territories’ between the two laws and relevant authorities under SAMR. Removing duplication between the AUCL and the Tender Law Unfair competition act of collusive tendering has been deleted from the AUCL 2018, which will be regulated by the Tender Law. 2. Keeping pace with the latest development of the market and the industry Further clarification and scope expansion regarding commercial bribery As mentioned above, Article 7 of the AUCL 2018 provides that commercial bribery shall consist of the intent to ‘pursue business opportunities or competitive advantages’. This Article lists out three types of recipients of commercial bribe (please refer to the above), which were not listed in the AUCL 1993 before. Meanwhile, this Article expands the category of bribe recipients to include, not only individuals from the counterparties of a transaction but also a third party (an individual or an entity) who may affect a transaction by using its functional power or influence. In addition, where an employee from a business operator solicits a bribe, it shall be deemed as the act of the business operator unless it can be proved otherwise. Article 9: Enhancing the protection of trade secrets The AUCL 2018 broadens the definition of ‘trade secrets’, by removing the ‘practical value’ requirement as one of the elements of a trade secret, saying that ‘commercial secrets refer to any technical information or operational information value, and for which its oblige has adopted measures to ensure its confidentiality.’ Additionally, and more importantly, the AUCL 2018 makes provisions for third-party infringement in cases where the proprietor of the trade secret is the employer of the trade secrets infringer. Under the AUCL 2018, a third party will be held to have infringed upon a proprietor’s trade secret if the third party was aware that the proprietor’s employee or ex-employee, another organization or an individual had obtained the trade secret through illegal means. Another important change is the increase in penalties for violating trade secrets from up to CNY 200,000 to CNY 3 million, which is a significant increase. Article 12: Addition of new provisions on internet related unfair competition activities With the continuous development of social and economic conditions as well as the internet in China, a large number of cases in respect of internet related unfair competition activities have arisen. Previously, the good faith principle under Article 2 of the AUCL was often used by courts in such cases. However, Article 12 of the AUCL 2018 now specifically addresses unfair competition activities conducted on the internet. Article 12(1) to (3) of the AUCL 2018 is a codification of recent important court decisions, such as Baidu v Qihoo (the flagging search results and hijacking traffic case)4 and Tencent v Qihoo (the ‘Kou Kou Bodyguard’ case).5 As an exhaustive list cannot comprehensively capture every act of unfair competition committed on an evolving internet with constantly changing technologies and business models however, Article 12(4) has also been included to serve as a catch-all provision to cover unforeseeable internet cases. 3. Enhanced power and measures of supervision and inspection Adding in more procedural provisions to regulate the investigation process of relevant authorities The AUCL 1993 was criticised for inadequate supervision, inspection and enforcement. These criticisms have been addressed by the amendment. The AUCL 2018 enhances the supervisory and investigative powers and duties of the law enforcement agencies. The AUCL 2018 also authorises law enforcement agencies ‘to seal up or seize the property related to the suspected unfair competition’ and ‘to investigate the bank accounts of operators involved in the suspected unfair competition.’ In addition, the AUCL 2018 places an obligation on the parties to cooperate with an investigation. Specifically, new articles have been added in regarding the procedure requirements during the investigation. For example, Article 13 of the AUCL 2018 endows the authority the power to ‘access the business premises involved in a suspected unfair competition act for inspection.’ - Enhancing the power of authorities The AUCL 2018 expands the authority’s investigation powers, including the power to enter a business premises where there is suspicion of an unfair competition act being conducted; the power to seal up and to seize properties relating to a suspected unfair competition act; and the power to access a bank account of a business operator who is suspected of conducting unfair competition acts. Before exercising such powers, approval must be obtained from the main responsible person of the relevant authority as a measure to avoid abuse. - Regulating the investigation procedure Article 15 of the AUCL 2018 explicitly provides that ‘the supervision and inspection authorities and their staff members shall keep confidential any commercial secrets known to them during the investigation’. The above two aspects not only endow the authorities more power in ‘dawn raid’ but also regulated its procedure requirements explicitly, which could protect lawful interests of both authorities and the investigated companies (Table 1). (ii) Calculation of damages for unfair competition Prior to the amendment, the court lacked statutory guidance in relation to the calculation of damages. Article 17 of the AUCL 2018 stipulates the basic principles for calculating damages, providing that: ‘The amount of compensation for the operator who has suffered damage due to unfair competition is determined according to the actual loss suffered by the infringement; if the actual loss is difficult to calculate, the amount of compensation shall be determined according to the interests obtained by the infringer due to the infringement.’ It is noteworthy that the provision clearly stipulates that ‘the amount of compensation shall include the reasonable expenses incurred by the operator in stopping the infringement.’ This is also the case with damages for intellectual property offences. (iii) Enhanced scale of discretion regarding the penalties imposed under the AUCL Table 1: Comparison of penalties in the AUCL 1993 and the AUCL 2018 Relevant Unfair Competition Acts AUCL 1993 AUCL 2018 Confusing Acts Illegal gains + penalty of 1 to 3 times of illegal gains Illegal gains > CNY 50,000, penalty could be up to 5 times of illegal gains/ Illegal gains < CNY 50,000, penalty could be up to CNY 250,000 Commercial Bribery Illegal gains + Penalty of CNY 10,000 to 200,000 Penalty of CNY 100,000 to 3,000,000 Exclude fair competition  by monopolistic  operators Penalty of CNY 50,000 to 200,000/ Penalty of 1 to 3 times of illegal gains N/A Misleading Commercial  Promotion Illegal gains + penalty Penalty of CNY 200,000 to 2,000,000 + Penalty imposed in accordance with Advertising Law Infringements of Commercial Secrets Penalty of CNY 10,000 to 200,000 Penalty of CNY 100,000 to 3,000,000 Collusive Tendering Penalty of CNY 10,000 to 200,000 N/A Prize-attached Sale Activities Penalty of CNY 10,000 to 100,000 Penalty of CNY 50,000 to 500,000 Injury Credit Standing N/A Penalty of CNY 100,000 to 3,000,000 Network activities N/A Penalty of CNY 100,000 to 3,000,000 Relevant Unfair Competition Acts AUCL 1993 AUCL 2018 Confusing Acts Illegal gains + penalty of 1 to 3 times of illegal gains Illegal gains > CNY 50,000, penalty could be up to 5 times of illegal gains/ Illegal gains < CNY 50,000, penalty could be up to CNY 250,000 Commercial Bribery Illegal gains + Penalty of CNY 10,000 to 200,000 Penalty of CNY 100,000 to 3,000,000 Exclude fair competition  by monopolistic  operators Penalty of CNY 50,000 to 200,000/ Penalty of 1 to 3 times of illegal gains N/A Misleading Commercial  Promotion Illegal gains + penalty Penalty of CNY 200,000 to 2,000,000 + Penalty imposed in accordance with Advertising Law Infringements of Commercial Secrets Penalty of CNY 10,000 to 200,000 Penalty of CNY 100,000 to 3,000,000 Collusive Tendering Penalty of CNY 10,000 to 200,000 N/A Prize-attached Sale Activities Penalty of CNY 10,000 to 100,000 Penalty of CNY 50,000 to 500,000 Injury Credit Standing N/A Penalty of CNY 100,000 to 3,000,000 Network activities N/A Penalty of CNY 100,000 to 3,000,000 Table 1: Comparison of penalties in the AUCL 1993 and the AUCL 2018 Relevant Unfair Competition Acts AUCL 1993 AUCL 2018 Confusing Acts Illegal gains + penalty of 1 to 3 times of illegal gains Illegal gains > CNY 50,000, penalty could be up to 5 times of illegal gains/ Illegal gains < CNY 50,000, penalty could be up to CNY 250,000 Commercial Bribery Illegal gains + Penalty of CNY 10,000 to 200,000 Penalty of CNY 100,000 to 3,000,000 Exclude fair competition  