China: Solicitation Of Public Opinions On The Anti-Unfair Competition Law (Revised Draft)

The Anti-unfair Competition Law of the People's Republic of China (Revised Draft) was deliberated at the 26th Session of the Standing Committee of the 12th National People's Congress ("NPC"), and is hereby promulgated via the website of the NPC. The public may directly visit the website of the NPC (www.npc.gov.cn) to submit comments, or send comments to the Legislative Affairs Commission of the Standing Committee of the NPC (at No. 1 Qianmen West Street, Xicheng District, Beijing, zip code: 100805; and, The words "comments on the revised draft of the Anti-unfair Competition Law" shall be indicated on the envelops). The deadline for providing comments is March 25, 2017.
Anti-unfair Competition Law of the People's Republic of China (Revised Draft)

Chapter 1: General Provisions

Article 1 This Law is formulated with a view to safeguarding the healthy development of the socialist market economy, encouraging and protecting fair competition, prohibiting activities of unfair competition, and protecting the legitimate rights and interests of business operators and consumers.
Article 2 Business operators shall, during market transactions, abide by the principles of voluntariness, equality, fairness, honesty and good faith, and adhere to widely-recognized commercial ethics.
For the purpose of this Law, activities of unfair competition shall refer to the activities whereby a business operator, in violation of the preceding Paragraph, engages in market transactions by improper means, thus undermining the legitimate rights and interests of other business operators and disrupting the order of competition.
For the purpose of this Law, business operators shall refer to natural persons, legal persons and other organizations that engage in the business operations of products or for-profit services (products referred to hereinafter shall include services).
Article 3 People's governments at all levels shall take measures to prohibit activities of unfair competition and create a favorable environment and conditions for fair competition.
The State Council shall establish a coordination mechanism for anti-unfair competition work, study and make decisions on major policies concerning anti-unfair competition, and coordinate the resolution of major issues for maintaining the order of competition.
Article 4 The departments responsible for industrial and commercial administration of people's governments at and above the county level (hereinafter referred to as the "Administration for Industry and Commerce") shall investigate and punish activities of unfair competition, provided that such activities shall be investigated and punished by other departments if so prescribed by laws or administrative regulations.
Article 5 The State encourages, supports and protects all organizations and individuals to conduct public oversight of activities of unfair competition.
State organs and their staff members shall not support or shield activities of unfair competition.

Chapter 2: Activities of Unfair Competition

Article 6 A business operator shall not engage in market transactions by any of the following improper means:
(1) Where the business operator uses, without authorization, the names, packaging or decoration unique to well-known products, or uses names, packaging or decoration similar to that of well-known products, causing confusion between its products and the well-known products of others and resulting in its products being mistaken for the well-known products;
(2) Where the business operator uses, without authorization, the enterprise name of another party and its abbreviation or trade name, uses, without authorization, the name, pen names or stage names of another party, or uses, without authorization, the name of a social organization and its abbreviation, resulting in its products being mistaken for the products of others;
(3) Where the business operator uses, without authorization, the main part of the domain name of another party, the website name, web pages and channels, program or column names and logos, etc. of another party, resulting in its products being mistaken for the products of others; or
(4) Where the business operator uses a registered trademark or an unregistered well-known trademark of another party as the trade name in its enterprise name, misleading the public.
Article 7 A business operator shall not use assets or other means to bribe transaction counterparties or third parties who may affect transactions. Transaction counterparties or third parties who may affect transactions may not accept bribes.
During transaction activities, a business operator may provide discounts for the relevant transaction counterparty in an express manner, or pay commissions to the intermediary concerned. A business operator shall truthfully credit relevant amounts into account books if it provides discounts for transaction counterparties or pays commissions to intermediaries. The business operators who accept discounts or commissions shall also truthfully credit such amounts into account books.
The acts of a staff member of a business operator to use bribes to seek for transaction opportunities or competitive advantages for the business operator shall be deemed as the conducts of the business operator, unless the business operator has evidence to prove that such acts are the conducts of the staff member in his/her personal capacity.
For the purpose of Paragraph 1 of this Article, a third party who may affect transactions shall refer to the entity or individual that may use relevant power to influence transactions.
Article 8 A business operator shall not use advertising or other means to engage in false or misleading business publicity campaigns, and shall not engage in false transactions.
Article 9 A business operator shall not commit any of the following acts that infringe upon trade secrets:
(1) Obtaining the trade secrets of a rights holder by theft, bribery, coercion or other improper means;
(2) Disclosing, using or allowing others to use the trade secrets of a rights holder that are obtained by any of the means prescribed in the preceding Item; or
(3) Disclosing, using or allowing others to use the trade secrets in its possession in breach of agreements or in violation of the requirements of the relevant rights holder on keeping confidential trade secrets.
For the purpose of this Law, trade secrets shall refer to the technical information and business information that are not known to the public and have commercial value and for which corresponding confidentiality measures have been taken by their rights holders.
Article 10 Any of the following acts shall be deemed as acts that infringe upon trade secrets:
(1) Where an employee or a former employee of the rights holder of a trade secret commits any of the acts prescribed in Paragraph 1 of Article 9 herein; or
(2) Where a third party clearly knows or should have known that the trade secret concerned is derived from an illegal channel provided for in Paragraph 1 of Article 9 herein, but still obtains, discloses, uses or allows others to use the trade secret.
Staff members of State organs, lawyers, certified public accountants ("CPA") and other professionals shall keep confidential the trade secrets that come to their knowledge during the performance of duties.
Article 11 When selling a product, a business operator shall not tie up the sales of other products against the wishes of purchasers, and shall not impose any additional unreasonable conditions.
Article 12 When engaging in sales by offering prizes, a business operator shall not fall under any of the following circumstances:
(1) Where information on the sales by offering prizes, such as the categories of prizes, the conditions for redeeming prizes, the amount of prize money or prizes, etc. is unclear, affecting the redemption of prizes by purchasers;
(2) Where the business operator engages in sales by offering prizes in a fraudulent manner, such as by falsely claiming there are prizes available or deliberately letting persons who have been internally determined win the prizes; or
(3) Where the business operator engages in sales by offering prizes through lucky draws, and the amount of the highest prize exceeds RMB 20,000.
Article 13 A business operator shall not fabricate and disseminate falsehood to impair the commercial reputation and product reputation of competitors.
Article 14 A business operator shall not use technical means to engage in any of the following activities in the Internet field that affect users' choices and interfere with the normal operations of other business operators:
(1) Where the business operator, without obtaining consent, insert links in the online products or services that are lawfully provided by other business operators to force the redirection of targets;
(2) Where the business operator misleads or compels users to modify, close or uninstall the online products or services that are lawfully provided by others, or deceives users into modifying, closing or uninstalling such products or services;
(3) Where the business operator interferes with or destroys the normal operation of the online products or services that are lawfully provided by others; or
(4) Where the business operator maliciously causes incompatibility with the online products or services that are lawfully provided by other business operators.
Article 15 Where a business operator violates Article 2 herein, and commits market transaction acts that seriously disrupt the order of competition and genuinely need to be investigated and punished, in the absence of any explicit provisions under Article 6 through to Article 14 of Chapter 2 herein and under relevant laws and administrative regulations, the Administration for Industry and Commerce of the State Council shall, on its own or in conjunction with other relevant departments of the State Council, study and put forward opinions on recognizing such acts as activities of unfair competition, and submit the same to the State Council for decision.

