The Chinese rules against unfair competition are being revised to address challenges of the digital economy and shifting market dynamics. The main changes, coming into effect in October 2025, are the introduction of a new concept of abuse of an "advantageous position" and a prohibition of below-cost sales on online platforms. While detailed implementation guidance is yet to be published, large companies and platforms should begin assessing the impact of the new rules, and potentially start auditing the payment terms for suppliers, and/or platform rules for on-platform sellers.
Background
In recent years, the rapid development of the digital economy and shifting market dynamics have given rise to increasingly complex issues such as involution-style competition, frequent data disputes, abuse of platform rules, fake transactions, and misleading conduct.
Involution-style competition describes a situation where individuals or organizations engage in intensifying internal competition that results in diminishing returns, rather than driving meaningful progress or innovation. In the context of market competition, this situation is reflected in a growing number of enterprises excessively focusing on low-price strategies, while neglecting critical aspects such as product quality, technological advancement, and long-term value creation. A recent example of this is price wars among auto dealers in China: these are said to squeeze margins along the whole supply chain to such an extent as to endanger the entire automotive ecosystem in China.
These challenges have underscored the urgent need to establish a more robust fair competition review mechanism.
On 27 June 2025, China published the revised Anti-Unfair Competition Law (2025 AUCL), which will come into force on 15 October 2025. The AUCL was first enacted in 1993 and has undergone two formal revisions already, first in 2017 and then in 2019.
The 2025 AUCL emphasises both the prevention and suppression of unfair competition activities. It aims at improving the legal framework governing market conduct and also aligns closely with the enforcement priority for the Chinese competition authority (SAMR). A key objective is the establishment of a unified national market characterized by fair and transparent competition.
To advance this goal, SAMR has convened four high-level meetings since the beginning of 2025, engaging representative enterprises from a wide range of sectors such as automotive, new energy, internet, glass, shipping, hospitality, pharmaceuticals, etc. These meetings are part of a broader initiative to foster compliance, gather industry feedback, and promote best practices under the updated legal framework.
Major developments
The 2025 AUCL introduces several significant updates, including:
- Addition of a dedicated clause addressing abuse of advantageous position by large enterprises.
- Ban on platform enterprises forcing merchants to sell below cost.
- Requirement for platform enterprises to define fair competition rules in service agreements and transaction policies.
- Inclusion of data scraping and unauthorized use of others' data as unfair competition behaviors.
- Explicit classification of fake orders, fake reviews, and malicious returns as unfair competition.
- Extension or further clarification of existing unfair competition activities, such as commercial confusion, defamation, bribery, etc.
Among the major revisions, two areas stand out for their potential impact on market dynamics: the abuse of an "advantageous position", and restrictions for platforms enterprises.
Abuse of Advantageous Position
Among the many new amendments that have been proposed to the 2025 AUCL is the inclusion of the concept of "abuse of advantage" and its associated liabilities. This is similar to the concept of an abuse of a superior bargaining position that we see in some other jurisdictions in Asia.
Japan
In Japan, the abuse of a superior bargaining position—such as coercive sales, forced returns, or demands for financial contributions—is considered an unfair trade practice. The Subcontract Act, supplementing the Antimonopoly Act, further prohibits delayed payments and other mistreatment of subcontractors and has only recently been tightened. The Japan Fair Trade Commission actively enforces these rules to protect smaller businesses.
Korea
Korea has explicit provisions addressing this issue under the Monopoly Regulation and Fair Trade Act (MRFTA). The Korea Fair Trade Commission (KFTC) actively enforces these rules, particularly in sectors like retail, franchising, and online platforms.
In 2023, the KFTC issued Guidelines for Examination of the Abuse of Superior Bargaining Position Against Workers, expanding the scope to include labor relationships. The KFTC also proposed the Fair Intermediation Transactions on Online Platform Act, refining such rules for digital markets.
Taiwan (China)
Taiwan's Fair Trade Act includes provisions that can be interpreted to cover relevant type conduct, especially in vertical relationships.
The Taiwan Fair Trade Commission (TFTC) may investigate unfair practices by firms that, while not dominant, exert disproportionate influence over trading counterparts. Enforcement tends to focus on retail and distribution sectors, where suppliers or buyers may impose unfair terms.
Looking further afield, German competition law regulates both relative and superior bargaining power (not limited to protecting smaller companies). While the competition authority can enforce this provision – as it did in 2015 when finding a large supermarket chain had abused its superior bargaining position by demanding retroactive rebates and preferential terms from suppliers of a discount chain it had acquired – it is much more commonly enforced through private litigation brought by suppliers or competitors.
