P.R.C. Law Against Unfair Competition (Draft Revisions) (2nd Reading Draft)

P.R.C. Law Against Unfair Competition (Draft Revisions) (2nd Reading Draft)

Chapter I: General Provisions

Chapter II: Acts of Unfair Competition

Chapter III: Investigation of Suspected Acts of Unfair Competition

Chapter IV: Legal Responsibility

Chapter V: Supplementary Provisions

Chapter I: General Provisions

Article 1: This Law is formulated in order to safeguard the healthy development of the socialist market economy, to encourage and protect fair competition, to stop acts of unfair competition, and to protect the lawful rights and interests of business operators and consumers.

Article 2: Business operators shall follow the principles of voluntariness, equality, fairness, honesty and credibility in business and production activities, and comply with laws and generally recognized business ethics.

"Acts of unfair competition" as used in this Law refers to a business operator's conduct violating the provisions of this law by using unfair methods to engage in market competition, disrupting the order of market competition, harming the lawful rights and interests of other operators.

"Business operators" as used in this Law, refers to natural persons, legal persons or unincorporated organizations engaged in the production or trade of goods, or the provision of services. ("goods" hereinafter includes services).

Article 3: People's governments at all levels shall adopt measures to stop acts of unfair competition, so as to create a favorable environment and conditions for fair competition.

The State Council is to establish coordinating mechanisms for efforts against unfair competition, research and decide on major policies against unfair competition, and coordinate and handle major issues of preserving the order of competition.

Article 4: Departments performing duties of administering industry and commerce of people's governments at or above the county level are to investigate and handle acts of unfair competition; where laws or administrative regulations provide that other departments are to investigate and handle [such acts], follow those provisions.

Article 5: The State encourages, supports and protects all organizations and individuals in the conduct of social supervision over acts of unfair competition.

State organs and their staffs must not support or cover up acts of unfair competition.

Chapter II： Acts of Unfair Competition

Article 6: Business operators must not engage in the following confusing conduct that leads people to mistakenly believe it is others' goods or that they have special relationships with others;

(1) Using the name, packaging, or dress of others' goods, or using names, packaging, or dress similar to that of others' goods, without authorization;

(2) Using the name of others' enterprises (including shortened forms, brands [字号] etc.),the names of social organizations (including shortened forms etc.), or personal names (including pen names or stage names etc.)without authorization.

(3) Using the main body of others' domain names, website names, or web pages; and the names or symbols of others' channels, programs, or columns, and so forth; without authorization;

(4) Using others' trademarks in the name of an enterprise.

Article 7: Business operators must not employ financial or other methods to bribe the following units or individuals in an attempt to obtain business opportunities or competitive advantages;

(1) Employees of the other party in a transaction;

(2) units or individuals entrusted by the other party in a transaction to handle related matters;

(3) State organs, State owned companies or enterprises, public institutions, people's organizations, or state employees;

(4) Other units or individuals that might use the authority of state employees to influence transactions.

In transactional activities, business operators may provide discounts to trade counterparts in an explicit manner, or pay commissions to intermediaries. Where business operators pay discounts to trade counterparts or pay commissions to intermediaries, it shall be truthfully recorded in the books. Business operators receiving discounts or commissions shall also include these in the books.

Where the employees of business operators carry out bribery, it shall be viewed as the conduct of the business operator; except for where there is evidence showing that the employee in question's conduct had no relation to obtaining transaction opportunities or competitive advantages for the business operator.

Article 8: Business operators must not commercially promote their goods falsely or so as to create misunderstandings, or trick or mislead consumers.

Article 9: Business operators must not carry out the following acts infringing on commercial secrets:

(1) Obtaining rights holders' commercial secrets by theft, bribery, intimidation or other improper tactics;

(2) Disclosing, using, or allowing others to use a rights holders' commercial secrets acquired by tactics provided for in the previous item;

(3) Disclosing, using, or allowing others to use commercial secrets in their possession, in violation of agreements or the rights holders' demands for preserving commercial secrets.

Where third parties clearly knew or should have known that commercial secrets were obtained by employees, former employees, or other units and individuals through the methods listed in the preceding paragraph, and still acquire, reveal, use or allow others to use them, it is viewed as a violation of commercial secrets.