by monopolistic  operators Penalty of CNY 50,000 to 200,000/ Penalty of 1 to 3 times of illegal gains N/A Misleading Commercial  Promotion Illegal gains + penalty Penalty of CNY 200,000 to 2,000,000 + Penalty imposed in accordance with Advertising Law Infringements of Commercial Secrets Penalty of CNY 10,000 to 200,000 Penalty of CNY 100,000 to 3,000,000 Collusive Tendering Penalty of CNY 10,000 to 200,000 N/A Prize-attached Sale Activities Penalty of CNY 10,000 to 100,000 Penalty of CNY 50,000 to 500,000 Injury Credit Standing N/A Penalty of CNY 100,000 to 3,000,000 Network activities N/A Penalty of CNY 100,000 to 3,000,000 Relevant Unfair Competition Acts AUCL 1993 AUCL 2018 Confusing Acts Illegal gains + penalty of 1 to 3 times of illegal gains Illegal gains > CNY 50,000, penalty could be up to 5 times of illegal gains/ Illegal gains < CNY 50,000, penalty could be up to CNY 250,000 Commercial Bribery Illegal gains + Penalty of CNY 10,000 to 200,000 Penalty of CNY 100,000 to 3,000,000 Exclude fair competition  by monopolistic  operators Penalty of CNY 50,000 to 200,000/ Penalty of 1 to 3 times of illegal gains N/A Misleading Commercial  Promotion Illegal gains + penalty Penalty of CNY 200,000 to 2,000,000 + Penalty imposed in accordance with Advertising Law Infringements of Commercial Secrets Penalty of CNY 10,000 to 200,000 Penalty of CNY 100,000 to 3,000,000 Collusive Tendering Penalty of CNY 10,000 to 200,000 N/A Prize-attached Sale Activities Penalty of CNY 10,000 to 100,000 Penalty of CNY 50,000 to 500,000 Injury Credit Standing N/A Penalty of CNY 100,000 to 3,000,000 Network activities N/A Penalty of CNY 100,000 to 3,000,000 V. Future trends We are expecting a more comprehensive system of competition law in China with the following efforts: improvement of legislation and its ancillary regulations and guidelines to keep pace with the latest economy development; clarification regarding the boundaries of law enforcements by different authorities to give clearer behavioural guidelines for both market participants and for authorities; and possible information sharing system to enhance the efficiency of competition law enforcers, which will require more prudent attitude of market participants. Footnotes 1 On 6 May 2004, the Directorate General for Competition of the European Commission (‘DG Competition’) and MOFCOM signed the Terms of Reference of the EU-China Competition Policy Dialogue. Following the entry into force of the AML in China on 1 August 2008, on 20 September 2012, DG Competition also signed a Memorandum of Understanding on Cooperation in the area of Anti-Monopoly Law with the NDRC and SAIC. 2 Three-pronged Plan refers to Rules for Functional Configuration, Internal Organization and Personnel Compilation for State Administration for Market Regulation, which is implemented since August 2018. 3 Article 2 of the AUCL 1993 provides that ‘unfair competition refers to acts that are conducted by operators in violation of the provisions of the Law, damage the legitimate rights and interests of other operators and disturb the socio-economic order’ By contrast, Article 2 of the AUCL 2018 provides that ‘unfair competition refers to any business operators’ act of participating in the production and operation activities in violation of the provisions herein to disrupt the competition order in the market and damage the legitimate rights and interests of other operators or consumers’. 4 (2014) Min Shen Zi No. 873, Supreme People’s Court of China. 5 (2013) Min San Zhong Zi No. 5, Supreme People’s Court of China. © The Author(s) 2019. Published by Oxford University Press. All rights reserved. For Permissions, please e-mail: journals.permissions@oup.com This article is published and distributed under the terms of the Oxford University Press, Standard Journals Publication Model (https://academic.oup.com/journals/pages/open_access/funder_policies/chorus/standard_publication_model)
TI - Insights of China’s Competition Law and its Enforcement: the Structural Reform of Anti-Monopoly Authority and the Amended Anti-Unfair Competition Law
JF - Journal of European Competition Law & Practice
DO - 10.1093/jeclap/lpy068
DA - 2019-01-01
UR - https://www.deepdyve.com/lp/oxford-university-press/insights-of-china-s-competition-law-and-its-enforcement-the-structural-Ka9WWzCpfb
SP - 36
VL - 10
IS - 1
DP - DeepDyve
ER -