360 v. Tencent: Competition and how to build internet industry market order

On February 24 2014, the Supreme People's Court issued a decision over 360 v. Tencent, a dispute between China's IT giants Qihoo and Tencent over unfair competition practices. In the decision, the court stated that the freedom of competition and innovation can be guaranteed only if we don't infringe upon others' legitimate rights and interests and that orderly market environment and well-defined competition law and regulations will safeguard the sound development of China's internet industry.

China Industry and Commerce News ("Zhongguo Gongshang Bao" in Chinese pinyin), a newspaper administered by State Administration of Industry and Commerce, recently conducted interviews with a number of scholars, government officials, market analysts and lawyers on the subject of establishing market order in the internet industry. These people pointed out that efforts could be made in terms of improving relevant laws and regulations, increasing costs for violation, strengthening regulators' enforcement efficacy, enhancing businesses' sense of integrity and self-discipline and protecting consumers' legitimate rights and interests.

Mr. Deng Zhisong, a partner from Dacheng Law Offices's capital market practice, said that despite the fact that more and more unfair competition cases in the internet industry had been tried in China's courts, the level of compensation or penalty ruled by the courts remained relatively low, leading to a vicious cycle of even more unfair competition practices. Besides, China's "Anti-Unfair Competition Law" did not expressly define what a claimant's "actual loss" should be. He suggested counting loss of business reputation as a fact justifiable for statutory damages, like what Germany, Japan and Taiwan had done.

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