"Commercial secrets" as used in this Law refers to technological information and business information that is not publicly known, has commercial value, and is subject to corresponding secrecy measures taken by the rights holder.

Article 10: The following situations must not occur in business operators' prize promotions:

(1) The type of award, the contest requirements, the payout amount or prizes, and other information on prize promotions is not clear, influencing consumers' redemption of prizes.

(2) Carrying out prize promotions by using the fraudulent methods of lying that there is a prize or intentionally having predetermined personnel win prizes;

(3) Having a top-prize valued at more than 50,000 RMB in drawing-style prize promotion.

Article 11: Operators must not fabricate or transmit false information, or transmit misleading information, harming the commercial reputation of competitors or their goods.

Article 12: Business operators using the networks to engage in production or trade activities shall comply with all provisions of this Law.

Business operators must not use technological methods, using influencing of user choices or other methods, to engage in the following conduct that impedes other business operators' from lawfully providing network products or services as normal.

(1) inserting links or forced transfers in other business operators' lawfully provided network products and services, without their consent;

(2) Misleading, deceiving, or compelling users to modify, close, or uninstall network products or services lawfully provided by others;

(3) Maliciously causing incompatibility with network products or services lawfully provided by other business operators;

(4) Other conduct that impedes or undermines other business operators' lawful provision of network products or service normally.

Chapter III： Investigation of Suspected Acts of Unfair Competition

Article 13: Supervision and inspection departments' investigation of suspected acts of unfair competition may employ the following methods;

(1) Enter business premises suspected of acts of unfair competition to conduct inspections;

(2) Question business operators under investigation, interested parties, as well as other relevant units or individuals, and request that they explain relevant circumstances or provide or other materials relating to the conduct under investigation;

(3) Make inquiries about, or reproduce, agreements, account books, invoices, documents, records, business correspondence or other materials relating to the suspected acts of unfair competition;

(4) Seal or seize assets related to suspected acts of unfair competition;

(5) make inquiries into the bank accounts of the business operators suspected of acts of unlawful competition,

The employment of the measures in the preceding paragraph shall be reported in writing to the principle responsible person or the supervision and inspection department, and be upon their approval. The employment of the measures in items 4 and 5 of the preceding paragraph shall be reported in writing to the principle responsible person or the supervision and inspection department at the districted city level or above, and be upon their approval.

Article 14: When supervision and inspection departments are investigating suspected acts of unfair competition, they shall follow the provisions of the "Administrative Compulsion Law of the People's Republic of China" and of other relevant laws and administrative regulations, and shall promptly make their conclusions public.

Article 15: In supervision and inspection departments' investigation of suspected acts of unfair competition, business operators under investigation, interested parties, and other relevant units or individuals shall truthfully provide relevant materials or circumstances.

Article 16: All units or individuals have the right to report suspected acts of unfair competition to the supervision and inspection departments, and the supervision and inspection departments shall promptly handle the reports it receives in accordance with law.

Oversight and inspection departments shall publicly release the phone numbers, mailboxes, or email addresses for accepting and handling reports, and preserve the confidentiality of those making reports. Where reports are made in ones real name and provide relevant facts and evidence, the oversight and inspection departments shall inform the reporter of the outcome of the handling.

Chapter IV: Legal Responsibility

Article 17: Where business operators violate this Law and cause damages to others, they shall bear civil responsibility in accordance with law.

Where business operators' lawful rights and interests are harmed by acts of unfair competition, they may file lawsuits in the people's courts.

The amount of compensation for business operators who have been harmed by acts of unfair competition is determined on the basis of the actual losses they suffered as a result of the violation of their rights; and where the actual losses are hard to calculate, compensation is determined on the basis of the benefit received by the infringers as a result of the infringement. The amount of compensation shall also include reasonable expenses paid by business operators in stopping the infringing conduct.

Where business operators violate articles 6 or 9 of this Law, and the losses suffered by the rights holder and the benefit gained by infringer are both difficult to determine, the people's courts are to make judgement for compensation of up to 3,000,000 RMB on the basis of the circumstances of the infringement.

