P.R.C. Law Against Unfair Competition (Draft Revisions for Solicitation of Comments)

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Chapter I: General Provisions

Article 1: This Law is formulated so as to prevent and stop acts of unfair competition, encourage and protect fair competition, preserve the lawful rights and interests of business operators and consumers as well as the societal public interest, and promote the healthy development of a socialist market economy.

Article 2: Business operators shall follow the principles of voluntariness, equality, fairness creditworthiness in business and production activities, and comply with laws and business ethics; they must not carry out, or assist others in carrying out, acts of unfair competition.

"Acts of Unfair Competition" as used in this Law refers to business operators' conduct violating provisions of this Law during production and business activities, which disrupts the order of marketplace competition, and harms the lawful rights and interests of other business operators and consumers, or the societal public interest.

"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: Efforts to counter unfair competition are to uphold the leadership of the Communist Party of China.

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 market competition.

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.

Article 4: The state is to complete rules for fair competition in the digital economy.

Business operators must not use data and algorithms, technology, advantages in capital, as well as platform rules, to engage in acts of unfair competition.

Article 5: Departments for market regulation at the county level or above are to investigate and handle acts of unfair competition.

Law enforcement efforts to counter unfair competition are to adhere to the principles of lawfulness, equity, fairness, and uniformity.

Where this law is silent, the provisions of other laws and administrative regulations may be applied.

Article 6: The State encourages, supports, and protects all organizations and individuals conducting social oversight over acts of unfair competition. State organs and their staffs must not support or cover up acts of unfair competition.

Industry organizations shall strengthen industry self-discipline, leading and regulating members to compete in accordance with law, and preserving the order of marketplace competition.

Chapter II: Acts of Unfair Competition

Article 7: Business operators must not carry out the following confusing conduct leading people to mistakenly believe it is others' goods or that they have special relationships with others:

(1) Unauthorized use of indicators, packaging, or dress that are the same or similar to the product names, packaging, or dress of others that have a definite influence;

(2) Unauthorized use of indicators that are the same or similar to those of others that have a definite influence without authorization, such as the names of market entities (including shortened forms, brands [字号], etc.), the names of social organizations (including shortened forms, etc.), or individuals' names (including pen names, stage names, translated names, etc.) without authorization.

(3) Unauthorised use of indicators or pages that are the same or similar to those of others that have a definite impact, such as parts of domain names, website names, page design, personal media names, software application names, or images;

(4) Unauthorized use of others' commercial indicators that have a definite influence, such as search keywords, misleading the public;

(5) Other confusing conduct that could lead people to mistakenly believe it is others' goods or that they have special relationships with others;

Business operators must not market confusing goods as provided for in the first paragraph of this article, and must not provide storage, transportation, shipping, printing, concealment, business premises, or other facilitating conditions for the carrying out of confusing conduct.

Article 8: Business operators must not, either directly or by instigating others, employ financial or other methods to bribe the following units or individuals in an attempt to obtain business opportunities or competitive advantages;

(1) The other party in a transaction or their staff;

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

(3) Units or individuals exploiting their authority or influence to impact trade.

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.

Bribes must not be accepted by any units or individuals in transactional activities.

Article 9: Business operators must not make false or misleading commercial publicity about goods' or goods businesses' nature, function, quality, type, source, market status, user appraisals, honors received, transaction information, business data, qualifications or credentials, and other such information, deceiving or misleading the relevant public.

Commercial publicity as used in the preceding paragraph primarily includes presentations, demonstrations, instructions, explanations, or text labeling of goods through business premises, exhibition activities, websites, personal media, telephone, leaflets, and other such methods.

Business operators must not use methods such as organizing false transactions or fake appraisals to help other business operators conduct false or misleading commercial publicity; and must not provide services such as planning, production, and publication for false publicity.

