The State Council has proposed amendments to the commercial
bribery provisions in China's legislation on unfair
competition. The amendments clarify the types of conduct that
qualify as commercial bribery, and this will hopefully lead to a
more uniform approach by Chinese enforcement authorities once the
amendments have been passed. But it remains important for companies
in China to stay up to date with enforcement trends. Especially
since the amendments increase liability of businesses for bribery
by employees and third parties, in terms of the scope of activities
that qualify as commercial bribery and the potential penalty
China's State Council recently proposed amendments to the
anti-bribery law provisions of China's Anti-Unfair Competition
Law (AUCL). The AUCL is a wide-ranging law containing provisions on
matters such as competition, procurement and trade secrets as well
as commercial bribery. Pursuant to the AUCL, commercial bribery is
punishable by economic and administrative sanctions.
The proposed amendments follow changes made to the anti-bribery
provisions in China's criminal law in 2015. Like the criminal
law changes, the proposed amendments to the commercial bribery
provisions in the AUCL seek to facilitate a more uniform
enforcement approach by local authorities and increase
Clarification of the term "commercial bribery"
The current provisions in the AUCL that prohibit commercial
bribery are rather vague and do not provide a definition of
commercial bribery. This has resulted in businesses relying on
enforcement trends, which can differ between enforcement
authorities. The proposed amendments include a specific definition
of commercial bribery:
"Commercial bribery is where a business operator
provides, or offers to provide, financial benefits to a transaction
counterparty, or to a third party with influence over a
transaction, for the purpose of obtaining an opportunity related to
the transaction or competitive advantages."
The new definition requires corrupt intent behind a payment or
provision of other financial benefit for it to qualify as
commercial bribery. The requirement of corrupt intent is not
apparent from the current wording in the AUCL. The term
"financial benefits" is not further defined. The same
term is used in the recently amended anti-bribery provisions of
China's criminal law.
Examples of commercial bribery
The proposed amendments include examples of commercial bribery
to help distinguish commercial bribery from legitimate business
practice, including the following:
(i) Commercial bribery through
third parties, by providing or promising to provide financial
benefits to a third party/agent that has influence over a
transaction. A third party in this context includes not only public
or private entities but also individuals and can, for example,
include supervisors or relatives of the counterparty or public
officials. Although enforcement authorities have previously fined
companies for bribery payments through third parties, the proposed
amendment brings greater clarity that such conduct is
(ii) Benefits between business
operators that are not truthfully recorded in agreements and
accounting books constitute commercial bribery. This provision
seems to be formulated such that bribery is assumed in the case of
a false or incomplete accounting entry. If the provision is
adopted, it will create additional liability in relation to
Increased liability for employee conduct and business
Companies will be held liable for commercial bribery activities
by any of their employees. They will not be able to use
implementation of a compliance framework as a line of defence. A
company will also be held liable for commercial bribery by any
business partner acting on the company's behalf (for example,
an agent or distributor) if the company should have known that this
business partner was committing commercial bribery.
The proposed amendments increase the penalties for commercial
bribery. The current AUCL provides for penalties ranging from RMB
10,000 to RMB 200,000, plus confiscation of illegal gains. The
proposed amendments impose fines of 10%-30% of the turnover related
to the activities for which commercial bribery was committed, and
fines of RMB 100,000 to RMB 1,000,000 for third parties of which a
company should have known that it committed commercial bribery.
Until now, enforcement authorities had some discretion in
calculating penalties, as illegal gains are not always easy to
determine. It seems that the proposed amendments do not entirely
resolve this issue, although turnover related to the illegal
activities may be easier to establish than illegal gains.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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