Article 18: Where business operators violate Article 6 of this law by engaging in confusing conduct, the supervision and inspection departments shall order them to cease the unlawful acts, and confiscate the unlawful goods. Where the illegal business revenue is above 50,000 RMB, a concurrent fine of less than five times the amount of illegal business revenue may be imposed; where there is no illegal business revenue or the illegal business revenue is less than 50,000 RMB, a concurrent fine of less than 250,000 RMB may be imposed. Where the circumstances are serious, business licenses are to be revoked.

Where the registered names of business operators' enterprises violate the provisions of Article 6 of this Law, the supervision and inspection departments shall also order them to apply to change their registered name within one month; where an application for change of registration is not submitted before that period is completed, the organ that originally registered the enterprise shall delete its name from the public notice system for enterprise credit information, and replace its name with its unified social credit number, and list that business operator in the directory or irregular businesses.

Article 19: Where business operators bribe others but it does not constitute a crime, the supervision and inspection departments are to confiscate illegal income and give a fine of between 100,000 and 3,000,000 RMB. Where the circumstances are serious, business licenses are to be revoked.

Article 20: Where business operators violate article 8 of this law with commercial promotions that are false of misleading, the supervision and inspection departments shall order them to cease the unlawful acts, and impose a fine of between 200,000 and 1,000,000 RMB; where the circumstances are serious, a fine of between 1,000,000 and 2,000,000 RMB is imposed, and business licenses may be revoked.

Where business operators violate the provisions of Article 8 of this Law and it is false advertising, punishment is in accordance with the provisions of the "Advertising Law of the People's Republic of China."

Article 21: Where business operators bribe other or accept bribes in violation of the provisions of Article 9 of this Law by infringing on commercial secrets, but a crime is not constituted, the supervision and inspection department shall order them to cease the unlawful acts and shall impose a fine between 100,000 and 500,000 RMB; where the circumstances are serious, impose a fine between 500,000 and 3,000,000 RMB.

Article 22: Where business operators conduct prize promotions in violation of the provisions of Article 10 of this Law, the supervision and inspection departments shall order them to cease the unlawful acts and shall impose a fine between 50,000 and 500,000 RMB.

Article 23: Where business operators harms others' commercial reputation, or that of their goods, in violation of the provisions of Article 11 of this Law, the supervision and inspection department shall order them to cease the unlawful acts and shall impose a fine between 100,000 and 500,000 RMB; where the circumstances are serious, impose a fine between 500,000 and 3,000,000 RMB.

Article 24: Where business operators violate Article 12 of this Law by impeding or undermining other business operators' lawful provision of internet products and services as normal, the supervision and inspection departments shall order them to cease the unlawful acts and shall impose a fine between 100,000 and 500,000 RMB; where the circumstances are serious, impose a fine between 500,000 and 3,000,000 RMB.

Article 25: Where business operators' violations of provisions of this Law by engaging in unfair competition or illegal activity are slight and are promptly corrected, administrative punishment is not given.

Article 26: Where business operators receive administrative punishments for engaging in unfair competition in violation of the provisions of this Law, the supervision and inspection departments shall record this in their credit record, and publicly disclose it in accordance with the provisions of relevant laws and administrative regulations.

Article 27: Business operators violating the provisions of this Law shall bear responsibility, administrative responsibility, and criminal responsibility, if their assets are insufficient to pay these,priority is given to bearing civil liability.

Article 28: Where the supervision and inspection departments' lawful performance of their duties is impeded by refusal or obstructing the investigation, the supervision and inspection departments are to order corrections, and may give individuals a fine of up to 5,000 RMB, and give units a fine of up to 50,000 RMB, and the public security organs may concurrently give public security administrative sanctions.

Article 29: Parties dissatisfied with a supervision and inspection department's decision may apply for an administrative reconsideration or bring an administrative lawsuit in accordance with law.

Article 30: Where employees of the supervision and inspection departments abuse their authority, derelict their duties, or twist the law for personal gain, they are given sanctions in accordance with law.

Article 31: Where a violation of the provisions of this Law constitutes a crime, criminal responsibility is to be pursued in accordance with law.

Chapter V: Supplementary Provisions

Article 32: This Law takes effect on xx-xx-xxxx.