Article 10: Business operators must not carry out the following acts infringing on commercial secrets:

(1) Obtaining rights holders' commercial secrets by theft, bribery, fraud, duress, electronic trespass, 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 confidentiality obligations or the rights holders' demands for preserving commercial secrets;

(4) Inciting, enticing, or assisting others to obtain, disclose, use or allow others to use rights holders' commercial secrets in violation of confidentiality obligations or the rights holders' demands for preserving commercial secrets.

Where natural persons, legal persons, and unincorporated organizations other than business operators carry out the illegal conduct listed in the preceding paragraph, it is to be viewed as a violation of commercial secrets.

Where third parties clearly knew or should have known that the commercial secrets rights-holders' employees, former employees, or other units and individuals carried out the illegal conduct listed in the first paragraph of this article, but still acquire, disclose, use or allow others to use commercial secrets, it is to be viewed as a violation of commercial secrets.

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

The state is to promote the establishment and completion of a system for protecting commercial secrets that integrates self-protection, administrative protection, and judicial protection.

Article 11: Business operators conducting prize promotions must not have any of the following circumstances:

(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) Conducting prize promotions through fraudulent methods such as falsely asserting the existence of prizes, falsely setting up the content of prize items, or intentionally having insider personnel win prizes;

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

After prize promotion activities begin, business operators must not change information on the prize promotions that is provided for in item (1) of the preceding paragraph, unless it is to the advantage of consumers.

Article 12: Business operators must not concoct or disseminate fake facts, or incite others to do so, harming competitors' or other business operators' commercial reputations or the reputation of their goods.

Article 13: Business operators with a position of relative advantage must not carry out the following conduct without legitimate grounds, unreasonably restricting or adding unreasonable conditions to the transactional activities of transaction counterparts. impacting fair trade and disrupting the order of fair market competition:

(1) Coercing the transaction counterpart to sign exclusive agreements;

(2) Unreasonably limiting the transaction counterparts' trading partners or conditions;

(3) Forcing the bundling of other goods when providing goods;

(4) Unreasonably restricting the price, sales targets, sales regions, sales time, or participation in the promotion of goods;

(5) Setting up unreasonable restrictions such as margin deductions or reductions of subsidies, discounts, or volume resources;

(6) Using methods such as influencing user choices, limiting traffic, blocking, reducing search ranking, and removing goods from stores, disrupting normal trading;

(7) Other conduct that impacts fair trade through unreasonable restrictions or by adding unreasonable requirements.

Article 14: Business operators must not seek improper benefit by carrying out the following acts of malicious trading, impeding or disrupting the normal business of other business operators:

(1) Deliberately engaging in large-scale, high-frequency trading with other business operators and giving positive reviews, leading to related discipline actions, and causing the other business operators to receive punishments such as reduced search rankings, reduced credit levels, having goods removed, having links broken, and having services stopped;

(2) Maliciously buying a large volume of goods in a short period of time and not paying;

(3) Maliciously returning goods or refusing receipt after buying a large volume;

(4) Other conduct using rules to carry out malicious trading, improperly impeding or disrupting the normal business of other business operators.

Article 15: 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 data and algorithms, technology, as well as platform rules, to disrupt the order of fair market competition by influencing user choice or other such methods.

"Influencing user choice" as referred to in the preceding paragraph includes violating users' wishes and right to choose, adding complexity to operation, or disrupting the continuity of use.

Article 16: Business operators must not use technical means to carry out conduct such as traffic hijacking, improper interference, or malicious incompatibility that influences user choice or obstructs or undermines the normal operation of online products or services that are legally provided by other business operators.

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

(2) Using methods such as keyword associations or setting up fake operation choices to set up links to one's own products or services, tricking or misleading users into clicking;

(3) Misleading, deceiving, or compelling users to modify, close, or uninstall network products or services lawfully provided by other business operators;

(4) Maliciously causing incompatibility with network products or services that are lawfully provided by other business operators.

(5) Intercepting or modifying the content or pages of products and services that are lawfully provided by other business operators;

(6) Other conduct that impedes or undermines other business operators' normal lawful provision of network products or services.