Chapter 3: Supervision and Inspection

Article 16 A supervision and inspection department shall be entitled to exercise the following functions and powers when investigating activities of unfair competition:
(1) Entering the business premises suspected of activities of unfair competition for inspection;
(2) Making inquiries to the business operator under investigation, interested parties and other relevant entities and individuals, and requiring them to provide supporting materials or other materials related to the alleged activities of unfair competition;
(3) Inspecting and duplicating agreements, account books, documentation, documents, records, business correspondences and other materials related to the alleged activities of unfair competition;
(4) Ordering the business operator under investigation to cease the alleged activities of unfair competition and to explain the sources and quantity of relevant assets;
(5) Sealing up and seizing assets related to the alleged activities of unfair competition; and
(6) Inspecting the bank accounts of a business operator who is suspected of committing activities of unfair competition and deposit-related accounting documents, account books, reconciliation statements, etc.
Article 17 Supervision and inspection departments and their staff members shall supervise and inspect activities of unfair competition pursuant to the Administrative Enforcement Law of the People's Republic of China and other relevant laws and administrative regulations.
Article 18 When supervision and inspection departments supervise and inspect activities of unfair competition, the business operators under inspection, interested parties and other relevant entities and individuals shall truthfully provide relevant materials or circumstances.
When conducting random checks of activities of unfair competition, supervision and inspection departments shall randomly select the parties to be inspected and randomly assign law enforcement inspectors, and make public the situations of random checks and the results of investigation and punishment in a timely manner.
Article 19 Any entity or individual shall be entitled to lodge tip-offs against activities of unfair competition to supervision and inspection departments. Supervision and inspection departments shall make public the phone numbers, mailboxes or e-mail addresses for receiving tip-offs, and arrange relevant personnel to accept the tip-offs. Supervision and inspection departments shall inform whistleblowers who lodge tip-offs in their real names of the handling results, and keep confidential their identities.

