On 30 December 2015, the State Administration for Industry and
Commerce ("SAIC") in China issued a new regulation -
the Interim Measures for the Administration of the List of
Dishonest Entities Committing Serious Illegal Activities
the "Interim Measures") - blacklisting "dishonest
entities" who engage in bribery and corruption. The
Interim Measures will come into force on 1 April 2016.
In this update we look at the key provisions of the Interim
Measures, their potential impact on the marketplace and what
Chinese companies should look out for.
Key provisions of the Interim Measures
The Interim Measures were issued after a consultation process
where SAIC sought opinions from the general public and other state
departments. They reflect the provisions of the
Cooperation Memorandum on the Coordinated Supervision of and
Joint Discipline and Penalty against Dishonest Entities
which was jointly issued by 38 departments at state level
(including the National Development and Reform Commission) and
The Interim Measures are relatively brief, comprising 21
articles. They apply to all companies that are registered
under Chinese law and are subject to the administration of the SAIC
and its equivalent bodies at local level.
Article 5 of the Interim Measures sets out the circumstances
where a company may be blacklisted, which include, but are not
limited to, situations where:
A company has been penalised for unfair competition activities
(such as commercial bribery) three or more times within two
A company has had its registration revoked for submitting false
materials or concealing other important facts by fraudulent means
from the authorities; and / or
A company has been penalised three or more times within two
years for violating consumers' rights by providing unsafe
products or services.
The Interim Measures aim to crack down on dishonest companies by
implementing various punitive measures, including:
Exercising stricter control and supervision over the business
activities of dishonest companies;
Prohibiting the representatives of dishonest companies from
taking up positions in other companies for three years; and
Marking the company as a dishonest enterprise in the publically
accessible Enterprise Credit Information System.
These measures will be administered by an administration
authority which will also be tasked with sharing information with
other governmental departments and implementing joint sanctions on
Bribery and dishonesty create inefficiencies in markets and lead
to the misallocation of resources, unfair competition and distorted
prices, all of which ultimately distort the market and disadvantage
consumers. By blacklisting dishonest companies, the government aims
to stamp out these practices and create a level playing field for
companies and consumers alike.
The consequence of being blacklisted can be very severe and far
reaching, particularly on a company's reputation.
Accordingly, Chinese registered companies would be well
advised to carefully review their daily business activities to make
sure they are in full compliance with the relevant laws and
We would also recommend to Chinese registered companies that
they ensure they have a compliance system in place, including
regular training for relevant staff on anti-bribery and
anti-corruption legislation. It is also recommended that companies
keep up to date with developments in law to make sure their
business activities comply at all times with relevant laws and
regulations. When in doubt, companies should seek advice from
external counsel. Bribery and corruption are serious
crimes with serious consequences and ignorance of the law is no
defence. As with all matters related to compliance, it is far
better to be safe than sorry.
In a criminal trial the charge is the foundation of the accusation & every care must be taken to see that it is not only properly framed but evidence is only tampered with respect to matters put in the charge and not the other matters.
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