Article 17: Business operators must not use technological methods, platform rules, and so forth to violate industry custom or technical specifications, improperly excluding or obstructing access and transactions with products and services that are lawfully provided by other business operators, disrupting the order of fair market competition.

Article 18: Business operators must not carry out the following conduct, improperly acquiring or using the commercial data of other business operators, harming the lawful rights and interests of other business operators and consumers, and disrupting the order of fair market competition:

(1) Disrupting technical management measures through means such as theft, coercion, fraud, or electronic trespass, improperly obtaining the commercial data of other business operators, and unreasonably increasing the operations costs of other business operators, impacting their normal business;

(2) Violating agreed upon, or reasonable and proper, data capture protocols to obtain and use the commercial data of others, so as to substantively replace the products or services provided by other business operators;

(3) Disclosing, transmitting, or using improper means to obtain the commercial data of other business operators, so as to substantively replace the products or services provided by other business operators;

(4) Using other methods contrary to good faith, credit, and commercial ethics to obtain and use the commercial data of others, seriously harming the lawful rights and interests of other business operators and consumers, and disrupting the order of fair market competition.

"Commercial" data as used in this Law refers to data collected by business operators in accordance with law that has commercial value, and for which they employ corresponding technical management measures.

Acquiring, using, or disclosing data that is the same as information that may be used by the public without charge is not improper acquisition or use of other's commercial data as provided for in the first paragraph of this article.

Article 19: Business operators must not use algorithms to analyze users' preferences, transaction habits, and other traits to carry out unreasonably differentiated treatment in terms of transaction conditions or to conduct unreasonable restrictions, harming the lawful rights and interests of consumers and other business operators or the societal public interest and disrupting the order of fair market competition.

Article 20: Business operators must not violate the provisions of this law by carrying out other acts of unfair online competition that disrupt the order of market competition and impact fair market transactions, and must not harm the lawful rights and interests of other business operators or consumers, and the societal public interest.

Article 21: The following factors may be comprehensively considered in the assessment of whether an act of unfair competition as provided by articles 13-20 of this Law is constituted:

(1) The impact on the lawful rights and interests of consumers and other business operators, and on the societal public interest;

(2) Whether tactics such as coercion, duress, or fraud were employed;

(3) Whether they went against industry custom, commercial ethics, or commercial morality;

(4) Whether they went against the principles of fairness, reasonableness, and non-discrimination;

(5) The impact on technological innovation, industry development, and online ecology.

Article 22: Platform operators shall strengthen competition compliance management, and actively advocate for fair competition.

Platform operators shall clarify the platform's internal rules for fair competition in service agreements and transaction rules, guiding businesses on the platform to compete in accordance with law.

Chapter III: Investigation of Suspected Acts of Unfair Competition

Article 23: Oversight inspection departments investigating suspected acts of unfair competition may employ the following measures:

(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 and third-party payment accounts, as well as the payment records, of business operators suspected of acts of unfair competition.

The employment of the measures in items 4 and 5 of the preceding paragraph shall be reported in writing to the principal responsible person for the oversight and inspection department at the county level or above, and be upon their approval.

When oversight 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 promptly make their conclusions public in accordance with law.

Article 24: In oversight 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 25: The oversight and inspection departments, and their staff members, have the duty to keep confidential the commercial secrets, personal privacy, and personal information learned of during the investigation.

Article 26: All units or individuals have the right to report suspected acts of unfair competition to the oversight and inspection departments, and the oversight 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 27: 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 this law and the circumstances are serious, the damages may be determined to be between one and five times the amount determined according to the aforementioned methods.

Where the actual damages suffered by business operators as a result of infringement and the benefit gained by infringer are both difficult to determine, the people's courts are to make a judgment for compensation of up to 5,000,000 RMB on the basis of the circumstances of the infringement.

Article 28: Where business operators violate Article 7 of this law by carrying out confusing conduct, the oversight and inspection departments shall order them to cease the unlawful acts, and confiscate the unlawful goods and tools of production. . 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, and where the circumstances are serious, their business licenses are to be canceled.