Chapter 4: Legal Liabilities

Article 20 A business operator who violates this Law and causes losses to others shall be liable for civil compensation in accordance with the law.
A business operator whose legitimate rights and interests are damaged by activities of unfair competition may bring a lawsuit to the competent people's court.
Article 21 A business operator who violates any of the items from Item (1) through to Item (3) of Article 6 herein shall be ordered by the relevant supervision and inspection department to cease its illegal acts and have the illegal products confiscated. Where the amount of illegal business operations reaches or exceeds RMB 50,000, the business operator may concurrently be given a fine of up to five times the amount of illegal business operations; and, in the absence of any amount of illegal business operations or where the amount of illegal business operations is less than RMB 50,000, the business operator may be concurrently given a fine of up to RMB 250,000. Under grave circumstances, the business operator shall be revoked of its business license.
A business operator who violates Item (4) of Article 6 herein shall be ordered by the relevant supervision and inspection department to apply for registration of name change within one month. Where the business operator fails to submit an application for change of registration within the prescribed time limit, the supervision and inspection department shall mete out punishments in accordance with the preceding Paragraph, and the original enterprise registration authority shall remove the name of the business operator from the enterprise credit information disclosure system, use the unified social credit code to replace its name, and include the business operator in the list of enterprises with abnormal business operations. Under grave circumstances, the business operator shall be revoked of its business license.
Article 22 A business operator who violates Article 7 herein, and offers bribes to others or accepts bribes from others shall be ordered by the relevant supervision and inspection department to cease its illegal acts, and be given a fine of not less than RMB 100,000 but not more than RMB three million. Under grave circumstances, the business operator shall be revoked of its business license.
Article 23 A business operator who violates Article 8 herein shall be punished in accordance with the Advertising Law of the People's Republic of China. In the absence of applicable provisions under the Advertising Law of the People's Republic of China, the relevant supervision and inspection department shall order the business operator to cease its illegal acts and impose thereon a fine of not less than RMB 200,000 but not more than RMB one million. Under grave circumstances, the business operator shall be given a fine of not less than RMB one million but not more than RMB two million, and may be revoked of its business license.
Article 24 Where a business operator infringes upon trade secrets by violating Article 9 herein or a third party infringes upon trade secrets by violating Article 10 herein, the relevant supervision and inspection department shall order the business operator or the third party to cease its illegal acts and impose thereon a fine of not less than RMB 100,000 but not more than RMB 500,000. Under grave circumstances, the business operator or the third party shall be given a fine of not less than RMB 500,000 but not more than RMB three million.
Where an employee or a former employee of the rights holder of a trade secret violates Article 10 herein and infringes upon the trade secret, the relevant supervision and inspection department shall order the employee or former employee to cease his/her illegal acts and impose thereon a fine of up to RMB 100,000.
A staff member of a State organ who violates Article 10 herein and infringes upon trade secrets shall be given disciplinary sanctions by the relevant appointment and dismissal organ or supervisory organ pursuant to the law.
Where lawyers, CPAs and other professionals violate Article 10 herein and infringe upon trade secrets, supervision and inspection departments shall order such professionals to cease their illegal acts, and impose thereon a fine of up to RMB 100,000. Under grave circumstances, relevant departments shall revoke the practicing certificates of such professionals.
Article 25 A business operator who engages in sales by offering prizes in violation of Article 12 herein shall be ordered by the relevant supervision and inspection department to cease its illegal acts, and be given a fine of not less than RMB 100,000 but not more than RMB 500,000, or a fine of not less than RMB 500,000 but not more than RMB three million under grave circumstances.
Article 26 A business operator who violates Article 13 herein and damages the commercial reputation or product reputation of others shall be ordered by the relevant supervision and inspection department to cease its illegal acts and eliminate ill influence, and be given a fine of not less than RMB 100,000 but not more than RMB 500,000, or a fine of not less than RMB 500,000 but not more than RMB three million under grave circumstances.
Article 27 A business operator who violates Article 14 herein and interferes with the normal operations of other business operators shall be ordered by the relevant supervision and inspection department to cease its illegal acts, and be given a fine of not less than RMB 100,000 but not more than RMB 500,000, or a fine of not less than RMB 500,000 but not more than RMB three million under grave circumstances.
Article 28 Unless otherwise prescribed by laws and administrative regulations, a business operator who violates Article 15 herein and engages in unfair competition shall be ordered by the relevant supervision and inspection department to cease its illegal acts, and be given a fine of not less than RMB 100,000 but not more than RMB 500,000, or a fine of not less than RMB 500,000 but not more than RMB three million under grave circumstances.
Article 29 Where a business operator is subject to administrative punishments for engaging in unfair competition in violation of this Law, the relevant supervision and inspection department shall include such punishments in the credit records of the business operator, and make public the same in accordance with relevant laws and administrative regulations.
Article 30 A business operator who shall concurrently bear civil compensation liabilities and pay fines due to violations of this Law shall bear the civil compensation liabilities on a priority basis if its assets are not sufficient to both pay compensations and fines.
Article 31 Whoever obstructs a supervision and inspection department from performing duties in accordance with this Law and constitutes violations of public security administration shall be punished by the relevant public security organ in accordance with the Law of the People's Republic of China on Public Security Administration Punishments.
Article 32 The parties concerned who have objections to the decisions made by supervision and inspection departments may apply for administrative reconsideration or bring administrative lawsuits in accordance with the law.
Article 33 Where a supervision and inspection department and its staff members practice favoritism for personal gains, abuse power or neglect duties, its leaders subject to liabilities and the personnel subject to direct liabilities shall be given disciplinary sanctions pursuant to the law.
Article 34 Whoever violates this Law and constitutes criminal offenses shall be investigated for criminal liabilities pursuant to the law.

Chapter 5: Supplementary Provisions
Article 35 This Law shall come into effect on MM DD, YY.

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