Provisions related to Internet Added
in Mainland China's First Revision to its
Anti-Unfair Competition Law

[Data Source: China Economic Information Daily]

The first revision to the Mainland China's Anti-Unfair Competition Law enters its final stage - the Financial and Economic Affairs Committee and the Legislative Affairs Commission of the National People's Congress ("NPC") have solicited comments in public for the Anti-Unfair Competition Law (Draft Amendment). In this new edition of law, provisions governing unfair competition over the network are added for the first time. New acts of unfair competition in the field of network such as business operators affect the choice of users and interfere the normal operation of other operators by using network technologies will be included into the scope of legal supervision.

The Anti-Unfair Competition Law, which is referred to as "Constitution of Market Economy", was passed in the third meeting of the standing committee of the eighth mainland China National People's Congress on September 2, 1993, and has never been amended before since it entered into force on December 1, 1993. In February 2017, the Anti-Unfair Competition Law (Draft Amendment) was formally submitted to the NPC Standing Committee for review. The amended contents involve 30 of the 33 articles in the current law, wherein 7 articles were removed and 9 articles were added, resulting in 35 articles in total.

In addition, with the promulgation of Anti-Monopoly Law and the amendments to Advertisement Law and Intellectual Property Law, there is the problem of conflict among relevant legal provisions which need to be solved systematically.

One of key points in this revision of Anti-Unfair Competition Law (Draft Amendment) is the addition of provision governing unfair competition over the network for the first time. This new type of cases involving unfair competition over the network burst out in the recent couple of years. Various malicious and unfair competition means such as knock-off, plagiarism, squatting of domain name, impeding installation and running of software, seducing or malicious uninstall of software, ranking of search results, installing malware, false propaganda, theft of information, business defamation and traffic hijack, etc. have become the key focus of unfair competition among operators in the field of network. Recently a famous mainland China mobile phone manufacturer was suited by another cell phone application software provider for alleged unfair competition because said manufacturer interfered user's choice of specific software with repeated popup window prompts, impeded the normal installation of downloaded software and seduced users to go to other sites.

But because there are no provision concerning competition over the network in the current law, some network companies even challenged the applicability of Anti-Unfair Competition Law in the field of network. The law enforcement department stated that various levels of industrial and commercial administrations also received before in succession a number of complaints on unfair competition issues arisen on the basis of network technologies, but could not exert their functions as administrative law enforcement authority because of the lack of definite specifications in the current law. In the recent 10 years, at least more than 400 cases of unfair competition in the network field aroused quite a lot of controversies in the scholarship for judge's oversized amplitude of free discretion due to no specific detailed provisions.

It is set forth in this draft amendment that: competitors shall not use technical means to influence the choice of users or interfere the normal operation of other business operators in the field of network. Acts that shall be prohibited are also specified in this amendment to strengthen the function of administrative law enforcement in investigating and punishing acts of unfair competition over the network.

Now there are still some systems that need deliberation in the provisions concerning unfair competition over the network under revision, such as whether the classification of illicit acts enumerated in the relevant provisions is perfect, whether the degree of typicality is proper, and whether there is the possibility of being circumvented by using technical means. Besides, the newly added "compatibility" duty for all market entities in the draft amendment is disadvantageous to the innovation of small and medium businesses. In addition to the addition of provisions concerning unfair competition over the network for the first time, the scope of commercial bribery was expanded appropriately in the draft amendment, and the right of administrative law enforcement was further refined by adding compulsory measures such as inspection, seizure, detainment, query, etc. Besides, civil compensation liabilities for acts of unfair competition were also added.

Now the revision has entered into its final stage, with the following issues need to be addressed:

1. To clearly add a general provision, not only constructing its premises through definition, but also designing an application procedure to prevent its abuse;
   
   
2. To stipulate the liabilities for violation against the general provision to prevent the general provision from being laid aside due to no penalty clause;
   
   
3. It is suggested to remove the "profitability" requirement for business operators so as to be consistent with the past law enforcement and judicial practices, and also keep the concept of "business operators" consistent with other laws, while avoiding inappropriately shrinking the applicable scope of the Anti-Unfair Competition Law;
   
   
4. It is suggested to add specific mechanisms to protect the interests of consumers. Although protecting the legitimate rights and interests of consumers is already listed as one of the legislative goals of this law, no mechanism was designed in the Remedy part for consumers to use to protect their rights and interests with this law.

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