Within China, this legal concept that is now "abuse of advantage" has undergone a significant evolution over the years:
- A draft of 2016 introduced the idea of a "relatively advantageous position,". It targeted dependency and switching difficulty, prohibiting practices like exclusive dealing and coercive charges. Partly due to its broad scope and vague definitions, it was not included in the 2017 revision to the AUCL.
- A draft of 2022 revived the concept with similar prohibitions, adding a focus on delayed payments. This laid the foundation for regulating payment-related abuses, and paved the way for the law's focus on payment-related abuses.
- The draft of what has become the current 2025 AUCL shifted the terminology to "advantageous position", deleted "relatively" and narrowed the scope to large enterprises, and focused on exclusive dealing that harms competition—aligning more closely with antitrust principles. This pivot reflected a strategic retreat from building a broad regulatory regime.
The final 2025 AUCL regulates that large enterprises and other business operators shall not abuse their advantageous position in terms of capital, technology, trading channels, industry influence or other areas to impose clearly unreasonable payment deadlines, payment methods, payment terms, default liabilities or other transaction terms on SMEs, or to default or delay in payments owed to SMEs for goods, projects, services, etc.
The final version removed references to exclusivity and anticompetitive effects, and instead puts a strong emphasis on payment-related abuses by large enterprises.
This version reflects a pragmatic compromise, which abandons the ambition of a universal unfair trading regime in favour of targeted protection for SMEs in payment relationships. Enforcement mechanisms include the "Three Letters and One Notice" approach (as previously reported here), allowing companies to rectify violations before a fine is imposed. That said, penalties are possible and range from up to RMB 1 million (approx. USD 135,000) to up to RMB 5 million (approx. USD 700,000) for severe cases.
Restrictions on Platform Enterprises
The 2025 AUCL also introduces a new provision prohibiting platform operators from (directly or indirectly) forcing merchants on their platforms to sell goods below cost in accordance with the platform's pricing rules. Violations of this provision may result in administrative penalties imposed by supervisory authorities, including: (i) an order to cease the illegal conduct; and/or (ii) fines ranging from RMB 50,000 to RMB 500,000. For serious violations, fines may range from RMB 500,000 to RMB 2 million.
The term "below-cost pricing" is broadly defined. A similar concept exists under China's Anti-Monopoly Law, which prohibits dominant market players from selling below cost without justification. In that context, enforcement agencies typically focus on whether the price falls below average variable cost—the per-unit cost that varies with production volume. In platform-based markets, additional factors may be relevant, such as the cost structure across different sides of a multi-sided platform, the economic rationale, and inter-market cost relationships.
In practice, some platforms have been observed using automated pricing algorithms, intelligent pricing tools, or system-driven price adjustments to track competitors' prices and pressure merchants to lower their own prices—sometimes even below the purchase cost. Such conduct may lead to a violation of the 2025 AUCL. However, enforcement will hinge on how regulators define and assess "cost price" in specific cases. The interpretation and application of this concept remain to be clarified through detailed guidance, future enforcement actions, and/or judicial practice.
Expectations
With the 2025 AUCL set to take effect on 15 October 2025, the three-month transitional period will likely see detailed implementation guidelines adopted. Several uncertainties remain regarding the application of the new law, for example:
- Whether supply contracts signed before the law's enactment should be subject to the new provisions.
- Criteria for identifying large enterprises: whether based on sales revenue, market value, or group-level metrics similar to the Anti-Monopoly Law.
- How to determine "below-cost pricing" in platform contexts, including the role of average variable cost and multi-sided market structures.
Experience from other jurisdictions shows that tracking terms and practical arrangements across a complex network of suppliers can be onerous. It is therefore important for large enterprises and platform operators to proactively assess potential risks under the 2025 AUCL during the transitional period, including establishing internal complaint and feedback mechanisms to gather supplier input on payment terms and conditions, and reviewing financial workflows to ensure timely payments and fair contract terms.
Last but not least, the 2025 AUCL introduces an extraterritorial jurisdiction clause, allowing enforcement against unfair competition acts committed abroad if they disrupt domestic market order or harm the rights of Chinese businesses or consumers. This provision addresses past enforcement challenges and enables regulators to pursue cross-border misconduct such as brand confusion, defamation, fake reviews, data scraping, and transnational commercial bribery.
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.