Where one knows or should know that others are carrying out confusing conduct, but still sells the confusing goods or intentionally provides conditions to facilitate the confusing conduct, or where one assists others in carrying out confusing conduct, it is to be addressed in accordance with the provisions of the preceding paragraph. Where selling goods that one doesn't know are confusing, and it can be proven that the goods were acquired lawfully and the provider can be explained, the oversight and inspection departments are to order that the sale be stopped.

Where the market entity name registered by business operators violates article 7 of this law, they shall handle formalities for changing the registered name within 30 days of a disposition decision being made; and the registration organs are to replace their name with the uniform social credit code until the name is changed.

Article 29: Where business operators violate article 8 of this Law by bribing others, the oversight and inspection departments are to confiscate illegal income and give a fine of between 100,000 and 5,000,000 RMB; where circumstances are serious, business licenses are to be canceled.

Where business operators or their staff accept bribes during transaction activities, and there are provisions on point in laws or administrative regulations, follow those provisions; where laws and administrative regulations are silent, fines are to be given in accordance with the preceding paragraph.

Article 30: Where business operators violate article 9 of this law by making false or misleading promotions of their goods or the entity producing and trading in goods, or by helping other business operators conduct false misleading commercial promotions by conducting fake transactions, fake appraisals, or other such methods, the oversight and inspection departments shall order them to cease the unlawful acts, confiscate items used to carry out the illegal conduct and any unlawful gains, and impose a fine of between 100,000 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 know or should know that something is an act of false publicity, but still provide services such as planning, production, or publication, fines are to be given in accordance with the preceding paragraph.

Where business operators violate the provisions of Article 9 of this Law and it is false advertising, punishment is to be in accordance with the provisions of the Advertising Law of the People's Republic of China.

Article 31: Where business operators or other natural persons, legal persons infringe on commercial secrets in violation of the provisions of Article 10 of this Law, the oversight and inspection departments are to order them to cease the unlawful acts, confiscate unlawful gains, and impose a fine of between 100,000 and 1,000,000 RMB; where the circumstances are serious, impose a fine between 1,000,000 and 5,000,000 RMB.

Article 32: Where business operators conduct prize promotions in violation of the provisions of Article 11 of this Law, the oversight and inspection departments are to order them to cease the unlawful acts and shall impose a fine between 50,000 and 500,000 RMB.

Article 33: Where business operators harm competitors' commercial reputation, or that of their goods, in violation of the provisions of Article 12 of this Law, the oversight and inspection departments are to order them to cease the unlawful acts and l impose a fine between 100,000 and 1,000,000 RMB; where the circumstances are serious, impose a fine between 1,000,000 and 5,000,000 RMB.

Article 34: Where business operators violate article 13 of this law by carrying out unreasonable restrictions or adding unreasonable requirements, the oversight and inspection departments are to order them to cease the unlawful acts, confiscate unlawful gains, and impose a fine of between 100,000 and 1,000,000 RMB; where the circumstances are serious, impose a fine between 1,000,000 and 5,000,000 RMB.

Article 35: Where business operators violate article 14 of this law by carrying out malicious transactions and impeding or disrupting the normal business of other business operators, the oversight and inspection departments are to order them to cease the unlawful acts, confiscate unlawful gains, and impose a fine of between 100,000 and 1,000,000 RMB; where the circumstances are serious, impose a fine between 1,000,000 and 5,000,000 RMB.

Article 36: Where business operators violate article 20 of this law by carrying out acts of unfair online competition, the oversight and inspection departments are to order them to cease the unlawful acts, confiscate unlawful gains, and impose a fine of between 100,000 and 1,000,000 RMB; where the circumstances are serious, impose a fine between 1,000,000 and 5,000,000 RMB.

Article 37: Where business operators violate article 2 of this law by carrying out acts of unfair competition that seriously undermine the order of competition and need to be investigated and addressed, but this law and related laws and administrative regulations have no clear on-point provisions, the oversight and inspection departments are to order them to cease the unlawful acts, confiscate unlawful gains, and impose a fine of between 100,000 and 1,000,000 RMB; where the circumstances are serious, impose a fine between 1,000,000 and 5,000,000 RMB.

Article 38: Where business operators violate articles 13, 16, 17, 18, 19, or 20 of this Law by carrying out acts of unfair competition, and the circumstances are especially serious or their nature is especially vile, seriously harming the order of fair competition or the societal public interest, the oversight and inspection departments at the provincial level or higher are to order that they cease the unlawful conduct, confiscate unlawful gains, and give a fine of 1-5% of annual sales, and may order them to stop operations, cancel related operations permits, or cancel business licenses; Where the business operators' legal representatives, principle responsible persons, and directly responsible personnel bear responsibility for the acts of unfair competition, a fine of between 100,000 and 1,000,000 RMB is to be given.

Article 39: Where business operators who have engaged in unfair competition in violation of the provisions of this Law, have circumstances such as taking the initiative to eliminate or mitigate the harmful consequences of the illegal acts, they shall be given a lighter or mitigated administrative punishment in accordance with law; if the illegal act is slight and promptly rectified, and no harmful consequences are caused, no administrative punishment is to be given.

Article 40: Where business operators receive administrative punishments for engaging in unfair competition in violation of the provisions of this Law, the oversight 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 41: Business operators violating the provisions of this Law shall bear civil responsibility, administrative responsibility, and criminal responsibility, if their assets are insufficient to pay these,priority is given to bearing civil liability.

Where business operators have circumstances suspected of violating this law, and a settlement on civil responsibility has already been reached between the relevant business operators, or the people's courts have already made a ruling on civil responsibility, and the business operators' conduct has not caused harm to the order of fair competition and the societal public interest, it is acceptable to not conduct an investigation; and where there is already an investigation, it may be concluded; and where the investigation is already finished, fines may be waived.

Article 42: Where the oversight and inspection departments' lawful performance of their duties is impeded by refusals or obstructions of the investigation, the oversight and inspection departments are to order corrections and may give individuals a fine of up to 50,000 RMB, and give units a fine of up to 500,000 RMB, and the public security organs may concurrently give public security administrative sanctions.

Article 43: Parties dissatisfied with an oversight and inspection department's decision may apply for an administrative reconsideration or bring an administrative lawsuit in accordance with law.

Article 44: Where employees of the oversight and inspection departments abuse their authority, derelict their duties, twist the law for personal gain, or disclose commercial secrets learned of during the investigation, they are to be given sanctions in accordance with law.

Article 45: Where violations of this Law constitute a crime, criminal liability is to be pursued in accordance with law.

Article 46: During civil trials on encroachment of commercial secrets, the rights-holder in the commercial secrets is to provide initial evidence showing that they employed protective measures for the asserted commercial secrets and reasonably demonstrate that the commercial secrets have been violated, and the suspected violator shall prove that commercial secrets asserted by the rights-holder are not commercial secrets as provided for in this rule.

When the rights-holder in commercial secrets feels that their commercial secrets have been infringed upon and reports the infringement to the market administration departments, they may provide initial evidence on the existence of the commercial secrets and infringement.

Where the rights-holder in commercial secrets provides initial evidence reasonably demonstrating that commercial secrets have been infringed upon, and provides any of the following evidence, the alleged infringer shall prove that they did not exhibit conduct infringing on commercial secrets:

(1) There is evidence demonstrating that the alleged infringer had channels or opportunities to obtain the commercial secrets and that information used by them is substantially similar to those commercial secrets;

(2) There is evidence demonstrating that commercial secrets have already been disclosed or used by the alleged infringer, or that their is a risk of their leaking or using them;

(3) There is other evidence demonstrating that commercial secrets were infringed upon by the alleged infringer;

Chapter V: Supplementary Provisions

Article 47: A "position of relative advantage" as used in this law includes business operators' advantages in areas such as technology, capital, user numbers, or industry influence, as well as other business operators' reliance on that business operator in transactions.

Article 48: This Law is to take effect on xx-xx-xxxx.

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